onondaga by chrstphr


									                                                                                                  STEVEN J. HANCOX
                                                                                                DEPUTY COMPTROLLER
THOMAS P. DiNAPOLI                       STATE OF NEW YORK                                DIVISION OF LOCAL GOVERNMENT
                                                                                            AND SCHOOL ACCOUNTABILITY
   COMPTROLLER                    OFFICE OF THE STATE COMPTROLLER                        Tel: (518) 474-4037 Fax: (518) 486-6479
                                               110 STATE STREET
                                            ALBANY, NEW YORK 12236

                                                        February 1, 2008

  Honorable Peter N. Wells, Surrogate Court Judge
  Onondaga County Surrogate’s Court
  Room 209, Court House
  401 Montgomery St.
  Syracuse, NY 13202

  Warren W. Bader, Esq
  Public Administrator of Onondaga County
  205 S. Salina Street
  Syracuse, NY 13202

  Report Number: S9-7-28

  Dear Judge Wells and Public Administrator Bader:

  A top priority of the Office of the State Comptroller is to help local government officials
  manage government resources efficiently and effectively and, by so doing, provide
  accountability for tax dollars spent to support government operations. The Comptroller
  oversees the fiscal affairs of local governments statewide, as well as their compliance with
  relevant statutes and observance of good business practices. This fiscal oversight is
  accomplished, in part, through our audits, which identify opportunities for improving
  operations and Board of Legislators governance. Audits can also identify strategies to reduce
  costs and to strengthen controls intended to safeguard local government assets.

  In accordance with these goals, we conducted an audit of the Public Administrator function of
  six counties across the State to determine whether the Public Administrators1 in each county are
  administering the estates according to the Surrogate Court Procedure Act (the Act) and The
  Report and Guidelines of The Administrative Board for the Offices of the Public Administrators
  (Administrative Guidelines).2 The County of Onondaga was included in this audit. Within the
  scope of this audit, we reviewed select estate records for the period of January 1, 2005 through
  August 9, 2006 for compliance with Article 12 guidelines.

    For purposes of this report letter, Public Administrator refers to the position of Public Administrator, as well as
  County fiscal officers acting as Public Administrator.
    Pursuant To Surrogate Court Procedure Act Section 1128 (Article 12) within the Counties of Erie, Monroe,
  Nassau, Onondaga, Suffolk and Westchester and County Treasurers within the State Acting as Administrators.
This draft report of examination letter contains our findings and recommendations specific to the
County of Onondaga. We discussed the findings and recommendations with the Public
Administrator and County officials and considered their comments in preparing this report. They
were also given the opportunity to respond within 15 days in writing to our findings and
recommendations. We did not receive a written response within this period. At the completion of
our audit of the six counties, we will prepare a global report that summarizes the significant
issues at all the Counties that were included in our review.

Summary of Findings

Our audit identified that the Onondaga Public Administrator (PA) needs to improve the
oversight of property search and collection and handling of bank accounts to better comply
with the Act and Administrative Guidelines. There should be stronger controls in place with
the collection and selling of assets to insure that all estate assets are accounted for properly.
Due to the lack of controls in this area, we could not determine if all assets were accounted for
as required.

In addition, the PA does not keep all cash in interest bearing accounts, and accounts over
$100,000 are not collateralized. As a result of these weaknesses, we estimated over $4,200 in
interest was lost because of the failure to keep all funds in interest bearing accounts; and over
$900,000, in funds exceeding the amount insured by the Federal Deposit Insurance Corporation
(FDIC) were not secured by a pledge of collateral or other means of protection. The Public
Administrator is currently taking steps to correct these weaknesses.

Background and Methodology

The Surrogate’s Court Procedure Act (the Act) provides authority for Public Administrators
within the Counties of Erie, Monroe, Nassau, Onondaga, Suffolk and Westchester and county
chief fiscal officers within New York State acting as administrators. County fiscal officers
acting in his or her capacity as Public Administrator may choose to obtain the services of an
attorney to act for him or her to administer estates. The Act allows any reasonable and
necessary expenses to be paid from the estates in which cost have been incurred from the
administration of the estates and stipulates the form and verification of all claims. Commissions
are also paid based on the value of the estates.

The Guidelines adopted for the operations of the Public Administrator offices in New York
include, “rules for the initial inspection of the decedent’s premises and guidelines for the
selection and compensation of investigators, appraisers, accountants, warehouses, auctioneers
and procedures for the disposal of personal property.” They also provide guidance on
recordkeeping, cash management, and the performance of other administrative functions. In
those counties where the position of Public Administrator has been established, an annual
independent audit is required.

Onondaga County‘s designated Public Administrator is a licensed attorney in the State of New
York. He is responsible for administering the estates of persons who die intestate and leave no
known heirs, or leave heirs who are not qualified or willing to administer the estate. He also

administers an estate if neither the executor nor any eligible beneficiary named in the
decedent’s will is able or willing to serve. As of December 31, 2005, total assets of the 424
open cases reported to the Office of the State Comptroller were valued at $2.4 million.

To accomplish our objective we interviewed the Public Administrator and his paralegal; and we
selected 15 open estate cases and five closed estate cases and reviewed the files maintained by
the Onondaga County Public Administrator for adherence to Article 12 and the Administrative

We conducted this performance audit in accordance with generally accepted government
auditing standards (GAGAS). Those standards require that we plan and perform the audit to
obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit objectives.

Audit Results

Our audit disclosed that the Onondaga Public Administrator could improve his internal controls
over the management of estates in which he is responsible to better comply with the Act and the
Administrative Guidelines. We also reviewed CPA reports for the years ending 2002, 2003 and
2004, and found that similar findings were included in these reports. As a result of weaknesses
identified, some assets were not fully protected and some cash was not kept in interest bearing

Inventory of Residence Contents – Administrative Guidelines provide that investigators should
photograph the contents of residences, preferably using video equipment, to submit to the
Public Administrator after the search. A search of a decedent’s premises is conducted as soon
as possible after notification of his or her death to ensure that all their personal property is
identified, recorded and credited to the estate. Some items are collected and secured by the
Public Administrator, such as money, stocks, bonds, bank books and statements, jewelry, and
other relevant records like the decedent’s will, mail and other documentation which might help
to determine heirs. The investigators are to thoroughly search the residences and
contemporaneously prepare a complete and detailed inventory of their contents. and ensure that
the auctioneer or someone acting on his behalf reconcile items sold or left unsold at auction to
estate property inventory records to ensure that all items have been accounted for properly.

The Public Administrator does not prepare a detailed inventory list of the contents of decedents’
residences, though photographs are taken of the contents when assets are considered material.
The auctioneer prepares a detailed list of items sold. Without a detailed inventory list created
when the home is first secured, there can be no reconciliation of items sold at auction to estate
property inventory records. As a result, the Public Administrator is unable to determine if the
entire contents of an estate have been properly identified, recorded, disposed of, or sold and
whether all applicable proceeds from sales of a particular estate’s saleable items have been
credited to the estate. This exposes the estates to the risk of loss due to unrecognized theft of
estate assets.

Five of the 20 estates had real and/or personal property collected, these estates totaled over $1.1
million. Three of these estates, valued at $800,000, did not have photographs or videos taken
while two estates had photographs taken of the contents. One was difficult to test as thieves had
ransacked the residence and it was hard to determine what was in the pictures. The other could
be tested and items identified in the pictures were also identified on the inventory sales list
provided by the auctioneer.

Non-Interest Bearing Accounts – Administrative Guidelines provide that all estate accounts
with balances under $500 may be placed in a commingled miscellaneous receipts account.
However, all such accounts must be interest bearing. The Public Administrator is to maintain
accurate records of the estates whose funds have been deposited in this account. Whenever the
total funds received and deposited in the miscellaneous receipts account for any estate exceeds
$500, the Public Administrator is to immediately open a separate account for that estate and
deposit into that account all funds belonging to that estate, including any interest earned.

Our testing revealed that monetary assets in six of 20 estates tested were not in interest bearing
accounts, resulting in an estimated loss of $4,275 in the two larger accounts tested. It was also
found that the commingled account of estates with balances less than $500 was not interest
bearing. This account had in excess of $27,000 cumulatively for these estates. This would
result in an estimated annual loss of $176 if accounts were separate or $320 if the funds were
together. The 2002, 2003 and 2004 CPA reports also contained a similar finding.

The Public Administrator had 456 open cases as of July 31, 2006 and 269 of them had balances
under $500. He considered the amount of time required to separate these accounts into interest
bearing accounts and to post monthly interest to be excessive for the small amount of interest
that would accrue. He has since arranged with the bank to put all new accounts with balances
greater than $100 into interest bearing accounts.

Non-Collateralization of Accounts – Administrative Guidelines require the Public
Administrator to maintain procedures to insure that no funds held for an estate in a particular
bank exceed the amount insured by the FDIC, which is currently $100,000. If funds held for an
estate in a particular bank exceed the FDIC insurance amount, the Public Administrator is to
immediately: 1) open a separate account or accounts in a different bank or banks so that no
funds held for an estate in a particular bank exceed the FDIC insurance amount; 2) invest such
additional sums in U.S. Treasury Bills so that no funds held for an estate in a particular bank
will exceed the FDIC insured amount; or 3) collateralize such sums with approved government
securities, pursuant to a written security agreement between the Public Administrator and the

The Public Administrator had not taken appropriate steps to ensure that estate funds above the
FDIC insurance amount were appropriately secured. Five of the 20 estate bank accounts tested
had balances above the FDIC insured limit, requiring collateralization of the amounts over
$100,000. These amounts were not collateralized, therefore placing approximately $917,000 of
estate assets at possible risk of loss. The 2002, 2003 and 2004 CPA reports also contained a
similar finding.

Subsequent to the start of our audit, the Public Administrator signed a third party custodian
agreement with the bank to collateralize funds greater than $100,000.


The Public Administrator should:

   1. Improve internal control of estate management by inventorying assets during initial
      search of the decedent’s residence and taking photographic or video records of all
      personal property, even if the value is considered minor.

   2. Review all estate bank accounts and continue to take steps where necessary to place
      estate monies in interest bearing accounts.

   3. Monitor estate bank balances to insure that balances in a particular bank exceeding
      FDIC coverage are appropriately secured.

The Public Administrator has the responsibility to initiate a corrective action plan. We request that
he forward the plan to our office within 90 days of issuance of the final report. See the attached
document for additional information on filing a corrective action plan. Our Office is available to
assist you upon request. If you have any further questions, please contact the Statewide and
Regional Projects Unit at (607)721-8310.


                                             Steven J. Hancox
                                             Deputy Comptroller
                                             Office of the State Comptroller
                                             Division of Local Government
                                             and School Accountability


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