division of ocal overnment & school ccountability ... · the hauppauge fire district ... the...

Division of LocaL Government & schooL accountabiLity

o f f i c e o f t h e n e w y o r k s t a t e c o m p t r o L L e r

report of ExaminationPeriod Covered:

January 1, 2013 — April 30, 2014

2014M-375

Hauppauge Fire District

Mandatory Training and Procurement

thomas p. Dinapoli

Page

AUTHORITY LETTER 1

EXECUTIVE SUMMARY 2

INTRODUCTION 4 Background 4 Objectives 4 Scope and Methodology 4 CommentsofDistrictOfficialsandCorrectiveAction 5

MANDATORY TRAINING 6 Recommendation 6

PROCUREMENT 7 Recommendations 9

APPENDIX A ResponseFromDistrictOfficials 11APPENDIX B AuditMethodologyandStandards 13APPENDIX C HowtoObtainAdditionalCopiesoftheReport 14APPENDIX D LocalRegionalOfficeListing 15

Table of Contents

11Division of LocaL Government anD schooL accountabiLity

State of New YorkOffice of the State Comptroller

Division of Local Governmentand School Accountability April2015

DearDistrictOfficials:

A toppriorityof theOfficeof theStateComptroller is tohelp localgovernmentofficialsmanagegovernment resources efficiently and effectively and, by so doing, provide accountability fortax dollars spent to support government operations.TheComptroller oversees thefiscal affairs oflocalgovernmentsstatewide,aswellascompliancewith relevantstatutesandobservanceofgoodbusinesspractices.Thisfiscaloversightisaccomplished,inpart,throughouraudits,whichidentifyopportunitiesforimprovingoperationsandBoardofFireCommissionergovernance.Auditsalsocanidentify strategies to reduce costs and to strengthen controls intended to safeguard local government assets.

FollowingisareportofourauditoftheHauppaugeFireDistrict,entitledMandatoryTrainingandProcurement.ThisauditwasconductedpursuanttoArticleV,Section1oftheStateConstitutionandtheStateComptroller’sauthorityassetforthinArticle3oftheNewYorkStateGeneralMunicipalLaw.

This audit’s results and recommendations are resources for local government officials to use ineffectively managing operations and in meeting the expectations of their constituents. If you have questionsaboutthisreport,pleasefeelfreetocontactthelocalregionalofficeforyourcounty,aslistedat the end of this report.

Respectfullysubmitted,

Office of the State ComptrollerDivision of Local Governmentand School Accountability

State of New YorkOffice of the State Comptroller

2 Office Of the New YOrk State cOmptrOller2

Office of the State ComptrollerState of New York

EXECUTIVE SUMMARY

The Hauppauge Fire District (District) covers approximately 12 square miles in the Towns of SmithtownandIslip,SuffolkCounty,andservesapproximately15,000residents.TheDistrict isadistrictcorporationoftheState,distinctandseparatefromtheTowns,andisgovernedbyanelectedfive-memberBoardofFireCommissioners(Board).

TheBoardisresponsiblefortheDistrict’soverallfinancialmanagement,hasthepowertolevyrealpropertytaxesandcanissuedebt.TheDistrictSecretary/TreasureristheDistrict’schieffiscalofficerandisresponsibleforreceiving,disbursingandmaintainingcustodyofDistrictfunds,maintainingfinancialrecordsandpreparingmonthlyandannualreports.

TheBoard adopts a budget annually,which is filedwith theTowns of Islip and Smithtown.TheDistrict’s expenditures for 2013 were $3.9 million. The 2014 budgeted appropriations were $3.8million,whichwerefundedprimarilywithrealpropertytaxes.

Scope and Objectives

The objectives of our audit were to assess Board compliance with training requirements and to review internalcontrolsoverprocurementfortheperiodJanuary1,2013throughApril30,2014.Ourauditaddressedthefollowingrelatedquestions:

• DidBoardmemberscompleterequiredtrainingforFireDistrictCommissionerstoassistthemineffectivelyoverseeingDistrictfinancialoperations?

• DidtheDistrictusecompetitivemethodstoprocuregoodsandservicesandpayforgoodsandservicesbasedonwrittenagreements?

Audit Results

WefoundthatthreeofthefiveFireCommissionershavenotattendedthemandatorytrainingrequiredby law. The lack of Board training may have contributed to the lack of oversight over key District operationsweidentifiedduringouraudit.

The District did not always use competitive methods when procuring goods and services as required by GeneralMunicipalLawanditsprocurementpolicy.Wereviewedpurchasesfrom20vendorsandfoundthat the District did not seek competition for purchases from 12 vendors who were paid approximately $414,878during theauditperiod. Inaddition, theDistrictmadepayments tofourvendors totaling


$187,418withoutcontractsandpaidfourvendorsmorethanprovidedinthetermsoftheagreements.Asaresult,thereisanincreasedriskthattheDistrictmayhavepaidmorethannecessaryforthegoodsand services purchased.

TheBoardmaystandardizeandawardpurchasecontractsforparticulartypesorkindsofequipment,material,suppliesorservicesbyadoptingaresolution.WhiletheDistrict’spurchasingpolicyspecifieshowtoprocuregoodsandservicesthatareunderthebiddingthreshold,theDistrictdidnotfollowits policy and did not properly standardize goods and services. The Board passed resolutions to standardizethepurchaseofcarbonmonoxidedetectors,firefightingturnoutgearandfirepolicegear,therebydesignatingthattheDistrictwouldpurchasespecificbrandnamesfortheseitems.However,theBoard resolutionsdidnot state the reasons for standardization, suchas theneed forefficiencyoreconomy,nordidtheresolutionsstatespecificreasonsfortheiradoption.TheDistrictpaidthreevendors associatedwith these products a total of $21,873.District officials should have obtainedquotesforthesegoods,butdidnot.

Additionally,theBoardstandardizedthreespecificvendorsforthepurchaseofemergencylightingandradioinstallations,firealarmsandaccesssystems,andhosetesting.WhiletheBoardhastheauthoritytostandardizeaparticulartypeorkindofequipment,thereisnoauthorityfortheBoardtostandardizespecificvendors.Thesethreevendorswerecollectivelypaidatotalof$29,635.1Asaresult,theDistrictlimited competition and may not have procured these goods and services at the best price.

Comments of District Officials

TheresultsofourauditandrecommendationshavebeendiscussedwithDistrictofficials,andtheircomments,whichappearinAppendixA,havebeenconsideredinpreparingthisreport.Districtofficialsgenerally agreed with our recommendations and indicated they planned to initiate corrective action.

1 According to the January 9, 2014 organizational meeting minutes, the District selected a different vendor for allemergencylightingandradioinstallation,buttherewerenopaymentsmadetothisnewvendor.TheDistrictcontinuedusingthevendorstatedintheJanuary10,2013organizationalmeetingthroughouttheauditperiod.


Background

Introduction

Objectives

Scope andMethodology

The Hauppauge Fire District (District) covers approximately 12 squaremilesintheTownsofSmithtownandIslip,SuffolkCounty,andservesapproximately15,000residents.TheDistrictisadistrictcorporationoftheState,distinctandseparatefromtheTowns,andisgovernedbyanelectedfive-memberBoardofFireCommissioners(Board).TheDistrictrespondstoapproximately950alarmsperyearandhas140activefirefighters.

The Board is responsible for the District’s overall financialmanagement,hasthepowertolevyrealpropertytaxesandcanissuedebt. The District Secretary/Treasurer is the District’s chief fiscalofficerandisresponsibleforreceiving,disbursingandmaintainingcustodyofDistrictfunds,maintainingfinancialrecords,andpreparingmonthly and annual reports.

TheBoardadoptsabudgetannually,whichisfiledwiththeTownsofIslipandSmithtown.TheDistrict’sactualexpendituresfor2013were$3.9million.Thebudgeted2014appropriationswere$3.8million,funded primarily with real property taxes.

The objectives of our audit were to assess Board compliance with training requirements and to review internal controls over procurement.Ourauditaddressedthefollowingrelatedquestions:

• Did Board members complete required training for FireDistrict Commissioners to assist them in effectively overseeing Districtfinancialoperations?

• Did theDistrict use competitivemethods to procure goodsand services and pay for goods and services based on written agreements?

We examined the District’s purchasing process and training records forevidenceofCommissionertrainingfortheperiodJanuary1,2013throughApril30,2014.

We conducted our audit in accordance with generally accepted government auditing standards (GAGAS). More information onsuch standards and the methodology used in performing this audit is includedinAppendixBofthisreport.


Comments ofDistrict Officials andCorrective Action

The results of our audit and recommendations have been discussed withDistrictofficials,andtheircomments,whichappearinAppendixA, have been considered in preparing this report.District officialsgenerally agreed with our recommendations and indicated they planned to initiate corrective action.

The Board has the responsibility to initiate corrective action. Pursuant toSection181-boftheNewYorkStateTownLaw,awrittencorrectiveactionplan(CAP)thataddressesthefindingsandrecommendationsinthisreportmustbepreparedandforwardedtoourofficewithin90days.Totheextentpracticable,implementationoftheCAPmustbeginbytheendofthenextfiscalyear.FormoreinformationonpreparingandfilingyourCAP,pleaserefertoourbrochure,Responding to an OSC Audit Report,whichyou receivedwith thedraft audit report.TheBoardshouldmaketheCAPavailableforpublicreviewintheDistrictSecretary/Treasurer’soffice.


Mandatory Training

NewYorkStateTownLaw(TownLaw)requireselectedorappointedfire district commissioners to complete an Office of the StateComptroller-approvedtrainingcoursewithin270daysof theirfirstdayofoffice.Thetrainingcoversthecommissioners’legal,fiduciary,financial,procurementandethicalresponsibilities.Specifically,thistraining includesprocurements anddispositionof assets, includingcompetitive bidding, procedures for procurements for whichcompetitivebiddingisnotrequired,maintenanceofassetinventoriesand the sale or other disposition of district assets. This training course is offered on multiple dates and in various locations across the State to facilitate attendance. Commissioners are required to complete the trainingeachtimetheyareelected, re-elected,appointedorre-appointedtooffice.

ThreeoftheDistrict’sfiveFireCommissionershavenotattendedthemandatory training, as requiredbyTownLaw.OneCommissionerwasre-electedin2012whileanotherCommissionerwasre-electedin 2011, but neither completed the required training. The thirdCommissioner, re-elected in 2010, registered for the class but didnot attend even though the District paid for the class. The District Secretary/Treasurer indicated that the Commissioners feel the training is unnecessary because they have many years of experience.

The lack of Board training may contribute to the lack of oversight of keyDistrictoperationsthatweidentifiedduringouraudit.

1. Each Commissioner should complete the required training within 270daysoftakingoffice,asrequiredbyTownLaw.

Recommendation


Procurement

AneffectiveprocurementprocesscanhelptheDistrictobtainservices,supplies and equipment of the right quality and quantity from the best qualifiedandlowest-pricedsource,incompliancewithBoardpolicyand legal requirements. This process helps the District expend taxpayer dollarsefficientlyandhelpsguardagainst favoritism,extravaganceand fraud. Unless an exception applies, General Municipal Law(GML)requirestheBoardtoawardpurchasecontractsinvolvinganexpenditureofmore than$20,000 to the lowest responsiblebidderoron thebasisofbestvalue (i.e., competitiveoffer) andcontractsforpublicworkinvolvingexpendituresofmorethan$35,000tothelowest responsible bidder.

GMLstatesthatgoodsandservicesthatarenotrequiredbylawtobecompetitively bid must be procured in a manner to assure the prudent and economical use of public moneys in the best interests of the taxpayers. It further provides that the Board require in its policies and proceduresthat,withcertainexceptions,theDistrictsecurethroughalternative proposals, by a request for proposals (RFP) process orquotations, for such goods and services, including professionalservices. Webelieveusingacompetitivemethod, suchasanRFPprocess, helps ensure that the District obtains needed qualifiedservices upon the most favorable terms and conditions and in the bestinterestofthetaxpayers.Tofurtherthoseobjectives,theBoard,asrequiredbyGML,adoptedprocurementpoliciesandproceduresto govern the purchases that are not subject to competitive bidding. The Board should also have written agreements or contracts with the District’s vendors and monitor payments to ensure that prices paid are accurate.

The District did not always use competitive methods to procure goodsandservices,asrequiredbyGMLanditsprocurementpolicy.TheDistrictpaid393vendorsatotalof$3,789,711duringtheauditperiod.Weselectedandreviewedpaymentsto20vendorswhowerepaidapproximately$574,502andfoundthattheDistrictdidnotusecompetitive methods when procuring goods and services from 12 vendorsthatwerecollectivelypaid$414,878.Additionally,theBoarddid not monitor payments made to four vendors that received a total of$36,247morethanthetermsoftheiragreementswiththeDistrict.The Board also did not consistently enter into written agreements with the District’s vendors.Without a written agreement, Districtofficialsdonothaveameansofdeterminingwhetherrateschargedareaccurate.Finally,theBoarddidnotproperlyusestandardizationasamethodofefficientlyprocuringgoodsandservices.


Competitive Bidding – The District made purchases of certain goods orservicestotaling$251,288fromfivevendors,whichexceededtheGMLdollar threshold forbidding.TheDistrictdidnot solicitbidsforpurchasesfromfourvendorstotaling$217,694.Forexample,theDistrict did not solicit bids when selecting a venue to provide catering servicesforthe2013and2014installationdinners,whichcostatotalof$91,836.2Inaddition,forthreeofthefivevendorswhowerepaida totalof$125,858, therewerenowrittencontracts. Forexample,avendorwaspaidatotalof$59,568forsupplieswithoutawrittencontract.

Professional Services – The District made payments to four professionalserviceproviderstotaling$145,676fortheauditperiod.However,Districtofficialsdidnotsolicitcompetitionwhenprocuringany of these services. For example, the District paid $61,560 formedical services without issuing an RFP to procure the service. The District also did not have a written contract with this vendor. While the District had agreements with the other two vendors for computer andlegalservices,theDistrictcollectivelypaidthem$20,204morethan the terms of their agreements.

Written Quotes – The District made payments to eight vendors totaling$147,903forgoodsandservices.However,theDistrictpaidonevendor$21,873forsmallequipmentbutdidnotsolicitquotes.Additionally,while theDistricthadcontractswith twovendors forlandscapingandHVAC3work,theDistrictcollectivelypaidthesetwovendors$16,043morethanthetermsoftheagreements.

Standardization – The Board may standardize and award purchase contractsforparticulartypesorkindsofequipment,material,suppliesorservicesbyadoptingaresolution.Theresolutionmuststatethat,forreasonsofefficiencyoreconomy,thereisneedforstandardizationand include a full explanation of the reasons for its adoption. Upon theadoptionofaproperstandardizationresolution,theDistrictmayprovide in its specifications for a particular make or brand to theexclusionofothercompetitors.Theuseofastandardizationresolution,however,isnotanexceptiontothecompetitivebiddingandofferingrequirements ofGML.Therefore, a resolution to standardize doesnot eliminate the need to award the purchase contract on the basis

2 InlightofaseriesofstatutoryamendmentstotheGML,itappearsthatservices,other than those necessary for the completion of a public works contract governed bytheprevailingwagerequirementsofArticle8oftheNewYorkStateLaborLaw(e.g.,buildingconstruction),arenowgenerallycategorizedunderthestatuteas“purchasecontracts”andnot“contractsforpublicwork.”Therefore,itappearsthat the District could have awarded the catering service by soliciting competitive bids or offers.

3 Heating,ventilationandairconditioning


ofa competitivebidoroffer,unless anexceptionapplies.WhenacompetitivebidorofferisnotrequiredbyGML,theDistrictisstillrequired to comply with its own procurement policy.

The District’s organizational meeting minutes dated January 10,2013andJanuary9,2014includeresolutionstostandardizecarbonmonoxidedetectors,firefightingturnoutgearandfirepolicegearbypurchasing these items by specific brand names.4 In this case, thestandardized items were below the dollar threshold and did not require the District to award the contracts on the basis of a competitive bid or offer.However,theDistrictwasstillrequiredtocomplywithitsownprocurement policy. The District paid one vendor associated with theseproductsatotalof$21,873butdidnotobtainquotesforthesegoods as provided for in the District’s procurement policy.

Additionally, the sameorganizationalminutes included resolutionswhichstandardizedthreespecificvendorsforemergencylightingandradioinstallations,firealarmsandaccesssystemsandhosetesting.WhiletheBoardhastheauthority, inappropriatecircumstances,tostandardizeaparticularbrandnameormakeofequipment,material,supplyorservice,thereisnoauthorityfortheBoardtostandardizespecificvendors.Thesethreevendorswerecollectivelypaidatotalof$29,635.Asaresult,theDistrictappearstohavelimitedcompetitionand may not have procured goods and services at the best value in accordancewithGMLorDistrictpolicy.

The Board believes it is in the District’s best interest to purchase specificmakesorbrandsofproductstomaintainconsistencysothatvolunteers are familiar with equipment and products and do not have tocontinuallylearntousenewequipmentorproducts.However,theDistrict still needs to procure the goods and services in accordance with GML and its procurement policy.When purchases aremadewithoutsolicitingcompetition,thereislittleassurancethatgoodsandservices are procured in the most prudent and economical manner andwithout favoritism. Moreover,withoutawrittenagreementorcontract,Districtofficialsdonothaveareadymeansofdeterminingwhether rates charged are accurate.

TheBoardshould:

2. Closely monitor the purchasing process to ensure that purchasesaremadeinaccordancewithGMLandtheDistrict’sprocurement policy.

4 We note that the resolutions did not include any explanation or reasons for the need to standardize such items.

Recommendations


3. Consider revising its procurement policy to require acompetitive process for procuring professional services.

4. Enter into written agreements with all vendors that detail the goods and services to be provided as well as the cost for those goods and services.

5. Monitorpaymentstoensurethattheyareinaccordancewiththe terms of the agreements.

6. Properly document the required process to standardize the purchase of goods and services.

7. Ensure that it only standardizes procurements of goods and servicesandnotspecificvendors.


APPENDIX A

RESPONSE FROM DISTRICT OFFICIALS

TheDistrictofficials’responsetothisauditcanbefoundonthefollowingpage.


APPENDIX B

AUDIT METHODOLOGY AND STANDARDS

Our overall goals were to determine whether all Board members attended the required training to assist ineffectivelyoverseeingtheDistrict,whethertheDistrictusedcompetitivemethodswhenprocuringgoods and services and whether goods and services were paid based on written agreements.

• WerequestedallthecertificatesfromtherequiredBoardOversighttraining.

• Weobtainedalistofvendorsandtotalamountspaidfortheauditperiod.Weselectedfiveofthehighestpaidvendorssubjecttobids,threeofthehighestpaidvendorssubjecttoRFPsandnine of the highest paid vendors subject to quotes during the audit period.

• We selected for testing all the vendors and products thatwere listed in the organizationalmeetingminutes,whichexpandedthenumberofvendorstoatotalof20.

• Weselectedthehighestclaimforeachvendorandverifiedthatthevendorswerepaidaccordingtotheircontractsoragreements,whenavailable.Wereviewedinvoices,contractsandothersupportingdocumentation,suchasquotes,bidsandStatecontractdocuments,whenapplicable,and compared them to invoices to determine any overpayments.

WeconductedthisperformanceauditinaccordancewithGAGAS.Thosestandardsrequirethatweplanandperformtheaudittoobtainsufficient,appropriateevidencetoprovideareasonablebasisforourfindingsandconclusionsbasedonourauditobjectives.Webelieve that theevidenceobtainedprovidesareasonablebasisforourfindingsandconclusionsbasedonourauditobjectives.


APPENDIX C

HOW TO OBTAIN ADDITIONAL COPIES OF THE REPORT

OfficeoftheStateComptrollerPublicInformationOffice110StateStreet,15thFloorAlbany,NewYork12236(518)474-4015http://www.osc.state.ny.us/localgov/

Toobtaincopiesofthisreport,writeorvisitourwebpage:


APPENDIX DOFFICE OF THE STATE COMPTROLLER

DIVISION OF LOCAL GOVERNMENTAND SCHOOL ACCOUNTABILITYAndrewA.SanFilippo,ExecutiveDeputyComptroller

GabrielF.Deyo,DeputyComptrollerNathaalieN.Carey,AssistantComptroller

LOCAL REGIONAL OFFICE LISTING

BINGHAMTON REGIONAL OFFICEH.ToddEames,ChiefExaminerOfficeoftheStateComptrollerStateOfficeBuilding-Suite170244 Hawley StreetBinghamton,NewYork13901-4417(607)721-8306Fax(607)721-8313Email:[email protected]

Serving:Broome,Chenango,Cortland,Delaware,Otsego,Schoharie,Sullivan,Tioga,TompkinsCounties

BUFFALO REGIONAL OFFICEJeffreyD.Mazula,ChiefExaminerOfficeoftheStateComptroller295MainStreet,Suite1032Buffalo,NewYork14203-2510(716)847-3647Fax(716)847-3643Email:[email protected]

Serving:Allegany,Cattaraugus,Chautauqua,Erie,Genesee,Niagara,Orleans,WyomingCounties

GLENS FALLS REGIONAL OFFICEJeffreyP.Leonard,ChiefExaminerOfficeoftheStateComptrollerOne Broad Street PlazaGlensFalls,NewYork12801-4396(518)793-0057Fax(518)793-5797Email:[email protected]

Serving:Albany,Clinton,Essex,Franklin,Fulton,Hamilton,Montgomery,Rensselaer,Saratoga,Schenectady,Warren,WashingtonCounties

HAUPPAUGE REGIONAL OFFICEIraMcCracken,ChiefExaminerOfficeoftheStateComptrollerNYSOfficeBuilding,Room3A10250VeteransMemorialHighwayHauppauge,NewYork11788-5533(631)952-6534Fax(631)952-6530Email:[email protected]

Serving:NassauandSuffolkCounties

NEWBURGH REGIONAL OFFICETennehBlamah,ChiefExaminerOfficeoftheStateComptroller33AirportCenterDrive,Suite103NewWindsor,NewYork12553-4725(845)567-0858Fax(845)567-0080Email:[email protected]

Serving:Columbia,Dutchess,Greene,Orange,Putnam,Rockland,Ulster,WestchesterCounties

ROCHESTER REGIONAL OFFICEEdwardV.Grant,Jr.,ChiefExaminerOfficeoftheStateComptrollerThe Powers Building16WestMainStreet–Suite522Rochester,NewYork14614-1608(585)454-2460Fax(585)454-3545Email:[email protected]

Serving:Cayuga,Chemung,Livingston,Monroe,Ontario,Schuyler,Seneca,Steuben,Wayne,YatesCounties

SYRACUSE REGIONAL OFFICERebeccaWilcox,ChiefExaminerOfficeoftheStateComptrollerStateOfficeBuilding,Room409333E.WashingtonStreetSyracuse,NewYork13202-1428(315)428-4192Fax(315)426-2119Email:[email protected]

Serving:Herkimer,Jefferson,Lewis,Madison,Oneida,Onondaga,Oswego,St.LawrenceCounties

STATEWIDE AUDITSAnnC.Singer,ChiefExaminerStateOfficeBuilding-Suite170244 Hawley Street Binghamton,NewYork13901-4417(607)721-8306Fax(607)721-8313

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