Clarkstown Central School District

Transcription

1 O FFICE OF THE NEW YORK STATE COMPTROLLER DIVISION OF LOCAL GOVERNMENT & SCHOOL ACCOUNTABILITY Clarkstown Central School District Legal Services Costs Report of Examination Period Covered: July 1, 2008 June 30, M-168 Thomas P. DiNapoli

2 Table of Contents AUTHORITY LETTER 2 Page INTRODUCTION 3 Background 3 Objective 3 Scope and Methodology 3 Comments of District Officials and Corrective Action 3 LEGAL SERVICES COSTS 5 Costs of Comparable Districts 5 Contract Provisions 6 Seeking Competition for Legal Services 8 Recommendations 8 APPENDIX A Response From District Officials 10 APPENDIX B OSC Comment on the District s Response 14 APPENDIX C Audit Methodology and Standards 15 APPENDIX D How to Obtain Additional Copies of the Report 16 APPENDIX E Local Regional Office Listing 17 DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 11

3 State of New York Division of Local Government and School Accountability January 2011 Dear School District Officials: A top priority of the is to help school district officials manage their districts efficiently and effectively and, by so doing, provide accountability for tax dollars spent to support district operations. The Comptroller oversees the fiscal affairs of districts statewide, as well as districts 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 Education governance. Audits also can identify strategies to reduce district costs and to strengthen controls intended to safeguard district assets. Following is a report of our audit of the Clarkstown Central School District, entitled Legal Services Costs. This audit was conducted pursuant to Article V, Section 1 of the State Constitution and the State Comptroller s authority as set forth in Article 3 of the General Municipal Law. This audit s results and recommendations are resources for district officials to use in effectively managing operations and in meeting the expectations of their constituents. If you have questions about this report, please feel free to contact the local regional office for your county, as listed at the end of this report. Respectfully submitted, Offi ce of the State Comptroller Division of Local Government and School Accountability 2 OFFICE OF THE NEW YORK STATE COMPTROLLER

4 Introduction Background The Clarkstown Central School District (District) is located in the Town of Clarkstown, in Rockland County. The District is governed by the Board of Education (Board) which comprises seven elected members. The Board is responsible for the general management and control of the District s financial and educational affairs. The Superintendent of Schools (Superintendent) is the chief executive officer of the District and is responsible, along with other administrative staff, for the dayto-day management of the District under the direction of the Board. There are 14 schools in operation within the District, with approximately 9,150 students and 1,800 employees. The District s and budgeted expenditures were $161 and $164 million, respectively, and were funded primarily with local taxes, State aid and Federal aid. The District has contracts with two separate legal firms, one as general counsel and one as counsel for labor relations. The District s agreement with its general counsel also includes services for labor relations. The District spent approximately $498,800 and $398,700 for legal services in fiscal years and respectively. Objective The objective of our audit was to examine the District s legal services costs and determine if there are cost saving opportunities. Our audit addressed the following related question: Has the Board obtained legal services at the most favorable terms and in the best interest of District taxpayers? Scope and Methodology We examined the District s legal services costs for the period July 1, 2008 through June 30, For comparative purposes, we expanded our scope to July 1, We conducted our audit in accordance with generally accepted government auditing standards (GAGAS). More information on such standards and the methodology used in performing this audit are included in Appendix C of this report. Comments of District Officials and Corrective Action The results of our audit and recommendations have been discussed with District officials and their comments, which appear in Appendix A, have been considered in preparing this report. District officials generally agreed with our recommendations and indicated they planned to initiate corrective action. Appendix B includes our comment on an issue raised in the District s response letter. DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 33

5 4 OFFICE OF THE NEW YORK STATE COMPTROLLER The Board has the responsibility to initiate corrective action. Pursuant to Section 35 of the General Municipal Law, Section 2116-a(3)(c) of the Education Law and Section of the regulations of the Commissioner of Education, a written corrective action plan (CAP) that addresses the findings and recommendations in this report must be prepared and provided to our office within 90 days, with a copy forwarded to the Commissioner of Education. To the extent practicable, implementation of the CAP must begin by the end of the next fiscal year. For more information on preparing and filing your CAP, please refer to our brochure, Responding to an OSC Audit Report, which you received with the draft audit report. The Board should make the CAP available for public review in the District Clerk s office.

6 Legal Services Costs District officials have a fiduciary duty to monitor all costs incurred by the District. Written agreements for professional services provide the District, along with the party furnishing services, with a clearly defined and mutually agreed-upon basis for entitlement to compensation. Written agreements should include the timeframe and description of services to be provided, and may be used to verify that the fees charged are in accordance with Board resolutions. If managed effectively, procurement requirements can increase competition and reduce the cost of goods and services of acceptable quality. Seeking competition for professional services may also be an opportunity to generate cost savings The District has contracts with two separate legal firms, one as general counsel and one as counsel for labor relations. We found that there was a potential duplication of services in the terms and conditions stated in the two contracts. The District s agreement with its general counsel included services for labor relations, as did the labor relations counsel s contract. Neither contract was specific as to which type of labor relations each counsel would handle. For example, there was no indication in either contract whether legal services for labor relations were for teacher or civil service union contracts. Costs of Comparable Districts Our analysis of District expenditures shows that the District s legal costs were high relative to all other Districts statewide based on ST-3 1 filings, as shown in the following table. Per Pupil Costs for Legal Services Fiscal Year Statewide Average Clarkstown CSD Costs $34.68 $ $41.34 $53.59 Because of the variance between the statewide average and District cost, we examined legal services costs at comparable school districts in the Counties of Orange and Rockland to determine how much they expended on legal services. As the chart below indicates, the District s costs were higher than average each year compared to similar school districts. The District paid an average of 54 percent more for legal services than comparable school districts in the two counties over the last three fiscal years. 1 The ST-3 report provides comprehensive information about a school district by outlining its financial activities and transactions. The report depicts the financial condition of the school district over a given period of time. DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 55

7 East Ramapo CSD Haverstraw/ Stony Point CSD Monroe- Woodbury CSD Ramapo CSD Clarkstown CSD Difference per pupil Potential Savings Average Pupils 8,003 7,880 7,503 4,649 9,463 Legal Costs $265,462 $242,487 $147,777 $172,776 $207,126 $424,528 Per Pupil Cost $33.17 $30.77 $19.70 $37.16 $30.20 $44.86 $14.66 $138, Pupils 7,901 7,923 7,494 4,666 9,307 Legal Costs $385,607 $255,379 $130,257 $163,337 $233,645 $498,763 Per Pupil Cost $48.80 $32.23 $17.38 $35.01 $33.36 $53.59 $20.23 $188, Pupils 9,258 8,057 7,382 4,692 9,149 Legal Costs $363,043 $197,284 $178,570 $129,038 $216,984 $398,737 Per Pupil Cost $39.21 $24.49 $24.19 $27.50 $28.85 $43.58 $14.73 $134,807 Total Potential Savings $461,863 If the District had achieved the average costs of comparable school districts in the region, it would have saved as much as $462,000 2 in legal services costs during the three fiscal years. Contract Provisions Written contracts for legal services should clearly define the services to be provided and the amount to be charged for each service. Although the District may agree to retainer fees, the amount of such retainer fees should be minimized so that District officials can be sure the District is receiving an appropriate amount of legal services for the amounts charged. The District s retainer for its general counsel was $235,952 in ; the District paid an additional $65,000 to the same firm for billable services. 3 During the same period, the District s retainer for labor relations counsel was $23,500, and the District paid an additional $40,500 in billable services. 4 We reviewed the details of both contracts and determined there could be a potential duplication of services. For example under the general counsel s retainer the contract states that the following services are included: 6 OFFICE OF THE NEW YORK STATE COMPTROLLER 2 Amount is calculated by multiplying average per pupil cost by number of pupils in the District and subtracting the total from actual District legal costs : $138,739.21; : $188,316.99; $134,807.47; Total three years is $461, The labor relations law firms retainer of $23,500 covers 100 hours of legal services; any services over that are billable. There is no limit on the hours of legal services for general counsel. 4 The remaining $33,785 was spent on other miscellaneous legal costs.

8 Advice and consultation regarding all aspects of labor or employment relations for all union and nonunion employees. The labor relations counsel s contract states that the following services are included in the retainer: Advice as needed, oral or written, with respect to the interpretation and application of the collective bargaining agreements with the District s eight unions. The labor relations law firm was paid approximately $45,500 in and $65,000 in We believe that some, if not all, of the service should have been covered by the retainer for the general counsel. Therefore, the District may have paid an additional $110,500 more during the two fiscal years for legal services than necessary. District officials informed us that the general counsel handled labor relations involving the teachers union and that the labor relations counsel handled cases involving the civil service unions. However, neither contract made this differentiation; therefore, it is unclear why two firms were required to handle labor relations at the District. We noted that none of the comparable school districts had two legal firms on retainer. Subsequent to our audit fieldwork, District officials ended their relationship with one of the two legal firms and retained only one firm for the fiscal year. We reviewed the contracts of the comparable school districts and found a variety of approaches to legal service contracts. The contracts provided for legal services as follows: For an annual retainer of $23,400 one of the comparable school districts was entitled to two hours per week of attorney conference time. This equated to approximately $225 per hour and additional hours above the two hours per week were billed at $195 per hour. For an annual retainer of $55,000 another comparable school district received 330 hours of legal services annually; this equated to approximately $167 an hour and was billed $210 hourly thereafter. For an annual retainer of $40,000 one of the school districts received the appearance of legal counsel at all regular and special Board meetings, and then was billed $200 per hour for all special education and general legal matters. The fourth school district did not pay any retainer, but contracted with their general counsel for $120 per hour for all services. DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 77

9 We examined invoices for the fiscal year. Unlike the examples above, the District s contract with its general counsel did not specify the number of hours it would receive for the retainer amount. The District s general counsel also did not provide itemized invoices for the hours worked on retainer. Because the District s contract with the law firm did not specify the amount of legal services the firm would provide for the $235,952 retainer amount and the invoices did not indicate the amount of work performed, District officials could not determine the hourly rate that the retainer represented. If the District had negotiated a contract that was more specific in services to be provided and hours of service to provide, we believe they would have been able to reach an arrangement more beneficial to the taxpayers for legal services. Seeking Competition for Legal Services The District s adopted purchasing policy states that invitations for proposals will be sought from appropriate individuals or firms for professional services and requires that services be procured in a manner so as to assure the prudent and economical use of public money in the best interest of the taxpayer. In 2006, the audited the District and found that District officials did not obtain proposals or quotes, or solicit any form of competition for eight different professional service providers as required by their procurement policy. Among those services tested in 2006 were legal services. The District s corrective action plan (CAP) dated May 10, 2007 stated that requests for proposals were now being used by the purchasing department for professional services. District officials have not complied with their purchasing policy as indicated in their CAP. As a result, District officials entered into the two legal service contracts without soliciting competition. The District has retained the services of the same general counsel since 1949 and the same labor relations counsel for the past 16 years. Without soliciting competition District officials cannot be sure that they are obtaining these services in the most favorable terms and in the best interest of District taxpayers. Furthermore, taxpayers have no assurance that District officials procured these services in the most prudent and economical manner and without favoritism. Recommendations 1. The Board should enter into written contracts with legal service providers that fully detail the services to be provided. 2. The Board should analyze their counsel needs and determine if two legal firms are necessary to provide legal services for labor relations. 8 OFFICE OF THE NEW YORK STATE COMPTROLLER

10 3. The Board should ensure that District officials obtain proposals for legal services in accordance with the District s purchasing policy. DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 99

11 APPENDIX A RESPONSE FROM DISTRICT OFFICIALS The District officials response to this audit can be found on the following pages. 10 OFFICE OF THE NEW YORK STATE COMPTROLLER

12 See Note 1 Page 14 DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 1111

13 12 OFFICE OF THE NEW YORK STATE COMPTROLLER

14 DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 13

15 APPENDIX B OSC COMMENT ON THE DISTRICT S RESPONSE Note 1 Because our audit was limited to a review of the District s legal costs, we did not audit the District s overall operational costs or its costs per pupil. 14 OFFICE OF THE NEW YORK STATE COMPTROLLER

16 APPENDIX C AUDIT METHODOLOGY AND STANDARDS Our overall goal was to assess the cost saving opportunities that could be achieved by District officials by seeking competition when procuring legal services. To accomplish this we analyzed financial data from districts statewide and compared revenues and expenditures to those of the District. School districts must annually file an Annual Financial Report (Form ST-3). OSC prescribes a Uniform Systems of Accounts which provides for a standard chart of accounts and fund structure that is the basis for the ST-3. The ST-3 report provides comprehensive information about a school district by outlining its financial activities and transactions. We reviewed ST-3 5 filings for fiscal year and to assess the level of expenditures that were made for legal services and compared the District s costs to statewide averages. The District paid an average of 30 percent more for legal services than other school districts statewide over the two fiscal years. We compared the ST-3 filings of four districts that had similar student population to the District in the geographical area. We also reviewed the following: Board minutes and resolutions Budget status reports for various account codes 2008 and 2009 audited financials Legal contracts for the District s attorneys District s prior audit report and District s CAP , and ST-3s for our statewide comparison of legal costs For the four comparative Districts, we reviewed each District s vendor transaction reports, contracts, RFP documentation and student enrollment data. We conducted our 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 objective. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objective. 5 The ST-3 report provides comprehensive information about a school district by outlining its financial activities and transactions. The report depicts the financial condition of the school district over a given period of time. DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 15

17 APPENDIX D HOW TO OBTAIN ADDITIONAL COPIES OF THE REPORT To obtain copies of this report, write or visit our web page: Public Information Office 110 State Street, 15th Floor Albany, New York (518) OFFICE OF THE NEW YORK STATE COMPTROLLER

18 APPENDIX E OFFICE OF THE STATE COMPTROLLER DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY Steven J. Hancox, Deputy Comptroller LOCAL REGIONAL OFFICE LISTING ALBANY REGIONAL OFFICE Kenneth Madej, Chief Examiner 22 Computer Drive West Albany, New York (518) Fax (518) Muni-Albany@osc.state.ny.us Serving: Albany, Columbia, Dutchess, Greene, Schenectady, Ulster counties HAUPPAUGE REGIONAL OFFICE Ira McCracken, Chief Examiner NYS Office Building, Room 3A10 Veterans Memorial Highway Hauppauge, New York (631) Fax (631) Muni-Hauppauge@osc.state.ny.us Serving: Nassau, Suffolk counties BINGHAMTON REGIONAL OFFICE State Office Building, Room Hawley Street Binghamton, New York (607) Fax (607) Muni-Binghamton@osc.state.ny.us Serving: Broome, Chenango, Cortland, Delaware, Otsego, Schoharie, Sullivan, Tioga, Tompkins counties NEWBURGH REGIONAL OFFICE Christopher Ellis, Chief Examiner 33 Airport Center Drive, Suite 103 New Windsor, New York (845) Fax (845) Muni-Newburgh@osc.state.ny.us Serving: Orange, Putnam, Rockland, Westchester counties BUFFALO REGIONAL OFFICE Robert Meller, Chief Examiner 295 Main Street, Suite 1032 Buffalo, New York (716) Fax (716) Muni-Buffalo@osc.state.ny.us Serving: Allegany, Cattaraugus, Chautauqua, Erie, Genesee, Niagara, Orleans, Wyoming counties GLENS FALLS REGIONAL OFFICE One Broad Street Plaza Glens Falls, New York (518) Fax (518) Muni-GlensFalls@osc.state.ny.us Serving: Clinton, Essex, Franklin, Fulton, Hamilton, Montgomery, Rensselaer, Saratoga, Warren, Washington counties ROCHESTER REGIONAL OFFICE Edward V. Grant, Jr., Chief Examiner The Powers Building 16 West Main Street Suite 522 Rochester, New York (585) Fax (585) Muni-Rochester@osc.state.ny.us Serving: Cayuga, Chemung, Livingston, Monroe, Ontario, Schuyler, Seneca, Steuben, Wayne, Yates counties SYRACUSE REGIONAL OFFICE Rebecca Wilcox, Chief Examiner State Office Building, Room E. Washington Street Syracuse, New York (315) Fax (315) Muni-Syracuse@osc.state.ny.us Serving: Herkimer, Jefferson, Lewis, Madison, Oneida, Onondaga, Oswego, St. Lawrence counties DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 17