Erie County Comptroller Mark C. Poloncarz today released an audit (the "Audit") of Erie County's (the "County") Department of Social Services' ("DSS") internal controls over cash receipts, cash disbursements and near-cash equivalents for the period January 1, 2007 to January 31, 2008. The Audit specifically examined Niagara Frontier Transportation Authority ("NFTA") bus passes purchased by DSS and distributed to eligible clients.

The Erie County Comptroller's Office commenced the Audit in part to follow up and review DSS' implementation of recommendations made by the Comptroller's Office in 2006 to help prevent fraud or abuse over such passes.

In February 2006, investigators from the Erie County Sheriff's Office arrested a number of individuals who had allegedly purchased NFTA bus passes stolen from DSS. Initial estimates of the value of the passes totaled $30,000. However, in close cooperation with the Erie County District Attorney's Office, the Erie County Comptroller's Office determined that approximately $337,000 worth of passes had been stolen.

In late May 2006, following a four month investigation by the offices of the District Attorney, Sheriff, and Comptroller, the Sheriff's Office determined that the bus passes had been stolen from the County by a DSS employee. That DSS employee and her accomplice ultimately pled guilty to various charges. During the investigation, the Comptroller's Office found problems in the way that bus passes were handled within DSS.

"Our auditors have completed the audit of DSS and have identified a number of issues that must be addressed going forward," said Comptroller Poloncarz. "Our Audit found troubling problems regarding the failure of DSS management to implement and maintain recommendations made in 2006 to stop or prevent fraud or abuse of bus passes."

The Audit found that deficiencies exist in DSS internal controls and revealed the following significant findings:

• Following the 2006 theft of bus passes, DSS initially implemented Comptroller Office recommendations to better account for bus passes but then later returned to an old system that is flawed under which the prior fraud occurred.


• Individual DSS employees maintain responsibility for custody of bus passes and record keeping, a violation of internal controls.


• DSS contract agencies that distribute NFTA bus passes do not adhere to their contracts and there is a risk of fraud of bus passes.


• Some DSS contract agencies do not require DSS clients to provide identification to receive their bus passes – a violation of their contract with the County.


• Some DSS contract agencies do not require DSS clients to return their prior month's bus pass to before receiving a new pass – a violation of their contract with the County and a potential for fraud.


• DSS maintains inaccurate client distribution lists and addresses for bus pass dissemination via US Postal Mail. This raises the specter that other public benefit assistance via DSS may be directed to erroneous addresses.


• DSS does not regularly or routinely conduct reconciliations of bus passes and paper records, raising the potential for fraud or waste.


• Contract agencies do not reconcile bus token balances and have poor inventory control.


• DSS does not send agency contracts to the County's Department of Law for review as to form, a technical violation of the County Administrative Code.

"The Audit identifies a number of serious issues regarding the failure of DSS and some of its contract agencies to properly track County-funded bus passes," said Poloncarz. The Comptroller expressed concern that prior recommendations for tightening internal controls to help prevent fraud and abuse were ultimately halted by DSS despite the conviction of a DSS employee for fraud. Poloncarz added: "It is disappointing to see that following a massive theft of $337,000 of County-purchased bus passes, DSS failed to follow enhanced internal control measures designed to help prevent future cases of such fraud."

The Audit found several positive internal control features at DSS.

• DSS policies and procedures concerning electronic benefit transfer cards safeguard the cards and prevent unauthorized credit from being applied to the cards.


• DSS has procedures in use, designed to detect billing errors by medical transportation providers.

A copy of the Audit can be found at: http://www.erie.gov/comptroller/county_audits.asp.