NYC Comptroller John C. Liu Statement on CITYTIME...

In response to questions about today’s additional criminal charges relating to CityTime, New York City Comptroller John C. Liu issued the following statement:

“Today’s announcement unfortunately sheds more light on just how flawed the management of the CityTime project was,” said Comptroller John C. Liu. “According to the indictment ‘virtually the entirety of the more than $600 million that was paid to SAIC was tainted directly or indirectly, by fraud.’ New Yorker’s can hope that this will eventually lead to restitution for the hundreds of millions of dollars paid on an out-of-control project, years overdue and, ten-fold over budget.”

Comptroller John C. Liu’s Record on CityTime

Jan. 1, 2010	Comptroller John C. Liu takes office, and makes the elimination of fraud, waste and abuse his top priority.
Feb. 9, 2010	Rejected additional contract related to CityTime.
Feb. 25, 2010	Initiates audit of CityTime Project Oversight.
Mar. 3, 2010	Liu calls on Mayor to freeze all payments associated with CityTime; appoints new representative from the Comptroller’s Office to OPA.
Sept. 28, 2010	Liu and mayor Bloomberg announce agreement to finish installation of CityTime at no additional cost.

News & Notes from NYC Comptroller John C. Liu

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NYC COMPTROLLER JOHN C. LIU ON CITYTIME

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Comptroller John C. Liu issued the following statement today:

“My office’s review of the CityTime project, which defrauded taxpayers of millions of dollars, has not interfered with the ongoing criminal investigation, nor have we been informed that it has. We applaud the U.S. Attorney for charging seven people and recovering $28 million to date. We are committed to working cooperatively with all law enforcement agencies.”

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COMPTROLLER LIU STATEMENT ON EDC LIVING WAGE STUDY

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City Comptroller John C. Liu stated the following in response to questions about a recently completed study commissioned by the NYCEDC, “The Economic Impacts on New York City of Proposed Living Wage Mandate.”

“The EDC’s claim that a living wage kills jobs shows just how distorted the agency’s operations have become. The proposed living wage would be a requirement on new projects that are heavily subsidized by taxpayers. It may curtail the number of new minimum wage jobs, with the hope that these new jobs would then pay a decent wage. The claim of job losses is rhetoric at its worst.

NYC Comptroller John C. Liu Releases NYC Claims Report

Lawsuit Payouts Declined by 7% in FY 2010,

But City Agencies Can Do More to Save Taxpayers

Tort Claims Payments Once Again Topped Half a Billion Dollars

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New York City Comptroller John C. Liu today released his Claims Report for Fiscal Years 2009 and 2010.* The report, the first under Comptroller Liu’s tenure, provides a comprehensive examination of data regarding claims filed against the City and analyzes recent trends.

Comptroller Liu’s report shows that in FY 2010 the City paid out $520.6 million in personal injury and property damage tort settlements and judgments; seven percent less than FY 2009, when the City paid $559.9 million.

“City agencies generally work hard to serve our residents, but we need to collectively minimize and prevent costly settlements that continue to hover at a half-billion dollars annually.” Comptroller Liu said. “My office will continue to work with Corporation Counsel to reduce the overall cost of litigation and settlements while being fair to people who have been harmed.”

In the Mayor’s Fiscal Year 2012 Executive Budget, the City has budgeted $655 million for the settlement of claims. Comptroller Liu testified last week that an analysis by his office deemed that number overestimated potential payouts by roughly $50 million.

Tort Claims Detail:

The report found that the New York City Police Department (NYPD), Health and Hospitals Corporation (HHC), and the New York City Department of Transportation (DOT) accounted for 67 percent of total tort claims paid in FY 2010.

The NYPD surpassed HHC in total claims payouts for the first time in 30 years. The City paid $135.3 million in FY 2009 and $135.8 million in FY 2010 on behalf of the NYPD. By comparison, claims against HHC cost the City slightly less, totaling $134.9 in FY 2009 and $134.4 million in FY 2010.

Comptroller Liu cited HHC’s success in risk and litigation management and noted that in addition to the NYPD, the DOT and Department of Education (DOE) may benefit from a pilot program replicating the HHC model of proactive management to reduce the costs incurred by the City. The Comptroller also suggested the Mayor’s Management Report track and publish agency claims data.

“This would better highlight agency efforts with regards to claims and civil litigation, and identify areas where greater risk management is needed,” Comptroller Liu said. “By posting this information the City will increase fiscal accountability.”

Click on image to enlarge

Non-Tort Claims:

The Comptroller’s Office also settles non-tort claims. These claims include disputes between contractors and City agencies, salary claims, and Department of Education tuition claims. In FY 2010, non-tort payments jumped to $165.1 million, up from $94.5 million the year before. The primary cause of this increase is DOE tuition reimbursement settlements, which totaled $132.9 million in FY 2010.

DOE tuition reimbursement claims arise when the City is unable to provide the necessary resources to special needs students. As a result, these students attend private schools for instruction and the City pays the tuition after a claim is filed. Comptroller Liu has recommended that the DOE take a more proactive view of their risk management programs to help drive down these costs.

Additional Findings:

• The Comptroller’s Office early settlement of claims is estimated to have saved the City $17.2 million in FY 2009 and $18.2 million in FY 2010, by working in cooperation with other City agencies and streamlining processes.
• In FY 2010, 2,286 defective sidewalk claims were filed against the City, the lowest number in a decade. As a City Councilman, Comptroller Liu authored and was the prime sponsor of Local Law 49, which amended the City Administrative Code in relation to liability for sidewalk claims. As a result of the legislation, the City has seen a significant decrease in the amount of taxpayer funds paid out to settle these claims.
• The Comptroller’s Office re-evaluated its agreement with Cybersettle, an electronic settlement program, and determined that the same goal could be accomplished more efficiently by in-house staff than through an outside consultant — saving the City $600,000 annually.
• The Comptroller’s Office collected a record $1.3 million as part of its Affirmative Claims program, in which the office pursues monetary reimbursement from companies who damage City property.
• Personal injury claims accounted for 98 and 99 percent of tort settlements in FY 2009 and FY 2010 respectively.
• The cost of civil rights claims increased 67 percent in FY 2010 to $78.7 million, largely due to a December 2009 class action settlement of $33 million that challenged strip search procedures in Corrections Department facilities.
• Working with the State Attorney General, the Comptroller’s Office was able to secure $95,000 for a crime victim under the Son of Sam Law, which allows crime victims the opportunity to receive portions of monetary settlements awarded to those convicted of the crime.

Filing an eClaim:

As a result of legislation signed into law on March 24, 2010, the City is required to accept Notices of Claim via electronic means. As a result of the legislation, the New York City Comptroller’s Office successfully designed, developed and implemented the “eClaim” system within six months of the law, which allows a claimant to electronically file a claim and attach all necessary supporting documentation.

Background:

Under the New York City Charter, the Comptroller is responsible for settling and adjusting claims for and against the City. The report on claims data is published every two years.

*Data may not include all claims against the City that will ultimately be settled due to a time lag between when a settlement occurs and when settlements and updates are entered into the claims database. For the purpose of this report, “settlement and judgment costs,” liabilities,” “expenditures” or “amounts paid” are used interchangeably with “recorded settlements and judgments.”

Comptroller Liu credited Deputy Comptroller for Legal Affairs and General Counsel Ricardo Morales, as well as the Bureau of Law and Adjustment for their efforts in compiling the report.

The full report can be viewed at www.comptroller.nyc.gov.

NYC Comptroller John C. Liu on the Mayor’s Fiscal Year 2012 Executive Budget

New York City Comptroller John C. Liu today presented testimony before the New York City Council Finance Committee regarding Mayor Bloomberg’s Fiscal Year 2012 Executive Budget.

Comptroller Liu’s testimony as prepared for delivery is below:

Good afternoon Chairman Recchia and members of the Finance Committee, and thank you for allowing me the opportunity to present testimony on the Mayor’s Fiscal Year 2012 Executive Budget.

The Mayor’s FY 2012 Executive Budget totals $65.7 billion after various prepayments. The FY 2012 budget is the product of a series of actions which closed a $3.26 billion gap in the July 2010 Financial Plan stemming from a structural imbalance where expenditures exceeded revenues. The gap was further exacerbated by State actions that took place during the year.

While it is estimated that FY 2011 will end with a $3.217 billion surplus, when compared with the $3.646 billion surplus similarly transferred from FY 2010 to FY 2011, it becomes clear that in the current year, the City is drawing on more resources than it is generating. However, if past history is any indication we can anticipate that the year may end with a budgetary surplus.

Overall spending in the FY 2012 budget has decreased by 0.4 percent when compared to the FY 2011 budget. But these numbers mask the fact that while overall expenditures have been held flat, the City-funded portion of the budget has increased from 67.1 percent of the FY 2011 budget to 70.7 percent of the FY 2012 budget. The City-funded portion of the budget is $2.2 billion greater than the FY 2011 budget and $2.1 billion more than was planned a year ago. The Financial Plan assumes that by FY 2015 the City-funded portion of the budget will exceed 74.5 percent. This trend is a direct result of a reduction in State and Federal aid to New York City.

As we hear talk of layoffs and cutbacks it is critically important for the City to identify as many areas of savings as possible.

You are well aware of the outcome of my office’s work on the CityTime issue. As a result of our steadfast oversight, the project is now nearing completion without any additional cost to the taxpayers. While that may be good news, it does not make up for the fact that the costs ballooned from $68 million to more than $700 million. My office will continue to work closely with the investigative authorities on this issue in hopes of possibly recouping some of the money that has been allegedly funneled to subcontractors on the project.

In addition, it was a welcome sign that the Department of Education has decided to cancel a $43 million contract with another high priced consultant, Future Technology Associates, who have been suspected of utilizing subcontractors to overbill the City. My office has been conducting an audit into the vendor for quite some time and will continue to do so in order fully disclose what really went on.

While we are discussing the DOE, I would like to point out that a review of OMB documents within the past week has found that after years of looking the other direction, the Department of Education has decided to finally seek additional Medicaid reimbursement funding from the State for occupational and physical therapy and speech and language services. The Executive Budget assumes an additional $100 million in revenue as a result of increased Medicaid reimbursements on top of the previous estimate of $17 million presented in the Preliminary Budget.

My office has been working with the City’s Office of Management and Budget and the UFT to identify the actual value of funds eligible for the City. While the current estimate of $117 million is enough to significantly impact the cuts proposed to the classroom, we believe this to be a cautious estimate. The City may be eligible for greater reimbursements, which would free up funds for use elsewhere.

The $100 million in additional reserves have been allocated to cover various other expenses in the DOE budget, such as $48 million for general education non-personal service and $26 million for charter schools. These dollars and any additional Medicaid funds realized during Fiscal Year 2012 should be used to help offset the proposed teacher layoffs, which have a more direct negative effect on classroom services.

In the Executive Budget, the Mayor has allocated nearly $1 billion towards funding anticipated changes in the actuarial assumptions and methods used in computing pension contributions. The City actuary is currently reviewing an independent audit of the rate change and will offer his recommendations to the pension boards. While it is expected that the actuary will recommend a change in the assumed rate of return of the City’s pension funds, there is more uncertainty about what other modifications would be proposed. As such, the eventual cost of the any recommendations is unknown at this point. It is also uncertain as to when the recommendations and the eventual changes would take effect.

Another potential area of savings is through the City’s settlement of claims. My office is responsible for authorizing monetary amounts of settlement where we feel the City may have been at fault for personal injury or property damage. The City has indicated that they expect a rise in the cost of settlements to occur. However, my office anticipates that based upon historical data, the City is overestimating this total by at least $50 million.

As always, my office will seek the most fair and equitable results in our claims settlement process and continue to act in the best interest of the taxpayer when doing so.

We have also identified some risks to the Mayor’s plan. Most significant is the assumption that contract discussions with the UFT and CSA will not result in any additional cost to the City. These are placed as risk because the Mayor has not budgeted for raises consistent with those of other municipal unions, and has instead relied on a labor strategy that uses productivity initiatives to offset cost.

Another risk to the Mayor’s plan is his underestimation of overtime. In fact, my office has estimated that the overtime costs will be upwards of $195 million more than the Mayor anticipates.

As we gradually move out of this recession, it is important to note that the City is continuing on a steady but slow path to recovery. Despite mostly positive indicators for the City’s short-term economic condition there exist the possibility of negative externalities that could hinder the current expansion. Factors outside of the City’s control such as rising energy prices, the continued depression of the construction industry specifically within the residential construction sector, and the potential European debt crisis can be expected to produce additional drag on the US and local economies.

One area that has shown strength is our City’s pension systems. After posting returns of 14 percent last Fiscal Year, the most recent data show that the funds are up more than 20 percent in the current year. These gains will help offset future payment towards the pension systems.

My office released a study last week, the first of its kind, which revealed the past decade of fluctuation in the markets will cause pension costs to rise in the short term. However, due largely to already enacted benefit reforms that took place between 1995 and 2009 the long term costs to the City will steadily decline. These projections are sound and have been verified by independent professional actuaries.

The study shows that over the next 30 years City pension costs as a percentage of the City's budget will decline from 11.4 percent in FY 2016 to 5.1 percent FY 2040.

I hope I was able to be helpful today in presenting an accurate look at the City budget, as well as provide some areas worth exploring during phase of the budget process. As always my office is available to assist you in any way necessary.

NYC Comptroller John C, Liu: High School Progress Reports Don't Measure Progress

Audit Finds that Department of Education’s Revisions to its High School

Grading System Leave Educators, Students Chasing a Moving Target

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New York City Comptroller John C. Liu announced that an audit of the Department of Education’s (DOE) High School Progress reports raised questions about the usefulness of the reports in comparing the yearly progress of schools.

“It’s troubling that a system that is used to decide school closings leaves teachers and students confused about what they need to do to improve,” Comptroller Liu said. “The Department of Education should not leave parents, educators or students in the dark when it’s deciding their fates.”

High School Progress Reports are a DOE accountability tool that assigns schools an annual grade of A through F. The Report grades play a significant role in the DOE’s decisions to reward high performing schools, perhaps with added funds, and restructure or close low-performing schools.

According to the audit, the DOE has revised the complex formula behind the grades every year. The frequent changes the agency has made to its grading and other formulas — without determining the impact of those changes — makes it difficult, if not impossible, to get a true picture of a school’s progress by comparing its grade from one year to the next. As a result, the High School Progress Reports paint an unreliable and confusing picture of a school’s progress or failure over time. Auditors recorded complaints from schools that the DOE’s lack of consistency made it difficult to set goals for students.

The audit focused on 10 high schools representing the five boroughs. It included three schools (Jamaica, Metropolitan Corporate Academy, and Norman Thomas high schools) that the DOE selected in January 2010 for closing.

CHIEF AMONG THE FINDINGS:

1. Inaccurate Picture of Year-to-Year Progress

The DOE’s changes to the formula behind the Progress Report grades make it difficult for parents and educators to measure a school’s performance from one year to the next.

The DOE says the Progress Report grades are meant as “a one-year snapshot” comparing one school against another in a given year, and not as a measure an individual school’s progress over time. Yet, the agency itself uses the formula to track achievement from one year to the next. For example, a school that receives a “C” three years in a row may be targeted for corrective action.

Example:

One school, Metropolitan Corporate Academy High School, which is set to close in 2014, improved its score every year from 2006 to 2010, but because of the DOE’s changing formula Metropolitan never rose above a “C.” In fact, the school fell to a “D” in the 2008-2009 school year even though its numeric score would have earned it a “B” under the 2006-2007 grading formula. It is impossible to tell to what extent Metropolitan’s scores reflect changes in its own performance or DOE’s changes to the grading formula. (See Table)

“The Comptroller’s audit of the High School Progress Reports demonstrates the difficulty of comparing a school’s letter grade over time when a school’s peer group composition and the cut scores for the grades change from one year to the next,” said Professor Aaron Pallas of Teachers College, Columbia University. “The recommendation that the DOE report high school progress report grades using both the old and new criteria would enable stakeholders both inside and outside of the schools to understand trends in school performance more completely.”

Action:

Since the audit, the DOE has posted an advisory on its website regarding year-to-year comparisons of High School Progress Report grades.

2. Lack of Communication

The audit determined that, while DOE met with school principals and others about changes, auditors found no evidence that it actually integrated feedback from them into the Progress Report. In fact, some educators told auditors that they felt as if they were chasing a moving target as they attempted to understand the changes that the DOE made to the grading formula each school year and to prepare students. The audit also found that the DOE did not do enough to inform schools what effect the changes to the grading system were expected to have on Progress Report grades.

“Taken alone, Progress Reports are an unreliable index for determining school closures or related high-stakes decisions,” said Professor David C. Bloomfield, chairman of the education department at the College of Staten Island. “Greater feedback by stakeholders, as recommended by the audit, might help to improve Progress Reports’ utility in this process.”

Action:

The DOE has since published materials summarizing and responding to feedback from educators and others involved in the 2010-2011 review process.

3. Data Reliability

The audit found that the data — student grades, Regents exam scores, and other information — that the DOE used to calculate each year’s Progress Report grades was representative of student data recorded in the DOE’s computer systems and verifiable. However, while the data in a given year was accurately recorded, it was not useful as a measure of an individual school’s progress over time.

RECOMMENDATIONS:

The DOE generally agreed with nine of the audit’s 10 recommendations and has begun to implement a number of them. However, the audit notes that “DOE inappropriately misinterpreted and even exaggerated, many of the audits ‘positive’ conclusions as an endorsement for the progress reports,” while simultaneously discounting its weaknesses.

SCOPE:

The audit was launched in March 2010 using data from the high schools’ 2008-2009 progress reports, the most recent data available at that time. The audit was expanded to include progress reports for the 2006-2007, 2007-2008, and 2009-2010 school years. In addition, auditors interviewed staff at the high schools in April and May 2010.

High School	Borough	2006-2007 Score/Grade	2007-2008 Score/Grade	2008-2009	2009-2010
ACORN Community HS	Brooklyn	63.3/B	64.4/A	65.4/B	71.7/A
Baruch College Campus HS	Manhattan	81.2/A	82.6/A	83.6/A	74.5/A
Curtis HS	Staten I.	64.2/B	59.4/B	68.8/B	69.8/B
DeWitt Clinton HS	Bronx	47.7/C	42.7/C	49.7/C	48.1/C
Flushing International HS	Queens	n/a	73.0/A	70.9/A	64.5/B
Jamaica HS	Queens	44/C	37.3/C	41.7/D	45/D
Metropolitan Corporate Academy HS	Brooklyn	35.9/C	39.1/C	43/1/D	48/C
New World HS	Bronx	n/a	97/A	92.1/A	85.6/A
Norman Thomas HS	Manhattan	33.4/D	29.7/D	36/D	36/F
Ralph R. McKee Career and Technical Education HS	Staten I.	63.8/B	67.6/A	79.5/A	76/A

BACKGROUND:

High School Progress Reports are a DOE accountability tool that assigns schools an annual grade (A through F) based on a variety of factors, including student performance, student progress, school environment, and comparisons between schools with similar populations. The letter grades were introduced in the 2006-2007 school year.

Comptroller Liu credited Deputy Comptroller for Audit H. Tina Kim and the Audit Bureau for presenting the findings. The full report is available at http://comptroller.nyc.gov/audits.

NYC Comptroller John C. Liu on Wal-mart

New York City Comptroller John C. Liu issued the following statement in response to questions concerning the NYC Pension Funds’ presentation at Wal-Mart’s annual meeting in Fayetteville, Arkansas today.

“Low prices are good, but it is Wal-Mart’s responsibility to ensure that it is not passing to its customers savings bought with abusive labor practices,” Comptroller Liu said. “Wal-Mart can and should do much more to hold its suppliers accountable for protecting human and workers’ rights. Wal-Mart can’t claim to be that bright yellow smiley face that we see around the world if its global suppliers don’t protect their workers from abuse or intimidation.”

The NYC Pension Funds’ shareholder proposal calls on Wal-Mart’s board to require that the company’s suppliers publish reports on their compliance with internationally recognized standards of human and workers’ rights. Kalpona Akter, a labor rights leader in Bangladesh and former garment worker, presented the proposal to Wal-Mart’s board of directors at the invitation of Comptroller Liu and the Funds.

The NYC Pension Funds hold 5,696,055 shares of Wal-Mart, Inc. valued at $305,023,745.25 million as of 6/2/2011.

NYC Comptroller John C. Liu's Remarks on City Time Scandal

Below are remarks by New York City Comptroller John C. Liu at a news conference on Wednesday, May 25, 4:30 p.m. regarding the CityTime project:

“Earlier this afternoon, my office was provided with a letter written to the Executive Director of the Financial Information Services Agency (FISA) by Science Applications International Corporation (SAIC), the prime contractor on the CityTime project. We were informed that SAIC had terminated their senior project manager who led the CityTime project.

“The name of that employee is Gerard Denault.

“SAIC has determined that Mr. Denault violated SAIC’s policies and standards with respect to timekeeping practices while working on CityTime. He routinely billed hours to the CityTime project that he did not in fact work.

“By their own admission, this latest development now implicates, for the first time in this scandal, SAIC. The very company entrusted by our City to build a timekeeping system for NYC employees has grossly mismanaged their own time keeping, and in the process over charged the city for sums of money – still to be determined.

“SAIC now says they will now refund $2,470,522 to the city coffers for the time Mr. Denault billed to hard working NYC taxpayers.

“A few moments ago I sent a letter to the Mayor because I believe we need to work together.

“I am asking him to join me in calling on the Department of Investigation along with all other relevant authorities to conduct a comprehensive review of other possible violations by SAIC, and I am proposing that the City withhold any future payments to SAIC pending the outcome of the investigations.

“This is a sad day for the New York City taxpayer.

“With the proposed budget cuts looming, we at least need to tightly manage expensive outside consultants.

“The public’s trust in government must be bolstered, and I am committed to working with the Mayor to do just that.”

Below is the full text of the letter sent to Mayor Bloomberg on May 25, 2011.

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May 25, 2011

Honorable Michael R. Bloomberg

Mayor

City Hall

New York, NY 10007

Re: Science Application International Corporation (SAIC)

Dear Mayor Bloomberg:

Today, we were informed by SAIC that they have terminated their project manager for CityTime. SAIC cited the project manager’s violation of SAIC’s policies and standards, specifically with regard to his time billed to the City of New York. Because SAIC cannot accurately calculate the amount that should have been billed to the City, SAIC will reimburse the City for this individual’s billed services. This repayment amounts to $2,470,522.

To date, the alleged fraud relating to CityTime has only involved subcontractors. This latest development now implicates the prime contractor and compels a comprehensive review of SAIC’s billings to the City, in particular, SAIC employees whose time was billed to the CityTime project.

I am directing my representative on the OPA board to introduce a resolution on the points below, and ask that your representative support the resolution:

• The Department of Investigation, along with all other relevant authorities, conduct a comprehensive review of other possible timekeeping violations; and
• The City withholds any outstanding payments to SAIC pending the outcome of the investigations.

I believe the above actions are necessary and as always, I am available to discuss any of these issues with you. Thank you.

Sincerely,

John C. Liu

View letter from SAIC to FISA: http://www.comptroller.nyc.gov/press/pdfs/SAIC-FISA-5-2011.pdf