The recently released report on the Office of the State Comptroller audit of the Jamesport Fire District (you can download it below) has the following to say regarding signing others in for activities:
120 points were supported by attendance records where the member did
Fourteen points were supported by manual attendance records where
What Do We Recommend?
Clearly, the State believes that members should not sign each other in. In general, most would agree that everyone should sign themselves into the activity, and the practice of having a chief or other officer sign a person in should be avoided. If it absolutely has to happen, it would be better if two officers vouched for the person.
Keep in mind, although this audit was focused on LOSAP, there are other reasons, in particular workers' comp coverage and benefits, why the individual should sign in himself/herself.
Download the report and read it below:
Last time we looked at a recent audit report released by the State Comptroller. Here is another section of the report, regarding the Miscellaneous Category:
Miscellaneous – GML authorizes a service award program to provide points for
“miscellaneous activities,” with one point per activity (up to a maximum of 15
points). For this purpose, GML defines “miscellaneous activities” as “participation
in inspections and other activities covered by the volunteer firefighters’ benefit
law and not otherwise listed.” The District’s system awards points for certain
miscellaneous activities such as parades, particular fundraising events or
funerals to a maximum of 15 points. However, Board resolutions dated 2014 and
2015 include awards of five points each for additional miscellaneous activities
such as probationary firefighter coordinator and various fundraising committee
positions such as the chairperson of bazaars, boot drives, letter campaigns,
raffles and 10K/5K runs. Providing five points for such “miscellaneous activity” is
not consistent with GML, which, as previously noted, permits only one point per
The thing to note here is that the OSC doesn't criticize the District for treating the probationary firefighter coordinator and committee positions as a "miscellaneous activity" - rather, that the District awarded five points for these activities. This seems to imply that the OSC is fine with a District awarding points to individuals acting as the chairperson of a committee. A District just cannot award more than one point to the chairperson. It has been generally understood that attending a committee meeting would be worth a point, but it wasn't clear if granting a point just for being a committee member or the chairperson would be acceptable. It would seem that it is - at least, this wasn't criticized in the report.
The Office of the State Comptroller recently released the latest LOSAP audit - this time the audit was of the Jamesport Fire District. You can download a copy at the end of this post.
There are several things to react to here, which we will do in some later posts. But off the top, the following are interesting:
Training Courses - the report indicates one point is awarded per hour (there are additional stipulations). The internal Fire District policy required that the training course be a minimum of one hour (not the statute). But in this case, members were being credited points for training courses that lasted less than one hour. The report doesn't indicate if the State's formal opinion is that training should be a minimum of one hour to receive a point, but the implication is certainly there and is something to be aware of.
Drills - the report criticizes the District for granting two points for drills that last four hours. On the surface, the literal text of the statute does state that only one point is awarded for a drill, and a drill must last a minimum of two hours. Therefore in theory a drill that lasts three or four hours is still just one drill and therefore one point. Similar to calls - some calls are 5 minutes, some are 5 hours - but the same credit is awarded for both (response credit that goes towards earning the points in that category). If your department is participating in drills that last four hours, the alternative may be to split the drill into two, two-hour parts, thereby making it two separate drills.
Officers - the report criticizes the District for granting 10 points to former chiefs. The report indicates that a former chief does not meet the definition of an elected or appointed position in the statute. This is something I have argued with clients in the past. But in some departments, the ex-chief actually has responsibility at a fire scene, and so therefore could fall under "line officer". So it would be important to make clear if a former chief has a responsibility or if it is just a "social" title.
Download and read the report below:
In New York, local government is restricted to how general and reserve funds can be invested. In general, they are restricted to typical bank accounts (checking, savings, and NOW accounts), certificates of deposit and very limited types of obligations, like US Treasury Bills. For more information there is a helpful guide issued by the Office of the State Comptroller called "Investing and Protecting Public Funds", which can be found easily using a Google search.
For the service award programs, Section 217(k) of the General Municipal Law contains the following language regarding the investing of the assets:
Every fiduciary of a service award program will be required to act solely in the interest of the program’s participants and beneficiaries. Subject only to the provisions of the program document, a fiduciary may accept, hold, invest in and retain any investment if purchased or retained in the exercise of the degree of judgment and care, under the circumstances then prevailing, which persons of prudence and intelligence exercise in the management of their own affairs, not in regard to speculation, but in regard to permanent disposition of their funds, considering the probable income to be derived therefrom as well as the probable safety of their capital.
This key points of this language is known as the Prudent Man Rule, or the Prudent Investor Rule. If we turn to Wikipedia and search for the "prudent man rule" the following article appears: https://en.wikipedia.org/wiki/Prudent_man_rule
In this article, a reference is made to a Massachusetts court case where Justice Samuel Putnam wrote that trustees should "observe how men of prudence, discretion and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income, as well as the probable safety of the capital to be invested."
The Prudent Man Rule provides a lot more flexibility in investing LOSAP assets than local governments have in investing general funds. This allows LOSAP sponsors to take risk in order to achieve greater returns over time. The type of risk and investments used should be formalized in an Investment Policy. A draft policy is often provided by the asset manager, but ultimately the document should be is adopted by the sponsor and provided to the asset manager as a guideline for investing.
We suggest reviewing this with your attorney and the asset manager assisting the Board with investing the LOSAP assets.
This post is a piggy-back of the last post - go back one day to read that (you may want to read a few of the prior posts as well).
We saw in the last post that is we assumed a 2.5% rate of return on the investments but consistently earned only 1.5%, contributions would increase over our 5-year time frame to ensure we meet our $100,000 goal. The annual contributions looked like this:
Year 1: $1,800
Year 2: $2,000 (11% increase from Year 1)
Year 3: $2,300 (15% increase from Year 2)
Year 4: $2,700 (17% increase from Year 3)
Year 5: $3,700 (37% increase from Year 4)
The total of these contributions is $13,300. You will notice how each year the increase in contribution became greater over time. That is partially due to the nature of the example - that $100,000 is due at the end of five years. In this instance, we were required to get to the $100,000 amount at year five. With a typical DB LOSAP, you aren't targeting a fixed number at a certain time, so you wouldn't see contributions increase as significantly as you see from year four to year five.
Now, what would happen if after year one, we recognized that our investments will not earn 2.5%, and that a 1.5% rate of return assumption is more realistic. A change to a 1.5% interest assumption would immediately increase the present value of the $100,000 payment owed. Remember, there is an inverse relationship to the interest rate and the present value - the lower the assumed interest, the higher the present value. The present value represents the amount of money needed today that will compound over time at the annual assumed interest rate to the $100,000 target. If we change the amount of interest we think we will earn - in this case going from 2.5% to 1.5% - then we'll need more in the bank today to reach our targeted amount due to lowered investment earnings. Hence, the present value increases.
The contribution requirement will also increase. Again, assuming the first contribution of $1,800 is made, the next four contributions would likely be around $2,860. This means over five years, a total of $13,240 would be contributed, or slightly less than if the rate was not lowered.
In the first year that the rate is lowered, the contribution increases significantly - by just over $1,000, or nearly 60%. The funded ratio also decreases - it drops from 90.5% to about 88.1%. However, the total contributions made would end up being less than if the interest rate was not lowered. The reason is hopefully intuitive - the more you contribute up front, the more investment income can be earned, thus requiring lower contributions over time.
The short time period doesn't create a huge savings, but if this model was extracted over 20 years or longer, you would see a more significant long-term savings by using the lower assumed interest rate, despite the short-term increase in contribution.
Of course, the underlying factor here is that the interest rate should reasonably reflect the rate of return that is expected based on the investment policy. This assumption needs to be monitored annually, and it is important to try and set a reasonable assumption from the beginning. It is better to err on the low side than the high side, since if returns are greater than assumed, then contributions will decrease over time. Short-term volatility that results in a lower than anticipated investment return is not cause for a change. But if market conditions or expectations for the future indicate that lower returns are expected based on the existing investment policy, then a change would then be considered and warranted.
Sharing my thoughts and insights on LOSAP, and occasionally other topics.