Purpose of Audit

The purpose of our audit was to determine whether the Board had delegated discretionary functions to independent contractors.

Background

The Village of Village of the Branch is located in the Town of Smithtown, Suffolk County, and has a population of approximately 1,800. The Village is governed by a Board of Trustees, which comprises four elected Trustees and an elected Mayor. The Village’s operating expenditures for the fiscal years ended May 31, 2011 and May 31, 2012 totaled $829,784 and $736,394.

Key Finding

• The Village Building Inspector did not take an oath of office and, as generally required of a Village officer, does not reside within the Village. In addition, the Village and this individual have entered into a contract, which provides for an annual fee for basic services of $8,000 plus 50 percent of certain permit fees. This type of arrangement is usually indicative of an independent contractor relationship. Requests for payment are submitted monthly by voucher. The Building Inspector receives an Internal Revenue Service Form 1099, and does not receive any fringe benefits. During our audit period, this individual received $84,197, nearly $73,000 of which was based on fees collected for building permits. Because there is no cap on the amount of fees paid to the Building Inspector, the Village cannot know whether the individual’s compensation is excessive in any given year. If it is excessive (e.g., more than reasonable compensation paid to inspectors in other comparable villages), then the Village may also have made a poor business decision in basing the compensation on the amount of fees collected.

Key Recommendations

• Ensure that anyone performing discretionary functions, such as fee collections, police powers and building inspections on behalf of the Village meets all the requirements for holding Village office, including being properly appointed to the office, taking and filing an oath of office, meeting residency requirements and being compensated by salary through payroll with appropriate deductions.
• Anyone performing these functions must be engaged as an employee, not an independent contractor.