Purpose

To determine whether WCHCC has a formal supplemental compensation program and whether the payments under the program were warranted and justified. The audit covered the period January 1, 2012 through January 15, 2016, and focused on payments to senior management employees for their performance during calendar years 2012 through 2014.

Background

Westchester County Health Care Corporation (WCHCC) is a State Public Authority created under Sections 3300-3321 of the Public Authorities Law. The primary mission of Westchester Medical Center is to serve as the regional health care referral center providing high-quality advanced health services to the residents of the Hudson Valley and the surrounding area.

Guidance regarding performance incentive programs for public authorities has been developed through the application of two legal opinions issued by State oversight agencies. These Opinions provide that supplemental compensation payments (or bonuses) are allowable, if they correspond with predetermined amounts paid after the end of prespecified work periods for meeting certain performance criteria.

WCHCC reports various salary and compensation data through the Public Authorities Reporting Information System (PARIS), which is an online data entry and collection system maintained by the Office of the State Comptroller and managed jointly with the Authorities Budget Office (ABO).

From 2013 through 2015, WCHCC paid 18 executives (with base salaries totaling about $21.6 million) almost $4.6 million in supplemental payments. The supplemental payments ranged from about $20,000 to almost $1.7 million per recipient for the three years ended December 31, 2014. In general, the supplemental payments corresponded to work performed during the previous year. The largest supplemental payments (totaling about $2.7 million) were made to the CEO and the Chief Financial Officer (CFO) and accounted for almost 59 percent of the total paid. The other payments (totaling about $1.9 million) were paid to members of “senior management,” which WCHCC defined as titles such as Senior Vice President and above.

Key Findings

• WCHCC officials stated that senior management had goals and were evaluated on achieving those goals before receiving their payments. There is no formal evaluation process for senior management. The CEO meets with all the senior executives each December to discuss their submitted goals and objectives for the following year as well as his expectations. At the end of the period, the CEO evaluates the CFO’s as well as each senior manager’s performance. We found that none of the employees submitted both Goal and Achievements in all three years. Further, WCHCC officials could not provide us with written performance evaluations for any senior managers.
• We identified other payments which we believe require further examination by WCHCC officials which, among other things, included sign-on and retention bonuses.
• From 2013 through 2015, supplemental payments were made to 18 employees, including the CEO, CFO, and 16 other senior managers, for job performance during the 2012-14 period. These were not all reported to the ABO.

Key Recommendations

• Establish and document a formal program for the award and payment of supplemental executive payments, which complies with the opinions of the State Comptroller and Attorney General. In particular, the program should ensure that: specific performance criteria is established and disclosed prior to the performance of services; and payments are made after the end of the period and only upon formal determination that an employee has met the prescribed criteria.
• Determine whether payments made by WCHCC comply with the opinions of the State Comptroller and the Attorney General.
• Ensure that all reports to the ABO/PARIS contain complete and accurate data.

Other Related Audit/Report of Interest

Rochester-Genesee Regional Transportation Authority: Performance Incentive Program (2014-S-2)