Objective

To determine whether the Division of Criminal Justice Services (DCJS) has complied with Article 36-A of the State Executive Law for revenues received by and expenditures made from the Motor Vehicle Theft and Insurance Fraud Prevention Fund and from any other source for purposes of the Motor Vehicle Theft and Insurance Fraud Prevention Demonstration Program. Our audit covered the period from January 2018 through December 2021.

About the Program

Motor Vehicle Theft and Insurance Fraud (MVTIF) has a substantial impact on motor vehicle insurance rates in New York State. The MVTIF Prevention Demonstration Program (Program), as established in State Executive Law under Article 36-A (Law), is intended to provide an integrated means to prevent, deter, and reduce the incidence of these crimes by developing and providing funding for programs that support specialized law enforcement units and prosecutors.

To fund Program operations, insurance companies collect the MVTIF Prevention Fee (Fee), currently $10, which is reflected in motor vehicle insurance policy premiums for vehicles registered in the State. In accordance with provisions of the State Insurance Law, the MVTIF Prevention Fund (Fund) receives the first $4.7 million from these Fees. However, in each of the 4 years of the audit period, there were also budget bills that authorized transfers of at least $1.1 million in Program funds to the State’s General Fund, totaling $7.9 million and representing more than half of the $13.9 million expended for Program grants.

Provisions of the Law require the Program to be administered by a 12-member Board, with DCJS as administrator and the DCJS Commissioner or their designee serving as Board Chair. Board members are appointed by the Governor, and represent auto insurance consumers, auto insurance companies, law enforcement agencies, and the judicial system. Under the Law, the Board must meet a minimum of four times per year, and a majority of Board members is needed to reach a quorum for the purpose of transacting business at meetings. DCJS must annually, by February 15, submit to the Governor and other State officials a report (Annual Report) on the Board’s activities, the activities of grant recipients, the results achieved by grant recipients in improving the detection, prevention, or reduction of MVTIF, and the impact these efforts may have on motor vehicle insurance rates.

Further, the Law requires that the Board develop and recommend to the DCJS Commissioner a Plan of Operation (Plan) that includes a regional analysis of the incidence of MVTIF and related activities. In addition, in allocating Program funds, DCJS – with the Board’s recommendation – must, to the greatest extent possible, consider the geographic incidence of MVTIF, so that localities with the greatest incidence are targeted for the purpose of this Program.

Key Findings

We found persisting gaps in Program governance throughout the 4-year audit period that hindered DCJS’ ability to conduct Program business. These gaps contributed to DCJS’ continued reliance on extending contract award amounts that were decided based on non-current crime statistics. We also found Program costs that lacked adequate support or were incorrectly charged to the Program. Specifically:

• The Board hasn’t complied with the Law’s governance provisions, particularly with respect to maintaining the required 12 members and holding meetings that would – if a quorum were present – allow Program business to be done.
  • The Board didn’t have the 12 members required by Law for any of the 4 years ended December 31, 2021.
  • The Board didn’t hold a minimum of four meetings in 2019, 2020, and 2021. There were three meetings in 2019, with a quorum reached for all three, but none in both 2020 and 2021. As a result, no actions were taken by the Board for part of 2019 and all of 2020 and 2021.
  • Each of the four Annual Reports for the period 2018–2021 was issued late – the most recent one was due in February 2022 and issued in December 2023.
• Lacking a full Board, DCJS also extended Program awards through 2021 (and subsequently through 2023) that were informed by 2014–2016 crime data and based on grant requests from 2017, and that may not have adequately considered county needs.
• DCJS should enhance its monitoring of grantees’ personal service costs to better ensure these costs are Program-related, accurate, and supported by a contractually required time and effort tracking system. We reviewed support for $986,716 in claimed costs, and identified excess and unsupported charges to the Program totaling $336,803, as follows:
  • $327,991 in personal service costs that weren’t appropriately supported by a time and effort tracking system;
  • 21 of 139 overtime requests that lacked appropriate supervisory approval and totaled $6,515, including 14 requests, representing three staff, that were authorized by the same person who worked the overtime and seven requests that were not approved; and
  • $2,297 in overtime (of the $31,933 charged) that was incorrectly charged to the Program, including $1,912 that the grantee attributed to a programming error and $385 in pre-approved overtime that – according to payroll records – was not worked.

Key Recommendations

• Take steps to ensure compliance with governance-related requirements under Article 36-A by:
  • Requesting appointment of Board members to meet the Law’s number and composition requirements;
  • Convening at least the four required Board meetings each year; and
  • Issuing the MVTIF Annual Report annually by February 15.
• Issue a Request for Proposals, in accordance with the Plan and with MVTIF Board approval, that results in awarding funding to entities in the counties that – using the most recent available data – have the highest incidence of motor vehicle theft and insurance fraud.
• Enhance assurance that grantee claims for reimbursement are for expenses that are Program-related, accurate, supported by time and effort tracking systems required under the contract, and appropriately approved.