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Putting a stop to insuring the dead Buffalo School District recoups $544,000 after audit finds premiums paid for deceased retirees

The fiscally strapped Buffalo School District paid more than $544,000 for health insurance coverage for dead retirees and their spouses, recouping the money only after a state audit red-flagged the problem.

Some individuals had been dead for nine years, according to a critical audit released Thursday by the state comptroller's office. The report cited weaknesses in the district's system for monitoring the status of retirees. School officials said steps already are under way to strengthen procedures.

The report revealed that the district paid for health insurance premiums for 15 deceased retirees and 14 dependent spouses during an 18-month audit period that ended last June.

In the past, the school district relied mainly on reading obituaries in newspapers, word of mouth, notification from relatives, periodic surveys and the state retirement system to track the deaths of former employees.

"We thought we would have seen some more sophisticated controls," said Steven J. Hancox, assistant state comptroller for the local government audit division.

Joy C. Trotter, the school district's human resources director, said that while the system hasn't been perfect, the audit indicated that most of the district's oversight procedures were sound.

"We were doing seven-eighths of the things we should be doing. Now we know about other resources that are available," Trotter said.

For example, the school district is in the process of subscribing to a service that will allow it to access the Social Security Administration's Death Master File.

Hancox credited the district for "responding very positively" to the audit and for taking swift steps to improve the system. He noted that it's particularly difficult to track the status of those retirees who are not required to make any co-payments to their insurance premiums. When individuals or their relatives have to contribute, lapses in payment can red-flag changes in status. Also, people have some incentive to notify employers of deaths in their family if they are making payments toward insurance coverage.

Nearly 60 percent of the school district's retirees do not pay anything toward their health insurance costs.

Trotter insisted it would be inaccurate to suggest that the district has been lax in trying to keep tabs on retirees, or that staffers limited their reviews to scanning daily death notices.

For example, she said the district has been conducting surveys every 18 to 24 months, seeking updates from beneficiaries. But Hancox noted that these periodic surveys did not identify a number of deceased individuals, including some who died as long ago as 1997.

When employers learn that a former employee or dependent spouse has died, they notify insurance companies and request credits for premiums that were paid after the death occurred. Trotter said that while the reimbursement process can sometimes be laborious, the district recovered all payments that were highlighted by the audit.

"We got every penny back, and we got it back promptly," she said.

The state comptroller scrutinized safeguards used by 20 municipalities for making sure that they are not paying insurance premiums for people who have died. The audit found that 19 municipalities needed to improve their systems, including the Buffalo Public Schools and Niagara County, the only two local government entities that were cited in the audit.

Niagara County Manager Gregory D. Lewis said the state audit determined that the county paid premiums for one individual who had died. The audit found that the amount was about $1,700; the money was recouped.

Lewis said that while the county has made some minor revisions to its system, he believes that oversight procedures have been sound.

The Buffalo Public Schools' payments represented nearly 70 percent of the $786,481 that the nine governmental entities paid for health insurance for beneficiaries who had died.

Donald A. Van Every, who represents the North District on the Board of Education, said he does not view the audit findings as a black eye for the school system. He credited Trotter's office for moving swiftly to strengthen the oversight system.

"Is it something that needed more vigilance? Sure," he said. "But I'm confident that this problem won't repeat itself."

e-mail: bmeyer@buffnews.com

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