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NYS Comptroller


Audits of Local Governments and School Districts

Franklin Square Water District – Life Insurance Policies (2013M-127)

Released: July 19, 2013 -- [read complete report - pdf]

Purpose of Audit

The purpose of our audit was to determine if the Board appropriately provided individual life insurance policies to the District’s Commissioners and employees for the period January 1, 2012, to February 28, 2013.


The Franklin Square Water District is located in the Town of Hempstead in Nassau County and serves the communities of Franklin Square and Elmont. The District is governed by an elected three-member Board of Commissioners (Board), comprising a Chairman, a Secretary, and a Treasurer. The District’s total revenue for the 2012 fiscal year was over $2.5 million, generated primarily from water usage charges and real property taxes. The District’s 2012 expenditures totaled almost $ 2.4 million.

Key Finding

  • The District has inappropriately provided individual whole life insurance policies to its Commissioners and employees. The Board has adopted a personnel policy that includes a provision that any Commissioner or employee, except temporary and seasonal, will be provided with a life insurance policy that, after 10 years, will be transferred to them upon retirement. While GML expressly allows group life insurance, and the personnel policy is not specific, it has been the District’s practice to purchase and pay the premiums for whole life insurance policies with a face value of $50,000 for each Commissioner and full-time employee, and $25,000 for each part-time employee. The District currently holds policies with face values totaling $550,000 for three Commissioners and eight full-time employees; these policies had a cash surrender value of $155,717 as of December 31, 2012. In addition to individual life insurance policies not being authorized under GML, the cash surrender feature of the whole life insurance policies may also constitute an unauthorized investment of District funds.

Key Recommendation

  • Review the insurance policies the District currently holds and consult with counsel and the insurance broker to take steps to ensure all insurance policies are in compliance with legal requirements.

Local Government and School Accountability Contact Information:

Phone: (518) 474-4037; Email:
Address: Office of the State Comptroller, Division of Local Government and School Accountability
110 State Street, 12th Floor; Albany, NY 12236