Responsibilities of Members and Officers
(Revised August 2016)
Monroe County Water Authority (the “Authority”) constitutes a public benefit corporation of the State of New York. The Authority fulfills a public mission and must comply with the provisions of applicable laws, including the New York Public Authorities Law. The following guidelines have been prepared in order to assist current and future Members and officers of the Authority to understand and carry out their fiduciary responsibilities. These materials are in addition to applicable laws and offer suggestions for fulfilling the Authority’s and the individual’s public mission.
I. What Should a Prospective Member Know Before Joining the Board?
Anyone considering accepting a position as a Member of the Authority is encouraged to do the following before joining:
- Read the Authority’s enabling legislation; By-Laws; 1991 trust indenture and all amendments thereto; Rules for the Sale of Water and the Collection of Rents and Charges; and board and committee minutes for at least the last year to learn about the Authority’s governance, stated purposes, activities and concerns.
- Obtain a current list of Members and committee members and find out from the chair and the Authority’s executive director what is expected of Members. Try to determine the relationship between board and staff. Talk to current and recent former Members to learn about the roles and responsibilities of Members.
- Review the Authority’s audited financial statements for at least the last two (2) years as well as its current internal financial reports to see how it uses its assets and to evaluate its financial health. Is its auditor’s report on the Authority’s financial statements unqualified?
- Evaluate whether the filings, audit reports and other compliance requirements appear to be completed on a timely basis. Find out whether there are any tax issues or concerns, or notices received from governmental authorities. Find out what other filings might be required, including filing appropriate payroll tax forms and paying the appropriate taxes.
- Obtain an understanding of the internal control structure of the organization and the processes in place to monitor it. Determine whether there is a current accounting policies and procedures manual that is followed. Review the past two (2) years’ management letters received from the public accountants and find out what has been done to remedy any problems identified.
- Understand the Authority’s mission, learn about its programs, read its publications, visit its program sites, look at its website and talk to key staff. Find out about its reputation in the community.
- Review the organizational chart and understand the accountability structure. Find out the backgrounds of key management. Understand the employee evaluation and compensation processes. Review due diligence procedures for material contracts and procurement.
- Make sure there is a conflict of interests policy and a code of ethics policy in place and that they are reviewed annually.
- Closely review Section 1107 of the New York Public Authorities Law. This provides that any Member, officer, employee or other such person will be guilty of a misdemeanor if they are in any way or manner interested directly or indirectly in the furnishing of work, materials, supplies or labor, or in any contract therefor.
- Determine whether the Authority has been audited by the Office of the State Comptroller or the Office of the Attorney General and read any reports prepared in conjunction therewith.
- Determine who the organization’s auditors are, what their reputation is and what their performance of the audit process has been.
- Find out if materials to be considered by the Members or their committees are distributed in advance of meetings and whether they provide sufficient information necessary to make decisions.
- Obtain the current year’s budget and cash flow projections. Find out how they compare to actual income and expenses and what processes are in place to monitor these comparisons.
- Find out whether the insurance coverage appears to be appropriate, including Members and Officers’ liability and employee fidelity insurance.
- Be sure to be able to devote the time expected of a Member. Understand any responsibilities expected of Members. Participate in annual training provided to Members. Joining a board without sufficient time to devote to its business is often at the root of troubles faced by many boards.
- Understand that each Member will complete an annual self-evaluation in the form prescribed by the Authority’s Governance Committee and furnish to the Authority biographical information that (except for confidential information) will be submitted to other governmental agencies as part of annual reporting by the Authority.
II. What are the Duties of Members?
While the Members do not participate in the day-to-day activities of the Authority, they are responsible for managing the Authority and must make crucial decisions, such as hiring and firing key officers and employees, engaging auditors and other professionals and authorizing significant financial transactions and new program initiatives. In carrying out such responsibilities, Members must fulfill fiduciary duties to the Authority and the public it serves. These primary legal duties include the duties of care, loyalty and obedience.
A. Duty of Care
The duty of care requires a Member to be familiar with the Authority’s finances and activities and to participate regularly in its governance. In carrying out these duties, Members must act in "good faith" using the "degree of diligence, care and skill" that "ordinarily" prudent people would use in similar positions and under similar circumstances. Ultimately, each Member must apply independent judgment in the best interest of the Authority, its mission and its ratepayers. The Authorities Budget Office ("ABO") requires each member to execute an acknowledgement of this duty upon taking his or her oath of office.
In exercising the duty of care, responsible Members should, among other things, do the following:
- Attend Member and committee meetings and actively participate in discussions and decision-making such as setting of policies. Carefully read the material prepared for Member and committee meetings prior to the meetings and note any questions they raise.
- Attend all compulsory training required for Members pursuant to Subsection 2 of Section 2824 of the New York Public Authorities Law.
- Read the minutes of prior meetings and all reports provided, including financial statements and reports by employees. Make sure her or his votes against a particular proposal are completely and accurately recorded. Do not hesitate to suggest corrections, clarification and additions to the minutes or other formal documents.
- Make sure to get copies of the minutes of any missed committee or Member meeting and read them timely, suggesting any changes that may be appropriate.
- Make sure there is a clear process for approval of major obligations and contracts pursuant to the Authority’s By-Laws.
- Read literature produced as part of the Authority’s programs.
- Make sure that monthly financial reports prepared for management are available to the Members or finance and audit committees, and that they are clear and communicate proper information for stewardship. Make sure there is an ongoing actual to budget comparison with discrepancies explained.
- Participate in risk assessment and strategic planning discussions for the future of the Authority.
- Insure that the Authority has addressed the sufficiency of its written internal financial controls and written policies that safeguard, promote and protect the Authority’s assets and that they are updated regularly. Make sure a policy for records retention and whistleblower protection is in place. Make sure a background check policy for prospective employees is in place.
- Be involved in the selection and periodic review of the performance of the executive director, director of finance and business services and other key employees responsible for the day-to-day activities of the Authority. Members are responsible for ascertaining whether these individuals have the appropriate education, skills and experience to assume a key position and then evaluating their performance.
B. Duty of Loyalty
Members shall be subject to the Authority’s written "conflicts of interest" policy and, accordingly, should be aware of the type of transactions that may prohibit them from becoming Members.
The conflict of interest policy is in addition to the rules set forth in Section 1107 of the Public Authorities Law. This statute makes it a misdemeanor for a Member to engage in certain transactions. Given the criminal penalties for violating these rules, it is best that any potential conflicts be discovered before they occur, so that an appropriate solution can be found.
Members and officers are charged with the duty to act in the interest of the Authority. This duty of loyalty requires that any conflict of interest, real or possible, always be disclosed in advance of joining a board and when they arise. Members should avoid transactions in which they or their family members benefit personally. If such transactions are unavoidable, disclose them fully and completely to the entire board of Members.
In order to exercise this duty of loyalty Members must be careful to examine transactions that involve Members or officers. Members must not approve any transaction that is not fair and reasonable, and a conflicted Member may not participate in the board vote. There should be an established code of ethics in place that is reviewed annually as well.
Transactions involving conflicts should be fully documented in the Members’ board minutes, and conflicts policies and disclosure statements should be discussed with the organization’s auditors and attorneys.
C. Duty of Obedience
Members have the duty of obedience to insure that the Authority complies with applicable laws and regulations and its internal governance documents and policies, including:
- Dedicating the Authority’s resources to its mission.
- Insuring that the Authority carries out its purposes and does not engage in unauthorized activities.
- Complying with all appropriate laws, including complying with registration and reporting laws, filing any required financial reports with the Office of the Comptroller, the Attorney General, the State Worker’s Compensation Board, the State Department of Taxation and Finance and the Internal Revenue Service, and paying all taxes such as Social Security and income tax withholding (federal, state and local). Members may be personally liable for failing to pay employees’ wages and benefits and withholding taxes on employees’ wages.
III. Identify, Understand and Update the Authority’s Mission and Internal Policies
The Authority’s mission statement reads as follows: The Monroe County Water Authority is a not-for-profit public benefit corporation that reliably provides quality, affordable water that fosters economic vitality and enhanced quality of life for Monroe County and area communities who request service. Additional information regarding the Authority’s purposes and public mission can be found in the Authority’s enabling legislation.
Employees should be aware of the Authority’s internal controls that impact their area of responsibility. At the time of adoption or revisions of internal controls, all Members, officers and employees should be made aware of such internal controls, given a copy of the policy and procedures manual, and trained to understand what is expected of them in carrying out their duties and in advising the organization’s management and/or the board of directors of violations of the policy. New employees should be trained before they assume their responsibilities.
Periodic review of the Authority’s structure, procedures and programs will assist Members in determining what is working well and what practices the Authority might want to change in order to be more efficient, effective or responsible.