Ward Telecommunications & Computer Services, Inc. v. State
| Citation | 372 N.Y.S.2d 423,83 Misc.2d 331 |
| Decision Date | 20 August 1975 |
| Docket Number | No. 57961,57961 |
| Parties | WARD TELECOMMUNICATIONS AND COMPUTER SERVICES, INC., Claimant, v. The STATE of New York, Defendant. Claim |
| Court | New York Court of Claims |
This claim, which was duly filed and served, alleged that claimant sustained $500,000.00 in damages as the result of the State of New York negligently conducting an audit of the North Country Community College (hereinafter referred to as NCCC); and, thereafter, disseminating for publication to the news media an audit report (Exhibit '3A') which contained libelous statements relative to the cost and character of the computer service rendered by the claimant to NCCC. The audit report (id., p. 18) stated the following:
4. Use of Consultants
The College has engaged a certified public accountant to assist in the establishment and maintenance of the accounting records for the Capital Construction Fund and to provide such other financial services as may be needed. The College has also engaged a local computer service company to maintain payroll records and to process all payrolls. The cost of these services for the two years ending August 31, 1971, as shown on the College records, is as follows:
Service 1969-70 1970-71 Total
-------------------- --------- ---------- ----------
Financial Consultant $2,928.27 $ 4,507.88 $ 7,436.15
Payroll records 6,584.13 8,480.74 15,064.87
--------- ---------- ----------
$9,512.40 $12,988.62 $22,501.02
--------- ---------- ----------
The cost of these services, as shown on the above schedule, is incomplete since the financial consultant has not submitted a claim for services rendered after December 31, 1970. Nevertheless we believe that these costs are excessive for the services actually rendered and that the contracts should be terminated.
The services performed by both of these consultants could easily be performed by a single qualified employee at a lesser cost. For example, a significant portion of the work performed by the financial consultant is of a clerical nature. The balance could be handled easily by a capable Assistant Business Manager in a few hours. As for the computer service, this involves the processing of payrolls for about 200 persons most of whom receive a uniform amount of compensation for each pay period. These payrolls and the supporting computation could easily be performed, on a part time basis by an additional employee who would be available for other work during the remainder of most pay periods.
Following the normal and routine practice of the Department of Audit and Control, (Exhibit '17') the audit report was released to the news media on March 27, 1973. (Exhibit '18')(See also, Education Law § 6304; State Finance Law § 8; and, General Municipal Law § 35.)
On March 28, 1973, the Adirondack Daily Enterprise, a newspaper servicing Saranac Lake, Lake Placid, and Tupper Lake, printed a front page article, relative to the audit report, which stated that
Auditors found the college engaged a certified public accountant to assist in establishing and maintaining accounting records and engaged in (sic) local computer service company to maintain payroll records and process all payrolls. Cost of the services for two years ending Aug. 31, 1971, was $22,501.02, which, the auditors maintained 'are excessive for the services actually rendered,' and they recommended that 'the contracts should be terminated.'
'The services performed by both of thses consultants could easily be performed by a single qualified employe at a lesser cost,' the auditors stated.
This was an apparent reference to local certified public accountant William Sweeney, and Ward Telecommunication Systems of Ray Brook. (Exhibit '11'.)
The principal stockholders and officers of the claimant were Bela and Edwina Ward. Both Mr. and Mrs. Ward were educated and trained in computer science. They are well-qualified and expert in their chosen field. I was impressed by their forthright honesty as witnesses at this trial.
In October or November of 1969, Mr. and Mrs. Ward decided to move to Saranac Lake, where Mrs. Ward had been born and reared. After investigating the potential in the area for a computer service, they decided to establish such a service and the claimant (hereinafter referred to as WTCS) was incorporated in December, 1969. It was the only local computer service in this area of Northern New York. In January, 1970, WTCS was engaged by the business manager of NCCC, Mr. Doolittle, to prepare the college's payroll on a bi-weekly basis and to provide other data processing service relative to the college's capital budget and to the registrar's office. Billin were made on a monthly basis. Separate bills were presented for payroll work, capital budget work, and registrar office work. (See, Exhibit '6' and Exhibit '21'.) The college's fiscal year was September 1st through August 31st. Ernest Wood, the present business manager of NCCC, reviewed all of claimant's bills for the period covered by the audit. He prepared a recapitulation of the billings and allocated the various bills to their separate categories. (See Exhibit '20'.) For the period January 1, 1970 through August 31, 1971, he allocated $4,763.99 to payroll, $2,734.20 to special reports or supporting payroll services, $5,032.00 to consulting services, $485.00 to capital budget, and $1,897.50 to registrar. In his opinion, the $7,498.19 allocated to payroll and supporting payroll services was not an excessive charge.
After the audit report, WTCS's association with NCCC was terminated by Mr. Wood under instruction from his superiors. The payroll work is now being performed by one employee who devotes 50% To two-thirds of her time to this assignment. This employee's annual salary plus benefits is approximately $9,100.00. Thus the cost to the college for this work is from $4,550.00 to $6,000.00 a year. The college also purchased an $11,000.00 bookkeeping machine to assist this employee in performing her payroll duties.
The State's audit commenced in the spring of 1971 and was completed in the spring of 1972. Three auditors were involved in the audit: Mr. Neltson McClellan, the Supervising Auditor; Mr. Regan, Auditor in Charge; and, Mr. Gormley, Assistant State Accounts Auditor.
Mr. Gormley prepared the basic audit. He was not aware of the fact that, upon completion of the audit, the Supervising Auditor McClellan had lumped all of WTCS's billings under payroll charges. He was never asked to draw off from his worksheets the specific amount of payroll and related payroll charges and he did not know why Mr. McClellan had placed everything under payroll charges. He had discussed the computer service with the other auditors and the word 'excessive' came into the conversation. He did not consider that the charges made for the services rendered were excessive. He stated that the word excessive was
* * * used in the context that the services provided were more than the college needed for their payroll. * * * this computer service was not necessarily needed for this preparation of this payroll, and the various systems which we went through that we said were payroll items. (Volume II, p. 223.)
Mr. Regan gave his worksheets to Mr. McClellan when his work was completed and he was released by his superiors from this particular audit. He did not know why Gormley's and his worksheets resulted in a final report which lumped all expenses under the category of payroll services. He stated that this might have been done in a rough draft report when invoices for consulting services did not specify the work involved in the consulting service and thereby force the college to provide a breakdown of the exact service rendered. He talked briefly with Mr. Ward who, after learning that WTCS's charges were being questioned, sought to explain in detail what consulting services had been rendered. He said that (Volume II, p. 244.)
However, the final audit report (Exhibit '3A', p. 18) resulted in the bald statement that '* * * these costs are excessive for the services actually rendered * * *.'
Mr. Ward wrote to State Comptroller Arthur Levitt on May 3, 1973 (Exhibit '14') and forwarded a copy of the newspaper article in the Adirondack Daily Enterprise (Exhibit '11'). He pointed out the errors in the audit report and requested that the report be corrected. Not having received a reply to the letter, Mr. Ward, on May 30, 1973, sent a telegram to Mr. Levitt requesting that corrective action be taken. (Exhibit '22') On June 8, 1973, Deputy Comptroller Martin Ives wrote to Mr. Ward in response to the May 3, 1973 letter as follows * * * We acknowledge that the report did not fully describe the scope of the payroll and non-payroll services for which your company received payments of $15,064.87 over a two-year period. However, we still believe that the payroll operation could have been accomplished with college personnel at a lesser cost to the college. In making this judgment in our audit report, we did not intend to imply that your charges were excessive but rather that the college payroll operation is not large enough to justify the use of a computer.
As you know, the college has implemented our recommendation that the payroll be done by college personnel. We estimate that the annual cost to the college for this operation is about $2,500.00, which is considerably less than was charged by your company.
We sincerely regret any...
To continue reading
Request your trial
-
Mink Hollow Development Corp. v. State
...v. Stoke, supra, 18 N.Y.2d at 402--404, 276 N.Y.S.2d at 102--104, 222 N.E.2d at 725--26; Ward Telecommunications and Computer Services v. State, 83 Misc.2d 331, 341, 372 N.Y.S.2d 423, 433; McAulay v. Maloff, supra, 82 Misc. at 450, 369 N.Y.S.2d at 948; Follendorf v. Brei, 51 Misc.2d 363, 27......
-
Stukuls v. State
... ... auditors in the State Department of Audit and Control (Ward Telecommunications and Commuter Serv. v. State of New York, ... ...