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SourceHOV Loses their Place in WCB

 WCB Ending Tainted 10-Year, $88.7 Million Scanning Contract:

By Peter Mantius, Northern Bureau Chief



The New York State Workers' Compensation Board has paid $75.8 million in the past 10 years to SourceHOV − a vendor accused earlier this month of botching state income tax services – before quietly ending its relationship with the company when entering into a new five-year contract for scanning services.


The WCB announced last Friday that Xerox would be taking over as its main scanning vendor this summer, working under the lead contractor, New York State Industries for the Disabled. NYSID entered into a five-year, $49.7 million contract with WCB in November 2013. The board said that it hopes to make the transition to Xerox by June 1.


The notice did not mention SourceHOV or the board's decision in March to grant the company a "final extension" on its contract to the end of the year for another $8.1 million. Although the WCB announced that it was working with NYSID and Xerox on the transition, it was silent on SourceHOV’s role.


State Comptroller Tom DiNapoli has blamed SourceHOV for mishandling 2013 state tax returns filed using paper forms.


"The contractor hired by the state Department of Taxation and Finance failed to meet many of its contract requirements and things quickly spun out of control," DiNapoli said in a statement April 9.


DiNapoli’s auditors found errors on 22% of returns processed, an error rate 40 times the contract performance standards. That could result in a 44% reduction in compensation under the contract, he said.


"Although NYSID is the prime contractor, its duties are largely administrative in nature," the audit said. "SourceHOV, as corporate partner, performs the technical work of the tax returns processing."


The Department of Taxation and Finance acknowledged the audit findings on the performance of NYSID and SourceHOV in a March 11 letter to DiNapoli’s audit director. "The department did not anticipate the possibility of cascading vendor failures experienced during 2013 that led to significant processing delays for New York taxpayers, which in retrospect clearly was a risk with this new vendor," Edward Chaszczewski, deputy commissioner of the Department of Taxation and Finance, wrote.


The three-year, $16 million NYSID/SourceHOV contract with the Department of Tax and Finance remains in force, DiNapoli spokeswoman Kate Gurnett said April 22.


The WCB, like the Taxation and Finance Department, said in its notice last week that it has experienced "delays and difficulties" in the scanning of its documents by SourceHOV. "The length of time between a document’s receipt and its placement in the case folder was temporarily longer than both historical averages and the interval of time as dictated by the current contract," the WCB said in its notice.


Board spokeswoman Rachel McEneny said Tuesday that the board intended to end its relationship with SourceHOV when it entered into a five-year contract with NYSID last November. She noted that Xerox, not SourceHOV, is named as the scanning vendor in the new NYSID contract.


That decision ended a relationship that has spanned nearly a decade. The WCB first entered into a "paper-to-image conversion service" contract with SourceCorp BPS Inc., an affiliate of SourceHOV, in January 2005.


The board has renewed or amended the contract several times since, comptroller records show. For example, in July 2012 an "increase in estimated contract value" added $8.65 million. In January 2013, "the fourth of five renewals" added another $10.8 million.


In January 2014, an "extension to allow time for the new contract startup" added another $2.7 million, while the "final contract extension" in March added the final $8.1 million.


In total, SourceCorp BPS Inc. has received $75,793,904 from its WCB contracts so far.

They have a current value of $88,720,000.


During the near decade-long contract, SourceCorp or affiliates have made at least 17 campaign contributions to Sen. Thomas Libous, R-Johnson City. Those contributions to Libous from June 2004 to August 2012 totaled $17,875, according to


In addition to serving as the No. 2 Republican official in the Senate, Libous represents a district that includes SourceHOV’s New York operations in Binghamton.


Libous is married to Frances M. Libous, who is vice chairman of the WCB. An appointee of former Republican Gov. George Pataki, she has served on the board since 2001. When her third term expired in December 2013, she was reappointed by Democratic Gov. Mario Cuomo to the four-year balance of a term held by former Commissioner Mona Barnesi.


Records did not list any contributions to Libous from Xerox.


Some New Yorkers have used the names SourceCorp and SourceHOV interchangeably in recent years. SourceCorp issued a press release in March 2011 that said it had merged with HOV Services.


The SourceCorp website is not active, but it transfers those seeking information to SourceHOV’s website.


In February, SourceCorp notified the state Labor Department that it was laying off 171 workers at its Wall St. location in Binghamton, according to WGNB News in Binghamton.


But a call to those offices April 22 was answered by a secretary who identified her workplace as "SourceHOV." She referred all questions to Mary Schneider, SourceHOV’s chief marketing officer at corporate headquarters in Dallas.


Schneider did not return a telephone call.

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