At the root of the four payroll fraud cases in New York over the last decade was the diversion of taxes and phony reports filed to the Internal Revenue Services and their clients, a report released this week by state financial regulators found. 

But more information on the industry may be needed to generate potential reforms, state lawmakers on Thursday said. 

The report compiled by the state Department of Financial Services was the result of state lawmakers pushing to study the payroll industry following the case of MyPayrollHR. The Saratoga County-based firm's former CEO was sentenced for bank fraud last year after he sought to defraud clients of $100 million. 

The report made public this week relied on court records and news reports of the 28 cases of payroll service provide fraud that were prosecuted across the country between 2010 and 2019. That may not tell the full scope of the problem, said state Assemblyman Kevin Cahill. 

“This report represents just the first step in building a comprehensive understanding of how payroll service providers operate in New York state," Cahill said. "It is clear that more research must be conducted into the industry so we can protect small businesses and their employees to the best of our ability."

It's also not clear from public records how many companies that provide payroll processing services to businesses are operating in the state, and that requirements like having these firms bonded, purchase insurance or adopt risk management would be effective. 

Cahill, who leads the Assembly's Insurance Committee, did not rule out further action to assess the payroll industry. 

“I thank the DFS for shedding light on payroll service providers, companies we knew very little about prior to this report,” Cahill said. “It is essential that policymakers are informed about an industry whose actions impact the financial well-being and solvency of New York small businesses and their workers.”