By Sunayana Prabhu
RED BANK – The Office of the State Comptroller (OSC) has reported Red Bank as one of nine towns in New Jersey that failed to prevent illegal sick leave and vacation payouts to employees. The OSC notified state officials in a letter dated Sept. 28 that, if the towns remain unresponsive in the next 30 days, it may request the state withhold funding and also require OSC approval of some municipal contracts.
In a letter to Gov. Phil Murphy and the legislature, Brian D. Walsh, acting state comptroller, reported that these municipalities “refused to cooperate” with the OSC’s request to evaluate and address the lapses found in their employees’ sick and vacation leave policies.
“These nine towns are failing in their most basic responsibilities: To act as a fiduciary of taxpayer funds and to be transparent about how these funds are used,” Walsh said in his letter. “After more than a year, they continue to delay. My office will use all of the tools we have to protect New Jersey taxpayers from fraud, waste, and abuse.”
In a July 2022 report the OSC examined the policies, ordinances and contracts of 60 municipalities to determine if they implemented the cost-savings measures in compliance with state law for sick and vacation leave. The laws were adopted in 2007 and 2010 to save taxpayers from costly leave benefits payments to public workers “that go far beyond their normal wages,” the report stated. OSC’s review found that, to a “startling degree, the laws have been ignored, sidestepped, and undermined in almost all of the municipalities reviewed.”
Of those 60 municipalities, 57 were found in violation of the state law and directed to provide a corrective action plan (CAP) to address the deficiencies. Most of those 57 towns provided CAPs and corrected their sick and vacation leave policies; 9 failed to implement the OSC’s required changes, including Red Bank.
Darren McConnell, Red Bank’s interim borough administrator, responded by text to The Two River Times that Red Bank’s governing body did file the CAP in 2022 as requested by the OSC but did not comply with all the requirements. “The Borough has had communications with the OSC regarding this matter and did file a CAP as required. Due to a procedural oversight the CAP was not approved by a vote of the governing body at the time, but we fully intend to do that as soon as possible.”
Additionally, the OSC requested an independent third-party auditor evaluate internal financial controls and review and identify whether improper payments were made and needed to be recovered.
“While we did an internal review, we did not have our independent auditor do so as it was ‘recommended’ at the time, not required,” McConnell explained. “We have now asked our auditor to complete the review. I expect this all to be done by the end of October.”
As per state law, employees hired after May 2010 cannot receive more than $15,000 for unused sick leave. Employees can only receive that $15,000 at retirement – not when they resign, change jobs, or as an annual payout. Employees also can’t carry over more than a year’s worth of vacation time. OSC’s investigation found that the majority of municipalities surveyed were violating aspects of this law and continued to enter into employment contracts and collective bargaining agreements that allow for improper payments.
OSC found that the terms of one of Red Bank’s contracts allowed payment of accrued sick leave at retirement in an amount greater than $15,000 and at a time other than retirement. The contract caps accumulated sick leave payout at retirement at $20,000 and allows payment should the employee die while still employed.
OSC initially notified Red Bank of its findings in July 2022, detailing the requirements for the CAP with a Sept. 30, 2022, deadline. Red Bank provided its CAP Sept. 6, 2022, stating that it planned to modify its union contracts and had reviewed payments to ensure it was following state law, but it failed to have the independent auditor review or get approval from the governing body, the two OSC sticking points.
In April, OSC requested an updated CAP to address these concerns by May 5, 2023, a deadline Red Bank missed.
“Many towns across New Jersey have made improper, wasteful payouts for years and years. It’s inexcusable that the basic steps to safeguard public funds are not being taken,” said Walsh. “Taxpayers deserve better.”
The article originally appeared in the October 5 – 11, 2023 print edition of The Two River Times.
