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State audit of Long Beach finances says city overpaid more than $500G in separation pay to 10 workers

An audit by the office of State Comptroller

An audit by the office of State Comptroller Thomas P. DiNapoli ends a 16-month probe into Long Beach's finances.  Credit: Newsday/Thomas A. Ferrara

Long Beach's then-City Manager Jack Schnirman and nine other current and former employees were overpaid more than $500,000 in separation payments between 2017 and 2018 for accrued sick and vacation time, according to a draft audit by the office of state Comptroller Thomas P. DiNapoli.

The audit, which ends a 16-month probe into the city's finances, found that Schnirman was overpaid $52,780 as part of a $108,000 separation payment when he left in December 2017 to serve as Nassau County comptroller.

Schnirman was paid $73,113 for 100 percent of his 878 hours of unused sick time and $34,910 for 419 vacation hours. Auditors said the city code calls for sick time to be capped at 30 percent and for vacation time to be capped at 50 days or 400 hours.

Schnirman declined to comment Friday, saying he had not reviewed the draft audit.

State officials are working with the office of Nassau County District Attorney Madeline Singas and said the audit is not considered complete until city officials respond to the report. 

The city has 30 days to respond to the draft before it is completed and released by the comptroller’s office.

The state comptroller began examining Long Beach’s finances last year after the City Council defeated a $2.1 million bond to pay for separation payments, including for Schnirman.

The city is in the midst of a fiscal crisis following years of unbalanced budgets and an influx of federal and state funding after superstorm Sandy in 2012 that masked the city’s deficits and reliance on borrowing.

Auditors said the city mismanaged funds, resulting in an $8.5 million deficit in the past four years. City officials have borrowed $15 million since 2012 for costly separation payouts to city officials, police and firefighters.

DiNapoli delivered two draft audits to Long Beach officials on Thursday and recommended the city try to recover overpayments made to employees that do not follow city code.

A second audit looking at an overview of Long Beach's finances found the city's general fund balance decreased 68 percent from 2014 to 2018, depleting the general fund balance from $9.9 million to $3.2 million and leaving a $813,994 deficit in 2018. 

The City Council issued $10.1 million in bonds from 2014 to 2017 to finance recurring expenditures and infrastructure projects after the storm. Auditors also said Schnirman did not draft a multiyear financial plan. The city did draft a long-term fiscal recovery plan in 2013, and earlier in the year contracted with an outside team of financial advisers.

Schnirman said he relied on the city’s payroll department to document his separation payments after he submitted his documented time. He said he thought the payments were calculated properly, but he said if an audit found payments were made in error he would seek to return any funds that were overpaid.

Comptroller officials said Long Beach has failed to correct its separation payment policy for more than 25 years, after audits in 1992 and 1996 found its separation payments were inconsistent with city code and union contracts.

At an Aug. 20 City Council meeting, council President Anissa Moore called on the state comptroller and the district attorney to conclude their investigations and release their findings. She called the current and former city employees who approved the payments “co-conspirators.”

“This is a clear abuse of power. This is a clear abuse of public trust,” Moore said during the meeting. “We will get to the bottom of this, and we intend to seek restitution for all that’s owed to the city.”

Singas is continuing a criminal investigation into the separation payments and said Thursday that the probe was delayed by “a lack of cooperation by some critical witnesses” and city records that were unavailable.

“I hope that the comptroller’s determination that payments were made in excess of the city code and the former city manager’s contract moves the city not only to take the recommended remedial actions immediately — including seeking repayment to the city for any inappropriate disbursements and implementing reforms detailed in this and earlier audits — but to cooperate fully and expeditiously with our criminal investigation as we seek to conclude it,” Singas wrote.

The district attorney’s office clarified in a letter Friday to the city’s outside counsel, Anthony Capozzolo, that he “has been responsive, professional, collegial and ethical.”

“Our generic reference to uncooperative witnesses that have delayed our investigation was not intended to suggest that your clients have been uncooperative,” Chief Assistant District Attorney Albert Teichman wrote.

Capozzolo said the city has fully cooperated with the comptroller and district attorney’s investigation by providing any witnesses and documents requested. He said the draft audit was leaked to the public before the city was able to respond to the comptroller’s findings.

“I can assure you that the city is preparing a detailed and fact-based account of the issues covered in the report and it will provide a full and fair understanding of the issues related to the separation payments,” Capozzolo said.

City officials told the state comptroller that the City Council approved a retirement incentive in 2012 to both union and exempt employees. The city interpreted the city’s code to allow exempt and management employees to be entitled to no less than 30 percent of accrued sick time, multiplied by the rate of pay.

“There was nothing restricting the city manager from providing exempt employees with more than the minimum entitlement set forth in the city code,” the audit states. “If it was the intent of the city as part of a retirement/separation incentive, to change the leave entitlement terms of the city code, the council should have amended the city code.”

Previous city managers were paid incentives as far back as 2008 that paid up to 100 percent sick leave, according to the audit. The payroll supervisor said the city has paid exempt employees 100 percent of all accumulated leave balances since 2014. The city also had an unwritten policy to give exempt employees the same benefits given to union employees.

The city also issued $229,494 in payments to eight city employees who did not leave employment in the city, auditors found, including Corporation Counsel and now acting City Manager Rob Agostisi, who was paid $119,855 in November 2017 and ended up not taking a job with the Town of Hempstead. 

The city also paid $471,799 in separation payments to retiring police officers last year. City police officials said it has always been their policy to pay PBA employees all accumulated vacation and compensatory time at separation. 

Auditors said the city should amend the city code to reflect how it intends to pay exempt employees for accrued time and review calculations before making drawdowns of times or separation payments. 

"The state comptroller's findings demonstrate wrongful behavior by city officials and a complete lack of respect for taxpayers," State Sen Todd Kaminsky (D-Long Beach) said. "The city should cooperate and take the initiative to determine who should be held accountable and to best protect the public funds going forward."

With Celeste Hadrick

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