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State to Long Beach: Recover 'unlawful separation payments'

The state is recommending Long Beach recoup the

The state is recommending Long Beach recoup the overpayments. Credit: Newsday/Thomas A. Ferrara

A final audit from state Comptroller Thomas P. DiNapoli’s office recommended Long Beach City Council members recover “any unlawful separation payments” after identifying nearly $750,000 in questionable leave payments made to city management employees.

The comptroller’s office released the report Wednesday on separation payments made in 2017-18. 

“Our auditors found severely lax oversight and excessively poor fiscal practices led to a rapid decline in the city’s fiscal condition,” according to the audit on the separation payments. “Auditors identified nearly $750,000 in questionable leave payments made to employees. It is time for city officials to work together and address the fiscal issues that could weigh down the city’s future for years to come.”

Long Beach City Council members submitted a response to the audit last month saying that they would seek clawbacks and said certain city officials may be held personally liable for authorizing overpayments.

Separation payments are under investigation by Nassau County District Attorney Madeline Singas and the U.S. Attorney’s Office for the Eastern District.

“Though our criminal investigation into separation payouts remains ongoing, it should not deter city officials from reading and following the City Code, modifying it as needed to improve fiscal responsibility and accountability, and ensuring that those working in service to the people of the City of Long Beach are held to the high standards of competence and professionalism that the taxpayers deserve,” DA spokeswoman Miriam Sholder said in a statement.

The comptroller said Long Beach officials have failed to correct its separation payment policy for more than 25 years after two previous audits found the payments were inconsistent with city code and union contracts.

The state comptroller also on Wednesday released a final audit on the city’s deteriorating financial condition over the past decade.

The city's general fund decreased 68% from $9.9 million to $3.2 million from 2014 to 2018. Auditors said the city mismanaged funds, resulting in an $8.5 million deficit in the past four years. 

Council members said in their response to the state that the council lacks oversight because the city charter gives all administrative authority to the unelected city manager.

“As a result of this apparent lopsided authority, we, the council will strongly consider the study of city charter reform to restores appropriate checks and balances to city government,” the city council’s response states.

City Council members said the city‘s fund balance declined in part to issuing bonds to cover separation payments. A state Financial Restructuring Board found the city paid $15 million in bonds since 2012 to fund high-cost separation payments to employees, police and firefighters.

Former Acting City Manager Rob Agostisi and the City Council hired consultants this year to draft a long-term fiscal improvement plan and review the city’s finances.

The separation pay audit mirrors a draft report released to the city in August that identified payments made for sick and vacation time to at least 10 employees who received $513,925 that auditors said was inconsistent with the city’s code and collective bargaining agreements.

Payments included $108,000 made to former City Manager Jack Schnirman when he was elected as Nassau County comptroller. Schnirman returned $52,000 to the city after the draft audit found he was overpaid in sick time in violation of the city’s cap of 30% sick time.

The audit found the city approved drawdown payments of $229,494 to eight employees who still worked for the city, including Agostisi, who was paid nearly $120,000 in November 2017 when he planned to leave to work for the Town of Hempstead.

Comptroller officials recommended the City Council amend the city code to reflect how the city intends to pay exempt employees for drawdowns and separation payments. The comptroller said the city should also recoup any separation payments and drawdowns that were illegal or did not follow city code.

The audit also identified $471,799 made in 2017 to retiring police officers, who city officials said had a policy to pay PBA employees all accumulated vacation and compensatory time at retirement. The audit found that three of five police officials who retired were paid by $401,000 more than what was authorized by the PBA. The audit did not address a $50,000 payment to Police Commissioner Michael Tangney.

The audit did not address separation payments to CSEA union employees.

The council had rejected a different response to the state that identified $3.1 million in additional payments made over the past decade to union employees and past city management employees.

City Council President Anissa Moore said the response was outside the scope of the comptroller’s audit and did not address the city’s financial condition.

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