East Hampton budget audit reveals flaws

At a town board work session this week, East Hampton town officials learned two unpleasant things -- no one in the town was in charge of health insurance benefits for retirees, and that lack of oversight was costing the town a lot of money.

On Thursday, the town board started to fix the problem, taking more than $400,000 from half a dozen town accounts to cover some of the cost of making health insurance premium payments for employees who did not deserve to get the benefits, including half a dozen who had died.

The errors were discovered in an in-house audit by the town's budget office. This year, the town began a new budgeting procedure proposed by town Supervisor Bill Wilkinson, which resulted in the problem coming to light, officials said.

Town accountant Charlene Kagel and town budget officer Len Bernard said they found that some town employees who had opted to pay for town insurance themselves after retiring did not actually pay those bills, while others were receiving benefits although the town had not budgeted for them.

Kagel explained that premiums paid for deceased people were caused by retirees who had opted for family coverage, and never notified the town to change the insurance after their spouse had died.

The town was billed for providing health insurance for 206 inactive employees earlier this year, although the town had budgeted for only 169. Under the current system -- which town officials say they plan to change -- each department head maintains their own records of who is covered. An earlier department-by-department census showed 134 inactive employees, although Kagel said some of the problem could be attributed to the fact that numbers can change as some workers retire or others find new work.

The state insurance program, which covers East Hampton, will allow the town to recover payment errors going back six months. Though there are no final figures showing how much the errors will actually cost the town, Kagel estimates the overpayment will cost about $50,000.