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Brigantine Could Have Saved as Much as $191,000 in Healthcare Benefit Costs in One Year, Audit Finds

Additionally, the city’s lifeguard pension plan has a $4.5 million deficit.

  • Posted on - 12/1/2022


TRENTONThe City of Brigantine could have saved as much as $191,000 in 2021 by participating in a state health care plan, an audit by the Office of the State Comptroller found.

Brigantine, which has about 137 full-time employees, relied on an analysis by an insurance broker, who failed to calculate State Health Benefits Program (SHBP) costs and bundling discounts accurately. For example, the broker’s analysis used rates for medical and prescription coverage purchased separately at full cost. When OSC applied the discount, the difference was more than $85,000.

 “This audit highlights the importance of constantly examining how public funds are being spent, including when dealing with health insurance,” said Acting State Comptroller Kevin Walsh. “In this case, municipal officials needed to dig into the broker’s projections to ensure they were based on the best available information.”

OSC estimates the broker’s fees averaged about $62,000 annually from 2019 through 2021. Insurance brokers do not receive a commission when a local government participates in a state health plan.

 “Our office has previously identified the use of insurance brokers as a source of risk. Brokers often have a built-in conflict of interest,” Walsh said. “What’s good for the broker may not be good for the taxpayers.”

The OSC recommends that municipalities pay a flat fee to brokers so that they aren’t incentivized to favor a more expensive plan. 

Brigantine also made wasteful payments of about $64,000 for health benefit waivers. Municipal employees who waive health benefit coverage may receive 25% of the savings (but no more than $5,000), but Brigantine made payments to employees who were receiving coverage through a spouse or family member employed by Brigantine.  

At a minimum, the city could have saved $116,000 in 2021 if it had chosen the SHBP Direct 10 plan, the OSC audit found. If Brigantine renegotiated a contract with one of the employee unions, then it could have gone with the SHBP Direct 15 plan and saved $191,000.

OSC’s audit also found that Brigantine failed to properly fund its lifeguard pension plan, leading to a $4.5 million unfunded plan liability. New Jersey law requires cities bordering the Atlantic Ocean to provide a pension plan to its lifeguards. Those completing 20 years of service can start drawing benefits at age 45.

While OSC was examining the pension fund for lifeguards, Brigantine’s actuary determined that the city needs to start contributing $358,000 a year over the next 19 years to close the gap. That represents a 1,700% increase from the 2021 contribution of $20,000 a year. 

OSC’s audit also identified issues with Brigantine policies and procedures, including:

  • Failure to adhere to City policy regarding documentation supporting sick leave usage. The audit found a potentially wasteful use of sick leave valued at $57,000.
  • Allowing the superintendent of public works to supervise his brother in violation of its anti-nepotism policy.
  • A provision in the CFO’s contract that stated the CFO can receive pay for 2,080 hours of unused sick leave at retirement to the extent permissible by law. The contract did not expressly document the 2010 law that caps payouts to $15,000 and only upon retirement for employees hired after May 21, 2010.
  • Allowing the carry-over of “comp” time by exempt employees or those covered by a collective bargaining agreement that prohibits the practice.

Read the full report.

To report government fraud, waste, mismanagement or corruption, file a complaint with OSC or call 1-855-OSC-TIPS.

The Office of the State Comptroller (OSC) is an independent State agency that works to make government in New Jersey more efficient, transparent and accountable. OSC is tasked with examining all aspects of government expenditures, conducts audits and investigations of government agencies throughout New Jersey, reviews government contracts, and works to detect and prevent fraud, waste and abuse in Medicaid.

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