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Audit Reveals Rockaway Township Could Have Saved $4.5 Million, Mostly By Eliminating Duplicate Prescription Benefits

The Office of the State Comptroller’s audit finds that Rockaway Township also accumulated nearly $4 million in liabilities.

  • Posted on - 05/24/2023


TRENTONAn audit released today by the Office of the State Comptroller (OSC) reveals that Rockaway Township could have saved $4.5 million in three years, mostly by eliminating duplicate prescription benefits. Rockaway also accumulated nearly $4 million in financial liabilities, due in large part to excessive accrual of unused vacation leave.

Rockaway has provided duplicate prescription benefits to retirees since at least 2008. OSC’s audit, which covers spending from 2019 through 2021, found the Township wasted $3.1 million on duplicate prescription benefits for 143 retired employees during that three-year period. Rockaway could have saved another $1.4 million by negotiating a switch to the State Health Benefits Plan for prescription coverage for current employees during the same time period.  

OSC also found that Rockaway’s collective bargaining agreements (CBAs) and employee manual permitted unused vacation time accrual in violation of the law. Some employees were allowed to carry over up to 75 unused vacation days, 25 more days than permitted by law. Police CBAs permitted up to 90 days, 40 days more than permitted by law.

The audit found Rockaway has made improper payments of $167,093. As of the end of 2021, Rockaway Township also had accrued financial liabilities of nearly $4 million in unused vacation leave and holiday-related pay, most of it by police officers.

Thirty-two employees have improperly accumulated vacation leave valued at $485,354. Additionally, Rockaway permitted excessive accrual of holiday pay by police. Rockaway police CBAs granted each officer up to 12 additional vacation days for working official Township holidays. Although the agreements say that these days must be used in the same year they’re awarded, Rockaway improperly permitted police officers to accumulate the holiday leave pay.

OSC found five senior police officers, including the police chief, improperly accumulated unused holiday-related vacation pay of $1.2 million. The unused holiday-related vacation leave accumulated by all police officers was $3.5 million as of the end of 2021, OSC finds.

“Our audit shows multiple failings by Rockaway Township, from unlawful policies and contracts to just staggering, inexcusable waste,” said Acting State Comptroller Kevin Walsh.  “For many years, Rockaway Township leaders failed to protect public funds.”

OSC’s audit also uncovered improper and illegal payments to the police chief for unused sick leave. Under a 2007 law, the police chief is limited to a single sick leave payment at retirement of up to $15,000 or an amount more than that if earned prior to becoming police chief.  The police chief is barred by the 2007 law from receiving annual payments for unused sick leave. Rockaway’s police chief was paid $47,433 for unused sick pay over three years.

Rockaway’s independent auditors in 2020, and again in 2021, recommended that the Township ask its lawyer to review policies and contracts to ensure that the municipality is complying with laws governing employee vacation leave and sick pay.

“Two years in a row, the Township’s independent auditor made recommendations that were intended to protect taxpayers,” said Walsh. “The auditors were right. There was a real problem here.” 

In 2021, the auditor also recommended reevaluating unexpended money in Township coffers. OSC calculated that $10 million has been sitting unspent and uncommitted for more than five years. The Township failed to take action on both matters.

OSC’s audit found $2.1 million in surplus funds could be returned to taxpayers. The Township has an annual budget of approximately $40 million.

OSC learned that the Township failed to follow state law when procuring health insurance. Rockaway didn’t have a written contract with the insurance broker, couldn’t provide any evidence that it sought competitive quotes, and awarded the contract without following legal requirements, such as disclosing the broker’s fee. OSC found the broker was paid about $279,000 in commissions over the three years.

Rockaway Township defended the wasteful prescription coverage spending by noting that the Township’s CBAs require it to negotiate with employees and retirees before altering insurance benefits. As noted in the report, OSC did not find evidence that Rockaway tried to renegotiate with retirees at any point, from 2008 to the present. 

Rockaway also noted that until recently, the State required that local government workers with SHBP medical coverage be automatically enrolled in SHBP medical and prescription coverage at retirement. The State lifted that restriction on January 30, 2020, but even before then, Rockaway could have chosen not to obtain benefits through SHBP. It elected instead to obtain benefits through SHBP and provide wasteful double prescription benefits to its retirees.

Read the 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.

Stay up-to-date with the latest from OSC by following us on Twitter, Facebook, LinkedIn, and on Instagram at @NewJerseyComptroller.

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