TRENTON—The Hunterdon Central Regional High School District spent $13 million a year on insurance coverage without seeking competitive proposals, and the Borough of Keansburg failed to recoup $95,000 in improper sick and vacation payouts. These are just a few of the wasteful practices that the Office of the State Comptroller (OSC) detailed in the two reports released today.

OSC’s audit of the Hunterdon Regional School District finds that the District hired an insurance broker and purchased the insurance coverage without seeking other proposals in fiscal year 2022 and fiscal year 2023. The broker – who was compensated $253,000 in fiscal year 2022 alone– recommended renewing the medical and prescription coverage for two consecutive years, without seeking other quotes. OSC’s analysis found that the School Employees’ Health Benefits Program (SEHBP) could cost up to $2.3 million less a year.  While changing providers requires negotiations with employee unions, knowing a potential benchmark – and what competitors can provide – can help with those negotiations and ensure that the District obtains the best coverage at the best price.  

In the case of Keansburg, OSC finds that the Borough failed to fully implement 11 of 13 recommendations OSC made in 2021 to address excessive employee benefits and lax internal financial controls. Specifically:

• The Borough did not attempt to recover $95,000 in “gratuitous” vacation and sick leave payouts to the Police Chief and the Municipal Clerk, which were not required by their employment contracts, the report said. Keansburg’s labor counsel claimed it would be “infeasible” to recoup funds and made no effort to do so.
• The Borough continues to provide 55 annual vacation days or 11 weeks off a year to the Police Chief and allows for unlawful accrual of time. That means that the Police Chief could receive a potentially substantial payout for unused vacation leave at retirement – even though the law only permits up to two years’ accrual of vacation leave.
• Keansburg failed to modernize its record keeping and continues to rely on index cards, rather than a computerized system, to maintain employee wage history and calculate rates of pay. Keansburg claimed that it had tried to obtain IT services but found them too expensive – but it did not provide OSC with any evidence that it had sought quotes in the last three years.
• The Borough failed to develop policies prohibiting personal use of Borough-owned vehicles and still does not adequately track the employees’ usage. Keansburg also continues to risk running afoul of Internal Revenue Service regulations as the Borough does not have any process to assess taxable fringe benefits.

“Our audits frequently uncover wasteful practices in health insurance procurement and unused vacation and sick leave payouts. But the waste should not be normalized, rationalized, or tolerated,” said Acting State Comptroller Kevin Walsh. “Taxpayers expect public officials to fulfill their obligation to protect public funds.”  

OSC found that Hunterdon violated Public School Contracts Law by hiring a broker without seeking other quotes for brokerage services and failing to have a written contract with the broker. This fundamental failure to obtain competition and transparency brings a greater risk of waste and abuse, the report said.   

Hunterdon’s broker fees increased from $50.49 per employee per month in fiscal year 2021 to $54.07 per employee per month in fiscal 2023. OSC has recommended in prior reports and continues to recommend that school districts and local governments pay brokers a flat fee so that they can be assured the brokers do not have a conflict of interest and recommend the provider that offers the best deal for employees and the public entity. The SEBHP does not pay commissions.

Read the Hunterdon audit and Keansburg review. 

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