Official Site of The State of New Jersey

The Honorable Vince Sera
City of Brigantine    
1417 West Brigantine Avenue
Brigantine, NJ 08203

Re: Follow-Up Report – A Performance Audit of Employee Benefits: City of Brigantine

Dear Mayor Sera:

On December 1, 2022, we issued an audit report, A Performance Audit of Employee Benefits: City of Brigantine (2022 Audit), ^[1] in which we made recommendations to address identified weaknesses. Pursuant to N.J.S.A. 52:15C-11, we have conducted a follow-up review of the corrective action plan of the City of Brigantine (the City or Brigantine) to assess the implementation of the recommendations contained in the 2022 Audit. Our findings and conclusions are set forth below.

Background, Scope, and Objective

Our initial audit of Brigantine identified weaknesses with certain fiscal and operating practices related to employee benefits. We found that the City lacked adequate policies, procedures, and controls governing the functions of personnel, payroll, and procurement.

The objective of our follow-up review was to determine if the City implemented the 15 recommendations contained in our 2022 Audit report.

Summary Conclusion

We found that Brigantine has made progress in implementing the recommendations set forth in our 2022 Audit report. Of the 15 audit recommendations, 10 were implemented, 1 was partially implemented, and 4 were not implemented. We urge the City to continue its efforts to comply with the recommendation not yet fully implemented.

Status of Initial Audit Recommendations

Recommendation 1

Seek advice from counsel regarding amendments to CBAs, individual employment contracts, and the Employee Handbook to include the requirements of the 2010 law. Limit sick leave payments to employees hired after May 21, 2010 to $15,000 and only upon retirement. Ensure vacation leave may not accrue for more than one year after the vacation leave was initially awarded.

Status: Implemented

Our 2022 Audit found that the City’s collective bargaining agreements (CBAs), employment contracts, and Employee Handbook did not comply with applicable state law pertaining to the payment and accrual of unused sick and vacation leave for employees hired after May 21, 2010. In its corrective action plan, Brigantine advised that it had engaged labor counsel to draft letters to the bargaining units addressing compliance with state law on payments for unused sick and vacation leave. At the time, no union had responded to an offer of a “side bar” agreement to bring its CBA into compliance.

During our review, we confirmed Brigantine sought legal advice related to contract amendments. We also confirmed that the City amended existing contracts, included a provision related to compliance with the 2010 law in recent contracts, and implemented policies and procedures to comply with that law. We sampled accrued leave balances and verified that no employees carried over more than one year of vacation to the following year.

We consider this recommendation implemented due to the actions taken by the City.

Recommendation 2

Perform an assessment of employee leave balances to determine if adjustments are warranted in order to comply with the 2010 law and make appropriate adjustments.

Status: Implemented

Our 2022 Audit found that the chief financial officer’s employment contract clauses addressing accumulated sick leave at retirement and carrying accrued vacation time were not in compliance with the 2010 law. The City advised in its corrective action plan that an assessment was conducted with personnel, department heads, union presidents, and the City Manager’s Office. The assessment included a review conducted of timesheets, departmental scheduling system hire dates, and files. Brigantine committed to conducting an annual assessment moving forward.

During our review, we judgmentally sampled employees hired after May 21, 2010 and verified that sick and vacation leave balances comply with the 2010 law. None of the employees carried more than one year’s worth of vacation from 2023 to 2024. Additionally, the City provided a document that tracked eligible unused leave payments in a centralized spreadsheet, specifically listing a $15,000 cap on unused sick pay for employees hired after May 21, 2010. We identified one employee who had accumulated sick time worth over $30,000 but also showed a cap of $15,000, which reflects the application of the cap under the 2010 law.
We consider this recommendation implemented due to the actions taken by the City.

Recommendations 3 and 4

Enforce current policies regarding the proration of accumulated leave time for separating employees and doctor’s note requirements to prevent abuse or misuse of accumulated sick leave.

Develop and implement a process for the calculation and review of payments to employees who have terminated their employment to ensure payments include only eligible earned leave time.

Status: Implemented

Our 2022 Audit found that Brigantine did not obtain the required documentation for retiring employees who used sick leave and did not accurately prorate accumulated leave time according to CBA requirements. In its corrective action plan, the City advised that letters were issued to all employees who exceeded 10 days of sick time. In addition, the personnel director, manager, and employee (or union representative) would all review the retiring employee’s time for accuracy. The City also developed payment policies and procedures to address the issue.

We reviewed the unused leave payments for six separating employees. This group consisted of three retirees, including two 2024 retirees and the chief financial officer, who retired in 2023, as discussed in the 2022 Audit. We also reviewed three resignation payments made in 2024. We confirmed that the City prorated leave time and required a doctor’s note for separating payment calculations and use of sick time prior to retirement, all according to CBA and individual contract requirements. The City provided sufficient evidence to show that it implemented the policies and procedures for calculating and reviewing unused leave time when determining payments for separating employees.

We consider these recommendations implemented due to the actions taken by the City.

Recommendation 5

Ensure that timesheets document the reasons for any overtime worked as required.

Status: Partially Implemented

Our 2022 Audit found that although Brigantine’s internal controls system for overtime payments was adequately designed, the City did not consistently document reasons for overtime on their timesheets. The City advised in its corrective action plan that steps were taken to address this recommendation.

We reviewed a correspondence reminding City employees to properly complete their timesheets, specifically requiring them to include reasons for any overtime worked. Additionally, we judgmentally sampled timesheets from employees who earned overtime in 2024 to verify whether the reason for overtime was recorded. A review of 32 timesheets for 12 employees found five instances of overtime worked without a specified reason.

We consider this recommendation partially implemented due to the correspondence sent to employees. However, our testing revealed several instances in which reasons for worked overtime were not documented. We encourage the City to ensure that a justification for all overtime worked is properly recorded.

Recommendation 6

Adhere to the terms of the current public works CBA and cease the carryover of unused compensatory time to the subsequent year.

Status: Implemented

Our 2022 Audit found that the City allowed public works employees to carry over unused compensatory time to a subsequent year despite the public works’ CBA prohibiting this practice. Brigantine’s corrective action plan advised that the relevant section of the CBA would be deleted in the next round of negotiations in the fall of 2023. The plan also stated that it is not realistic to prevent carryover of compensatory time.

We reviewed the 2024 to 2026 public works’ CBA and verified it was amended to allow employees to carry accrued compensatory time to subsequent years. We also sampled the records of public works employees who accrued compensatory time and verified compliance with the limits established in the CBA. Specifically, we verified that no employees accrued more than 480 compensatory hours in 2024.

We consider this recommendation implemented due to the actions taken by the City.

Recommendation 7

Designate a third party to attend personnel meetings, sign off on performance reviews, and approve timesheets in order to ensure compliance with the City’s anti-nepotism policy.

Status: Implemented

Our 2022 Audit found the City failed to comply with its own anti-nepotism policy by allowing the Superintendent of Public Works to supervise and approve timesheets, including overtime, of a family member. The City advised in its corrective action plan that the City Manager would be responsible for handling all reviews, requests, complaints, and timesheets.

We confirmed that the City implemented new policies and procedures requiring a third party to approve timesheets, performance reviews, and complaints of the Superintendent’s family member.

We consider this recommendation implemented due to the actions taken by the City.

Recommendation 8

Eliminate waiver payments to employees receiving City-provided health insurance through a family member.

Status: Not Implemented

Our 2022 Audit found that the City made wasteful health benefit waiver payments to employees receiving City-provided health insurance through a family member. We reported that “[u]nder the City’s approach, if related employees are both eligible for City-provided health insurance coverage, one employee may receive payment for waiving coverage while also receiving the City’s health insurance coverage through their eligible family member. As a result, employees ‘double dip’ and receive waiver payments while simultaneously receiving health benefits from the City, which causes additional wasteful costs to taxpayers.”

We noted that the Division of Local Government Services, within the Department of Community Affairs, issued Local Finance Notice 2016-10 to advise local governments that they have sole discretion regarding whether to offer employees payment for the waiver of health benefits because health benefit waiver payments are statutorily prohibited from being subject to the collective bargaining process. That notice states:

Local Units Encouraged to Review 
Existing Policy on Healthcare Waiver Payments

Prior to municipal officers and employees being required to substantially share in the cost of their health benefits, there was less incentive to waive the local unit’s coverage even if alternative coverage existed. Offering payments in lieu of health benefits often functioned as the only practical means by which local units could achieve a waiver of coverage and thus save taxpayer dollars. However, the increased amount that employees must now contribute under the law will often be a sufficiently strong incentive for them to waive coverage through the local unit without the need for a waiver payment in situations where alternative coverage, for example through a spouse’s coverage, is available. Therefore, the Division strongly recommends that the governing body of each local unit authorizing payments in lieu of health benefits annually review, and have a thorough discussion about, their policy, its impact on the local unit’s budget, and whether such waiver payments remain fiscally prudent.

As noted above, waiver payments are often an unnecessary giveaway because employees are unlikely to pay twice for insurance. This point is especially salient when the employee receiving the waiver payment is also receiving health insurance from the City itself.

Our 2022 Audit found the wasteful payments totaled approximately $64,300. These payments were a portion of $542,000 in waiver payments made from 2019 to 2021 (with the remainder going to employees who did not receive health insurance through other family members who were Brigantine employees). The City advised in its corrective action plan that no action had been taken since the Mayor and Council were still discussing waiver payments.

During our review, we found that in 2024, the City paid a total of $208,300 in waiver payments to 51 employees. Three of these employees received both health coverage paid for in part by the City and waiver payments totaling $15,000.

The City explained it is not legally required to stop health waiver payments to employees covered by its health insurance. The City wrote that other employees “have the opportunity to receive the opt-out payment” and that the City therefore “chose to extend the same option to . . . two individuals for consistency and to support workplace morale.”

We consider this recommendation not implemented due to the City’s decision to continue health benefit waiver payments to employees receiving City-provided health insurance through a family member. As a cost-savings opportunity, we encourage the City to discontinue these waiver payments for all employees who are covered by the City’s health insurance.

Recommendation 9

Develop policies and procedures for administering health benefit waivers. The policy should require an annual review to ensure that waiver payments comply with the law and remain fiscally prudent. The City should evaluate whether the requirement that employees contribute to the cost of their health insurance obviates the need for employees to receive waiver payments. If the waivers are found to no longer be beneficial, the City should reduce or eliminate the payments accordingly.

Status: Implemented

Our 2022 Audit found Brigantine failed to comply with state statutes and follow local finance notice guidance for the administration of health benefit waivers. The City advised in its corrective action plan that once a determination was made by the Mayor and Council regarding waiver payments, any necessary policies and reviews would be conducted.

During our review, the City provided copies of the policies and procedures related to health benefit waiver payments, which were formalized in 2025. This document required the calculation to determine eligibility for the full waiver amount or a smaller incentive. We confirmed the City correctly calculated the 2024 waiver payments, applying either the maximum of $5,000 or lesser amount, depending on each employee’s eligibility. The City also provided a letter stating this policy is regularly reviewed as part of an ongoing assessment of its financial impact. The letter also reaffirmed the City’s financial decision to continue providing health benefit waiver payments.

We consider this recommendation to be implemented due to the action taken by the City.

Recommendation 10

Substantiate the data received by the insurance broker to ensure the analysis includes accurate and relevant data concerning rates, employee contributions, and employee health benefit waivers. Request that the broker provide support for its analysis.

Status: Not Implemented

Our 2022 Audit found the City failed to substantiate 2021 rate information and assumptions in its health insurance broker’s cost analysis resulting in the potential loss of $191,000 in healthcare savings. We also found that there was an inherent conflict between the broker’s and the municipality’s interests and that the broker’s analysis failed to discuss substantially cheaper insurance available to the municipality, which would have resulted in savings of approximately $439,200. We concluded that “the broker’s presentations lacked all relevant plan options for City officials to make an unbiased decision for the most cost-efficient health insurance plan.” We cautioned municipal officials about their overreliance on the broker, stating:

The broker does not earn a commission if the City participates in the [State Health Benefits Program] SHBP. It is, therefore, extremely important that the City independently review the information provided by the broker to ensure it is accurate, relevant, and presented in an unbiased manner. Municipalities must ensure transparency during the healthcare selection process and not simply defer to a person with a financial self-interest in persuading the City to not use the SHBP.

The City advised in its corrective action plan that prior to the award of 2023 brokerage services, the broker submitted additional information with relevant information from the SHBP.

During our review, we found that the City did not conduct a formal review of the information presented by the health insurance broker in 2024. Our review of the broker’s 2024 presentation found that the information provided included additional SHBP plans, appropriate rates, and reasonable waiver payment assumptions. However, we noted that similar to the 2022 Audit, the broker’s presentation again failed to present a complete and accurate analysis. The broker again failed to consider employee contributions for dental and vision coverage when presenting the SHBP costs. This oversight resulted in an overstatement of approximately $46,700.

We consider this recommendation not implemented due to the City’s lack of a formal review of the information provided by the health insurance broker. The conflicts of interest that are present whenever a broker is paid on commission remain. Given the high risk and documented tendency of brokers to misrepresent the actual costs of alternative health insurance options, we continue to urge the City to either independently verify the comparison rates received from the health insurance broker or to require external supporting documentation to substantiate the information provided.

Recommendation 11

Agree upon a flat fee rate, not to exceed the contract amount for insurance broker services, instead of a commission-based payment to mitigate the risk of the broker recommending more expensive health insurance coverage in order to increase its commissions. The flat fee rate should be the only compensation provided to the broker by the City or insurance provider. Any additional compensation received by the broker should be returned to the City or credited to the insurance premiums.

Status: Not Implemented

Our 2022 Audit found that the City failed to verify the information given by its health insurance broker or independently reassess costs using reliable data. Because the broker does not earn a commission if the City opts into the SHBP, it is crucial for the City to independently evaluate the broker’s information to ensure its accuracy, relevance, and objectivity. The City advised in its corrective action plan that it would work to accomplish our recommendation with its health insurance broker.

We reviewed the 2024 health insurance broker’s bid and found the broker received a two-percent commission rate for medical and prescription plans to be paid by the insurance company. The City did not provide documentation showing that a flat fee rate was requested. They explained that the percentage-based compensation was disclosed in the broker’s bid proposal and discussed during the broker’s presentation. The bid proposal, however, did not include a disclosure regarding additional compensation for which the insurance broker may be eligible, based on performance financial incentives. Based on the 2024 broker’s renewal form, we estimated that the two-percent commission for medical and prescription insurance was approximately $55,000. As stated in the 2022 Audit, the broker receives a commission directly from participating insurance companies based on healthcare coverage costs and number of enrollees. Additionally, brokers may be eligible to receive additional performance-based financial incentives from insurance companies beyond the aforementioned commissions and payments without disclosing these payments to the governing body and taxpayers. This creates another incentive to avoid promoting forms of insurance that do not provide commissions or other financial incentives.

These hidden bonuses were addressed in OSC’s September 9, 2025 report on health insurance funds, Local Government and School Board Health Insurance Funds: A Report on Conflicts of Interest and Procurement Violations ^[2] in which OSC wrote:

The risk to taxpayers is enhanced by a lack of transparency regarding payments made to incentivize brokers to bring more business to insurance companies. In addition to the fees permitted for producers, program managers, brokers, risk managers, and administrators under the [Health Insurance Funds’ (HIF)] and local units’ procurements and contractual arrangements, there is another way to make money that is evidenced through a recurring compensation disclosure in HIF TPA [third party administrator] agreements. This disclosure reserves the insurance carrier’s right to pay additional compensation to producers for bringing in business. This results in brokers being entitled to yet another avenue of compensation from insurance carriers with which the HIFs contract. This additional income creates additional hidden incentives for insurance professionals and comes on the backend, outside of the procurement process and without the approval of any public entity. When the public function of running a statewide government-sponsored insurance program is performed by private actors without full competition and without transparency regarding who is paid for what, taxpayers are likely to come out on the losing end.

In sum, undisclosed bonus payments create a further conflict of interest between the broker and City officials seeking the most cost-effective insurance coverage. The existence of these sorts of conflicts of interest, and Brigantine’s failure to take any steps to mitigate the potential harm resulting from it, is especially problematic given the repeated inaccuracies and misleading data contained in the City’s broker’s presentations.

We consider this recommendation not implemented because the City did not agree upon a flat fee rate for the health insurance broker contract. We continue to strongly urge the City to consider a flat fee rate with its broker in the future in order to guard against conflicts of interest and to protect taxpayer funds.

Recommendation 12

Seek advice from legal counsel to determine if the broker-supplied information and recommendations for insurance plan selection met all contractual, legal, and ethical obligations for 2019, 2020, and 2021. To the extent legal counsel’s review reveals any deficiencies, determine whether the City should pursue an appropriate legal remedy.

Status: Not Implemented

Our 2022 Audit identified discrepancies with the 2019, 2020, and 2021 broker’s analyses that included omission of relevant plans, use of inaccurate rates, exclusion of applicable contributions, and unsubstantiated medical waiver payment assumptions. The City advised in its corrective action plan that its counsel determined all contract requirements were met.

During our review, the City was unable to provide evidence that a legal review was conducted on the health insurance broker contracts for 2019, 2020, and 2021, specifically whether the City should pursue an appropriate legal remedy to address the harm caused to Brigantine resulting from the broker’s inaccurate proposal. The proposals failed to address relevant plan options and contained incorrect and misleading information. In our 2022 Audit, we found that Direct 15 plans were omitted, which prevented the City from considering a potential savings of approximately $191,000. More significantly, the broker’s 2021 analysis estimated that 42 employees receiving insurance waiver payments from the City, including 32 with the SHBP as their alternate plan, would reenroll in the City’s health insurance. However, our review found that only seven employees would reenroll due to lower contribution costs. We note that the City continued to use the same health insurance broker during the scope of our follow-up review.

We do not consider this recommendation implemented because there is no evidence of a legal review for the broker-supplied information and recommendations for the 2019, 2020, and 2021 presentations and plan selections. We recommend that the City reassess its ability to pursue legal remedies based on the aforementioned potential conflicts of interest and issues related to the broker presentations provided to the City.

Recommendation 13

Increase City contributions to the Plan by tax levy to ensure that City contributions, at minimum, comply with the requirements of N.J.S.A. 43:13-27(b) and address the unfunded liability noted in the actuarial report.

Status: Implemented

Our 2022 Audit found that Brigantine’s contributions to the lifeguard pension plan were less than required in 2020 and 2021. The City advised in its corrective action plan that Brigantine increased its yearly contributions in 2022 to $60,000 and contributions would be budgeted going forward.

Our review confirmed that the City’s 2024 contribution of $60,000 to the lifeguard pension plan complied with N.J.S.A. 43:13-27(b) minimum requirements. This amount included an additional $18,700 over the necessary employee contributions to address the unfunded liability highlighted in the actuarial report. The City’s 2024 audit report showed total contributions from the City and its employees, including interest, totaled around $126,600; expenses were approximately $80,200. As a result, the lifeguard pension fund balance increased by $46,400, raising the pension reserve to approximately $641,400. Although Brigantine took steps to address the unfunded liability, the 2024 actuarial report identified an unfunded liability of $4.87 million and recommended the City make annual contributions between $200,000 and $378,000 to the lifeguard pension fund.

We consider this recommendation to be implemented due to the action taken by the City. However, we recommend the City follow the actuarial report’s recommendation to contribute at least $200,000 annually to the pension fund.

Recommendation 14

Comply with GASB 73 financial statement disclosure requirements regarding the Plan.

Status: Implemented

Our 2022 Audit found that Brigantine did not acquire the required periodic actuarial reports, as mandated by GASB 73, from 2006 to 2021. However, the City obtained an actuarial report in 2022, which found its accrued liability to be $4.5 million as of January 1, 2022. The City advised in its corrective action plan that, going forward, the finance department would obtain actuarial reports annually.

Our review found that in 2024, Brigantine obtained an actuarial report for its lifeguard pension liability, revealing an unfunded liability of $4.87 million as of January 1, 2024. This information was disclosed in the City’s 2024 audit report. The lifeguard pension liability actuarial report and disclosure met the requirements outlined in GASB 73. We note that differences in actuarial assumptions can result in significant changes in plan liabilities, such as changes in the longevity and other demographics of plan participants, variations in investment returns, and contributions that do not meet actuarial recommendations. Accordingly, we again urge the City to follow the actuary’s contribution recommendations.

We consider this recommendation to be implemented due to the action taken by the City.

Recommendation 15

Seek advice from counsel regarding an amendment to the Plan allowing employees to withdraw contributions upon separation of employment.

Status: Implemented

Our 2022 Audit found that Brigantine’s Plan does not allow employees to withdraw their contributions upon separation of employment. The City advised in its corrective action plan that because Brigantine is a Class B Municipal/State pension, any action would need to come from the State and would be in effect for all shore towns with lifeguard pensions.

In our July 23, 2025 report, A Review of New Jersey’s Lifeguard Pension Law and Municipal Programs, ^[3] we found that all but one city in New Jersey that provides lifeguard pensions “keeps all of the funds contributed by lifeguards, most of whom never get close to the required years of service to receive a pension. This effectively taxes the labor of more junior lifeguards to pay for retiree benefits. This is inconsistent with state law establishing other pension programs, which allow funds contributed by public employees to be returned to them when they stop accruing eligible time toward their pension.”

During our review, we found that the City did not amend the Plan to allow employees to withdraw contributions based on legal advice provided by their labor counsel. Although no court has ruled on this issue, we are aware of no law that prohibits Brigantine from returning funds to former lifeguards once they stop accruing eligible time toward their pensions. Consistent with the position we took in our July 2025 report, we recommend that the City amend its plan to allow the return of contributions prospectively for employees who do not meet the minimum requirements under the Lifeguard Pension Law.

We consider our recommendation to consult counsel to be implemented due to the action taken by the City, but we further recommend that Brigantine revisit this issue in light of the observations made in this report.

Reporting Requirements

We provided a draft copy of this report to Brigantine for their review and comment. Their response was considered in preparing our final report and is attached as Appendix A.

By statute, we are required to monitor the implementation of our recommendations. To enable us to meet this requirement, within 90 days, Brigantine shall report to our office regarding the actions that have been or will be taken to address the unresolved issues in this report. We will continue to monitor those steps.

We thank the management and staff of Brigantine for the courtesies and cooperation extended to our auditors during this review.

Sincerely,

KEVIN D. WALSH
ACTING STATE COMPTROLLER

By: Christopher Jensen, CPA
Director, Audit Division

c: Tige Platt, City Manager, City of Brigantine
   Al Stanley, Chief Financial Officer, City of Brigantine
   Jacquelyn A. Suarez, Commissioner, Department of Community Affairs
   Michael F. Rogers, Director, Department of Community Affairs, Division of Local Government Services
   Michele Meade, Deputy Director, Department of Community Affairs, Division of Local Government Services
   Tina Zapicchi, Assistant Director, Financial Regulations, Department of Community Affairs, Division of Local Government Services
   Jorge Carmona, Bureau Chief, Department of Community Affairs, Division of Local Government Services