Palisades Park officials ignored New Jersey laws capping sick leave payouts for employees, reimbursed employees for personal expenses and “wasted” hundreds of thousands of dollars, according to a state investigation released Tuesday.
The State Comptroller’s Office found “widespread financial mismanagement” that enriched its employees in violation of state laws and at the expense of taxpayers in the small Bergen County borough.
The investigation identified contract, collective bargaining provisions and employee perks far more generous than allowed under state law and mismanagement of expense reimbursements and fuel purchases.
“The borough’s failure to adopt and implement internal controls to protect borough funds has resulted in hundreds of thousands of dollars of improper, fiscally irresponsible, or otherwise questionable payouts for the years reviewed,” the report said.
Palisades Park did not adhere to state laws limiting compensation to employees for unused sick leave, known colloquially as boat checks, unlawfully paying out $109,000 in 2018 to 27 employees and $95,000 in 2019 to 22 employees.
“The borough’s failure to comply … by limiting sick leave payments to employees covered by that law has exposed the taxpayers of Palisades Park to substantial and unnecessary financial obligations that the borough was barred from assuming,” the report said. “The statewide mandate to protect taxpayers from the costs of runaway sick leave payments has been substantially disregarded in the Borough of Palisades Park.”
Investigators found problems with the borough’s vehicle policies, noting that Palisades Park, which encompasses 1.25 square miles, spent $120,000 on gas in 2019. The borough wasn’t able to identify how many fuel cards were distributed, which employees have fuel cards and whether they were using them for personal travel. There were no limitations on how much an employee could charge on their card and no mechanisms to detect fraud, investigators said.
Given that, it’s unlikely the borough would know whether former employees were still charging the borough for their fuel costs.
“The borough’s lax approach to fuel card usage has resulted in waste, fraud, and abuse,” investigators said.
Much of the report’s findings were devoted to the borough administrator, a $207,000-a-year employee who also runs a construction business in the borough. Administrator David Lorenzo is entitled, according to his contract, to 57 days off each year, including 25 vacation days, 15 holidays, 12 sick days, four personal days and his birthday.
His contract also provides him with “extravagant benefits,” including health care benefits in which the borough covers not only the premiums but “costs for all health, hospitalization, surgical, dental and prescriptions drug plans” for himself and his dependents. He’s eligible also for two weeks of severance at his current salary for every year of service to the borough — 50 weeks and counting — including a dozen as a part-time council member earning just $2,000 a year.
All told, the borough would be on the hook for $360,000 in sick leave payouts, severance and other benefits if he retired now, the comptroller’s report said. Lorenzo’s annual sick leave payments already exceeded the $15,000 cap imposed by the state, the report said.
More evidence of the borough’s lax oversight, investigators said, is a nearly $68,000 expense reimbursement paid to the administrator for expenses related to a federal investigation. The borough voided the reimbursement once the comptroller’s office began its investigation, the report said.
Of the $68,000 in expenses, the administrator submitted supporting documentation for only $29,000, according to the report. The reimbursement also included $10,500 for his wife’s legal defense, even though she’s not employed by the borough, $5,200 for a pre-paid vacation he said he had to cancel because of the investigation and more than $16,000 for accounting services related to his private construction business. He sought reimbursement for a retainer for legal representation and then again for legal bills clearly covered by the retainer, “thus seeking double payment of the retainer fee,” investigators found.
“Each step of the way, a reimbursement request that should have set off alarm bells was instead pushed along. That constitutes a startling failure by borough officials and employees to protect the public funds entrusted to them by the residents of Palisades Park,” investigators said.
Lorenzo’s employment contract stipulates also that he can only be fired for cause and with the unanimous consent of the borough council, which contravenes state rules saying he is an at-will employee who can be removed by a two-thirds vote.
“The contract the (business administrator) negotiated in 2015 purports to place him in the extraordinary position of being able to remain as municipal administrator even if five of the six members of the Borough Council vote for him to be removed,” the report said. “Palisades Park does not have the discretion to alter the requirements of state law or to contract away the requirements of its own ordinances. The unanimity requirement, therefore, is unlawful.”
Lorenzo’s borough office deferred comment to borough attorney John Schettino, who said the mayor is forming a subcommittee to devise a plan to “take all the appropriate action to ensure compliance with all state statutes and practices.”
Regarding sick leave compensation, Schettino said the state’s regulations are open to some interpretation, and once sorted out the borough will determine whether it has a basis to claw back some of the money.
“Many of these practices have been in place for several years, prior to many of the people on the governing body being elected to office,” he told NJ Advance Media on Tuesday. “Because they were part of contract agreements that may have existed prior to them taking office, or collective bargaining agreements, it was accepted as practice. And now that they’ve been alerted to the comments in the state comptroller’s report, it’s going to be remedied and they will take responsibility for ensuring that occurs.”
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