Three of the nine areas reported in an audit of the Hampden County regional pension system were found to be resolved by the commission overseeing the state’s public pensions.
In a June 24 letter to the Chairman of the Pension Board, Richard Theroux, John Parsons, Executive Director of the Public Employees’ Pension Administration Commission, provided a summary of the status of matters arising from the audit, which reviewed a three-year period of the system from January 1, 2014 to December 31, 2017.
“I think they were cooperative and they were sincere in their desire to adjust the results and they made good progress,” Parsons said. “There is still work to be done, but yes, the system has been diligent in processing the results. “
The areas considered resolved are:
Banking service charges
One area Parsons described as resolved was the system resulting in a bank service charge totaling $ 87,229. The audit found that the average monthly balances in the Hampden County system in 2017 ranged from $ 5.6 million to $ 27.4 million. Other retirement systems with similar balances pay no fees, Parsons said.
During the audit, the pension council transferred an account to another bank and no longer incurred these costs. As a result of the audit, the pension board also transferred its remaining account to another bank in order to avoid future service charges. Parsons said the pension board noted that bank accounts were accumulating interest, but the fees associated with the account essentially wiped out that interest.
Another problem that PERAC thinks the pension board has resolved concerns contracts that paid more than $ 250,000 in health insurance premiums for two part-time lawyers. Since the audit, the remaining lawyer on the board has resigned and the two former lawyers have received requests for reimbursement, one of which was referred to the board. The council also hired two new attorneys: Edward Pikula, a City of Springfield attorney whose practices focus on municipal law, civil rights and employment, and Alfredo Vivenzio of Scibelli & Vivenzio, PC, based in Springfield.
Documentation of council expenses
The final area that the progress report sees as fully resolved is the unapproved salary increases for Theroux. The audit found that Theroux’s salary increased from $ 25,642 to $ 27,485 during the audit period without a recorded vote of the board of directors authorizing the increase. Although the board of directors has drafted a policy requiring the review and approval of any changes to the president’s salary, PERAC could not find any records of the vote. There is no recorded vote, so it’s unclear whether or not it was initially approved by the board or not, Parsons said. The board signed and approved a monthly mandate, so it would have been aware of the increase, Parsons added.
In another area of documenting board expenses, progress has been partially resolved. The audit found that three board members, who are retirees, were improperly enrolled in Social Security, contrary to general Massachusetts law, and as a result, the pension system incurred costs totaling 4,842 $ by paying the employer’s share of social security. Although the practice ceased once identified by the audit, Parsons said PERAC learned during its weekly meeting with pension board chief executive Julianne Bartley that the pension system reimbursed all three board members. Parsons explained that the reimbursement money should not come from the pension system, but rather from the Social Security Administration.
“The social security funds of the board members are not with Hampden, they are with the Social Security Administration and that’s where they have to get their money back,” he said.
After discussion with PERAC, two of the three board members returned the reimbursements. The third member, Theroux, did not return the refund. In an interview, he said he hired a lawyer and wrote to the Social Security Administration on his behalf. He said that because his dollar amount was much higher than the others, he decided to seek another route with a lawyer to try and get the money back.
“The Social Security spending was something that completely caught the three people off guard,” Theroux said. “The three individuals were not aware that this had been done and it is unfortunate because the current system, as anyone can imagine, is the government’s black hole.”
Among the areas not yet considered resolved:
The audit determined that the board lacked policies in the procedures surrounding the use of overtime staff and recommended that the board create policies and procedures regarding the use, approval and documentation of overtime. The board is currently finalizing a policy regarding these policies. Overtime worked after the audit has been specifically and prospectively approved by the board before being used.
Reimbursement of questionable accommodation costs
The audit noted that Theroux received reimbursement during the audit period for costs that may not have been incurred, particularly for a location he owned, Parsons said. Initially, Theroux submitted questionable documents to receive a total of $ 1,825 in reimbursement during the audit period for non-hotel accommodation expenses incurred while attending a conference in Cape Cod. As a result of the audit, he wrote a check to council for this amount and has since paid an additional $ 3,825 for payments received before and after the audit period for a total of $ 5,650.
“I want to make it clear that this meeting, the Massachusetts Contributor Retirement System meeting, has been approved by the board of directors. I attended every meeting, signed up and signed up and got credit for the classes I attended, ”Theroux said. “The issue of renting cabins near mine in the past and so on has never been raised by any audit in the past. This auditor felt that this was inappropriate and that I should rent a suitable hotel near the conference and have to say the only reason I didn’t do this is because this hotel, the Sheraton Hotel in Hyannis, The rooms went straight away and that was just for convenience. It’s that simple.”
Following the audit, Theroux said a few groups, including a Boston-based political group, have filed Freedom of Information Act requests with the Pension Board and the City of Agawam to seek any irregularity in travel and mileage. He said a letter was returned to these groups stating that there were none.
“The problem for me is with almost 50 years in government and this is the one and only problem I have ever had that is questionable,” he said. “It’s been 32 years as a city clerk and 14 years as a city councilor. This is the only question that certainly concerns me and I have addressed it. I resolved it immediately by refunding the money. … Frankly, anyone who knows me, and you can do the math, this is a four day conference and I’m not looking to make any money. It’s just ridiculous.
Board expenses for services not received
PERAC found that the board partially resolved the finding that it paid more than $ 235,000 to more than 50 entities for services that the pension board did not contract or receive. The board is trying to contact the entities that have been paid. That effort was hampered when the board’s internal and external legal advisers resigned, Parsons said. Policies have been further developed regarding the process of paying through invoices to external vendors, which now include requirements for W-9 and 1099 tax information. Prior to payment, invoices must be identified as under current contract and for services rendered, and any invoice that does not meet these criteria will be reviewed with legal counsel and verified prior to any payment.
Three board members attended three conferences during the audit period paid for by the board’s investment advisor. The investment consultant paid for the conference, accommodation, airport transfers, and recreation and entertainment provided. According to the audit, the brochures for the investment consultant program do not specify what the actual costs are, but PERAC estimated the value of the hotel expenses to be $ 10,936. The Board of Directors has since reimbursed its investment consultant an amount of $ 7,983.70 for the alleged costs of these conferences. This amount will be verified in future audit work, Parsons said. The council is also in the process of updating its travel policies.
Monthly financial information
PERAC also identified concerns regarding the board’s budget and the financial oversight process. Among their concerns was the 2017 budget overrun of 6.5%; use a budget for the fiscal year and an accounting system for the calendar year; budget items not correlated with expenditure accounts; lack of reconciliations of bank statements for control and money market accounts presented to the board of directors; and expired checks.
At her next board meeting in June, Theroux said the board is expected to adopt a six-month budget for the second half of the year, which will allow her to adopt a budget for the calendar year later. 2022. The board of directors is also in the process of doing this. update its retirement software in order to better manage its financial and reporting processes. The board is up to date in its handling of overdue checks and performs timely bank reconciliations, according to Parsons.
“I am very satisfied with the report we received in a short period of time and the progress we have made,” said Theroux. “What, of course, still doesn’t satisfy me is that we had an audit of this nature, after 22 years of audits that encountered very minor issues, but that’s not the point. The point was, these were issues and although the board was really, in many cases, oblivious to the issues, it is still our job and we are dealing with it. … We’ll clean this up if it’s the last thing I do and get it right.