Lynn pension audit shows overpayments

LYNN – City Councilors Tuesday unanimously recommended expanding an audit of the retirement system after an independent auditor revealed three of 12 randomly selected accounts – including that of former Mayor Edward Clancy – reflected overpayments that totaled nearly $42,000.”A 25-percent hit rate is pretty significant,” said Audit Subcommittee member Paul Crowley after the subcommittee’s meeting Tuesday evening. “It throws up a red flag, particularly when no (problems) were seen in six years” of previous audits.City Chief Financial Officer Richard Fortucci said he met with Mayor Judith Flanagan Kennedy and the auditor when the issue arose.”It’s unusual that it would happen,” Fortucci said. “But I think the auditor said it right, mistakes were made and people were not even aware of what was happening.”According to independent auditor John Sullivan of Melanson Heath and Company, the firm’s initial and annual audit of the retirement system selected 12 accounts to examine and that auditors found overpayments in three of those accounts. This was the first time in the firm’s six years of auditing the retirement system any irregularities were found, Sullivan told councilors, adding that one of the overpayments was caught by the Retirement Board.All of the overpayments appear to have resulted from what should have been one-time, retroactive payments that were instead paid each month, and reflected errors not malfeasance.”They got put in and never taken out,” Sullivan told the subcommittee at its meeting hours before the full council met. “They got repaid and repaid.”The overpayments totaled $42,000, divided among three accounts with overpayments of $13,000, $20,000 and $9,000, and were “an anomaly,” said Retirement Board Administrator Gary Brennan. Brennan said the board oversees approximately 1,250 pensions and authorizes payments totaling $2.6 million each month. He noted the state performed an audit of the system the month after the city’s audit and the state found nothing amiss.”Every year the city comes in and does it and we’ve never had a problem, but it happens: Errors are made,” said Brennan. “I’m glad they did catch them, but I think it’s the exception rather than the rule – I can say that pretty confidently.”Brennan said the board has already taken corrective action to ensure pensions are paid correctly to those accounts affected. The Retirement Board will vote on whether to recoup or waive the overpayments. The $20,000 account error the Retirement Board caught has been in repayment for years, Brennan noted.Retirement Board Chairman Michael Marks said the audit – including the expansion – would cost an estimated $5,000 to $6,000, and he’s confident no further problems will be revealed.”When I received word that the city auditor had looked at 12 individuals and that three came back, I was dumbstruck – I couldn’t believe it,” Marks said. He said he was heartened, however, after subsequent internal and external audits came back with no problems. “I’m confident that when the city auditor comes in and looks at it (again) they will not find any additional overpayment – I would be really concerned if that would happened.”He said the board would not make a determination on whether or how to recoup the reimbursements until after the expanded audit is completed.The amount former Mayor Clancy was allegedly overpaid was not disclosed, but the board made it clear that his was not the $20,000 error. A message left for Clancy Wednesday evening was not immediately returned.Marks said he could not recall the names of the others affected by the overpayments.Ward 1 Councilor and Audit Subcommittee member Wayne Lozzi said the audit results also surprised him, and that filling the position of City Comptroller would prevent such oversights in the future. The comptroller position has been vacant since former comptroller John E. Pace was fired in June.Fortucci found that Pace received more than $2,800 in salary that he was not entitled to when he