Home>Highlight>Audit finds millions of dollars in mismanagement costs in Roselle

Acting New Jersey State Comptroller Kevin Walsh.

Audit finds millions of dollars in mismanagement costs in Roselle

Borough kept suspended clerk on payroll for six years, costing more than $650,000

By Nikita Biryukov, January 27 2021 9:41 am

An audit released by the Office of the State Comptroller Wednesday found mismanagement cost taxpayers in Roselle millions of dollars.

Officials there kept the borough’s municipal clerk on payroll despite a suspension pending the results of an investigation. That matter sat untouched for six years, over which time Roselle paid them $611,000 and spent $48,000 on health benefits before eventually accepting the clerk’s resignation in July 2018.

The audit looked at the time period of January 1, 2015 through June 30, 2017.

The Union County town leaned on an inaccurate cost analysis for its employees’ health care coverage, buying a private health plans for its employees that acting State Comptroller Kevin Walsh said cost the town $1.9 million more than plans under the State Health benefits Program would have.

The town paid $800,000 in health insurance coverage and opt-out waivers to 22 current and former employees or their deceased spouses. It also continued to pay for dependents’ health coverage after its employees died, a practice that wouldn’t have happened under the state-run plans, Walsh said.

“Our audit showcases many of the opportunities for cost savings that municipalities commonly miss when it comes to purchasing health insurance for employees,” he said. “Municipal officials did not do their due diligence before deciding to pursue a private health care plan. Our audit showed in numerous ways that the Borough failed to use good financial judgment with funds entrusted to it by residents of Roselle.”

Fairview Insurance Agency has served as Roselle’s insurance broker since at least January 2016. Its contract was most recently reapproved earlier this month. The comptroller found Roselle’s broker overestimated annual premium increases from the state-run plan. Officials in Roselle took their estimates on faith, failing to account for the fact that the no broker fees are paid while participating in the public plan, the auditors said.

“A broker has no incentive to promote the State Health Benefits Program as a healthcare option to clients and has a very clear incentive to discourage what may be the most financially sound approach,” the comptroller’s report said.

Roselle also put a little more than a quarter million dollars, $257,000, into health plans for its elected officials, but the borough couldn’t show they worked the 20 hours per week required for health coverage eligibility.

It said the payments were pegged to a resolution but did not, or could not, provide auditors with a copy of the resolution.

The borough also failed to properly monitor use of its vehicles, which were lent to employees and misused. The vehicles had GPS tracking capabilities, but those weren’t used for monitoring, and auditors found 40% of the miles on those vehicles went to locations outside of Roselle.

Finally, Roselle officials breached the Local Public Contract Law in awarding a contract to a career development non-profit and paid a vendor with which it had no contract $146,000, leaving the town vulnerable to a legal dispute, Walsh said.

Officials there have 90 days to submit a corrective plan to the comptroller, but in an initial response, borough officials told auditors many of the problems had been corrected. The borough had since moved toward the government-run plan, they said, and was now keeping a log of its vehicles.

Roselle Mayor Donald Shaw and Council President Denise Wilkerson echoed that response, pledging to work on further reforms with the rest of the council.

Shaw won election last year over an independent challenge from Wilkerson, who was first elected to council in 2017.

“We welcome complete transparency on all Borough activity. Mostly all items raised in the state report covering items raised prior to 2017 have been corrected,” Shaw said. “As we move forward with Borough business, this entire governing body will continue to deliver the strong, capable government that our community deserves.

This article was updated with comment from Shaw at 4:31 p.m. It was updated again at 6:40 p.m.

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