An audit of Saugus payroll spending has identified nearly $162,000 in wage and benefit expenses incurred in apparent violation of municipal finance laws and state regulations over an eight-month period this fiscal year.
Nearly $65,000 was spent on wage increases that were not budgeted, cellphone allowances for which there is no clear policy, and car allowances that violated the town's travel policy, the audit report states.
Another $97,000 was spent to increase wages for some employees above the rates negotiated in collective bargaining or personnel contracts. Expenses were not charged to the proper accounts. In several instances, regular payroll was charged to overtime and expense accounts, auditors found.
The missteps violated municipal finance laws and “led to misleading and fraudulent accounting of the actual nature of the financial transactions,’’ auditors wrote.
The audit report is the second of three prepared for the town by Powers & Sullivan, a Wakefield-based accounting firm. The first report detailed $1.4 million in improper water, sewer, and public works spending. A third report, due by the end of the month, will look at allegations of improper bidding of public works projects. The audits look at spending from July 1, 2011, until Feb. 29, 2012.
The forensic audit, a detailed analysis of financial accounts, was ordered by the state Department of Revenue after town employees reported financial irregularities after Town Manager Andrew Bisignani retired in January. The Revenue Department now is closely monitoring town finances.
“The transactions were done with various degrees of violations,’’ James Powers, a partner at the accounting firm, told selectmen Tuesday. “In some instances, it was bad practice. Some may have been innocent. Some may have been intentional.’’
The town charter gives the town manager the authority to set compensation and negotiate union contracts. In a prepared statement, Bisignani, now the part-time town administrator in Nahant, denied any financial wrongdoing during his nine-year tenure in Saugus.
“I acted within the authority granted to me in the town charter, and most often with the advice of town counsel and labor counsel,’’ Bisignani stated. “I was never given the opportunity to discuss or explain any of the issues presented in the report, many of which are presented out of context or simply not true; most of these issues were openly discussed during budget presentation with the Board of Selectmen, FinCom and Town Meeting. Everything I did as Town Manager was done to protect the health, safety and well-being of the residents of Saugus and was done with the knowledge of other town officials. I made judgment calls, as I saw fit, most of the time with the knowledge and approval of town officials.’’
Saugus has taken painful steps to balance its books. About 20 town employees have been laid off to help lower a $1.4 million deficit in public works spending. Joan Regan, the town accountant at the time of the inquiry, no longer works for the town. The assistant town accountant, along with a consultant from Powers & Sullivan, is temporarily overseeing the accounting department, said Michael Serino, chairman of the Board of Selectmen.
Joseph Attubato, the town's longtime public works director, has also retired. The department is being temporarily run by a foreman, Serino said.
“It's been a difficult time for many people in the town,’’ Serino said. “We are committed to financial transparency and getting things straightened out.’’
Selectman Steven Castinetti said he feared the audit's findings had hurt public confidence. “I think there is a perception out there that we are just floating.’’
But Powers said that's not the case, noting that most expenses in the town budget are legitimate. “Most of the expenses and things are proper. [Mistakes] were isolated to those types of transactions. I don't think you're floundering.’’
Stipends paid to town employees now are being reviewed by the town's outside labor counsel, officials said.
A fire captain and a police patrolman each were paid $833 annually because they are required on nights and weekends to respond to animal-related calls, including dead animals in the street, the audit states. Police Chief Domenic DiMella was paid $15,178 for compensatory time, which is not covered by his contract, the audit report states.
In an interview, DiMella disputed the auditor's findings. “It's totally erroneous,’’ he said. “My contract states that the chief of the department shall receive all the benefits that are in the superior officers’ contract. They have the ability to earn and cash in comp time . . . This provision has been in the chief's contracts for years. The auditors never spoke to me about this.’’
Bisignani agreed the payment was required. “It was paid because of contractual obligation and past practice,’’ he said. “In the long term, the manner in which these issues have been settled was far cheaper for the town.’’
Regan, the former town accountant, received a $2,000 salary increase, paid in $200 installments over a 10-week period, the report states. A public works foreman received an $848 wage increase without an appropriation, the report states.
Bisignani said many of the stipends were paid to settle union grievances.
“Not all of them, but many were. Some of the stipends I agreed to for different reasons. If someone was working to 50 hours a week, instead of paying them overtime, which they were entitled to, I made arrangements with them to accept [a stipend]. Overtime payments would have been far more expensive for the town,’’ Bisignani stated.