The Essex Regional Retirement System, once plagued by questionable management practices, has made a turnaround, according to a new audit released by the state commission that oversees public pensions.
“We’re happy that it came out that we were operating in a businesslike manner and all of our financials seemed to be satisfactory,” said retirement board chairman H. Joseph Maney.
The audit, conducted by the Public Employee Retirement Administration Commission, covers the years 2009 through 2011.
Three years ago, a commission audit led to the firing of former chairman and executive director Timothy Bassett and was a precursor to legislative changes that reformed the system. That audit, for 2006 to 2008, found that financial records were not being maintained and that Bassett had spent significant sums of money without a search process, competitive bids, contracts, or board approval.
The latest review confirmed that there has been a significant turnaround in practices, according to executive director Chuck Kostro, a former town administrator in Newbury who was hired to run the operation in March 2011.
“The 2011 year was our first year, really, as a board,” said Kostro, who noted that the board changed its membership in December 2010.
The Essex Regional Retirement System, formerly the Essex Regional Retirement Board, administrates the public pension system for municipal employees in 19 Essex County towns, plus school districts, housing authorities, and other entities representing approximately 5,000 individuals. Represented are Boxford, Essex, Georgetown, Groveland, Hamilton, Ipswich, Lynnfield, Manchester-by-the-Sea, Merrimac, Middleton, Nahant, Newbury, North Andover, Rockport, Rowley, Salisbury, Topsfield, Wenham, and West Newbury.
“One of our goals was to try to restore people’s confidence in the retirement system being properly managed, and one of the reasons people lost confidence was the prior audit, the 2010 audit,” Kostro said. “That audit concluded that finances were not being managed in conformity with the standards that [the commission] had established. Reconciliations weren’t being done, and reports weren’t being filed. What this audit shows is that we are doing those things now.”
The 2010 audit found 23 “deficiencies” including poor record keeping, lack of reporting or oversight, and violations of the open meeting law.
At that time, Bassett and the board were under fire in the news media and by the towns and entities they were entrusted to serve. An article in The Boston Globe revealed that Bassett had exploited the system to secure “tens of thousands of dollars in enhanced annual pension benefits” for him and his wife, who received retirement credit based in part on her volunteer service on the Lynn public library board of trustees in the 1980s. The Globe also reported that the board gave member Katherine O’Leary retirement credit based on her time as a teenage park instructor in Salem.
Boxford’s treasurer/collector, Ellen Guerin, who sits on the advisory council for the retirement system, recalled that getting information from the old board was difficult, at times requiring her to file requests under the Freedom of Information Act.
“Many of us who worked hard during that time period were not pleased with the former board and are very pleased with our new board, and the number of initiatives they’ve undertaken to increase transparency, performance, and accountability,” she said.
Maney said the three deficiencies cited in the new audit are technical in nature, dealing with employer pay codes and retirement withholding. Both Kostro and Maney said that they will be addressed.
“We’re determined to do the right thing so the next time they don’t have any items to cite,” Maney said.
“We want people to know that, so they can have confidence that the retirement system is being properly managed,” Kostro said. “That was an important improvement for us.”
Kostro said that in addition to the three-year audits the commission conducts, the board hired Wakefield-based Powers & Sullivan to conduct annual audits. The first one, for 2012, is expected to be released before the end of October.
When the new board and administrator took over, they had to not only change the methods of operation but also to restore trust from those who entrusted them with their pensions and from the public, Maney said.
“We fixed it and hopefully we’re restoring public trust,” said the board chairman and retired town administrator from Lynnfield. “Sometimes that takes a little longer, to wipe out all of the problems of the past and the perception people have about that. When they see the results of this audit in particular, we’re hopeful that they will think we’re doing the right thing. Going forward, we certainly plan to.”
A copy of the audit is available on the system website, at essexregional.com.