Warwick overpaid firefighters by as much as $386,000 for sick time, long-awaited report concludes

“There was nothing nefarious,” firefighters union president says. “It was a matter of contract interpretation.”

Warwick City HallLane Turner/Globe Staff

WARWICK, R.I. — The City of Warwick made up to $386,000 in “excess payments” to firefighters for unused sick time between 2013 and 2018, according to a long-awaited report released Thursday.

The Marcum accounting firm sent the Warwick City Council a report dated Aug. 18, saying the city had made “excess payments” to firefighters of either $385,875 or $308,043, depending on which “payout scenario” was used.

The city allows firefighters 20 sick days per year, and they can accumulate up to 140 unused sick days. When they retire, they can get payouts for 75 percent of the accumulated sick time, and when they reach the 140-day maximum, firefighters can get payouts “at the end of each year” for 75 percent of unused sick time, pro-rated on a monthly basis, up to 15 days.

But the contract also calls for those payments to be made “by the last day of each month,” and that’s what the department did. So, the report said, “If an employee utilizes any sick days during the year, a monthly payment scenario as used by the department, results in a payout of greater than 3/4ths of his unused year sick leave.”

The report called for the city to change “inconsistent contractual wording as it relates to monthly vs. annual payout scenarios for unused sick time benefits.” And it called for the city to change its policies and procedures “to more accurately account for this benefit.”

The 187-member Fire Department had used a handwritten ledger to track unused sick time, although accruals were also recorded in an Excel spreadsheet, the report said. “As evidenced by the multiple errors identified during our procedures, the manual nature of the process increases the risk that errors in maintaining sick leave records will go undetected,” it said.

The City Council hired the YKSM accounting firm more than three years ago, and the Providence-based firm has since merged with Marcum, a national company based in New York.

Warwick Mayor Frank Picozzi, who took office in January, said the company had not released the report earlier because it had not received a payment, but he believes the Aug. 18 release was prompted by a recent state Ethics Commission decision.

Marcum sent the report to the City Council one day after the Ethics Commission found probable cause to believe former Warwick City Council President Steven Merolla violated the ethics code by approving $195,000 in payments to YKSM, whose partners included his campaign treasurer and personal accountant.

Merolla not only voted for the increases of $30,000 and $165,000 in a city contract with YKSM, he also signed five invoices for the firm and hounded administration officials when they balked at making the payments, according to an Ethics Commission investigative report.

The Ethics Commission noted that Thomas E. Lisi Jr. was a partner in YKSM (and now Marcum) who served as Merolla’s campaign treasurer until 2019, when Merolla appointed his mother as campaign treasurer.

In the report dated Aug. 18, Marcum added a disclaimer.

“It should be noted that during the period of our investigation, one of the partners of our firm was the treasurer of now-former Councilman Steven Merolla’s campaign,” Marcum wrote. “We did not deem this fact to impair our objectivity in performance of these investigative services, as Councilman Merolla was not the subject of this investigation nor was he responsible for maintaining the sick leave accruals and payments for the Warwick Fire Department.”

Rob Cote, the Warwick resident who filed the ethics complaint against Merolla, said he began looking into the Fire Department sick time issue in 2016. He and Ken Block, the Watchdog RI founder who ran for governor as a Republican and Moderate Party leader, obtained public records that they said showed firefighters receiving excess sick time payments.

“My numbers were right on the money,” Cote said Thursday. While the city paid YKSM a lot of money, he said he provided the firm with most of the documentation needed for the investigation. And, he said, “I did it for free. You didn’t need a CPA to do this. You could have brought this to Sister Mary at St. Kevin’s who teaches first-grade math, and she would have figured it out for free.”

Cote said firefighters should be required to pay back the excess payments they received. “Clearly there should be restitution,” he said.

But Michael Carreiro, president of the Warwick firefighters union, Local 2748, said firefighters never received “excess payments” and there is no need for restitution.

“There was nothing nefarious with what was going on,” he said. “There was no big scandal or scheme. It was a matter of contract interpretation.”

Carriero said the union and the city disagreed about how to interpret a previous version of the contract, and they attempted to clarify that language with a memorandum of understanding in 2013, during former Mayor Scott Avedisian’s administration.

While the city now considers that memorandum “void and unenforceable,” the union and the city entered arbitration over the issue during former Mayor Joseph J. Solomon Jr.’s administration, Carreiro said. And in any case, the issue has now been clarified in a new contract, he said.

Carriero said the union hired an accounting firm, Ward Fisher & Co., to conduct its own analysis of the unused sick time payments,” and “it was not anywhere near the $385,000 they are reporting.”

Picozzi said he is not sure if firefighters will be asked to repay the money.

“We got this the other day, and we are trying to absorb it,” he said. “The city solicitor is reviewing it and looking at how to proceed from here.”

City Council President Stephen P. McAllister said he had read the executive summary but he did not want to comment until he had seen the full report. “I want to have the full report in hand, and once I do we will work with the administration and the council to decide what to do going forward,” he said.