Auditors: Jacksonville Pension Officials May Be Skirting Payout Rules

palm tree

Auditors and watchdog groups are asking questions about the “questionable benefits” of some members of the Jacksonville Police and Fire Pension Fund.

This comes in the wake of a Florida Times-Union investigation that claimed some of the system’s top officials, and active members, were breaking city rules by participating in the Deferred Retirement Option Program (DROP) even if they weren’t eligible.

From the Florida Times-Union:

The long-time chairman [Bobby Deal] of the troubled Jacksonville Police and Fire Pension Fund will collect $610,000 more in retirement funds than a strict interpretation of the law says he is entitled to, a Florida Times-Union investigation found.

Even more alarming to City Council members, city auditors and independent analysts is that Deal is not alone.

There is also former fire chief Richard Barrett, who was allowed into DROP even though he had passed the point of eligibility. And there is Richard Lundy, a former fire captain and business partner of Deal’s. Together they stand to receive more than $1.8 million in questionable benefits.

They are among what is expected to be potentially more than 1,000 former police officers and firefighters who were allowed to skirt the rules and participate in the DROP either too early or — like Deal — for longer periods than city law allows.

Most of the special arrangements allow employees into DROP prematurely, which has a negligible impact on the troubled pension fund. But others like Deal who participate longer than the city law states will end up costing taxpayers hundreds of thousands of dollars each in DROP payouts.

DROP payments are secondary pensions on top of regular pensions that sometimes stretch out for four to five decades.

Pension officials and city officials seem to disagree on what the rules have to say about DROP eligibility. From the Times-Union:

The police and fire pension fund’s executive administrator denies any favoritism or improper application of the law.

“It’s absolutely done properly,” John Keane said.


Under rules set up by the police and fire pension fund — and agreed to by the city in the late 1990s — an employee who already has worked 30 years is allowed to be in DROP for only three years. Workers with 20 years of service but fewer than 30 years are able to participate in DROP for the full five years. Those with 32 years of service may not participate in DROP at all.

Not so, says Keane.

Keane said it takes time to process paperwork and emphatically denies that rules were skirted for Deal or any other member.

“It’s like going out and catching an airplane; you have to go out and get a ticket before you can board the plane,” Keane said. “When you have 40 to 50 people signing up for the DROP, [all that paperwork] cannot be cleared in just a few days.”

[Jacksonville City Council auditor] Kirk Sherman said there is no quarrel about paperwork deadlines, only about eligibility and following the rules.

The Jacksonville Police and Fire Pension Fund is 43 percent funded.

Read the entire Florida Times-Union investigation here.

Legal Quirks Complicate New GASB Rules in Pennsylvania

Balancing The Account

The Governmental Accounting Standards Board (GASB) has rolled out new financial reporting rules for pension funds, and the expectation is that the new rules will expose some “red ink”, so to speak, at pension funds who previously kept some liabilities off the books.

But implementation and enforcement of the rules is hardly straightforward. Pennsylvania serves as a great microcosm of the rules’ complexity. Mark Guydish writes about the impact of the rules on small municipalities:

GASB standards do not have the weight of law and GASB has no enforcement powers. The standards are widely adopted because independent auditors look for compliance with GASB, and state and federal money may depend on that compliance.

Theoretically, a small township that has an elected auditor rather than a contracted auditor could disregard GASB standards…though the risk to state and federal funds would still exist.

There’s another quirk in Pennsylvania, and Luzerne County, that complicates how these standards play out: The high number of municipalities managing their own pension funds, creating a wide disparity in the size of those funds.

On the one hand, the sheer number of municipalities and authorities may prevent big swings in the numbers once the new standards are used, simply because so many pension plans cover only a handful of people in many townships and boroughs.

On the other hand, Dave Davare, retired director of research at the Pennsylvania School Boards Association, noted that the dollar figures are so small it wouldn’t take much of a change to move a fund from surplus to deficit.

Dreyfuss pointed out that the standards do not require a municipality to meet pension obligations, simply to report them differently. From the municipality’s point of view, the most important number in Pennsylvania is the state-mandated “Minimum Municipal Obligation,” or MMO. Fail to pay the MMO, and state money can be at risk.

Hanover Township Manager Sam Gusto said that’s the focus at his office, and that there is no way of knowing the impact of the new GASB standard until the actual book work changes are implemented.

You can read the rest of Guydish’s massive piece here. It goes on to explain how the rules might impact school districts and state-level pension funds.


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