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Some NJ Towns Continue the Improper Practice of Sick/Vacation Payouts

(The Center Square) — New Jersey's top fiscal watchdog is pressuring cities and towns that haven't complied with his office's demands to end "improper" sick and vacation time payouts, warning that he may seek to withhold state funding.

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In a letter to Gov. Phil Lamont and legislative leaders, Acting State Comptroller Kevin Walsh said at least nine local governments have "refused to cooperate" with his office to develop corrective action plans by evaluating and addressing deficiencies in their sick and vacation leave policies.

Walsh said if those communities, many of them small townships, don't respond to his demands within the next 30 days, he may seek to withhold state funding.

"The failure of the nine municipalities to prepare a corrective action plan, as directed by the Office of the State Comptroller, creates risks that taxpayer funds will be wasted and that unlawful policies will remain in effect," Walsh wrote.

A 2007 law mandated changes to sick leave policies for senior employees of municipalities and school districts, limiting payment for accumulated unused sick leave to $15,000.

The law also prohibited officers and employees covered by the law from receiving annual sick leave payments, making supplemental compensation payable only at the time of retirement. It also limited vacation leave accrual to two years’ worth for senior employees of non-civil service municipalities and school districts.

A 2021 investigation by the comptroller's office found the laws were largely being “ignored, sidestepped, or undermined,” Walsh said, with 57 of the 60 municipalities reviewed as part of the probe failing to fully comply with the laws.

Many cities and towns have since complied with the rules, but at least nine "have failed to respond to OSC’s correspondence requesting that they correct the deficiencies," Walsh wrote.

Some of the communities failed to detail an evaluation of their internal controls, he said, while others failed to address a requirement to get governing body approval for sick and vacation payouts.

Walsh said the most common deficiency among the nine local governments was a failure to obtain an independent evaluation to identify potential improper payments.

"The intent for such approval was to provide transparency and notice to taxpayers and the governing body that there were improper terms and conditions in contracts and policies," he wrote. "Public examination of the CAP would enable taxpayers and the governing body to question the municipality on its management and operations."

The letter, a copy of which was sent to township officials, pointed out that the comptroller's office has the authority to request withholding of state aid and grants to the communities.

"At this time, OSC does not request either of these actions to be taken," Walsh wrote. "But it provides notice that, if municipalities remain in non-compliance upon the expiration of 30 days, OSC may request these actions be taken."

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