Mercer Town Failed To Prevent 'Illegal' Sick, Vacation Leave Payout: Comptroller

MERCER COUNTY, NJ — A Mercer County town failed to take necessary action to prevent illegal employee sick leave and vacation payouts causing a waste of taxpayer money, the NJ State Comptroller said Thursday.

In a letter sent to Gov. Phil Murphy and the Legislature, Acting State Comptroller Kevin Walsh noted that Hamilton Township along with eight other municipalities failed to cooperate with Office of the State Comptroller (OSC) and had not addressed deficiencies identified by them.

The OSC notified State leaders it may request withholding funding to the towns if, after 30 days, they remain in non-compliance.

“These nine towns are failing in their most basic responsibilities: To act as a fiduciary of taxpayer funds and to be transparent about how these funds are used,” Walsh said. “After more than a year, they continue to delay. My office will use all of the tools we have to protect New Jersey taxpayers from fraud, waste, and abuse.”

In July 2022, OSC released a report noting that of 60 towns surveyed, 57 failed to follow the laws capping payouts of sick leave and accrued vacation time to government employees, hence creating a financial liability of many millions of dollars for taxpayers.

OSC told the municipalities to provide corrective action plans that included provisions to identify and recoup improper payments and prevent more wasteful payouts.

Most of the 57 towns complied with OSC’s recommendations and have corrected their sick and vacation leave policies, officials said.

Some also are in the process of negotiating new contracts with labor unions and entering into side agreements.

But of the nine towns identified, seven failed to have an independent fiscal assessment. OSC requested this assessment to identify whether improper payments were made and need to be recovered, officials said.

OSC also told the towns to submit corrective action plans for approval, but six of the nine towns failed to do that.

The nine towns identified were Bridgewater, Hamilton, Pennsville, Piscataway, Red Bank, Rutherford, Sparta, Wantage, and West New York.

By state law, all employees hired after May 2010 cannot receive more than $15,000 for unused sick leave. Employees can only receive that $15,000 at retirement and not when they resign, change jobs, or as an annual payout.

Employees also can’t carry over more than a year’s worth of vacation time.

According to the OSC’s investigation, the majority of municipalities surveyed were violating aspects of this law and continue to enter into employment contracts and collective bargaining agreements that allow improper payments.

“Many towns across New Jersey have made improper, wasteful payouts for years and years. It’s inexcusable that the basic steps to safeguard public funds are not being taken,” Walsh said. “Taxpayers deserve better.”

One of OSC’s recommendations in 2022 was that the Legislature impose accountability measures to ensure the laws are enforced.

Last month, the Local Finance Board issued regulations that strengthened the legal obligations of towns and counties.

Specifically, CFOs are now required to review and approve any payments for sick leave and vacation payouts, and as part of annual audits, auditors are required to confirm the eligibility and propriety of any payouts.

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