Audit Objective
Did City of Mechanicville (City) officials ensure that employees’ separation payments were accurate?
Audit Period
January 1, 2022 – September 30, 2024
Understanding the Audit Area
When an employee leaves city employment (e.g., by resignation or retirement), the employee may be entitled to receive separation payments for compensation of their earned, but unused, leave benefits (such as unused sick leave or vacation time) while employed with the municipality. A city may also establish “retirement incentives” to officers or employees that meet specified requirements (e.g., a lump sum payment based on years of service). City officials should ensure that employee separation payments are authorized and accurate before making payments to maintain financial integrity and limit financial losses for the City.
From January 1, 2022, through September 30, 2024, the City employed 98 people and paid them $6.2 million in gross wages. During this period, 17 full-time employees left City employment (separated from City service).
Audit Summary
During the audit period, City officials did not ensure the accuracy of separation payments. As a result, three employees received questionable or unsupported payments totaling $15,766 due to miscalculations of vacation payouts and an ineligible retirement incentive. Without formal policies and internal controls over separation payments, the City has an increased risk that officials and employees could make improper payments and misuse public funds.
Specifically, we determined that three separation payments totaling $37,118 were inconsistent with language in the City’s employee handbook or collective bargaining agreements (CBA), which may have resulted in overpayments.
City officials did not have adequate policies or written procedures in place to guide how separation payments should be calculated, reviewed and approved. Officials also did not establish a formal review process to verify that the calculations were accurate. In addition, they did not ensure that separation payments were consistent with employment agreements and paid only to those who were eligible and entitled to receive the payments.
The report includes eight recommendations that, if implemented, will improve the City’s ability to accurately calculate and verify separation payments, comply with employment agreements, protect taxpayer dollars and avoid overpaying employees who leave City employment. City officials generally agreed with our recommendations and have initiated or indicated they planned to initiate corrective action.
We conducted this audit pursuant to Article V, Section 1 of the State Constitution and the Office of the New York State Comptroller’s (OSC) authority as set forth in Article 3 of the New York State General Municipal Law (GML). Our methodology and standards are included in Appendix C.
The City Council (Council) has the responsibility to initiate corrective action. A written corrective action plan (CAP) that addresses the findings and recommendations in this report should be prepared and provided to our office within 90 days, pursuant to Section 35 of GML. For more information on preparing and filing your CAP, please refer to our brochure, Responding to an OSC Audit Report, which you received with the draft audit report. We encourage the Board to make the CAP available for public review in the City Clerk’s office.