The Office of the State Comptroller (OSC) announced that $100,000 in “substantial annual bonuses” was paid to top executives of the Middlesex County Improvement Authority (MCIA) that were not provided for in employment contracts.
The OSC announced the findings of the audit in a press release issued Aug. 1.
The MCIA provides financing assistance to the county and its municipalities through the issuance of bonds. The OSC audit, however, found no exceptions to the authority’s financing practices, according to the press release.
The audit found Executive Director Richard Pucci received a base salary of $185,384 in 2010, but ultimately received $249,366 in total compensation due to $55,617 in incentive bonuses, $4,800 for car allotment, and $3,565 in unused sick time. Lory L. Cattano, chief financial officer, Frank Damiani, administrator of the Roosevelt Care Center, and Jane S. Leal, director of administration and communications, received bonuses that ranged from $11,600 to $20,500 in 2009 and 2010.
Similar bonuses were paid to the top four officials as far back as 2007, the release indicated.
A bonus incentive program was not referenced in the MCIA personnel manual and OSC auditors discovered the bonuses only after reviewing individual payroll records.
“Even at the height of the economic recession, the MCIA awarded its top officials not only their contractual salary increase, but additional unsubstantiated bonuses worth 10, 15, even 30 percent of their salary,” State Comptroller Matthew Boxer said.
Boxer also criticized the criteria used to award the bonuses, which the report stated included basic benchmarks that did not reflect measurable criteria tied to the authority’s goals.
“Criteria like ‘interacts well with others’ and ‘understands and follows instructions’ are not sufficient justification for the payment of more than $100,000 in yearly bonuses to the upper management of a government agency,” Boxer said.
The OSC further stated that although payouts were said to be based on performance evaluations, Pucci did not receive written evaluations.
According to the OSC, the MCIA received more than $8 million in subsidies from Middlesex County in 2010.
The statement also stated that eight of nine contracts reviewed in the audit were awarded by the MCIA without “appropriate vendor-selection criteria.”
All nine vendors had previously been awarded contracts by the MCIA, and in six cases the incumbent vendor was the sole respondent.
In addition, the OSC determined Daria Venezia, MCIA’s outside legal counsel, had “improperly received MCIA-funded health benefits.”
The audit made several recommendations to the MCIA to re-evaluate the incentive program, eliminate yearly sick-leave buyouts, implement a formal vendor-evaluation process for awarding professional service contracts and impose limits on total compensation to authority executives and management.
Pucci, who has served executive director of the MCIA since its inception and is also in his seventh term as mayor of Monroe Township, defended the authority and said the OSC failed to observe the potential impact of their recommendations on authority programs.
He highlighted the authority’s impact on the county in administering recycling programs, the preservation of 7,200 acres for open space as well as the authority’s management of the Roosevelt Care Center, Edison, which resulted in the county’s lowering of the annual subsidy of the facility from $18 million in 1995 to $7.5 million in 2010.
“The programs we are involved with, which is a wide scope of programs, we’ve got a really good track record,” Pucci said. “I believe it’s our obligation first and foremost to perform that service and be answerable to taxpayers at the most economic way we can, and that’s the way we’ve operated over all these years.”
He reiterated that the audit found no exceptions to the authority’s financing practices, which enables the MCIA to help municipalities save money through their AAA bond rating.
“We literally saved towns millions of dollars through capital lease programs, purchasing everything from police cars to public works equipment to communications equipment,” he said.
In an MCIA statement, the authority asserts the OSC inaccurately depicted the nature of executive bonuses.
Non-union full-time employees receive an annual raise between 0 and 1.5 percent in salary based on performance evaluations and such increases become a part of “pensionable salaries,” according to the authority’s statement.
In the case of the four executives, such incentive-based compensation was not permitted to be a part of pensionable salaries and was used primarily for “taxable nongroup benefits” chosen by the employee; for example, health insurance or deferred compensation plans.
Due to IRS regulations, the statement adds, such benefits are not permitted to be paid directly by the employer and are designated as supplement benefits instead.
“Those adjustments came over a long period of time; … they’re implying [that] just yesterday that we came up and said 15, 20 or 30 percent bonus for everybody,” Pucci added.
He also defended the authority’s practices with regard to service contracts.
“The comptroller leans toward more competitive contracting: ‘Get the best price and change the firms if you have to,’ ” he said. “We lean in the direction of, ‘We’re going to pay the same competitive price, but we want to have the selection process in our hands so we pick a firm we’re comfortable with.’ The law allows both ways.”
In addition, he said Venezia, who has been with the authority since its inception, still deserves health benefits despite recent changes in pension laws in 2009 prohibiting professionals from being in the pension system.
“We made a determination here at that time that it would be unfair after all these years and the best thing would be to continue that service with health benefits,” he said, adding that an adviser from the county health insurance program acknowledged she could remain in the system given the uniqueness of the situation.
In a statement, MCIA Chairman Leonard Roseman said the report “blatantly ignores the success of the MCIA-administered programs, millions of dollars in taxpayer savings, and the high quality of professionalism among the MICA staff.
“The salaries and benefits received by the MCIA executives are merited given their experience, high level of expertise, and excellent records of performance, particularly with the outstanding success of the MCIA programs,” Roseman added in the statement.
The authority, established in 1990, is one of the largest in the state with a workforce of more than 600 employees and a balance sheet of $651 million and $25 million in net assets, according to the MCIA statement.