Ocean City receives clean audit, responds to financial allegations

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No issues found after state requests deeper investigation

OCEAN CITY — City auditor Leon Costello and his associate Mike Garcia of Ford-Scott Associates presented to City Council a clean audit with no findings or recommendations Thursday, Sept. 12.

Garcia said that there was a unique circumstance with this year’s audit, which caused a delay in the audit presentation.

“At the end of the audit process, our firm received a letter from the state of New Jersey requesting that we follow up as part of our audit on several allegations made to the state regarding Ocean City financial activity,” he said.

Garcia read a letter from Christopher J. Vaz, assistant director of the New Jersey Division of Local Government Services, to Costello dated July 3 that stated, “We received correspondence dated June 19, 2013 from a resident of Ocean City alleging numerous instances of mismanagement related to procurement on the part of Ocean City officials.”

The allegations were: failure to encumber funds prior to making purchases, failure to obtain quotations in accordance with the Local Public Contracts Law, use of a procurement card without training, use of a procurement card without authorization of the governing body and approval of emergency contracts without the required documentation.

Garcia said that some of these items he and Costello were aware of from newspaper articles. He said that after researching each of the five claims, supported with 18 pages of documentation, his conclusion is that these allegations are not true.

Garcia briefly went through each allegation, three of which were Hurricane Sandy-related purchases.

The first was that during a state of emergency the city failed to encumber funds for a contract with Shore Shine Car Wash, LLC. While $22,413 worth of services was performed in 2012, they weren’t paid for until April 26, 2013, Garcia said.

He said that he spoke with city director of finance Frank Donato who indicated the funds were not encumbered for two reasons. According to Garcia, Donato said the work was done in response to Hurricane Sandy when city workers were displaced making normal operations extremely difficult and the city questioned some of the invoices, so the funds would not be encumbered until the amounts were researched and deemed accurate.

The second allegation, failure to obtain quotations in accordance with the Local Public Contracts Law, is also related to Shore Shine. Garcia said that the law sets the bid threshold at $36,000, meaning that formal bids are required. The law also states that at $5,400, quotes are required to be obtained. He said that while the amount in question is below the bid threshold and above the quote threshold, the statute states that quotes should be obtained “when practical.”

“Obviously, in this case, because of the hurricane, it became impractical to get quotes,” Garcia said.

The third allegation of use of a procurement card, often called a p-card, without training, he said, is without merit because the city has a policy on training employees on the use

p-cards. Garcia said that the fourth allegation, use of a procurement card without authorization of the governing body, is also without merit because City Council passed a resolution authorizing the use of p-cards.

The last allegation, approval of emergency contracts without the required documentation, was unsupported, Garcia said.

“Every emergency contract that was awarded after the hurricane was done by resolution,” he said, adding that the resolutions also appear on the city website.

“Every ‘I’ was doted, every ‘T’ was crossed,” Garcia said.

As part of the audit, he suggested that since the city is not currently part of the State Health Benefits Plan, it would need to hire an actuary to determine the cost of future benefits for employees. Garcia suggested the city could do the same for its lifeguard pension system.

Costello praised the city for its clean audit.

“This is a multi-structured city, you have a lot of things going on here,” he said. “From my standpoint this city is soundly run.”

On Friday, Mayor Jay Gillian, in his weekly letter to residents and visitors, wrote that this is the fourth consecutive year the city has received a clean audit.

“This is an outstanding accomplishment and speaks to the competency and professionalism of our team members in each and every department,” Gillian wrote. “The auditors described the overall favorable financial position that we are in. We continue to maintain a healthy fund balance and a responsible debt service schedule into the future. “

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