Austin City Hall
7:12 am
Fri May 23, 2014

City Council Members Concerned About Handling of $231K Employee Overpayment

This story comes to us from our city hall reporting partner, the Austin Monitor.

Mayor Pro Tem Sheryl Cole and Council Member Bill Spelman, who both sit on the Council’s Audit and Finance Committee, as well as a local attorney with expertise in employment law, have expressed concern over the city’s handling of an employee who received more than $200,000 in salary overpayments but was only required to repay $6,000 of it.

Cole, chair of the audit committee, told the Austin Monitor, "It is unacceptable for this error to have occurred in 2004 and not be discovered until 2011. The fact that it took two additional years to address the matter adds to my deep frustration upon being made aware of this issue. The employee should be required to repay these public funds to the extent legally pursuable."

An aide in Cole’s office told the Austin Monitor Thursday that she plans to put the matter on next Wednesday’s Audit and Finance Committee agenda.

New documents have surfaced which indicate that the employee received some $231,000, with $90,000 of the amount the result of inaccurately calculated overtime pay.

A more detailed timeline of the events has also surfaced. In a February 2013 memo to Deputy City Manager Michael McDonald, Assistant Human Resources Department head Judy Wallace and City Comptroller Diana Thomas detail how the mistake occurred, and staff’s proposals for correcting it.

Attorney Derek Howard specializes in employment law. He told the Monitor that, in his opinion, the employee at the heart of the issue could be charged with felony theft for his actions in not reporting the overpayment. Further, Howard called the city's explanation of its investigation "laughable," and suggested that it was skirting the main questions behind the issue, including the basic issues of whether an overpayment had occurred and whether the employee had accepted it.

"Heads need to roll," he said. "Somebody at a high level didn't do their job."

Howard added that overpayment occurs regularly in the arena of unemployment pay, and that state officials pursue such errors with rigor. "It's a circus and it needs to be exposed and the city's feet need to be held to the fire," Howard later added.

Through city spokesman Kyle Carvell, the Law Department has declined to expand on its rationale behind the settlement with the employee.

Carvell has repeatedly told the Monitor that city management considers the issue resolved even though management has not provided the details surrounding the overpayment and subsequent agreement with the employee to Council.

City Auditor Ken Mory’s office confirmed via Carvell that, though the office had conducted an investigation into the matter, no report had been issued.

"The City Auditor determined that a report was unnecessary in this particular case given that management was actively looking into this matter, had initiated disciplinary action, and were working with City attorneys to address the recovery of overpaid wages," the Auditor's office reported via email.

Spelman strongly disagreed. "We've got a substantiated, conclusive investigation, we have a substantiated, conclusive finding after our investigation, and we're not issuing a report," he said. "Well, why not? Because, he says a report is unnecessary because management is actively looking into this matter. Well, what do we have an auditor for? We don't have an auditor to make sure that management is doing its job quietly and undercover where nobody can see it, we have an auditor to make sure that management is doing what it is doing."

Spelman continued: "Part of what management should have done is to actively look into the matter, which they did. And part of what they should have done is report back to the policy makers and to the public--we just found out," he said. "This is – I won't say outrageous – this is a substantial violation and you deserve to know about this, but nobody said that. Instead, they quietly held meetings and tried to do what they could without releasing it to public scrutiny, and I think that needs to happen.”

In addition, Spelman noted that Mory "was not doing his job by not releasing a report that would put (it under) public scrutiny." He later added that the Human Resources department "shouldn't consider the matter closed until they've actually told anybody about it – and they haven't told anybody about it, at least not in a formal way."

City officials settled with the employee for roughly $6,000. In the Wallace/Thomas memo, legal staff suggests that the staff could seek to recover as much as $68,000. It was not immediately clear why city officials settled for the low amount.

The memo also details the process by which the mistake, and the subsequent continuance of the employee’s overpayment, persisted for more than eight years.

The issue was originally brought to the attention of city officials after two of the employee’s EMS co-workers looked up the employee's salary on the Texas Tribune's government salary listings.

In January 2012, according to the memo, the mistake – a clerical error that resulted in a dramatic pay increase for the employee – was definitively uncovered. The error was the result of an incorrect hourly status inputted during a salary correction period brought on by a 2004 market survey.

The issue was reported up the Human Resources chain to Assistant HR Director Tommy Tucker who, according to the memo, told his subordinates to "fix" the issue. However, then-EMS director Paul Hafner, reports the memo, believed that the coming change to Civil Service rules for EMS employees would correct the matter. Thus, says the memo, Hafner did not immediately correct the mistake.

According to the memo, the city’s current EMS Director, Ernie Rodriguez, became aware of the situation sometime between October 2011 and January 2012. The memo reports that Rodriguez believed that the issue was "huge," and subsequently asked Austin's corporate Human Resources Department for assistance. However, a corporate HR employee told city officials that she never received a request for help.

It took Rodriguez until December 2012 to realize that the overpay error had never been corrected. At that point, he brought in corporate HR Director Mark Washington along with other high-level city officials.

Though staff took a series of steps to correct matters, Council members remained in the dark about the issue--even as Mory, a direct Council report--conducted his investigation.

Meanwhile, according to the memo, staff reassigned the employee to a position that would "pay more than his corrected salary." The memo reports that the EMS and HR departments helped the employee in that regard.

Council Member Spelman characterized that action as a promotion "in order to maintain (the employee's) income at a level at which he had become accustomed." He noted that the action struck him as "a just plain bad, bad, bad idea."

For his part, Spelman turned to a familiar metaphor to describe the situation. "It's not about the burglary, Mr. President, it's about the cover-up," he said.