GloucesterTimes.com, Gloucester, MA

August 29, 2013

Retirement system gets favorable audit

By Paul Leighton
Staff Writer

---- — DANVERS — The last time the state audited the Essex Regional Retirement System, it revealed lavish spending, secret meetings and mismanagement of funds.

Three years later, the system is being painted in a much more favorable light. The towns of Essex, Rockport and Manchester, the Manchester Essex Regional School District and the Rockport Housing Authority are members.

An audit released last month by the Public Employee Retirement Administration Commission gave the Essex Regional Retirement System a generally favorable review.

The audit cited three deficiencies — a far cry from the 23 noted in the last audit in 2010. Joseph Connarton, executive director of PERAC, described the problems this time around as “minor.”

“We’re pleased with the leadership of the board and the administrator they hired,” Connarton said. “He has certainly delved into the problems of the past and done an excellent job of addressing those.”

That administrator is Charles Kostro, a former state transportation official and town administrator in Newbury who took over as executive director of the retirement system in March of 2011.

Along with a new board of directors, Kostro was charged with cleaning up a scandal-plagued agency whose misdeeds led to the ouster of its former board and management.

“Even though we still have work to do to get where we want to be, I think this (audit) is tangible evidence that the system has turned itself around and is doing the things it is supposed to be doing to properly manage the money that’s entrusted to us,” Kostro said.

Essex Regional oversees public pensions for 48 local entities, including 19 towns and six school districts, with a total of more than 3,000 public employees and retirees. The money for their pensions comes from contributions from both employees and taxpayers.

Kostro said the regional retirement system has cut operating expenses by 30 percent, sliced its legal expenses by more than half, and trimmed salaries from more than $500,000 to $451,000.

The agency has also lowered costs on its consulting and service contracts through competitive bidding, which had not been done in the past, Kostro said.

“We’ve brought down costs all across the board,” he said.

In a press release, Joseph Maney, chairman of the Essex Regional Retirement System board, called the audit “a validation of nearly three years of effort by the board to clean up the finances and management” of the agency.

The audit, which covered the period from January 2009 to December 2011, said Essex Regional “performed in conformity with the standards” established by the commission, with the exception of three findings presented in the report.

Those findings included errors by some of the system’s members in determining what earnings were considered regular compensation, and failing to make sure that all employees who earn over $30,000 are contributing an additional 2 percent toward their pensions, as required by law.

Connarton said those kinds of problems are not unusual in regional systems that have many members.

“It’s difficult to establish uniformity,” he said.

Kostro called the deficiencies “very important,” but also “very different in nature compared to the types of things (in the audit) a few years ago.”

Overall, Kostro said, the audit reflects the system’s determination to overcome the problems of the past.

“Our mission has been to restore people’s trust in the system,” he said, “and we think this is a validation that this is happening now.”

Staff writer Paul Leighton can be reached at 978-338-2675 or pleighton@gloucestertimes.com.