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City officials recently announced a shortfall of $1,070,000 in the city’s 2012 budget more than a month after its approval — but according to former chief financial officer [CFO] Juan Uribe, those who put the budget together knew of the discrepancy all along.

“This was a deliberate move suggested by the auditor to the city manager, and subsequently planned by them,” Uribe said in a written statement.

At the Sept. 19 council meeting, city manager Terence Reidy, auditor Dave Kaplan and acting CFO Christine Paulin told the city council and the public of the $1 million shortfall in this year’s budget line item for health insurance costs.

This stemmed from the city’s 2011 decision to defer $1,070,000 of its health insurance payment, opting to tack about $500,000 each year onto the 2012 and 2013 budgets instead, Reidy said.

But the extra million deferred last year was not taken into account in this year’s budget. Thus, $5.6 million was budgeted this year for health insurance, instead of the approximately $6.6 million required.

At the Sept. 19 meeting, officials said Uribe provided the inaccurate estimate in the budget.

“It was an estimate that the finance director [Uribe] came up with at the time,” Reidy said at the meeting. “We must have had eight, nine, 10 budget sessions. That was a number that was in flux every time we met. It was the finance director’s best estimate at the time. It was off.”

In a phone interview on Monday, Uribe said he was only informally notified of the shortfall by Paulin in “late June or early July.” After he found out, he was excluded from budget meetings between Paulin, Kaplan and Reidy, he said.

“I asked Christine [Paulin] what was going to be done” about the shortfall, he said. “She told me, ‘Well, they’re going to decrease that appropriation and get an emergency appropriation for that amount.'”

Uribe said he suggested in an email to Reidy that the city switch insurance carriers as a way to make up the difference. But according to Reidy, he never made that suggestion.

Reidy, Paulin and Kaplan did realize there would be a shortfall in the health insurance line item of the budget shortly before its adoption, Reidy said, but they thought cost decreases in other areas would make up for it.

“We had initiated two new insurance plans that were less expensive for the city that gave our employees, if they fit the profile, better coverage for less money,” Reidy said. In addition, “we were collecting more money from employees — larger contributions [to health care costs] — as a result of a state law … We figured that it was possible to make up the difference because we didn’t find it out until the very end.”

The city is now looking to declare a financial emergency through a resolution which will allow them to seek permission from the state’s Local Finance Board to bond $1 million and pay the debt over the course of five years — although the mayor was absent and the remaining council members did not have the requisite two-thirds majority vote in favor of taking that action at the Sept. 19 meeting. The governing body is expected to vote again at tomorrow night’s council meeting, with the mayor present.

Uribe feels he’s been blamed for the shortfall, “which is something that really shocked me,” he said. “I never expected that kind of blow.”

He also said he was unaware of the Lag agreement between the city and the health insurance company, although Reidy said the agreement was spelled out in a previous year’s audit report which Uribe signed off on.

URIBE’S RESIGNATION

Uribe resigned from his post as CFO on Aug. 2, the day after the 2012 budget’s final adoption and his presentation of a corrective action plan [CAP] to the council. A CAP outlines how the city can act on audit recommendations to improve its financial health.

Uribe said he chose to resign rather than sign the budget, which he perceives to be in violation of the law. He also cited his “tumultuous” relationship with Reidy as another factor in his resignation.

But according to Reidy, Uribe was given two choices — resign or be terminated.

“I called him in and gave him the opportunity to resign or be terminated,” said Reidy, who was not happy with Uribe’s performance as CFO. “I didn’t want to hurt the guy. I guess that was a mistake.”

Because Uribe did not sign the 2012 budget, that duty fell to Paulin, as the current acting CFO, Reidy said. She has signed the document.

Uribe also said he was not given sufficient time to prepare the CAP he presented to the council on Aug. 1. He should have had 60 days — until mid-September — after the 2011 audit was received, he said. But Reidy asked for Uribe to prepare the document on the Thursday before the Aug. 1 meeting and wanted it ready by that weekend.

Reidy said he was unaware of the 60-day window for the CAP, and that the council had requested the CAP be ready for the Aug. 1 meeting because they were concerned by the difference between the 2010 and 2011 audits.

In 2010, there were seven findings listed in the municipal audit and auditor Kaplan made five recommendations. In 2011, there were nine findings, with Kaplan making 10 recommendations. Findings and recommendations are listed in the final pages of audit documents on the city’s website.

“The council was clearly concerned and wanted a report on it, and they wanted to know exactly what the problems were and how they were going to be addressed,” Reidy said.

Uribe pointed out his first day of work in the city was in November 2011, meaning the audit for 2011 represented a year during which Uribe was only on the job for two months. He felt he should have only been held responsible for one of the findings in the audit.

But according to Reidy, Uribe should have begun to rectify all those issues, but the audit showed he had not.

During the Aug. 1 council meeting, Uribe said he was “chastised and embarrassed” by questioning from Mayor Ed Johnson and other officials during his presentation of the CAP. He also said he felt the CAP presentation was “a setup,” and that his plan was “the best that has been put together in that town in three decades, and I did it in 36 hours.”

Uribe also alleged that the relationship between external auditor Kaplan and Reidy “has grown too cozy and intertwined to the point of almost impairing a healthy auditor-auditee association,” he said in his written statement, adding he found it difficult to work under “an overbearing, overzealous and controlling city manager and an auditor in practice acting as an unofficial CFO.”

Reidy said Kaplan at times has performed duties beyond that of an external auditor because the city was without a CFO since 2009.

Uribe is currently seeking another position in the public sector. Before working in Asbury Park, he was on the finance team in the city of Elizabeth as an internal auditor for five years. Prior, he held a variety of positions in the private sector as an accountant and financial analyst for about 20 years.

 

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