Auditor General DePasquale Urges Darby Borough to Properly Fund Pension Plan Facing Unfunded Liability of Nearly $2.7 Million

June 13 2013

Auditor General DePasquale Urges Darby Borough to Properly Fund Pension Plan Facing Unfunded Liability of Nearly $2.7 Million

HARRISBURG (June 13, 2013) – Auditor General Eugene DePasquale today urged Darby Borough officials in Delaware County to correct pension plan management problems that have resulted in its police pension plan being underfunded by nearly $2.7 million as of early 2011, the most recent figure available.

State auditors found that in 2009, 2010 and 2011 the borough failed to make required payments to the pension fund totaling $750,888, which has contributed to the unfunded liability. 

“While we acknowledge that the Borough of Darby, like other municipalities across the state, is facing financial difficulties, the borough must ensure that the pension plan has adequate resources to meet benefit obligations to its police officers,” DePasquale said. “If the minimum required contributions are not made, the plan will not be able to meet the obligated pension payments to retired police officers.”

In addition to the underfunding issue, the audit report also contained additional findings, including:

• Failing to amend the plan’s governing document as recommended in the prior audit of the plan to prohibit the inclusion of lump-sum payments for leave earned outside the pension computation period to be included in pension calculations. This resulted in two retirees receiving pension benefits in excess of those authorized by state statute;
• Failing to amend the plan’s governing document as recommended in the prior audit report to eliminate an unauthorized nonservice-related disability benefit provision which resulted in a retiree and a deceased member’s estate receiving unauthorized pension benefits;
• Improperly certifying one ineligible police officer to the Department of the Auditor General in 2010 and 2011 for state aid reimbursement that resulted in a $17,662 state aid overpayment to the borough for those years; and
• Failing to timely deposit its 2011 state aid allocation into the pension plan. 

State pension aid for police, firefighters and non-uniformed municipal employee pensions is provided from a two-percent tax on out-of-state casualty insurance premiums and a portion of the two-percent tax on out-of-state fire insurance premiums. 

Borough officials agreed with the audit findings. In the area of underfunding, the borough subsequently deposited $250,000 into the police pension plan and intends to deposit $20,000 per month to fully pay their municipal obligation. The borough also has paid the $154 in interest due to the plan because of the untimely deposit of state aid. 

Where the auditors found repeat non-compliance with pension benefit provisions contained in the governing state pension statute, Darby officials indicated they would attempt to negotiate the issues out of the next labor contract, which runs through Dec. 31, 2015.

The Department of Auditor General will monitor the borough’s actions to comply with the finding recommendations subsequent to the release of the audit report. The failure to properly fund the plan could result in a potential withholding of the borough’s future state aid allocations if the borough fails to take action to ensure the plan is properly funded. 

The department also released an audit of the borough’s nonuniformed pension plan. The two audit reports are available online at www.PaAuditor.gov, select “Municipal Pensions,” then, “Access Latest Reports Online.”

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