State Auditor General Jack Wagner's office is questioning a $158,045 lump sum retirement payment Scott commissioners approved three years ago to former police Chief Stanley Butkus Jr.
Officials are concerned because the payment came from the township's police pension fund.
In its most recent audit for 2006-2008, auditors found that there are no provisions in state retirement statutes for such a payout to be made in addition to the $4,390 monthly police pension Mr. Butkus receives.
"This was a cash lump sum payment. It was styled as a reverse DROP [deferred retirement option plan]," said Steve Matthes, deputy chief counsel for the state auditor general.
The DROP payment allows an employee to set a retirement date up to 60 months in advance, but continue working while accumulating his or her pension in a separate account they cannot use until they leave.
Mr. Butkus' lump sum payment was determined by multiplying his monthly pension by 36 -- the number of months from Feb. 1, 2005, when he set his retirement date, to Jan. 30, 2008, when he retired.
The monthly pension is based on the chief's years of service as of Feb. 1, 2005, rather than at his retirement date. DROP pensions allow municipalities to keep valued employees after they are eligible to retire.
Neither the state nor the township expects Mr. Butkus to repay the money. The township responded that it would be "an unusual hardship to require return of the lump-sum payment or a reduction of the pension at this late date."
However, because the lump-sum payout was made from the township police pension plan, the state points out that it reduced the amount available for investment and expenses.
"We're concerned about the overall health of the pension funds," said Mr. Matthes, noting the state considers the lump sum as an unauthorized expenditure from the pension plan.
The state said there are no provisions for Mr. Butkus to receive a lump sum in addition to his pension.
The finding recommends that Scott officials meet with their solicitor to determine whether the township is responsible to reimburse the pension plan from its general fund for the unauthorized payment.
Scott officials defend their position, saying the township appropriately calculated the pension benefit and the drop amount.
Commissioners discussed the issue behind closed doors following their Jan. 25 meeting, and the following day Commissioner Tom Castello described the police pension plan as "pretty solid." He noted police started paying into the plan only recently.
"We're not conceding that the audit report is correct or that we owe any money," Mr. Castello said. "To me, the critical fact is that nobody complained. There's nobody [here] that's upset."
He went on to say, "There is case law that supports what we do."
According to township minutes for Nov. 27, 2007, the reverse DROP "was designed specifically for the retiring chief of police. The money that this individual normally earned would be placed in an account, and in his retirement, the police chief would get this money as well as what his accrued pension would be up to Jan. 31, 2005."
The minutes further say the state auditor general's office had been called, but that "they don't give official opinions on these."
The commissioners adopted the reverse DROP Dec. 27, 2007, by a 7-0 vote, with Commissioners David Calabria and David Jason absent.
In February 2008, an overflow crowd watched as deputy police chief Jim Secreet was sworn in as Scott's chief, a position he retains today.
Carole Gilbert Brown, freelance writer: firstname.lastname@example.org .