State audit: Former Oceanside Sanitation District supervisors received benefits they were not entitled to

Two former supervisors at Hempstead Sanitary District 7 in Oceanside were paid a total of $800,000 in retirement benefits they were not entitled to on top of the six-figure salaries they also received, according to a state audit.

Agreements between the district's governing board and the pair resulted in Mike Scarlata, who retired as supervisor in 1998, receiving $391,000 in deferred retirement payments from 1998 to 2013 he was not entitled to. His son, Charles Scarlata, who succeeded him as supervisor, received $421,353 in unauthorized deferred payments from 2012 through 2013, according to the audit, while also earning a $255,000 annual salary before retiring in 2013.

"The board entered into 'deferred compensation' agreements with a former sanitation supervisor and his successor, and made payments from the district's general fund, despite having no legal authority to do so," the comptroller's report stated.

The sanitation district, which picks up garbage, serves 13,000 homes and 950 businesses in Oceanside. Last year the special taxing district collected $8.8 million in taxes.

The comptroller's office said the payments to the Scarlatas violated New York finance law, which is different from criminal law, and no further investigation is underway. New York State Comptroller Thomas DiNapoli's report said the sanitation board should try to recoup the funds paid to the pair.

Became paid consultant

Michael Scarlata, 81, retired in 1998 with an annual pension of $75,000. He reached an agreement days later to stay with the board as a paid consultant for an annual payment of $62,000 plus health benefits, according the Nassau County comptroller's office. He continued to work as a consultant last year at publicly attended meetings.

Michael and Charles Scarlata, 56, could not be reached for comment. Board members did not return a message left at the district office.

However, sanitation board members said in a letter in response to the audit that the district is no longer paying post-employment benefits. The board said in its letter to the comptroller's office that the audit cleared them of any malfeasance.

"The board was pleased that you found no misappropriation of funds and no falsification of documents," the board's letter to the comptroller states. "As to recoupment of past payments, the district will investigate its options."

The sanitation district, has been cited for excessive payments to the Scarlatas in previous audits. A 2009 review by the Nassau County comptroller's office found that the father and son collected a combined $1 million in salaries, benefits and deferred payments from 2006 to 2008.

The state comptroller's office audited the district from 2012 through 2013 to review payments to board members, claims for expenses made by the district, and noncompetitive bids to outside contractors.

Audit: Money misused

Responding to the board's letter to the comptroller, state officials said the audit shows that taxpayer dollars were misused.

"I think it will be up to the board if they feel the need to take any action to recoup funds. To say it wasn't stolen is fine, but it was clearly money that shouldn't have been received," said comptroller's spokesman Brian Butry.

According to the state audit, Michael Scarlata signed an agreement in 1988 with the district's board that he would be paid an additional $20,000 annually for 15 years if he retired at any point after March 1, 1996. If he didn't retire in 1996, his deferred payments would be increased 10 percent each year after.

Michael Scarlata retired in 1998 and he collected annual retirement payments of $26,217 until 2012, when the remaining $51,122 was bought out.

His son signed a similar agreement with the board, according to the audit. The district agreed to pay Charles Scarlata $25,000 annually over 15 years if he retired after March 1, 2008. He received the same 10 percent increase of deferred payments. The board bought out his settlement package in a lump sum for $421,353 on Jan. 15, 2012, before he retired in October 2013, according to DiNapoli's office.

Comptroller officials say local governments can make deferred retirement payments under collective bargaining agreements, but the practice is prohibited for special districts, according to the audit.

In other findings, state auditors found the sanitation board had poor oversight of checks written from the district's $9.8 million budget.

"The board has improperly delegated check-signing authority to all board members and has allowed them to issue checks without the treasurer's signature and a proper claims audit," the report states.

Treasurer job shared

The district also designated two people as treasurers and divided duties between them. The board did not audit or prepare statements for $723,556 in 26 claims or vendor bills for sanitation business. State auditors also found four checks totaling $393,246 were not signed by either treasurer.

Board members said in their letter to the comptroller that the district's supervisor reviews and authorizes all purchase requests. A district treasurer also completes a claim voucher, which is approved by three of the five board members. Checks are issued by a district treasurer and signed by two board members. Purchases are then presented at the board's meetings, the board's letter states.

Comptroller officials said in their rebuttal that the district's process was insufficient and usurps the treasurer's duties.

"Frequently we'll find one individual in control of the purse strings, and far too often, that has led to misuses of public funds," Butry said. "There are no checks and balances or public oversight of money disbursed. When multiple people disburse district funds, it increases the likelihood that public money can be used inappropriately."

By John Asbury

john.asbury@newsday.comJohnAsbury

John Asbury is a breaking news and general assignment reporter. He has been with Newsday since 2014 and previously worked at The Press-Enterprise in Riverside, California.