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Council Scrambling to Fill City Auditor’s Position

Thursday, July 26, 2012

 

Worcester City Council is on deadline to replace the retiring City Auditor. The position will be vacant soon and a replacement has not been identified. 

When asked whether she thought the council has waiting too long to look for a replacement, Councilor-At-Large, Konstantina Lukes said, “That has been a concern of mine. If we can’t meet that deadline, we’re going to be hitting Christmas and Thanksgiving, and we may have to persuade him to stay.

City Auditor, James DelSignore, has held his position since 1991, and according to Councilors, has been trying to retire for years. Despite knowing of his plans to retire, the city’s Committee on Municipal Operations still has no replacement in mind.

Committee members oversee, among other things, the retirement system, taxation, fees, charges and other revenues, and the City Auditor, who is responsible for the city’s retirement, pension, and auditing as well as serving as a “watchdog” for the City Council.

Councilor Michael Germain called the position “one of the most important in the city.”

Council’s Job to Hire

At this week’s meeting, the Committee will discuss DelSignore’s leaving, but the job remains in the hands of the City Council, who employs the auditor. 

“Really the meeting this week is to get up to date and get the whole process back on the top of everybody’s desk,” said City Councilor and Chair of the Committee on Municipal Operations, Michael Germain. “We really need to move faster than we’re moving now.”

Germain said that this week’s meeting will hopefully begin the process.

“We’re looking into getting some candidates in here now – four or five finalists – and getting the finalists in front of the council. It’s more of a status of where we are and getting us to move as fast as possible,” he said.

Councilor Lukes, who is also on the board of Municipal Operations is worried that they may have stalled on this issue.

Waiting too Long?

According to Lukes, DelSignore has been trying to retire for years. GoLocalWorcester tried to contact the City Auditor, who was unreachable for comment.

“He’s been saying that [he is going to retire] for several years now,” Lukes said, adding that the Council will be trying very hard to avoid asking him to stay another year. Germain concurred, saying that the Auditor was already “doing us a favor” by staying another year.

“It depends on who applies,” she added, saying that she hopes they are not stuck with many applications, but none suitable. “That’s my worst fear,” she said.

“There’s no heir apparent. He has not recommended anyone in particular,” Germain said. “January will be us begging him stay.”

Councilor-at-Large, Konstantina Lukes

Who’s Fit for the Job?

While no replacement has been considered and the Auditor has not recommended anyone to fill the position, Councilor Germain said that they will be looking for someone with experience.

“Jim will be difficult to replace. We’re relying on him to get some input on what the nuts and bolts of that job entail,” he said. “I’m not an expert on that at all, but once we get down deeper than on the surface, about qualifications and background then we’ll figure out the type of person we need there.”

Germain said that the job is “one of the most important in the city,” and that while it doesn’t come with much attention, the importance of the job makes it even more necessary to act fast.

“The speed factor I think is the biggest. My personal opinion is that it’s also important to have someone in here who can spend the last while with Jim. If we wait until the end, January 1st, we won’t have that overlap,” Germain said.

Pension Problems

Another factor facing the city’s auditor is an issue that will radically affect the city’s pensions and retirement costs, if not taken care of. PERAC, the state pension board has been attempting to block the city’s investment options. 

DelSignore raised the issue at a recent council meeting, saying that, “Our oversight agency has been undermining us. We are having a big problem right now. It’s going to cost people all over the state millions if not hundreds of millions if nothing is done to resolve this.”

“That’s an issue facing the auditor right now,” Germain said. “Being right in the middle of that is part and parcel why we need to get someone in there right now and work with him.”

While Germain raised concern about this situation, Lukes does not think the issue will have any bearing on hiring a new auditor for the city. However, she does agree that retirement costs is an enormous problem.

“He discussed the fact that we don’t have the autonomy we’re used to. PERAC seems to be calling the shots,” she said. “We’re paying more people not to work than paying them to work.
A lot of people don’t understand how big of an issue this is.”

With this issue bearing down on the deadline to hire a replacement, Lukes says that this switch is imminent and will likely be repeated with other positions at City Hall again in the upcoming years.

“The switch has to be made eventually,” she said. “There has been concern about the Commissioner of Public Works and the fire chief. In the next five years we’re going to see major retirements.”

 

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Comments:

Kim Boisvert

The Pension Governance Reform Law prohibits retirement boards from indemnifying investment managers and requires that such managers be fiduciaries with a special duty of care in investing the assets of the retirement system. The justification for these provisions is reflected in the investment which is the focus of Mr. DelSignore’s comments. During the course of the Commission’s review of the decision of the WRB to invest in the Harvest Partners VI (Harvest) partnership it became clear that certain provisions of the agreement governing the relationship between the WRB and Harvest raised serious concerns about compliance with the indemnification limitation and the pledge of fiduciary duty requirements of the law, which are in place to protect the assets of the retirement system and shield the city of Worcester from any liability due to unfavorable contract terms agreed to by WRB.

As to violation of the statutory provision barring indemnification, these concerns centered around the fact that limited partners, including the WRB, were obligated to indemnify the General Partners and others for “…claims, liabilities, damages, losses, costs and expenses (including amounts paid in satisfaction of judgments, in compromises and settlements, as fines, as penalties and legal and other costs and reasonable expenses of investigating or defending against any claim or alleged claim)” including those associated with criminal conduct on the part of the indemnitee. Consequently, in agreeing to such language, Mr. DelSignore would be committing the WRB and, in effect, the taxpayers of the City of Worcester to pay fines, penalties and damages resulting from criminal behavior on the part of various parties.

In regards to the fiduciary duty requirement, the agreement governing this investment fails to satisfy the standards set forth in Massachusetts law. The agreement is governed by Delaware law which allows a partnership agreement to establish the parameters of the duty owed by the investment manager (in this case the General Partner) to the investors (in this case the Limited Partners, including the WRB). Specifically the Delaware law states “…A partnership agreement may provide for the limitation or elimination of any and all liabilities for breach of contract and breach of duties (including fiduciary duties) of a partner or other person to a limited partnership or to another partner or to an other person that is a party to or is otherwise bound by a partnership agreement; provided, that a partnership agreement may not limit or eliminate liability for any act or omission that constitutes a bad faith violation of the implied contractual covenant of good faith and fair dealing."

The terms of the partnership agreement which Mr. DelSignore is so eager to sign, in conjunction with the Delaware Law, essentially eviscerates the fiduciary duty owed to the WRB by the general partners and thus violates the provisions of Chapter 32 Section 23B. The investment of assets of the Worcester Retirement System under such conditions would severely limit the prospects of recovery on behalf of the members of the system and Worcester taxpayers in the event losses are incurred.

Although Mr. DelSignore categorizes the Commission as a “so-called oversight agency”, we believe that our actions enabling Worcester employees, retirees and taxpayers to avoid the risks associated with committing to a partnership agreement which violates Massachusetts law is precisely what is expected of the Public Employee Retirement Administration Commission by the citizens of the Commonwealth.

Thank you for the opportunity to explain the Commission’s position on this important matter.

Sincerely,
Joseph E. Connarton
Executive Director
Public Employee Retirement Administration Commission




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