Wilmington paid pension of dead woman for 20 years, loses $73,000

• As of December 1, 2016, there are 1,314 recipients of city pension benefits, according to a city audit.
• In Fiscal Year 2016, the city disbursed over $24 million in pension benefits.

The Wilmington Treasurer's Office paid the pension of a dead woman for more than 20 years, and the city is now out nearly $73,000 that it may not be able to get back.

According to a city audit obtained by The News Journal, the unnamed pensioner received spousal benefits from June 1974 until she died in November 1997. But the city continued to direct deposit money into her bank account every other week until officials learned of her death in June of last year. 

Over two decades, Wilmington paid the deceased woman $72,966.60. 

"It’s an extremely unusual occurrence," said City Treasurer Velda Jones-Potter. 

The city has relied on a third-party vendor that cross-checked employee and pensioner information with death records and Social Security data on a semi-annual basis. Jones-Potter said this petitioner's death did not come up in those searches because it was not documented in Social Security records. 

"In this case, it's apparent that her death was not reported until many years after it occurred," she said. 

When the Treasurer's Office learned about the death, the city immediately stopped payments, according to Jones-Potter. But she does not know if the city will get its money back. 

"It’s in the Law Department’s hands at this time," Jones-Potter said. 

John Rago, deputy chief of staff for policy and communications for Mayor Mike Purzycki, who took office in January, would not say whether the city is pursuing a criminal investigation into whether someone was spending money from the dead woman's account. 

“We are retracing the steps taken during the previous administration regarding both the investigation of the pension issues detailed in the auditor's report and whether any appropriate action was taken at that time," he said. 

The city tries not to rely entirely on the outside vendor to identify dead recipients, said Acting City Auditor Tamara Thompson.

The Treasurer's Office checks the newspaper regularly for death notices, she said. Oftentimes, families call the city about a death, or city employees hear about former colleagues dying by word of mouth. Payment stubs are sent to pensioners' homes, and mail to deceased recipients usually bounces back, which alerts the Treasurer's Office, Thompson said. 

"They usually have some way of knowing," she said. "But they never got returned mail for this person. There was no indication that the person was dead." 

The city has used the vendor Comserv for about two decades, Jones-Potter said, and it has generally been effective. 

"This happened to be an anomaly," she said. "If it’s not reported, then it's nearly impossible to detect." 

The News Journal was not able to reach anyone from Comserv or the New Castle Social Security Office for comment. 

Jones-Potter said she places no blame on Comserv, but the company has gone out of business. Wilmington has hired another contractor for $2,500 annually that allows the Treasurer's Office to review Social Security information monthly or more frequently as needed. 

"It gives us much greater protection," she said. 

Other Wilmington pensioners have received payment after death, although for much shorter time periods.

A recipient of spouse-beneficiary payments was paid $1,920.84 after their death in May 2015, the audit said. The city didn't learn of the person's passing until June 2016, according to the audit. 

Another former city employee was paid $2,008.84 after their death, the audit said. 

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Payments to dead recipients are a problem that state and federal agencies are struggling to combat. 

Every year, pension funds in Illinois are sent to dead people, according to a 2016 investigation by the Chicago Sun-Times and the Better Government Association. From 2010 to 2014, over 1,000 people were in Illinois' "dead pensioners' club," the investigation said. In some cases, family members who dipped into their late relatives pension accounts faced criminal charges. 

The federal government published a report in 2011 noting the problems with a system that relies on family members to report deaths. The Civil Service Retirement and Disability Fund loses $120 million a year to deceased annuitants and other improper payments, the report said. 

"The Administration and Congress have determined that the amount of improper payments government-wide is unacceptable and as such, efforts must be made to identify the root causes of the improper payments and put in place a corrective action plan to reduce them," wrote then-Inspector General of the Office of Personnel Management Patrick E. McFarland. 

The report suggests ways that governments can attempt to curb posthumous payments. It recommends regularly examining the population of recipients over 90 years old to "verify if they are still living" and increasing communication with recipients and their families to remind them of their responsibility to report deaths. 

Wilmington's audit, conducted from July 2015 to June 2016, found other issues in the city's pension system. 

There were errors and inconsistencies in files of new pensioners, the audit found, which creates "an increased risk that benefits are paid to ineligible pensioners."

One police pensioner was overpaid $1,679.08 due to "an error in benefit calculation," the audit said. 

The city auditor also found that the Treasurer's Department has disregarded a recommendation that has been made since 2011 — that it should have a comprehensive policy and procedure manual. According to the audit, lacking such a document means the department is not meeting best practices.

Contact Christina Jedra at (302) 324-2837, cjedra@delawareonline.com or on Twitter @ChristinaJedra.