Oakland Continues Overtime Payments 2 Months After City Auditor’s Probe Called Them Waste

Two months after Oakland’s city auditor identified over $1.6 million in excess overtime, the city has continued the payments as it attempts to locate documents that show they are authorized.

The city auditor’s investigation, which was prompted by a July 2023 anonymous whistleblower complaint, found the city overpaid dozens of employees in the departments of transportation and public works.

According to a report released Feb. 20, the investigation reviewed payroll records dating back to 2018 and found the city used formulas for calculating overtime that exceeded federal guidelines established by the Fair Labor Standards Act.

The report cited one example of an employee whose annual salary was $127,691.20, and who received $3,885.16 in payment for a one-week period as opposed to the $538.32 required by the FLSA.

At an April 22 meeting of the Oakland City Council’s Finance and Management Committee, city officials responded to the auditor’s investigation.

“What we’ve programmed does not align with the federal standard, but it is not illegal and it’s not inappropriate as long as it’s been duly authorized,” Oakland Finance Director Erin Roseman told the committee.

Roseman said city officials were attempting to review a multitude of documents, including legal settlements, side letters and MOUs with labor unions, to ensure the payments comply with city agreements.

Staff are going through paper files and emails because the 2023 ransomware attack on the city’s computer systems had cut off access to certain documents, Roseman said.

But the auditor’s review of MOUs, Oakland’s city charter, municipal code and city ordinances did not find justification for the payments, the report states.

“Nobody is arguing that cities can’t be more generous than what the law requires,” Michael Houston, Oakland’s City Auditor, told KQED in an interview. “The problem is that — well, one problem is that there’s no basis on which they are paying in such excess of what the law requires.”

“It would need to be approved. Any kind of overtime pay would have had to have been approved by the City Council or part of the labor negotiations,” he added. “You can’t just decide; a process needs to be followed. Otherwise, it’s a gift of public funds.”

Houston said his office consulted the city attorney’s office throughout the investigation.

“We investigated this matter for over a year and requested authorizing documents, and didn’t receive any. If there were such documents, I would have hoped that they would have found them over the course of the year,” he said.

The city auditor’s office plans to present the findings of its investigation to the full city council on May 20.

In the meantime, the city is facing an $87 million shortfall in this year’s budget and a $265 million deficit projected over the next two years.

Interim Mayor Kevin Jenkins was expected to release a proposed FY 2025-27 budget today.

But in a press release Wednesday evening, the city announced it was pushing the date back four days to, “allow for the briefing and input of incoming elected officials and other key stakeholders.”

The city is legally required to pass a balanced budget by June 30.

Oakland City Administrator Jestin Johnson said at the April 22 meeting that Oakland pays city employees more than the minimum required, and that rates are driven by the city’s agreements with labor unions. He said the city was consulting an outside expert.

“When this item first came up, we worked very closely with the office of the city attorney, who identified an external resource that can actually help us parse through the real answer to the question, is if, whether or not the calculations are correct,” Johnson said.

A spokesperson for the city attorney’s office confirmed that it is contracting with the employment and labor relations law firm Liebert Cassidy Whitmore to advise the city on the auditor’s report.

The spokesperson declined to describe exactly what the firm is looking into, citing attorney-client privilege and the city administrator’s ability to act in the best interest of the city.

It’s unclear how much the city is paying the law firm. Oakland’s city administrator has the authority to spend under $250,000 without approval from the City Council.

“I don’t know why we would need to verify information from an independent auditor that the city already has and pays for and that voters elect,” City Councilmember Janani Ramachandran, who chairs the Finance and Management Committee, said in an interview. “It’s like questioning the independence and veracity of what he’s doing.”

Ramachandran and Councilmember Rebecca Kaplan asked during the meeting whether the city was still using the same formulas two months after the city auditor identified them as unauthorized.

Roseman said the city is waiting to hear from the outside law firm before making any changes.

“My jaw dropped,” Ramachandran said. “Why on Earth are we not moving forward with rectifying the problem immediately? That just blew my mind.”

According to the auditor’s report, the city made the payments to 158 employees in the city’s Department of Transportation and 368 employees in the Public Works Department.

Houston said his office had no reason to believe the problem was limited to just the two departments.

“That’s what we were able to absolutely confirm,” but he noted, “The calculation applies citywide, and it could be a much bigger number.”

Ramachandran said she was interested in expanding the investigation of overtime pay formulas to the city’s other departments.

In a statement, Oakland Mayor-elect Barbara Lee said she was alarmed by the findings of the city auditor’s investigation.

“Under no circumstances should taxpayer dollars be spent improperly, without oversight, or in a manner that lacks transparency and accountability,” Lee said. “As Mayor, I will work closely with City administration and other City leaders to strengthen oversight, and push for the formal adoption of an authoritative overtime pay calculation — and make City payroll, spending systems, and formulas more transparent to the public across all departments.”

The report recommends a citywide review of overtime formulas, but Houston said his office does not have the capacity to conduct such a review.

Councilmember Zac Unger requested that Johnson ask the law firm to look into overtime formulas for sworn employees, such as police and fire.

The city attorney’s office spokesperson declined to say whether or not that was a possibility.

“I’m very concerned because we don’t have a single penny to waste,” Ramachandran said. “And every dollar means something, regardless of how much it is. This is an example of mismanagement of taxpayer dollars, and it needs to be rectified as soon as possible.”

Former Oakland City Administrator Dan Lindheim said any potential waste is likely to be a political issue rather than a financial one.

“If people believe you’re wasting public money, they’re not going to vote for a sales tax or a parcel tax,” he said. “So it’s really an issue of trust rather than the actual dollar amount in this particular case. But if this goes much further. If there’s miscalculations of overtime in [Oakland Police Department], then that could be a big number.”