13 hours Ago By CBS San Francisco
Oakland spent nearly $1.7 million on unauthorized overtime in two departments during a period of several years due to a payroll system problem, according to a recent city auditor's report. From at least January 2018 to May 2024, Oakland overpaid 158 employees in the city's Department of Transportation and 368 employees in Public Works because its payroll system was using "a method for calculating overtime that differs from what the Fair Labor Standards Act requires," according to City Auditor Michael Houston.
The Fair Labor Standards Act sets federal requirements for minimum wage, overtime pay, record keeping and child labor standards in both the public and private sectors. Cities can pay more than what the federal rules require, but Houston said he found no evidence that Oakland ever authorized such payments. "This issue of excessive overtime pay warrants the city's immediate attention because taxpayers have essentially been incurring significant costs that were never approved," Houston said.
"I implore the City Administration to ensure that city employees are paid no more and no less than authoritative regulations and agreements require. I will watch closely how the City Administration works to rectify this issue." The auditor who found the waste suspects the error may be just the tip of the iceberg.
Some say the problem is more than an example of government waste; it is another hit on city leaders' credibility. Taxpayers want the city to fix this problem fast. Lifelong Oakland resident Dion Baker said his city is going through one of the worst periods in decades, from the recall of Mayor Sheng Thao to the current budget crisis threatening basic services .
"I'd just dropped off my car just a few moments ago because I hit a pothole and knocked the car out of alignment," Baker explained. He said as the city lays workers off, slashes public safety spending, and browns out fire stations, it's hard to hear about years of wasteful government spending. "A bit of frustration and a bit of sadness because trust for leadership in general, I'd say, is a little low," said Baker.
"We have budgetary issues and any waste is a challenge for us as we are trying to get our budget together," said interim Oakland Mayor Kevin Jenkins. Kenkins says this type of waste erodes public trust. "What I'm going to do is have a talk with the auditor and see what the best course of action is moving forward," said Jenkins.
The auditor launched the investigation after a whistle blower made the overpayment complaint. It appears the payroll department used the incorrect overtime formulas to pay workers. "Without the tip, we may not have become aware of this issue that is significantly costing the city," Houston said.
"I don't know if we can recoup the money or not. But I think the bigger issue is the perception damage," said current Oakland Public Works Director Josh Rowan. The Oakland Finance Department oversees the city's Payroll Division, which is responsible for payroll processing, but officials in those offices were unable to explain the overpayments or pinpoint exactly how long they've been happening, according to the report.
Officials in the city's Human Resources Management Department and the City Attorney's Office were similarly baffled. Houston said the overpayments are particularly troubling in light of the city's ongoing and massive budget shortfalls -- estimated at $280 million over the next two years -- which have prompted city leaders to look "under couch cushions for spare coins," institute large-scale layoffs and significantly cut services. He also noted that the problem might be much larger and more expensive than he was able to identify since he only examined overtime spending in two departments.
Houston suspects investigators may find similar issues if they look into other departments. Baker says they should dig deeper. "Maybe we need to audit a lot more stuff.
The pandemic caused a lot of households to audit themselves," said Baker. "So I think it's time that the government do the same thing." In his report, Houston makes a number of recommendations, including that city officials conduct a review of overtime formulas for all employees, adopt overtime formulas that don't exceed federal guidelines and make those formulas publicly available, consult with the City Attorney's Office to identify how to address past payments and discuss the report's findings at a public meeting.
People can read the full report at https://www.oaklandauditor.com/wp-content/uploads/2025/02/20250202_FLSA-Investigation-Report_FINAL.
pdf . Da Lin contributed to this report..
