Five months after $550K error, Richmond Retirement System still failing to stop payments to deceased retirees: audit

RICHMOND, Va. (WRIC) -- More than five months after Richmond city auditors found that the Richmond Retirement System (RRS) paid more than $550,000 to deceased retirees, a new audit released on Friday shows multiple high-priority recommendations remain open and significant issues are still unresolved.

On Friday, May 9, the Office of the City Auditor (OCA) completed an audit of the RRS, which provides retirement, disability retirement and survivor benefits to more than 4,000 members. The audit found that 44 deceased retirees received $554,661.50 in payments after their date of death, with overpayments ranging from 10 days to over seven years. Auditors attributed the overpayments to delays in identifying deceased members, errors in calculating overpayments and inconsistency when verifying death audit reports.

The May audit also emphasized that the RRS issued incorrect 1099-R forms for 2022 after one-time bonus payments were misclassified as “non-taxable” in its payroll system, indicating further significant internal control issues for the RRS, though separate from the overpayments to deceased retirees.

This issues led to required corrections and reissuance to affected retirees, per the May audit.

On Friday, Nov. 21, in its audit report detailing the current state of Richmond’s audit recommendations, the OCA highlighted that multiple high-priority findings remain unresolved, indicating that the overpayment risk remains significant.

City auditors flag ongoing system failures

Auditors discovered many significant issues regarding the RRS, identified back in the May audit, continue.

Per the audit, the RRS continues to make overpayments after death to deceased retirees due to failures or delays in identifying deceased members, miscalculations in overpayment amounts and weak or inconsistent review of death audit reports. Forty-four deceased retirees received improper payments totaling $554,661.50.

In addition, the audit found that RRS still lacks a centralized or reliable tracking system to document amounts overpaid, actions taken or collection status, which was initially found in May.

Other issues include ineffective or inconsistent collection efforts due to limited documentation of follow-ups and weak internal controls and staff dependence on individual employees due to a lack of cross-training. Auditors also found that insurance and tax payments were made on behalf of deceased retirees, which may require reimbursement from external agencies.

High-priority fixes still unresolved

Despite the OCA making several recommendations on how RRS management and staff can improve the 1099-R process, from the audit report, the November update shows that many of those recommendations were followed through upon, and as a result, remain open.

In May, auditors recommended a total of nine recommendations, and according to that report, the RRS agreed to the city auditors' findings in all cases. Of the nine cases, eight were intended to be implemented by May 31, 2025.

According to the audit, the RRS's following open recommendations are past their original target dates of May 2025:

• Implement a formal process to identify and verify dead retirees
• Review all dead retiree accounts with post-death payments and document findings
• Coordinate with external agencies to recover insurance and tax overpayments

While the final recommendation remains open, it is not late -- its deadline is June 30, 2026.

The audit shows RRS closed five high-priority recommendations this period, meaning some of their issues were resolved before the November audit report, which are all connected to:

• Improving collection efors
• Enhancing oversight
• Updating the overpayment policy
• Training staff
• Establishing a continuing plan for overpayment handling

Despite the open recommendations regarding the RRS's failure to identify deceased retirees, Avula’s administration has 130 open recommendations still left to tackle -- and nearly all of them (124) are overdue.