PORTSMOUTH — An otherwise upbeat presentation of the town’s 2021 audit Monday night was used as an opportunity for three residents to sharply criticize the town’s management of its pension plan.

Mary L. Sahady, an attorney and certified public accountant with Hague, Sahady & Co., spent half an hour presenting an overview of the town’s annual comprehensive financial report for the fiscal year ending June 30, 2021. She noted no major red flags in the report, and pointed out that the town last year again received a Certificate of Achievement in Excellence in Financial Reporting by the Government Finance Officers Association.

But three residents wanted to talk about the town’s pension plan.

“Since the council closed the defined benefit pension plan and switched to a 401K plan in 2012, the defined benefit pension plan’s total liability has increased about 50 percent, or by $35 million,” said local resident Tom Grieb. “Total liability has nothing to do with how much our pension assets earn in the market; it is simply the total cost to the town of the program. Clearly, a 50-percent increase in a closed pension plan is astounding.”

Grieb said he was hoping the audit would have shed light on what is driving the liability increase, “but the report is woefully deficient in providing insight into what his happening with our pensions.”

Last year, Hague, Sahady & Co. missed an unauthorized reduction in the pension asset return rate used for the calculations, according to Grieb. In fact, the firm signed off on a clean report, he said.

“Without details in the report, no one, not even our auditor, found that unauthorized change in rate. This year that return rate was corrected back up to the proper council-determined rate,” Grieb said, noting that the increase in the return rate should “substantially reduce” this year’s pension liability.

In addition, Grieb said he discovered that “three new and/or existing employees were added into the closed pension plan by town staff without council authorization. Like last year’s rate change, these details were not included in the report.”

Seeks council oversight

Larry Fitzmorris, president of the taxpayer group Portsmouth Concerned Citizens, raised similar concerns.

“We’ve had three people added to the pension plan without this council’s approval,” Fitzmorris said, noting the PCC had submitted a public access report and received the names of everyone in the plan. “There are people who appear in the plan over the last couple of years that weren’t there before. That means they were added on.”

Three people could add up to “$3 million by the time this thing is done,” he said. “Taxpayers are ultimately holding in their hands the liability for this pension plan.”

Fitzmorris suggested the council adopt a pension plan ordinance that gives the council sole authority over the plan. In addition, no new employees should be added to the plan, and an investment committee should be established as well as an annual oversight review, Fitzmorris said.

“The key thing here is the council’s oversight,” he said.

Town Administrator Richard Rainer, Jr. categorically denied the charge that three people had been added to the closed pension plan.

“I’d just like to state for the record that that’s not true. The town has not violated any of the tenants of the pension rules,” he said, a statement that was supported by Council President Kevin Aguiar.

Aguiar asked for copies of suggestions and questions posed by Fitzmorris and Grieb, and promised to get answers to them within the next couple of weeks.

Resident questions error

Another resident, Nancy Grieb, questioned a discrepancy she discovered when comparing the printed version of the audit report with one that appeared online.

Grieb said after spending $31.65 for a copy of the plan from the Town Clerk’s Office on Jan. 13, she discovered that the pension plan’s funded ratio — the value of assets in a pension fund divided by the value of promised lifetime income benefits — appeared differently in the printed and web versions of the audit. The town gave no notification of the correction, which is standard practice in financial reporting, Grieb said.

“This is not the first time that Rainer has changed a financial report without notification,” Grieb said. “How many more changes have been made in this report without disclosure?”

An angry Rainer responded in a raised voice. “Never once have I ever defrauded this town or deceived this town on purpose,” he said, before turning the microphone over to Finance Director Lisa Lasky.

“This is on me,” said Lasky.

Council member Keith Hamilton offered to take the blame as well. He said he found the typo and asked for it to be corrected two or three days after the audit came out. “It was corrected,” he said.

Grieb said there was nothing wrong with making a mistake, but the change should have been clearly identified in the report. “All you had to do was post a correction on the website,” she said.