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.”
A spokesperson for City Administrator Jestin Johnson emailed a statement saying his office is reviewing the report.
“The Administration is grateful to our City Auditor’s Office for their close review of this issue, and we appreciate everyone playing a role helping control City expenditures,” the statement said. “Administration leadership is reviewing the Auditor’s findings now, including their investigation of the issue and their recommendations, and we will provide a timely response.”
Looking ‘under couch cushions’
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.
“This issue of excessive overtime pay warrants the city’s immediate attention because taxpayers have essentially been incurring significant costs that were never approved.” City Auditor Michael Houston
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.
Houston said his office was alerted to the payroll problem because someone used the auditor’s anonymous whistleblower hotline to report their suspicions in July of 2023.
“Without the tip, we may not have become aware of this issue that is significantly costing the city,” Houston said.
People can read the full report on the city auditor’s website.