Oakland may have overpaid city workers using the wrong formula. It hasn't fixed the problem

San Francisco Chronicle​

23-04-2025

Oakland officials are scrambling to explain why the city appears to have overpaid some city staff by $1.6 million using an incorrect payroll formula, and whether the problem is more widespread amid a city budget crisis.
The city auditor released a report in February concluding that between January 2018 and May 2024, Oakland paid employees in the transportation and public works departments excess pay for overtime work. The audit determined that the overpayment problem could have affected other city departments.
On Tuesday, the city administrator told members of the City Council's finance and management committee that it had not yet fixed the problem and was seeking help from an outside consultant.
The revelation comes as Oakland officials try to close an $89 million budget deficit in the general purpose fund, which pays for police and fire, before the next fiscal year begins on July 1.
'I'm concerned that we're spending money that we don't have,' Council Member Janani Ramachandran told the Chronicle.
The February audit determined that the city was using a method for calculating overtime that is different from the requirements of the Fair Labor Standards Act (FLSA), a federal law that sets standards for minimum pay.
The city's audit showed that 158 transportation employees and 368 public works employees were overpaid. One public works employee, whose annual salary was $127,691, received $107.44 per hour per the city's formula instead of $80.53 per the FLSA formula – meaning that the employee received 33% more than they should have, according to the audit.
On Tuesday, Jestin Johnson, Oakland's city administrator, said that FLSA sets minimum standards, but that the city typically pays above that minimum.
'We pay a higher rate, which can impact the calculation,' Johnson told the committee.
Erin Roseman, the city's finance director, said the payroll issues are 'not illegal and it's not inappropriate' as long as it's authorized, which staff are in the process of determining.
But auditors found there was no evidence that the overtime pay was ever authorized.
'Neither the City Charter, Municipal Code, City ordinances, nor labor contracts explain the City's method for calculating overtime pay,' the audit said. 'Furthermore, the Finance Department — whose Payroll Division processes payroll and ensures employee compensation aligns with official terms and regulations — could not explain why the City is using this method; neither could the Human Resources Management Department or the City Attorney's Office.'
Michael Houston, the city auditor, said Tuesday that his office was unable to determine how the formula was first entered into the city's system and why. In addition to the city's transportation and public works departments, he said officials should also review payments to employees in other departments.
'The calculation applies citywide and it could be a much bigger number, but we can only speak to what we found,' Houston said. 'There is no reason for us to think that it's limited to that.'
It's unclear how long the consultant will take to complete their analysis of the city's finance issues. The consultant is currently reviewing the auditor's work, but Johnson said he would ask them to also look at other city departments.
Ramachandran told the Chronicle she's confused why an external consultant needs to review the auditor's work. She agreed that the consultant would be necessary to review other city departments that may have been affected.
'I definitely believe in the need to have good salaries for city workers who do a range of core city services,' Ramachandran said. 'But not overpayment beyond what's authorized.'