What it is: A LOSAP is a 401(k)-like pension program for members of volunteer fire companies and rescue squads that meet a locally set minimum number of calls or program activities. Operating under state law and rules and approved by voters, participating municipalities and fire districts make annual payments ranging from $1,150 to $1,650 to volunteers who meet the requirements. The funds are placed into individual accounts for each member, who then controls how it is invested. Qualified third-party investment managers administer the plans on behalf of members. LOSAPs are also regulated by the federal government and the Internal Revenue Service.
Why it’s important: The State Comptroller issued a report earlier this month that found problems in five local programs it reviewed — problems that stem from a breakdown of controls and procedures established in the law and rules. Among the findings were incorrectly appropriated public funds, members who received improper benefits, and mismanaged records.
How it’s supposed to work: The sponsoring municipality or fire district approves a point schedule that allocates credit for each type of volunteer activity. When a member reaches the minimum number of points, he or she is eligible for the LOSAP payment to be deposited into his or her account at the end of the year. Each volunteer organization is responsible for keeping track of its member’s points, and annually certifying them to the sponsoring governing body. After a waiting period to allow protests to be filed, the payment is authorized.
Where did it go wrong? Each volunteer group made mistakes that resulted in overpayments. In some cases, a group made decisions that were contrary to the law and the local policies. In other cases members of the governing body approved payments for themselves, a conflict with the Local Government Ethics Law. Some justified disregarding the adopted point schedule and substituted their own decisions for the one approved by the sponsoring government agency.
Is there a bigger problem? Yes. This law was intentionally drafted to be as self-enforcing as possible, meaning the state oversight agency (Division of Local Government Services) was obligated to design a program that had limited state authority over local actions. The comptroller found clear misinterpretations and lack of attention among volunteers and the sponsoring, municipal and fire district officials. That led to their failure to fulfill their responsibilities. This highlights what happens when a law doesn’t provide for a diligent oversight process as a way of limiting the role of the state. This has implications for other state programs where limited oversight contributes to abuses of law.
What will happen now? The comptroller recommended remedial actions to the volunteer organizations and the sponsoring government agencies. He also made recommendations to the Division of Local Government Services to provide guidance and additional oversight. Those recommendations should be followed to ensure the integrity of the program. Both local organizations and the state need to provide sufficient resources to ensure taxpayers are protected. Finding the right balance is important; the comptroller’s findings made it clear that the current oversight model is inadequate. The comptroller will go back after a period of time to report on actions that are taken by the state and the offending parties.