For two years, the City and County of Honolulu overpaid 240 employees a total of $98,000 due to a “glitch” in the payroll system.

Despite a state law that says governments that overpay employees “shall commence immediate recovery” of the funds, the city has no intention of trying to get it back, and the city’s HR director refuses to talk about it.

The overpayments were outlined in a February 2018 letter, obtained by Civil Beat, from Human Resources Director Carolee Kubo to the director of the Hawaii Government Employees Association.

The issue affected employees who are “non-exempt” workers under the Fair Labor Standards Act and who earned paychecks while working overtime while also being available for work on standby in the same pay cycle, according to the letter.

Honolulu’s program for calculating overtime was incorrectly configured, Kubo wrote.

“Employees were credited with as much as four times the actual amount of the stand-by pay,” the letter states.

Civil Beat repeatedly asked to interview Honolulu Human Resources Director Carolee Kubo, whose photo hangs at Honolulu Hale. She opted to answer only questions she had written herself.

Christina Jedra/Civil Beat

Civil Beat repeatedly asked to interview Kubo. Instead, she interviewed herself.

In an email, she wrote both the questions and the answers. Kubo’s unsolicited Q&A states that the overpayments were discovered through an audit and that it had never happened before.

“Is the glitch fixed so this will not happen again?” Kubo asked herself.

“Yes, the system configuration was changed,” she wrote.

Brett Oppegaard, chair of the University of Hawaii’s undergraduate journalism program, said it’s the first time he’s seen a public official write her own questions. “That’s a new one,” he said. “It makes it hard for the public to know what happened.”

Civil Beat emailed the city a list of followup questions, asking how the glitch occurred, which employees were impacted, the highest and lowest amounts paid to individuals, why the problem went undetected for two years and how the city responded after it discovered the error.

Kubo did not respond.

‘The City Will Not Collect Any Overpayment’

Kubo and Nelson Koyanagi, director of the department of budget and fiscal services, decided not to try to recoup the funds because of a “cost benefit determination,” Kubo said in her emailed Q&A.

She pointed to a section of state law to justify their decision. It says if a government agency wants to get back salary overpayments, it has to notify employees “within two years” of the date of overpayment.

Kubo’s letter – dated Feb. 23, 2018 – states overpayments to HGEA employees occurred from Feb. 1, 2016 to Jan. 31, 2018. However, she wrote in the email to Civil Beat that the time span was Dec. 1, 2015 through Dec. 31, 2017. Kubo did not respond to a question about that discrepancy.

In either scenario, the city had an opportunity to collect at least some of the wages at the time Kubo wrote her letter. It still has a chance to collect a portion now.

Nelson Koyanagi Director of Budget and Fiscal Services discusses Caldwell's strategy on raising the $44 million for rail.

Nelson Koyanagi, Honolulu director of budget and fiscal services, was one of the city officials who decided not to pursue collection of the overpayments.

Cory Lum/Civil Beat

Kubo’s letter cites another reason. Essentially, she told employees: It was our fault, so you can keep the money.

“Because the overpayment was due to an incorrect configuration/set-up of the Payroll system, the City will not collect any overpayment from the employees that resulted from this particular issue,” Kubo wrote.

But Hawaii Revised Statutes Section 78-12 – the same section Kubo excerpted in an email – states that when overpayments occur, a government entity “shall commence immediate recovery of the indebtedness” after notifying employees in writing and allowing them to request an appeal.

If the indebtedness is $1,000 or less, the agency “shall immediately deduct” money from future paychecks until the overpayment is recovered. For those greater than $1,000, the law says the government agency “shall deduct” no less than $100 per pay period or one-quarter of the employees’ paychecks “until the indebtedness is repaid in full.”

Michelle Alarcon, an attorney and longtime human resources professional, said the overpayment law seems more focused on protecting employee rights than saving taxpayer dollars.

What do we do if they abuse their spending power by being negligent like this?” asked Alarcon, who teaches at Hawaii Pacific University. “Can we sue them? We can’t. There’s no standing.”

The Hawaii Attorney General’s office did not respond to questions.

Honolulu City Council Budget Chair Joey Manahan said he was not briefed on the payroll situation and didn’t know about it until he was contacted by Civil Beat.

“All I know so far is what I’ve read in the letter, and the issue is not sitting well with me,” he said.

Manahan said he wishes the administration would request approval from the budget committee for this kind of expenditure.

“I have asked for a briefing from the Department of Human Resources and I am considering drafting a bill to prevent these types of errors and loopholes,” he said.

Councilwoman Kymberly Pine said she would like information on how much money was overpaid to individuals. If it’s substantial, she said, it could be a financial hardship for employees to pay back.

“We shouldn’t be making these mistakes in the first place,” she said. “And any time the city makes mistakes, they should tell the public. These are taxpayer dollars.”

A Nationwide Problem

Overpayments to government employees are not a new problem for Hawaii.

A 2012 Hawaii News Now investigation found the state had overpaid employees by more than $1.5 million going back to the 1990s. Much of it had to do with errors in vacation or sick leave paperwork.

“The problem has persisted for so long that many state employees have retired or even died while still owing the state thousands of dollars they were paid by mistake,” HNN reported.

Ultimately most of it was uncollectable because it exceeded the state’s two-year limit.

Overpayments happen in other states too.

A New York county comptroller had to return $52,000 mistakenly paid to him when he left a job as a city manager. His overpayment was part of more than $500,000 in erroneous payouts in accrued sick and vacation time that were caught through a state audit, Newsday reported. In a similar case in San Diego, a school superintendent agreed to pay back $15,000, according to the San Diego Union-Tribune.

Philadelphia is currently facing a lawsuit over a litany of paycheck errors including overpayments, underpayments and other mistakes, according to the radio station KYW.  In February, officials in Fort Worth, Texas, had to ask for $54,000 in erroneous payments to 74 employees, an NBC affiliate reported.

Accidental overpayments happen in the private sector too. A couple in Pennsylvania spent $120,000 that their bank accidentally put in their account, and they were charged with felony theft, CNN reported.

Getting the money back isn’t always easy.

A judge in Washington state ruled that Benton County officials were wrong to automatically deduct $130,000 in overpayments from the paychecks of 85 jail employees without first negotiating with their union, according to the Tri-City Herald. The judge ordered the county to “refund the money it deducted from paychecks and negotiate repayment terms with the union,” the newspaper reported.

The Hawaii Government Employees Association declined to be interviewed for this story.

Civil Beat did not obtain a full list of affected employees, some of whom may have been represented by the State of Hawaii Organization of Police Officers. A SHOPO spokesman did not respond to a request for comment.

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