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Errors, staff absences behind $300 mln New York City gaff: report

NEW YORK (Reuters) - Absent employees, flawed processes, and inadequate systems were among a catalog of problems uncovered at New York City agencies in a new report into why nearly $300 million of city money was erroneously paid out to pensioners earlier this year.

The city commissioned consultancy firm KPMG to write the report, released on Thursday, after a payment of $298.4 million was inadvertently made to more than 31,000 retired city police and fireman on April 30.

The problem was due to a poorly executed and controlled test of a proposed system change to allow automatic child support deductions from pension payments, the report found. The test went wrong and issued a transfer order to JP Morgan Chase Bank.

When Chase tried to check the transfer the two employees it emailed were out of the office. One had been on long-term leave since February, the other was out for the afternoon. Getting no response, Chase duly executed the order.

"If one of the two employees had received the e-mail that day, OPA (Office of Payroll and Administration) would have had the opportunity to cancel the disbursement," the report said. "If this control was effectively implemented, OPA had the last opportunity to detect this issue and correct it."

The report contains a detailed time line of events that shows city officials only became aware of the error the following day when retirees started calling the pension fund and posting on Facebook about the unexpected windfall, which averaged nearly $10,000 per person.

The city has managed to recover 99 percent of the funds, according to the report, which still leaves almost $3 million that it is trying to recover by deducting it from future pension payments. The city was unable to recover money from 288 pensioners, the report found.

(Reporting by Edward Krudy. Editing by Andre Grenon)

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