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Case of the missing money must be solved: Editorial

Posted 7/18/18

The residents and businesses of Middletown should be outraged at the apparent loss of $1.1 million from the borough’s coffers in 2015.

They should be deeply concerned about reports of …

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Case of the missing money must be solved: Editorial

Posted

The residents and businesses of Middletown should be outraged at the apparent loss of $1.1 million from the borough’s coffers in 2015.

They should be deeply concerned about reports of shredded documents and missing meeting minutes related to the Middletown Borough Authority from that same time frame.

Middletown Borough Council and all the employees of the borough should be doing everything they can to find out what happened to that money, and to ensure it never happens again.

A forensic audit that council paid RKL, a Lancaster-based accounting firm, to complete for borough financial activities from Dec. 30, 2014 through Dec. 31, 2015 found the problem.

In brief: $1.3 million was transferred to the Middletown Borough Authority on Dec. 30, 2015. That body went out of existence in May 2016 because Suez took over borough water and sewer functions in January 2015. “No documentation of the check’s purpose or explicit approval was maintained or provided,” according to the audit. Only about $240,000 is accounted for. There is an overwhelming amount of information regarding unusual activity as well.

The $1.3 million check was “not processed routinely” in that the borough employees whose job it was to process checks were bypassed. It was processed by someone who logged in in place of another person who was among those authorized by the borough to process checks, according to the report.

The $1.3 million transfer was not discussed by council and was covered in a vote council took to ratify all borough expenditures for all of 2015.

According to minutes from the Dec. 30, 2015, meeting that are included in the RKL report, former council member Rachelle Reid requested a list of the expenditures to be ratified, and asked council to allow more public comment. That was voted down.

That’s a shocking lack of transparency for an amount of money such as that.

The RKL report notes that “the majority” voting to ratify the 2015 expenditures, including the $1.3 million to the authority, “lost their seat on council the following day” due to not being re-elected or not running again.

Also, on Dec. 23, 2015, borough Manager Tim Konek, Public Works Superintendent Lester Lanman, and borough Secretary Amy Friday all resigned. All three were hired during Chris McNamara’s tumultuous and eventful tenure as council president. McNamara lost his re-election bid in November 2015.

RKL says that a borough employee told the firm that “a significant amount of document shredding occurred in the borough office” at the time of the transaction, but RKL could not determine why.

We believe it is unlikely that someone walked off with more than $1 million in their pocket, in essence robbing the borough of the money. However, taxpayers deserve to have answers — even if it is a simple clerical error that caused the problem. We hope there is not a nefarious reason for the missing money, but the trail of questionable activity found in the audit does not paint a pretty picture.

Nearly the entire borough structure from that time frame is gone, which is probably a good thing. Mayor James H. Curry III was in office, but no council member remains and most of the borough management staff is different.

RKL told council that the person who logged in to process the check was believed to be with Susquehanna Group Advisors, the consulting firm hired by the borough that was acting as the borough’s finance director at the time. That company no longer works for the borough.

There is a relatively easy step that the borough should take immediately, and it did not take at its July 9 meeting.

Emily A. Bomberger, a certified public accountant with the Business Consulting Services Group of RKL, told council June 19 that the borough might be able to get information on all checks that were written by the authority, or by the borough, during the time period in question by contacting the bank.

That’s a move Curry and Councilor Mike Woodworth urged the borough to do.

If criminal activity took place, it must be prosecuted.

The council needs to show urgency in addressing this matter. We hope the explanation is a simple one, and that the checks don’t raise even more questions about what happened to more than $1 million of your money.