Schuylkill Audit Report Shows Sloppy Bookkeeping

The Schuylkill Township Board of Auditors presented its full report to township officials Wednesday night, and it showed violations and continued failure to comply with real estate tax collection standards.

Marjorie Belliotti, chair of the board of auditors, presented the report along with Kyle Shirkness. Charles J. McCarthy is listed on the township’s website as the elected tax collector for the township.

Some of the violations included failure to respond to audit requests in timely fashion, holding township funds—including $159,847 for the 2011 tax year—beyond Dec. 31 and “findings of potential misuse of township funds.”

Township records were found to be in order, but the report highlighted concerns with the real estate tax collection procedures. The real estate tax in Schuylkill Township accounts for 85 percent of revenues, according to the report. An executive summary read at the meeting stated concerns about real estate tax collection in the township.

Given the limitations that we have to work with related to the real estate tax collection process, the only conclusion that we are able to reach on it is that the township did receive the funds that the tax collector sent. Although implementation of a new tax collectors software program provides some relief from prior deficiencies, for the fourth year in a row, we are unable to draw any conclusions on that accuracy of the overall tax collection process. In each of the past four years, the audit of the real estate tax collector’s account has identified recurring violations and continued failure to comply with the Tax Collectors Manual.

The auditors were limited to simply confirming that the township deposited the checks sent by the tax collector. During the audit, the board also found an uncashed check from a taxpayer in a random drawing of test documents. Additionally, taxes that were paid were showing as delinquent in some cases.

“The reporting of already paid taxes as delinquent to the county continues to be problematic,” the report states.

For 2011, several taxpayers reported arguments with the tax collector where Township Manager Mary Bird had to intervene. While the new software helped, it didn’t clean up all issues, such as the issue of the uncashed check, the report states.

“Using a new program will not address the excessive sloppiness of the recordkeeping,” the report says.

In 2011, the balance collected and not handed over to the township by Dec. 31 was $159,847, and for 2010, $70,061 was not handed over by the last day of the year.

"This is a violation of the tax collectors law and puts township cash flow at risk,” according to the audit report.

The report goes on to cite issues with record keeping and submitting reports by the required deadlines. In particular, a monthly report should include a reconciliation of taxes collected vs. those outstanding. The auditors requested such a report for the last three years and it has not been received, the report states. However, as of March 31, the new software will produce the required reports, according to the auditors.

All tax money paid must be handed over on or before the tenth day of the month, and, as shown by the money paid and not turned over—the $159,847 for 2011 and an amount of $70,061 for 2010—this has not been occurring, the audit board found.

Tax collectors are also prohibited from depositing tax funds into personal accounts, and that provision has been violated in the past, the report states.

“The tax collector was in violation of this for the 2008 tax year,” according to the report. “Due to the lack of clear and accurate records, the auditors are unable to determine if there were/are other violations of this nature.”

The board of auditors recommends “that the tax collector be reprimanded and requested to either comply with the Tax Collectors Manual and related Local Tax Collectors Law or consider vacating the position.”

More problems were cited in the report. In 2011, the tax collector turned over approximately $48,000 in taxes that were paid in March 2010. In a 2007 audit, “there was some discussion centering on approximately $5,000 that the auditors felt belonged to the township.” The tax collector initially disagreed, according to the report, but he changed his mind and sent a check for those funds to the township.

Problems continued in 2008, the report states.

At the 2008 annual auditors meeting, the tax collector informed the auditors that he withdrew $4,455 from the township funds because he thought he was owed this amount. The withdrawal was by check and made payable to the tax collector’s personal account … in February 2008. The tax collector stated that the funds were replaced in March 2008. Since the deposit was not a separate transaction the auditors could not verify the accuracy of the re-deposit back into the township’s account.

A subpoena was issued and after two years, the matter was resolved when sufficient documentation was produced. A 2009 refund to a property owner was also questioned, and the tax collector said the property was located in East Pikeland Township, but no documentation was provided. Because of concerns, the audit was expanded to 100 percent of the township, and with more than 50 percent of taxpayers responding, “no major discrepancy between the responses and the account has been found,” the audit board found.

The board made several recommendations to correct the problems listed. However, in conclusion the auditors determined that they could not sign off on the tax collector's account.

While the auditors are not aware of, nor have we discovered, any malicious intent, we are concerned that our random testing has identified an unusual transaction in each of the past four years. The absence of documentation, requested information and a lack of understanding of these types of transactions leaves us unable to reach a conclusion on them. Based on the recurring nature of these items (undocumented unusual transactions, lack of cooperation, sloppy recordkeeping) we are unable to sign off on the validity of the tax collectors’ account at this time. In order to get comfortable with this account, a more detailed, multi-year audit would need to be completed.

The report went on to detail more issues, including a lack of an audit trail for when people pay with credit cards, have refunds issued or have checks returned for insufficient funds. The board also cited issues with getting bank statements for the account. Finally, the auditors noted that the tax collector may have been using people who are not insured and bonded to help with tax collection.

The board of supervisors did not see the report until just before the meeting, and heard the reading of the executive summary by Shirkness. Vice Chairwoman Barbara Cohen asked if anything could be done to deal with the problems with the tax collector.

Belliotti said the board has little authority and has already been to court over the issues. There is one more option left, she said.

“That would be to pursue criminal charges,” Belliotti said. “I would not recommend that. That is not something this person deserves.”

Asking for a resignation is out of the auditors’ authority, Belliotti said. The tax collector is an elected official, Solicitor William Brennan pointed out, and the matter has already been looked at legally.

“My understanding is the conclusion at the end of all of that was that nothing was missing that could be articulated, and that was what we were mainly concerned about,” Brennan said.

Belliotti said she would not be willing to sign off on that.

“What I am willing to sign off on is I can’t say if anything is missing and I can’t say if anything is not missing,” she said.

The issues have been ongoing for the last few years, she explained, and taxpayers have had their bills go to collection after payment. She stated the example of money paid to the tax collector in March 2010 but not handed over to the township until February of the following year.

“That’s a whole lot of people who had their taxes turned over for collection before we got the cash for that,” Belliotti said.

Cohen said she’s heard from numerous taxpayers who said they’ve paid their taxes but still had liens.

“As you say, there’s nothing criminal here. It’s a question of how to sort this through,” Cohen said.

Supervisor Jim Morrisson said the entire 11-page audit report should be posted on the township’s website for the public to see. Chairman Fred Parry said he agreed but was worried that the township officials did not have enough time to review the report before Wednesday evening’s meeting. He said it will be posted on the website in the future.

The document is available to the public at the township building, 111 Valley Park Road, Phoenixville.