West York audits show borough in disarray; council members seek forensic probe
West York Borough Council is considering the unusual step of hiring a forensic auditor to examine the municipality's finances.
Such a move could be a significant development, considering the main purpose of a forensic audit is to produce a report that can be used as evidence in court.
"Forensic audits are used wherever an entity’s finances present a legal concern," according to Black's Law Dictionary, a widely used legal resource.
What exactly is the concern in the half-square-mile borough of about 4,600 residents bordering York City?
Council members who voted to explore a forensic audit haven’t been specific, and none of them have publicly accused anyone of doing anything illegal.
When asked for examples, they cited vague concerns.
However, West York’s two most recent independent audits appear to show a government office in disarray, with problems including overall poor record-keeping, a failure to pay payroll taxes on time and an issue relating to the borough's state-allocated liquid fuels funds.
Council President Mary Wagner has said she joined five other council members in the March vote because West York has had a "black cloud" over its finances for years.
Councilwoman Mildred Tavarez, who took office in January, said her knowledge of the borough’s finances is limited but that the public has many questions, “especially (for) 2016 to early 2017.
“My residents are not conspiracy theorists. They have questions, as do I, and that’s why I voted in favor of the forensic audit inquiry,” Tavarez said. “A forensic audit will give residents peace of mind. We need to get it done regardless of the outcome.”
Lack of controls: Alan Vandersloot, a council member since 2016, was the only "no" vote, and he still thinks a forensic audit would be a waste of money.
"I do not believe any criminal activity occurred, just incompetent management," Vandersloot said.
Shawn Mauck, who served on the council before becoming mayor in 2016, agreed.
He acknowledged the borough lacked adequate controls for its finances and said he’s been working to establish better policies and procedures since he took office.
Like Vandersloot, the mayor said the issue is incompetence, not criminality.
Recent audits: The borough's 2015 and 2016 audits — the most recent available — note a laundry list of issues.
The 2015 audit contains a disclaimer from York-based accountants Kochenour, Earnest, Smyser & Burg.
“(W)e have not been able to obtain sufficient appropriate evidence to provide the basis for an audit opinion, and, accordingly, do not express an opinion on the financial position of the governmental activities of West York Borough as of and for the year ending December 31, 2015 …”
A year later, the same firm issued an adverse opinion for the borough’s 2016 audit:
“The large amount of errors, misstatements, missing records and lack of documentation for transactions, when combined with a lack of oversight and supervision by the governing body and existing management at the Borough, have led to the conclusion that the financial statements are materially misstated and do not present fairly the financial position of West York Borough.”
The firm listed 11 deficiencies, leading with a problem related to the borough’s 2016 Liquid Fuels allocation from the state Department of Transportation.
The auditors indicated that they confirmed with PennDOT that the department had sent the borough’s $107,333.77 allocation for the year.
Yet, they wrote, “the amount was not deposited into the Liquid Fuels PLGIT Account during 2016. We could not trace the receipt of this amount directly due to problems with cash receipt documentation …”
Each year the state distributes Liquid Fuels money to municipalities based on their populations and miles of eligible roads.
The money can only be used on certain projects, such as road and bridge improvements, according to PennDOT Communications Director Rich Kirkpatrick, who added that 20 percent of an allocation can be used to purchase major equipment for use on roads and bridges.
Address issue?: Mauck initially insisted the audit finding was the result of a misunderstanding.
He said PennDOT sent the 2016 Liquid Fuels check to 1700 W. Philadelphia St. — the address of West York’s former municipal building — when it should have been sent to its new building at 1381 W. Poplar St.
“Nobody misplaced the check,” Mauck said.
It was “never cashed,” according to the mayor, who said he worked with PennDOT to have a new check issued.
However, Kirkpatrick disputed that account.
“It was cashed on April 12, 2016,” the PennDOT communications director said.
He confirmed the check was mailed to 1700 W. Philadelphia St., and that is where the borough offices were located at the time.
The West York Borough Council didn’t vote to purchase the former Grace Loucks Elementary School at 1381 W. Poplar St. until April 18, 2016 — six days after PennDOT says the Liquid Fuels check was deposited.
Then-Councilman Mauck made the motion to buy the building — which the council did, for $200,000 cash.
PennDOT records show whoever deposited the check did not endorse the back of it, according to Kirkpatrick. “It was marked for deposit only WYB General Fund.”
He confirmed that municipalities are required to deposit Liquid Fuels funds into a “bank account designated for Liquid Fuels. And other funds may not be comingled with these funds.”
Separate issue in 2017: Asked about the discrepancy between his account and PennDOT’s, Mauck said later that he misspoke, and the 2016 Liquid Fuels funds have been transferred to the correct account.
He explained he had confused the issue with the 2016 Liquid Fuels check with another issue holding up the borough’s 2017 check.
Kirkpatrick confirmed the 2017 check for $112,335.64 wasn’t mailed until Dec. 21, 2017 — about nine months later than usual — because the borough didn't file its Form 941, known as the Employer's Quarterly Tax Form.
That’s the form employers use to report taxes withheld from employees’ paychecks.
“That (Liquid Fuels) payment was delayed until the borough resolved a tax issue that put a hold on the normal delivery schedule,” Kirkpatrick said. “That check was never cashed.”
West York's 2017 audit has not been completed yet, but the borough's handling of payroll taxes was another deficiency noted by the accountants in the 2016 audit.
Unprepared: And it's just another example of dysfunctional management, Mauck said.
Linda Diaz, who was hired as borough manager in February 2017, said the 2016 audit “was her first audit.” She admitted she has been behind on completing administrative tasks since her hire.
Mauck said he does not blame Diaz. He said before her, there were two managers: one who worked for the borough for 30 years, followed by another who was on the job for 10 months.
The longtime manager had her own set of internal controls, the mayor said. When she passed away, he said, the borough wasn’t prepared to pick up her responsibilities.
"We didn't have the right people in place ..." Mauck said, later adding, "and, the borough pretty much had to start over."
Diaz "tendered her resignation" prior to the council's Monday meeting, the mayor said.
Prior to that, the borough manager had been tasked with finding a forensic auditor to brief council members on the process of a forensic audit. She had said she hoped to have someone address the council at Monday's meeting.
However, Wagner, the council president, announced that the manager had reached out to three auditors, and two of them declined to explain how a forensic audit is conducted. They were waiting to hear from the third, she said.
Council member Brian Wilson, who made the motion in March to seek a forensic auditor's expertise, said he's now very frustrated.
He said if the borough's challenges are as bad as they appear to be in the annual audit, then "why don't we just hand the keys over to Harrisburg?"
No vote or action was taken on a forensic audit at the meeting.