Port Deposit overdrawn by $850,000 State audit also finds wages paid in cash, poor recordkeeping

March 08, 1996|By Joe Nawrozki | Joe Nawrozki,SUN STAFF

PORT DEPOSIT -- The municipal treasury has slipped at least $850,000 into the red, state auditors have found -- leading some residents of this historic town on the Susquehanna River to fear their government is on the brink of financial ruin.

The auditors' scathing report, which comes amid a simmering political scandal, details inadequate recordkeeping, improper bidding procedures, cash payments to employees and blank checks signed by the mayor.

Recordkeeping was so shoddy, the report says, that neither investigators nor town officials can say how much money the town has to spend.

"The town's financial condition has steadily deteriorated," said the special state audit report obtained by The Sun.

"There's a real problem because we don't know how much is in the treasury," said Diane Stackwick, part of a volunteer committee hoping to straighten out the town's fiscal woes. "There are missing bank statements, town bills were stuffed in shoe boxes. I am fearful we will be bankrupt."

"Everyone's in shock," added the new mayor, Kerry Abrams.

In a bit of small-town irony, she was sworn in Tuesday night by Erma M. Keetley, 74, who resigned amid the financial chaos and political scandal. Mrs. Keetley also serves as a clerk in the marriage bureau at the Cecil County courthouse in Elkton.

Treasurer pleaded guilty

Since the state prosecutors office began a probe into the town government in October, former Clerk-Treasurer Nancy L. Peters has pleaded guilty to misconduct in office for failing to pay her property taxes and utility fees, and those of two other town residents -- including the former mayor.

Port Deposit's general fund has accumulated an $118,240 operating deficit for fiscal 1989 to 1994, the state report said. Meanwhile, the town's water and sewer system showed operating losses totaling $733,607 during that period, said the report prepared by the Office of Legislative Audits for the state legislature.

The town routinely borrowed reserves from the water and sewer enterprise fund to finance general fund expenditures, the report said.

Cash, investments fall

"It should also be noted that the town's total cash and investments [combined] decreased from $712,214 in June 1989 to $252,515 in June 1994," the report said.

Other critical points raised in the report included:

The town maintained an unusually large number of bank accounts, considering its size and other factors. In mid-1995, the town had three checking accounts, two savings accounts, one money market account and three certificate of deposit accounts.

Although the mayor and clerk-treasurer signed all disbursement checks, including payroll checks, the mayor generally did not review invoices and supporting documents. In several cases, the mayor signed blank checks for the convenience of the clerk-treasurer.

The town did not always obtain competitive, sealed bids for major purchases. For example, in February 1994, the clerk-treasurer signed a contract to buy a backhoe for $36,000 without obtaining such bids, and the town council did not approve the contract.

The town did not maintain adequate supporting documents for spending. "Our test from August 1 1994 to October 31 1994 disclosed that 33 disbursements totaling $37,810 were not supported by an invoice or other appropriate supporting documentation."

The clerk-treasurer "occasionally paid certain employees in cash rather than by payroll check."

The clerk-treasurer provided for the maintenance supervisor and herself payment for unused vacation, sick and compensatory leave totaling $8,730 for 1988 to 1994. "Due to the lack of leave records, there was no assurance that the employees earned and had unused leave to warrant the payments.

'Absence of controls'

"There was a general absence of controls and oversight," Anthony J. Verdecchia, chief state auditor, said yesterday.

A state auditor will be assigned to Port Deposit for several months to assist officials in sorting out their financial problems, he said.

Mrs. Keetley, who had been mayor and council member for nearly three decades, resigned under pressure rather than face criminal charges by the state prosecutor's office, sources said.

James I. Cabezas, chief investigator for the state prosecutor, said Mrs. Peters, the former clerk-treasurer, remains a "cooperative witness."

Mrs. Keetley refused to comment on the case; Mrs. Peters refused several times to answer her door on High Street this week.

Residents shocked

The fallout of the investigation has staggered a divided populace of about 700 people -- one group representing older residents, the other newer faces in the town that was formally founded in 1812.

Once a thriving lumber town when the river served as a highway for the timber, the town fell on hard times after the Navy closed nearby Bainbridge Training Center in the early 1970s and a company that brought jobs and income to the area left in the early 1980s.

Mrs. Peters' successor, Sharon Weygand, said that since she became clerk-treasurer in January, she has attempted to start a computer program to organize the town finances.

"Before, taxes and water and sewer bills were done manually," she said. "The payroll was kept on 3-by-5 cards and basically, there has been no accounting done for 18 months. It's pretty difficult to say how much the town is in the hole.

"Actually, right now it's just plain difficult."

Pub Date: 3/08/96

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