Kennett Township opens books in 2019 audit report04/28/2021 09:41AM ● By Richard Gaw
By Richard L. Gaw
A recent audit of Kennett Township’s 2019 finances revealed “suspicious activity” and “several deficiencies,” all of which were likely to have factored in the conduct of former Manager Lisa Moore that led to her firing in May of 2019 and later her arrest in December of 2019 on suspected charges of fraud, theft and embezzlement of more than $3.2 million in township funds.
The audit and subsequent presentation was conducted by Christopher Herr, a certified public accountant with the firm of Maillie, LLP at the township’s April 21 online meeting.
Among Herr’s audit findings were:
· Annual budgeted contributions to local boards and authorities were not in equal installments and limited back-up was provided.
· Checks were signed using a rubber stamp signature.
· Staff salaries were not approved by the Board of Supervisors, although percentage increases were approved by the board.
· Not all township invoices had evidence of approval. Each individual invoice should require a signature indicating approval for payment.
· Invoices could not be located for three transactions (not related to the identified questionable and suspicious activity of Moore)
· Checks for smaller amounts only had one authorized signature.
Herr said the audit report also uncovered a segregation of duties in cash receipts.
“During our review of internal controls of the process of receipts, it was determined that the accounting clerk (Moore) received all receipts, entered the receipts into the accounting system, prepared the deposit and put the deposit into the bank,” he said. “One person was running the whole process, which is not something you ever want to see when it comes to internal controls.
“When any entity – for-profit, non-profit and government -- starts getting into problems with internal controls, segregation of duties is usually one of the main culprits. You want to have multiple people involved in the process.”
Following Herr’s presentation, Finance and Human Resources Director Amy Heinrich listed the many checks and balances that have since been instituted in an effort to better account for how the township has controlled its finances since 2019. They have included:
· An extensive investigation of township transactions prior to the time of Moore’s dismissal as township manager in April 2019 was conducted by the Chester County District Attorney’s office and Marcum LLP, a forensic accounting firm. These findings were incorporated into legal charges against Moore by the Chester County District Attorney’s office.
· Every 2019 transaction has been thoroughly reviewed by the township and reconciled to bank records and other back-up documents.
· The township staff has addressed nearly all of the discrepancies found in the 2019 audit, and the few remaining have been rectified by implementation of Sage Intact, the township’s new general ledger system.
· All invoices are approved by one or more members of the management team.
· The use of stamped signatures on invoices has been eliminated by the township, and all checks are signed by two members of the Board of Supervisors.
· The township now has the people in place to properly divide up the duties related to the financial management of the township, including the Finance/HR Director and three members of the township’s financial department.
· The township no longer accepts cash payments, and now accepts credit cards for all payments, including permits and police reports. Additionally, sewer payments go to a lockbox service to drastically reduce check volume.
· Payments from other government bodies and most grant funders come electronically.
· All salaries and any changes since the fraud discovery are now approved by the Board of Supervisors.
“A key portion of an audit is always to highlight concerns about material deficiencies,” Heinrich said. “Of course, given 2019 and the events leading up to April of 2019 (when the deficiencies in the township’s accounting were first detected) we were very familiar with what were going to find in the audit.”
Funding for Five Points Intersection
In other business, the township was recently awarded $2.19 million in funding that will be used to construct a long-awaited roundabout at the Five Points intersection. The grant was one of PennDOT’s 43 multimodal projects planned across the commonwealth.
The township’s local match to the project is $767,743, for a total project cost of $2,961,293.
Expected to begin its engineering plans this summer, the roundabout will be located at the intersection of South Union Street, Kaolin Road, Hillendale Road and Old Kennett Road. The grant comes after several unsuccessful attempts by the township to secure funding to build the roundabout, a topic that nonetheless has remained near the top of the township’s priority list, in order to enhance the safety of the regions’ residents and commuters, reduce growing congestion and increase traffic efficiency.
Ratliff, who acknowledged PennDOT, Sen. John Kane and Rep. Craig Williams for their assistance in getting the project funded, said that had the township not been proactive in securing funding for the intersection, upgrades would likely not occur before 2030.
Ratliff also said that while the design concept for the roundabout is being drawn for a project that is likely to be completed in three years -- the township will be working with businesses and homeowners near the intersection.
To contact Staff Writer Richard L. Gaw, email [email protected].