Last week, the State of Delaware Office of Auditor of Accounts released its report on the inspection of the Town of Frankford.
“In general, the Town of Frankford continues to lack processes to provide assurances about the accuracy and integrity of its budgetary and accounting records. During our investigation, Town officials indicated they are working on developing and implementing controls…” read the 17-page report.
“While our work did not identify blatant examples of fraud or abuse, it is possible that inappropriate activity occurred and was not detected, particularly when dealing with cash transactions.”
The review also noted that the Delaware Department of Justice had performed a review and investigation of the Town of Frankford in early 2015, following numerous complaints from town residents. The Attorney General’s Office concluded then that there was “insufficient evidence to sustain a criminal prosecution.”
The 2016 inspection report said that it was following the resignation of former town clerk Terry Truitt in 2015 that the town council contacted the AOA with concerns, including those about a conflict of interest (as Truitt is, and was during her employment with the Town, married to former councilman Jesse Truitt, who resigned from council in August 2015), that the office agreed to do the inspection.
The report stated that a 2008 Special Investigation report had recommended that the Town adopt a formal policies and procedures manual, and work to better segregate Town duties.
“Unfortunately, the Town did not take timely action on AOA’s recommendation. As of May 4, 2016, current Town Council has not yet developed formal policies and procedures over financial processes.”
For more than a year, some citizens had voiced concerns regarding the accuracy of the Town’s budget, with some suggesting the council was hiding a budget for a Town pension in a police training line item.
“AOA compared the Town’s Fiscal Year 2014 General Fund portion of the Town budget to the actual Fiscal Year 2014 General Fund revenues and expenditures, and we found a minimal overall variance of less than 5 percent of the total budgeted General Fund revenues and expenditures. Although the Town could have provided better transparency… no pension funds were actually spent.”
For Town expenditures, the Town was able to provide support for all transactions, save two — Pep-Up Fuel cards and a single $45.81 cash transfer to another Town bank account.
For the fuel cards, the Town paid a total of $20,253.88 for purchases charged to four separate cards over the three fiscal years audited. The report noted Town officials were unable to provide a policy or guidelines related to the use of those cards.
The audit focused on the failure to issue receipts, noting that the Town lacks any formal policies and procedures surrounding financial transactions, including the process for collecting payments from residents for taxes and utilities.
“The Town failed to issue receipts and did not maintain adequate supporting documentation for deposits during the period of our review. Therefore, AOA was unable to trace cash deposits per the Town’s records to the bank statements. Because cash can be easily misappropriated, and the Town lacked sufficient internal controls and records, we could not verify if all cash collected was appropriately deposited.”
Payroll transactions were also singled out as an area of concern, and while all were supported with a corresponding timesheet, “Most timesheets lacked the supervisor’s signature. Also, during Fiscal Year 2014, the former Council President/member [Jesse Truitt] signed his wife’s payroll checks.”
Truitt said that was not the norm, and he would be one of the two required signatures on all employee payroll checks.
The overtime pay of Truitt and former police chief William Dudley over the course of the three fiscal years was also examined and be found inconstant with Town policy. Truitt was paid overtime in excess of a 10-hour time cap, while Dudley was paid for overtime at a rate of 1.5 times his pay for hours worked in excess of 40 per week, “rather than earning hour-for-hour compensatory time.”
The report concluded that the discrepancies resulted in “overpaying” the two employees for a total of 457.25 hours, totaling $13,321.38. Truitt said that, if they were to take the overall figure, divide it by two, and then divide it by the 27-month time period, it would equate to less money than $250 per employee per month — less than what it would cost the Town to hire additional employees.
In conclusion, the report recommended the Town develop comprehensive written policies and procedures for operating expenditures.
“These procedures should be detailed to address controls such as authorization, segregation of duties, management review and reconciliation. Due to the Town’s limited employees, the Town is encouraged to involve Council to ensure a proper segregation of duties.”
The town council, which was given a preliminary copy of the report last month, wrote in its response that they believed a more thorough investigation was warranted, as many citizens had voiced concerns related to nepotism prior to the Truitts’ resignations.
“These concerns covered a period of many years and alleged serious financial irregularities. Therefore, the current council felt it was their fiduciary duty to engage your office for a complete and holistic review of the Town’s finances for the 13-year period in question.”
In response, the AOA wrote, “To address the Council’s two specific concerns, AOA did not find it prudent to launch a 13-year investigation with no solid evidence of fraud. Therefore, absent any solid evidence of fraudulent or inappropriate transactions during the scope of our engagement, AOA decided not to probe further. We also performed procedures that were not specifically identified in the report, but offered a level of comfort that proceeding further was not necessary.
“While we understand that the former Town Clerk and former Council Member (and one-time Council President) were married, creating a conflict of interest, we found no evidence that other council members were ‘shut out of the decision making process’ since the meeting minutes demonstrated that they attended the Council meetings and voted on the various topics. Regardless, Council members should not approve or sign checks for transactions they do not approve or understand, or without proper supporting documentation.”
Truitt herself said the two resignations had nothing to do with one another, and noted that there were other resignations from the Town during that time, including that of Dudley, former police officer Nate Hudson and former Town Solicitor Dennis Schrader.
“My biggest concern was this has been drug out for nine months. It has been detrimental for both myself and my family,” she said. “It’s a lovely community, but you have social media and everything else… I took a beating out there Wednesday night on Facebook — people who didn’t even live in the town.”
She added that she was glad to have had her name cleared, in a sense, as the report showed no evidence that monies were used inappropriately.
The report also emphasized that the Town must work to implement policies that were suggested nearly 10 years ago, to safeguard it from any financial wrongdoings.
“Overall, AOA appreciates the cooperation of the Town Council and Town employees during our inspection. In light of the fact that the Town Council did not implement policies and procedures as our 2008 investigation recommended, it is imperative that the Town ensure all policies and procedures are comprehensive to provide adequate segregation of duties and proper safeguarding of Town assets.”