The 1999 town audit – released last week – showed none of the problems that had plagued the Recreation Department and the Municipal Court the previous year.
The state requires that each year, a town’s finances and procedures be reviewed by an independent auditor, and the auditor may in some cases make recommendations about various operations. Over the last two years, the annual audit showed areas of concern in the Recreation Department and the Municipal Court.
“This does not mean the town broke the law,” said Town Administrator Anthony Iacono last week. “These are recommendations to keep something from happening in the future.”
Mayor Dennis Elwell said the 1998 audit had been somewhat problematic, both in the court and the Recreation Department. “We did our own house-cleaning and corrected the problems,” said Elwell last week.
In 1997, the firm of Suplee and Clooney, based in Jersey City, found 30 areas of concern, most of which were in the court system. In 1998, the auditors found about 14, again most of them in the court, with some questions about the Recreation Department. This year the auditor had one recommendation.
“Of the state’s 566 municipalities, less than one percent had so few,” Iacono said.
Recreation lead to investigations last year
The Recreation Department – after the release of the audit for 1998 in August, 1999 – came under sharp scrutiny that eventually led to several investigations and caused the County Prosecutor’s office to request a Grand Jury hearing. Although no wrongdoing was found, the audit did show what were considered unwise business practices.
According to the town’s audit for 1998, the Recreation Department had failed to deposit in the bank “within a reasonable time” cash collected at various public events. Payments to vendors for goods and services were made directly from the department’s checking account, rather than through the Purchasing Department. Numerous checks were also found to have been made out to cash. In fact, records show that in 1998, almost half the checks issued from the recreation account were made out to cash. Most of these ranged from $40 to $90.
In issuing its report for 1998, the auditing firm recommended against the practice. Town records show that checks made out to cash continued into 1999 but ceased in August after the firm issued its recommendations and when Mayor Anthony Just began to question the practice.
Who got how much, and for what purpose?
Mayor Just was equally concerned with checks issued to various Recreation Department employees. The amounts of the checks varied from $40 to $1,800. These employees then cashed the checks and apparently paid off referees and umpires in cash.
Iacono said umpires and referees who officiated various sporting events run by the Recreation Department refused to work unless paid in cash.
For the month of January 1998, for instance, four checks were issued to one employee for a total amount of $6,528. From January to December 1998, 63 checks were issued to other Recreation Department employees ranging from $103 to $450. In total, over $30,000 was paid out in this manner. Income tax reports were issued only to those umpires and referees to whom the town paid in excess of $600 for the year. Many umpires and referees received no tax statements.
According to town officials, the names of referees and umpires are not known in advance, so checks were made out to employees.
The referees and umpires had been used to being paid in cash, as it is done that way in several towns. In an October 1999 report to the Town Council, Bob Cagnasola, a representative of Suplee and Clooney, said this was a common problem in Hudson County where municipalities operate recreation programs. In other parts of the state, he said, volunteer groups raise and spend money free of the strict state-imposed regulations municipalities are required to follow.
“When a town operates recreation programs like we do in Secaucus,” he said, “the Department of Community Affairs regulates how we handle finances. Nothing was done wrong here. But we knew that if we didn’t pay cash, we would have a problem getting these officials.”
Ken Davie, an special attorney hired by the town to investigate the matter, said he had interviewed each person who had cashed these checks. Although he did not interview umpires and referees to whom the money was eventually issued, he said in his report in October, 1999, that no wrongdoing had been detected.
As a direct result of the auditors’ recommendations, the town began issuing tax statements in 1999 to any one officiating for recreation programs. But this, according to Iacono, increased the cost of recreation programs to the town. In order to keep the umpires and referees, the town was forced to increase their wages to cover the increased cost they would incur in paying taxes.
Problems found in tracking purchases
One of the more serious issues raised in the audit for the year 1998 involved purchasing. The auditors found that the town did not have in place a means of monitoring purchases below the bid threshold.
Unscrupulous municipal employees in other parts of the state have been known to get around bidding laws by placing numerous orders under the $12,300 (which has since been raised to $12,800) that would require the town to go out to bid. Without a system in place that would account for these multiple purchases, no one would be able to detect if bidding laws were being broken. While Suplee and Clooney found no instances in which such multiple purchases were made in Secaucus, they said records could not provide a accounting for accumulated payments.
“The result of such an accumulation could not be reasonable ascertained,” their report said.
In June 1999, town officials, who were notified of the impending bidding concerns by the auditors, issued a memo to all town employees to make certain that all purchases were properly documented and reported to the Purchasing Department. Although prompting fewer questions from the town council, problems were also found in the court’s administration where financial records did not jive or were not registered in proper accounts.
“Some of the problems we had in our past audits involved practices that are common around the state,” said Elwell. “We had problems because state law changed.”
In 1997 and 1998, the state changed some of the court accounting procedures that led to confusion in that department. Many of the corrections made in the court system, according to Iacono, were the direct result of work done by Judge Kathleen Walrod, hired in late 1997, and Arlene Catton as Municipal Court Director hired in late 1998.
“Many of the same problems had appeared from years to year, and he said the town pushed to have them rectified,” Iacono said.