Kennett financial investigations continue

Posted by Monica Fragale on October 19, 2019

As dual investigations continue into suspicious transactions in financial accounts earlier this year, Kennett Township supervisors continue to take steps to improve the financial and administrative health of the township.

Those steps include:

Hiring a full-time financial/human resources director;
Hiring a human resources consultant to help the township craft policies for things like sexual harassment and whistleblowers;
Holding a special meeting announcing a switch in retirement plans to comply with federal tax laws;
Reclassifying financial account numbers to comply with those recommended by the Pennsylvania Department of Community and Economic Development, one of the entities that audits the township’s financials; and
Ensuring that transferred funds are accurately reflected in the account in which they need to be spent.

The supervisors are also planning a public meeting that will be held once the Chester County District attorney and the forensic accountant hired by the township finish their investigations into the suspicious transactions. Those transactions were discovered April 25 and led to, among other things, the firing of the former township manager.

Supervisors’ Chairman Scudder Stevens said the public meeting will be scheduled soon after the reports are finished.

“After their reports are made, we will be able to provide information on what happened and what is being done to fix it,” Stevens said at the beginning of Wednesday’s supervisors’ meeting. “We also hope to have available several people who have been involved in the investigations and the work since then to answer your questions.”

Stevens also welcomed new finance/HR Director Amy Heinrich, who begins work today. Her last day as the chief financial officer and finance director for West Whiteland Township was Wednesday, after which she drove to the Kennett supervisors’ meeting.

Her hiring was first announced at the Oct. 2 supervisors’ meeting. Heinrich, a Kennett Township resident, has been a staple at supervisors’ meetings in the last six months and had offered her help on numerous occasions to the township in the wake of the discovery of the suspicious financial transactions.

Heinrich will give her first report to the public at the Nov. 6 township meeting, according to township Manager Eden Ratliff.

At Wednesday’s meeting, the supervisors also approved the hiring of human resources consultant Roseanne McGrath at a cost of $125 an hour, not to exceed a total of $5,000. Ratliff explained the township doesn’t have “critical human resources policies” in place.

He said McGrath would help design “policies and procedures that make sense for us.” Those policies and procedures, before being enacted, would first need to be approved by the supervisors. Heinrich would, in her new capacity, ensure that the policies were being followed.

The supervisors will hold a special meeting at 7 p.m. Oct. 28 to move forward with a new retirement plan for township employees, one that would put the township in compliance with federal tax laws. Currently, Kennett employees have a simple IRA plan which is not compliant with the federal tax code. To implement a 457b retirement plan, which Ratliff said is in keeping with other municipalities, the supervisors first need to advertise the switch and then adopt an ordinance making the change.

Also at Wednesday’s meeting, Ratliff presented revenue budget numbers that were organized according to a state Department of Community & Economic Development format. He said that when he first began work with the township, he realized that the chart of accounts was not in the proper format recommended for municipalities.

“We were at the point where we needed to reconstruct,” he said.

According to DCED, the chart of accounts classifies financial transactions according to similar accounts. It is “the heart of the accounting system because it provides the means by which all transactions are recorded,” according to a DCED document that outlines the chart of accounts.

The DCED chart of accounts also is used in annual audits and financial reports to the Commonwealth.

The revenue numbers he presented at Wednesday’s meeting represented the general fund and a portion of the EMS fund. The 2019 general fund budget was set at $4.13 million, with the year-to-date number as of Sept. 30 at $4.59 million and the projected revenues for 2019 at $5.69 million.

The approximate $1.5 million difference between the budget and the projected revenues represented transfers from other funds.

“Essentially it’s an allocation issue,” Ratliff said, explaining that when money is collected, it’s placed in different accounts. “We spend money out of a couple other accounts, which are general fund accounts, and then we have to transfer accordingly.

“Part of the problem is that up to this point, some funds have been expensed out of the general fund … and transfers didn’t happen from those (other) funds. It seems to be that we operate out of the general fund, even if it should be an expense out of the sewer fund or open space fund. All of that, I promise you, will be a lot cleaner and make a lot more sense next year because we’ll divide this up and expense it accordingly.”

Ratliff invited all township residents to attend the supervisors’ meetings to learn about municipal government fund accounting and become involved in the budget development process.

“The township’s budget is a statement of our priorities, and it should be the taxpayers who tell us where they want their money spent and what the priorities should be,” Ratliff said.

The budget will next be discussed at the Nov. 6 supervisors’ meeting, which begins at 7 p.m.

About Monica Fragale

Monica Thompson Fragale is a freelance reporter who spent her life dreaming of being in the newspaper business. That dream came true after college when she started working at The Kennett Paper and, years later The Reporter newspaper in Lansdale and other dailies. She turned to non-profit work after her first daughter was born and spent the next 13 years in that field. But while you can take the girl out of journalism, you can’t take journalism out of the girl. Offers to freelance sparked the writing bug again started her fingers happily tapping away on the keyboard. Monica lives with her husband and two children in Kennett Square.