K-9 audit questions spending, control of funds
WEST CHESTER » Four-thousand, seven hundred, eighteen dollars and fortyone cents paid for a stay at the Hilton Baltimore in June and July 2015. At least
$5,290.74 on 75 miscellaneous lunches and dinners over a three-year period;
$4,200 for a custom-made golf cart; $2,500 for tires and front and back winches on a privately owned pickup truck; $579 for a one-night stay at the Quality Hotel in Exton in September 2017.
Those are some of the expenses that the Chester County Controller’s Office has questioned in its audit of the way that funds for the county sheriff’s K-9 Unit, estimated at more than $198,000, were raised and spent over the years
2015 to 2017. The controller zeroed in on expenses, paid for with checks and credit cards, where it could not ascertain how those individual payments directly related to the services K-9 Unit was formed to provide to law enforcement agencies and others in and out of the county.
The 23 instances of questionable actions by the K-9 Unit cited in a summary report of the controller’s audit — including failure to register as a charitable organization, file for tax-exempt status, and establish an overall “formal or informal structure” for receipts and disbursements — led the office to the rare step of bringing the matter to the attention of other elected officials in the county, according to a statement issued by the controller’s office.
“Based on our evaluation of the limited documentation we received, it did not appear that the majority of the generous donations received from well-meaning donors and sponsors (of the K-9 Unit) were being used for their intended purpose,” Controller Margaret Reif said in a statement to Digital First Media. “Given that fact, according to the County Code, our responsibility at that point was to stop what we were doing and bring our concerns to the commissioners and the district attorney, which is what we did.”
In a separate statement to Digital First Media, attorney Dawson R. Muth of the West Chester firm of Lamb McErlane said that Reif, a Democrat, was pursuing the audit of the K-9 unit as a way of attacking county Sheriff Carolyn “Bunny” Welsh, a Republican. He also said the sheriff had recently enlisted an outside auditor to review the same records that the controller referenced, and that to date no wrongdoing was found.
“The sheriff offered several times, prior to being subpoenaed by the controller, to sit down with the controller and explain all of the programs and fundraising efforts,” he said. “The controller and her solicitor chose not to accept that offer. Instead they have chosen to leak certain information to the press, to start a criminal investigation and to malign the hardworking professional law enforcement officers who protect and serve the citizens of Chester County.
“The controller’s conduct in this matter is clearly and without question politically motivated and is nothing more than a personal attack leveled at the sheriff of Chester County,” Muth said.
On Monday, Sept. 10, District Attorney Tom Hogan sent separate letters to the state Attorney General’s Office and the U.S. Attorney’s Office in Philadelphia, passing on Reif’s request for an investigation into allegations swirling around the K-9 funds.
No charges have been filed in the case.
Hogan determined that his office could not conduct an investigation into the finances of the K-9 unit itself because of an apparent conflict of interest, he wrote in letters to the agencies, involving a donation his office made to the K-9 Unit for training.
Included in the referral to the two outside agencies was a copy of the controller’s 10-page summary of its findings involving the review of records for the unit, which consists of nine dogs and their county-employed handlers.
The unit is not supported by county tax dollars beyond the salaries of the deputies who handle the canine officers and insurance paid for those dogs. For several years, the sheriff’s office has solicited private funds for support for the unit — including appeals for donations on the county government’s website and outside events including a golf tournament, a “wild game” dinner, and a classic car show.
In June, the controller began asking the sheriff’s office to submit to an audit of those funds that had been raised for the K-9 Unit partially through the county’s website and email. The sheriff, Reif said, initially agreed to the audit, but later backed away from that stance. The controller issued a subpoena for records involving the unit from 2009 to the present.
According to the summary, the audit began on Aug. 13, when the controller’s staff was provided with six file folders for the K-9 Unit fund for the years ending in 2015, 2016, and 2017, a third of the records that the controller had demanded.
The staff photocopied the records, but after several days of sorting through them noted that, “a material amount of supporting documentation … was not included in the six file folders provided by the sheriff’s office.” It completed its review of the partial documentation regardless, ending that process sometime in early September.
Among the deficiencies noted in the summary was the fact that even though the K-9 fund listed five bank accounts that handled K-9 activity, the information provided by the sheriff’s office related to only two.
In its findings, the auditors noted that, “there is no formal set of documented controls, processes or procedures for the K-9 Fund.” Even after asking for information about the fund’s system of checks and balances, nothing was presented. From what the auditors could determine, only two people handled the account — a bookkeeper in the sheriff’s office and Lt. Harry McKinney, the longtime sheriff deputy and founder and head of the K-9 Unit.
When the bookkeeper was removed from the accounts, McKinney took over all responsibility of deposits and withdrawals for the bank accounts, the auditors wrote. He thus had authority for both requesting and authorizing funds from the bank accounts.
The audit showed that the two bank accounts reviewed showed deposits of
$64,790 in 2015, $61,438 in 2016, and $72,039 in
2017, for a total three-year income of $198,268. The
K-9 accounts showed payments of $201,800 during the period, split essentially equally between check payments and credit card purchases. Those credit cards were listed under the names of Welsh and McKinney, who have had a longtime personal relationship.
In connection with the credit card expenses, the auditors said they determined that McKinney was “the main spending user,” along with Welsh. But there did not appear to be any authorization process to use the K-9 funds via credit cards, in contrast to the minimal check-writing oversight between McKinney and the office bookkeeper, Lee DiMattia.
“Based on the structure noted, it appears that Lt. Harry McKinney was both the approver and the spender for the credit cards, giving him unchecked control and discretion of how and when the funds were spent,” the summary report states. It noted that of the $93,519 put on credit cards for the three-year period, only $52,836 was documented, leaving $40,683 unaccounted for — most of which were billed by McKinney.
Of the $52,833 in credit card purchases the audit team was able to document,
$5,290 went for “non-event meals,” $15,899 to direct
K-9 expenditures, $22,654 to store purchases, $7,448 to travel and automobile expenses, and $1,540 in membership payments.
“Due to the fact that only a vendor, date and amount was listed to the credit card support for the purchases, the appropriateness of many expenditures remains in question and in need of further explanation,” the report states. “Also, it appears that the direct K-9 expenditures were mainly for
K-9 dogs under the control of (McKinney) and not the rest of the K-9 Unit.”
The report further stated that $1,690 of the direct K-9 funds were spent on grooming services for McKinney’s dogs, including one, Roxy, which is not listed as a member of the K-9 Unit.
Auditors identified several of the expenditures, such as the stay in Baltimore during the 2015 National Sheriff’s Association Conference or the purchase of the golf cart, or installation of winches on the privately owned pickup truck, that appeared to be personal expenses and not K-9 related. No reimbursement documents were provided.
Of the 23 items of concern pointed out in the re-
port, the first is that the K-9 Fund did not appear to be in compliance with state Department of State guideline for organizations soliciting contributions from state residents that total more than $25,000 a year. It also noted that the fund did not appear to be in compliance with federal guidelines.
Additionally, even though some of the purchases from vendors were made tax-free, the K-9 fund was not a registered charitable organization and thus did not hold tax-exempt status.
Also of note, the report states that funds that went to support the K-9 unit, for purchase and insurance of the dogs, came from federal and county tax dollars, and that despite Welsh’s insistence that the unit had brought $165,000 to county coffers since 2009, the county Finance Department listed only $34,000 in payments.
“This number needs further explanation and documentation,” the report authors note.
In his comments on the report, Muth declined to address specific questions about individual findings in the report, citing the potential investigations by the attorney general and U.S. attorney’s office. He said, however, that the sheriff had retained an “independent, professional auditor” to review the records of what he referred to as “the K-9 entity.”
“Unlike the controller, this auditor took the time and effort to conduct a thorough and comprehensive review of the records, the actual receipts, the expenditures, the credit card statements and the bank statements,” Muth said. “It was a real audit, not a cursory review with assumptions of wrongdoing.”
Muth stated that the auditor — whom he declined to identify — concluded at least for the 2017 records he reviewed thus far, “there was no wrongdoing, there was no self-dealing” and that there were no expenditures inconsistent with the broad objectives of the fundraising efforts conducted by members of the sheriff’s office.
Muth promised that when the auditor’s work was completed, it would be made available to the public.
Chester County Sheriff Carolyn “Bunny” Welsh
Chester County Controller Margaret Reif