Published Friday, Feb. 8, 2002
GREENVILLE
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Debt piled up over years, auditors said
Herald Staff Writer
The Borough of Greenville endured its second disastrous fiscal year in a row in 2001 and faces a budget deficit of over $1 million, but the financial quagmire the town is now in was at least five years in the making, auditors reported Thursday.
During 2001 -- and as it had done the previous year -- the borough spent about $450,000 more than was available in its general fund and dipped into a bond issue and other borough funds to keep itself afloat, according to an audit by Sharon firm Black, Bashor & Porsch.
Spending outpacing revenues in the general fund last year by $448,000, auditors said. As a result, Greenville entered this year with a $1,062,000 deficit, auditors said.
The deficit would have been higher had the borough not removed money from a $3.67 bond issue reserved for a recreation and revitalization project or borrowed from other borough funds.
Last year, the borough used $171,000 of the bond for general spending, auditors said. Since the bond was issued in 2000, the borough has removed $667,000 from it, auditors said. All of that money must be replaced.
In the process of removing money from the bond, the borough lost $46,000 in interest.
The borough has also borrowed from various other borough sources to cover day-to-day expenses. The borough last year borrowed $39,000 from its nonresident wage tax fund and $52,000 from its sewer capital fund -- including past borrowing, the borough owes those funds $325,000 and $83,000, respectively.
The borough also owes $245,000 on a tax-anticipation note that defaulted, plus $13,000 in interest.
Auditors also reported the general fund is owed $199,000 from the borough's sewer operating fund and $41,000 from the streetlight fund.
While the past two fiscal years have been disastrous, Mastrian said the borough's problems began in 1996 -- the first of six straight years the borough would end with a deficit in its general fund.
In 1996, the borough reduced taxes by 1 mill and lowered the millage reserved for the general fund, Mastrian said. The borough lost an estimated $300,000 in revenue as a result and never recovered, Mastrian said. The borough could not keep up with rising costs, he said. Small, consistent annual tax hikes may have prevented the problem, he added.
While it took auditors about two minutes to review the numbers, discussion of the audit continued for more than an hour. Among the comments and exchanges:
"No one," said borough solicitor Warren Keck III. Added Mastrian: "They were unauthorized transfers."
"Who signed the checks?" Surano asked.
"The former borough manager (Peter D. Nicoloff Jr.)," Mastrian said.
"It was a violation of the bond contract, but not something that constitutes criminality," Keck said. "The money was appropriated for our own use ... It was misappropriated, mismanaged."
Council has called for a criminal probe. Borough Manager Kenneth S. Weaver said the borough likely would refer the matter to District Attorney James P. Epstein.
Mastrian said he has sent his audit reports to the borough building and discussed the findings with the borough manager, but has not been asked to make a presentation to council for about 10 years. The 2000 audit report was directed to Nicoloff and council. "No one was aware that council was not aware. As far as we knew, everyone on council was informed. We went as far as we could go and tried to do everything we could without barging into council meetings," Mastrian said.
Keck said after he was informed by auditors a year ago that bond money had been used for general purposes, he said he sent a reply to the auditors indicating the transfers were unauthorized and notified Nicoloff.
Later at Thursday's meeting, borough staffer Betsy Smith said Nicoloff had "locked the last two years of audits in a safe." She said it took repeated attempts for her to get the audits so she could mail copies to the state. "Mr. Nicoloff was responsible. He smoothed everything over and people believed it."