An audit of the Farrell Recreation Commission shows that the commission did not keep $20,053 in expense invoices in 2001.

While that doesn't necessarily mean any money is missing, it shows that the commission has been sloppy about keeping its books, and the deficiency could land the city in hot water with the state over its Community Development Block Grant.

"The big question in this: Is the money missing or is it just not documented?" asked City Manager LaVon Saternow.

The commission also could face Internal Revenue Service scrutiny for failing to withhold payroll taxes for employees.

Because of the incomplete records, auditing firm McGill, Power, Bell & Associates LLP said it was unable to substantiate the commission's cash balance as of Jan. 1, 2001, and could not determine if expenses were properly incurred or reported, or that cash was properly recorded.

The firm found checks made out to cash without being able to tell what they were for, checks signed by signature stamps instead of by hand, can celed checks were missing, no one reconciled bank statements with commission records and expenses were not approved by the board.

Supporting the view that money is not actually missing, but was improperly documented, commission member James Guerino said last year's summer recreation program went off as it always had.

"I don't think anyone who's expecting money has gone without it," Mrs. Saternow said.

Riley Smoot, a sergeant with Southwest Mercer County Regional police and newly appointed chairman of the commission, said the matter has not been referred to the police department for a criminal investigation.

The lack of invoices appears to be a violation of the CDBG provisions, the audit said. Mrs. Saternow said the state Department of Community and Economic Development has been notified.

Referring to the city's DCED contact, Mrs. Saternow said, "He has told us, in all likelihood, they would come and do some probing and ask some questions."

Mrs. Saternow said she is not sure what will be done about the failure to withhold payroll taxes, which affects not only the commission but the employees.

The commission also paid one person beyond the limit at which it must issue a federal 1099 Miscellaneous Income form but did not issue a form.

"I've never had a situation like this and I don't know what happens, whose obligation it is to report them," Mrs. Saternow said of the payroll problems.

The commission is a joint venture of the city and Farrell Area School District. The school board appoints two members and the mayor appoints two council members and five at-large members.

Its most visible ongoing activity is the summer recreation program at playgrounds in Farrell and Wheatland.

The commission also makes donations to sports organizations.

The audit showed the commission had a budget of $42,004 in 2001, with $27,500 from the school district, $5,000 from the City of Farrell, $8,399 from a Community Development Block Grant furnished by the city, $1,100 from a basketball tournament and $5 in miscellaneous revenue.

The auditing firm said the "critical deficiencies" in bookkeeping warranted a top-to-bottom reassessment of commission policies and procedures.

The commission has already taken steps to correct the slack bookkeeping and administration, from agreeing to set regular meeting dates and record minutes of meetings to preparing a budget that must be approved by the city and school board, approving all payments and having an audit performed annually.

The McGill, Power, Bell audit was the first the commission ever had.

Also, at the auditing firm's recommendation, the commission no longer will make checks payable to cash or sign checks with a signature stamp. Three commission members -- the chairman, secretary and treasurer -- must sign checks for them to be issued.

The auditing firm discovered that more than $6,000 in checks were made payable to cash in each year from 1999 to 2001, and $1,500 in 1998, without accounting substantiation.

In 1997, checks made payable to Chairwoman Rose Marie Branca, totaling $2,450 also were made without substantiation.

James Hughes, principal with the auditing firm, said the commission is on the right track to avoiding past mistakes.

"If you follow the provisions of the resolution you adopted, these problems will go away," Hughes said.

The resolution provisions also pleased school Superintendent Richard R. Rubano Jr.

"I'm glad to see something's going to be done with the internal controls," he said. "As long as they're doing that, I'm satisfied."

Guerino, a school board member, said he hopes the city and school district will take more initiative in overseeing the commission.

"That's for us to make sure it occurs," said Louis Falconi, a commission member and councilman.

Commission members didn't offer any explanation for how matters got so bad.

"I'm learning it myself," Smoot said, adding that the commission will not point fingers at anyone.

"We consider ourselves a good commission," Falconi said, noting that many members have served for a long time and lived in Farrell for many years. "We may have gotten sloppy."

"We're certainly not going to back away from anything," Falconi said. "We're going to do what's right."

The commission has had trouble for "well over a year" holding meetings because of an inability to have enough members show up to conduct business, which is called a quorum, Smoot said. It takes five members present to conduct business.

Mrs. Branca became ill in the fall and died in January, and another member moved out of the city and then died, Falconi said.

Records have been kept at a member's house and passed on as members came and went, Smoot said. The Branca family has been asked to look for anything in Mrs. Branca's possessions that might relate to the commission.

"They're still researching," he said.

With a new set of policies and procedures in place, the commission's priority is to organize the summer recreation program. Commission members said they are behind in preparations.

The board Wednesday hired Anthony Retone as recreation coordinator, replacing Mrs. Branca's son, Chuck, who is on a medical leave of absence.

Retone, a former recreation coordinator, will be paid $5,000 a year and will have access to the city gasoline supply for personal use of his vehicle during the program.

But, the commission set a cap of $200 on the fuel bill, and decided to do away with a cellular telephone Branca used.

"I think we need to start pinching pennies and save some money," Falconi said.

The commission also said it wants Retone to develop a winter recreation program.

One of Retone's first duties will be to wade through the 17 applications for summer recreation program work. Applications will be accepted through May 15.

Also Wednesday, the board agreed to pay a $300 bill for the Midget Football League. The money was for trophies, and the league claimed Mrs. Branca promised the commission would pay the money.

Smoot said he has not been able to verify that, but he noted the league has been sued by the company that made the trophies and faces an upcoming hearing before District Justice Henry J. Russo.

Smoot recommended paying the money, adding, "From this point forward, we know how bills are going to come in and how they're going to go out."

The commission members agreed to meet at 4 p.m. May 8 in the fire station meeting room.

You can e-mail Herald Staff Writer Joe Pinchot at: jpin chot@sharon-herald.com