MEDIANEWS GROUP FILE PHOTO
Chester Receiver Michael T. Doweary.
CHESTER – On Monday, the city’s Receiver is asking Commonwealth Court to strip Chester Councilman William Morgan of his financial operational authority for a variety of reasons including incorrectly paying police officers and firefighters, $750,000 in Internal Revenue Service penalties and the purchase of $1,500 in gift cards last December.
The court has scheduled a hearing on the Receiver’s Mandamus request at 1:30 p.m. It can be viewed here https://youtu.be/1wIvsFy_V_Q. Court rules allow for viewing but recording is prohibited.
Since September 2016, Morgan has been director of Chester’s Accounts and Finance and supervises the city’s Finances and Human Resources departments. The Mandamus request asks the court to suspend his authority solely in this capacity.
In addition, the Receiver is asking the court to rescind $10,000 pay increases that some city officials enacted for themselves for this year; reverse an application for an economic development liquor license for a property partially owned by a city employee and relative to the mayor; and require city officials and staff to comply with the Receiver’s March 2 order regarding financial and human resources operations.
According to the court documents, Chester Solicitor Ken Schuster, at a March 2 meeting with Mayor Thaddeus Kirkland and all of the members of council except Councilman Stefan Roots, informed the Receiver the city would not be complying with the March 2 order.
As a result, the Receiver filed a request that the Commonwealth Court issue a Writ of Mandamus forcing the city to comply with the order suspending Morgan’s authority as director of the Finance and Human Resources departments.
Morgan has referred comments to the response filed on behalf of city officials by attorney H. Marc Tepper.
In the March 4 court filing, the Receiver maintained, “The City of Chester is running out of time. The City stands on the brink of bankruptcy. But for federal rescue plan funding and a $5 million emergency loan from the Commonwealth’s Department of Economic and Community Development (DCED), the City would have run out of cash last year. The City’s fiscal situation is just as precarious this year.”
The filing said the city owes approximately $37 million in missed pension payments and the police pension fund has about six to seven months of benefits left.
“Simply put,” the Receiver continued, “the City desperately needs help and the actions that some of its elected officials have taken which have necessitated this filing not only violate the Amended Recovery Plan and its goals, but also make it much more difficult to obtain that help and to put the City back on solid financial footing.”
In its response to these court filings, Tepper filed a response denying these accusations, saying the allegations are conclusions of law to which no response pleading is required or that city officials don’t have sufficient knowledge or information to form a belief as to the truth of the allegation after reasonable investigations.
In 2020, Gov. Tom Wolf declared a fiscal emergency in the city of Chester. In June 2020, Commonwealth Court appointed Michael T. Doweary as Receiver for the city to create and implement a plan to bring Chester out of financial distress. On Dec. 28, 2021, the Receivership was extended for two years.
One of the issues in the mandamus request involves some city officials’ salaries.
Prior to 2020, each city county member and the elected controller earned $35,000 and the mayor earned $41,000. In 2020, two council members and the controller received $25,000 increases to $60,000 and the mayor received a $34,000 increase to $75,000.
The mayor has maintained that prior administrations lowered the compensation of these positions as they readied to leave office. In the city’s court-filed response, they maintain that the officials agreed to a temporary voluntary salary reduction.
During 2021 budget proceedings, city officials agreed to lower the mayor’s salary to $65,000 and the city council members’ and controller’ salaries to $50,000 each. In December, city council added $10,000 to the council members’, controller’s and mayor’s salary, despite the Receiver telling them not to do so.
Court documents also state that the Receiver became aware of a city resolution in February in support of an economic development liquor license for a property partially owned by Ronald Starr, Chester’s business development director and son-in-law of the mayor.
The resolution was passed despite the Receiver instructing the city to remove it from the agenda to “discuss ethical issues surrounding this resolution.”
Court documents said while economic development is important, the Receiver maintains that “businesses must be assured that there is a level playing field in the City and that no person or business receives preferential treatment from the City Administration or elected officials because of who they work for or who they are related to.”
In the March 2 order, the Receiver declared he has “serious concerns about the internal controls and processes within the Finance Department.”
“(W)ith Mr. Morgan as director, I have lost confidence in the City’s Finance and Human Resources Departments (which he oversees) to accurately carry out basic municipal services such as payroll, tax reporting, financial reporting, and audit preparation,” the Receiver wrote in the order.
In addition, he said Morgan has failed to cooperate with Interim Chief Financial Officer Sheila Winfrey-Brown, refusing to give her access to the city’s financial system, refusing to give her a City Hall pass or email, excluding her from staff meetings and instructing staff they need to get his approval before giving her information.
The March 2 order also outlines a list of other concerns the Receiver has about the financial and human resources operations of the city.
It noted that the Receiver’s team discovered that a “significant number” of police officers and firefighters were being paid incorrect base salaries and longevity amounts, with some receiving more than they were entitled and some receiving less.
The Receiver also alleges that Morgan authorized payroll staff to make $137,540 worth of unbudgeted payments to certain employees this year.
“This amount was not budgeted for 2022, meaning that we will need to find cuts in other areas to offset these costs,” the order stated. “The City remains in a situation where it could run out of money this year and unauthorized and unbudgeted expenses such as these are completely irresponsible.”
The order said Chester has incurred $750,000 of Internal Revenue Service penalties from late or inaccurate W-2 or W-3 filings.
With the last audit having been completed in 2018, audit completion, as well as calculations to access loss revenue reimbursements under the American Rescue Plan Act, have been delayed “due to excessive time needed to provide basic data,” according to the Receiver.
In addition, the Receiver said Morgan approved reimbursements for himself for the purchase of $1,500 in gift cards in December and directed the accounts payable employee to reimburse him. The interim CFO Winfrey-Brown reportedly asked for receipts for the gift card purchases and had not received them as of March 2.
Then, in November 2020 review of city health care plans, the Receiver said his team found seven employees on a “very expensive” health care plan that had been discontinued for active employees. Those seven employees included the mayor, Solicitor Ken Schuster, Morgan, then-CFO Nafis Nichols and three other employees. After it was brought to Nichols’ attention, these employees were then moved to the plan offered to active employees, according to the order.
