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Public Corruption in Chester County, PA

I believe an unlikely mix of alleged drug trafficking related politicos and alleged white nationalist related politicos united to elect the infamous “Bloc of Four” in the abysmal voter turnout election of 2005. During their four year term the drug business was good again and white nationalists used Coatesville as an example on white supremacist websites like “Stormfront”. Strong community organization and support from law enforcement, in particular Chester County District Attorney Joseph W. Carroll has begun to turn our community around. The Chester County drug trafficking that I believe centers on Coatesville continues and I believe we still have public officials in place that profit from the drug sales. But the people here are amazing and continue to work against the odds to make Coatesville a good place to live.

Sunday, September 30, 2012

"We are all going to jail"

I am posting this now because I believe that concerning "the people's money" nothing has really changed. 

Coatesville City Council Vice President Karl Marking at the January 4, 2010 reorganization meeting of the Coatesville City Council:
"A resolution to allow the Chester County District Attorney’s office in conjunction with the Federal Bureau of Investigation to immediately conduct a forensic audit of the City of Coatesville’s finance and reality transactions for the purpose of determining evidence of obstruction of justice, misdirection of funds, willful negligence and actions of criminal intent by the city administration and or council." 

How nervous were the employees in Coatesville City Hall back in 2010/20011? 

It was back  in 2010/20011 when Coatesville Finance Director Stacy Bjorhus and Manny Dechter, the forensic auditor suggested by then District Attorney Joe Carroll, were independently looking through files and modules. 

Did IT Administrator and Staff Accountant Dharmesh Kalaria) say that if the forensic auditors went back to 2005 they would find $2 million missing? 

Was Raj saying, "We are all going to jail!" after City Council authorized a forensic audit. 

Raj allegedly came to work on Monday August 22, 2011 at 10:00 AM and said he had an airline ticket for India and he was leaving that afternoon. 
At the August 22, 2011 Coatesville City Council Meeting: 
I asked, “Is it true that Raj from the Finance Department didn’t show up to work today and that he may be on his way to India? 
City Solicitor John Carnes, “That’s a personnel matter, that can’t be discussed in public.” 
Me, “OK, but it’s in the public record.” 
John Carnes, “Well, I mean… 
Me, “Now it is.”


Who stole the people's money?


Can the FBI, in India, interview people that worked in the USA?

Thursday, September 27, 2012

RDA Downtown Revival Limited Partnership (DRLP): Where’s the money?

"Why did the RDA Chairman back off from demanding repayment of more than $60,000 due to the RDA from the DRLP? The RDA’s sustainability, as an entity, is in a critical cash position and the DRLP refunds which are due to the RDA could sustain the RDA for two more years until the RDA could hopefully develop the Flats and the Train Station. 

Why did the DRLP present the RDA payments as payments for the DRLP properties, in some cases?
Why isn’t the RDA Board holding the DRLP to the Agreements signed in 2002?"

You might also ask where is Redevelopment Project Director Rob Barry?


Guest Column

Stacy Bjorhus

Former Finance Director at city of coatesville

The City of Coatesville Redevelopment Authority (RDA) and the Downtown Revival Limited Partnership (DRLP) entered into an Agreement in 2002.
The DRLP proposed renovating 5 buildings on 4 Downtown parcels in exchange for a loan of $420,000 from the RDA.  Repayment would be on a monthly basis through 2022.  Repayment of the $420,000 loan would be paid in monthly installments equal to the amount that the RDA leased the ground floors of each of the DRLP renovated units.  The RDA would be permitted to sub lease the ground floor units, which were Commercial Units, and create a revenue stream from the excess amount of the rent derived over the amount of the lease payments to the DRLP.
The DRLP obtained the $420,000 from the RDA (due in monthly payments), $500,000 from the City (due (0% interest) as a balloon payment in 2042, County Grant money and a loan from Wachovia Bank.  In all the sum of money was in excess of five million dollars ($5,000,000).  More than five million dollars was committed to the DRLP for renovation on five buildings in Downtown Coatesville.  The buildings themselves were dilapidated at the time of acquisition by the DRLP and were sold to them at an insignificant cost.
There were multiple Agreements between the RDA and DRLP:
Revised Master Lease: 
The Revised Master Lease noted the basic terms of the Agreement.  The RDA had the right to lease the ground floor of the DRLP buildings (noted as the Commercial Units) and the DRLP would lease the Residential Units which were on the upper floors of the buildings.  The DRLP would pay basic fees on behalf of the RDA (insurance, snow removal, property repair and maintenance on items not improved at the time of renovation, etc) and the RDA would pay the DRLP a monthly fee based on their share of the reimbursement of these items.  The Revised Master Lease noted that at Year End there would be a ‘True Up’ of reimbursable services to be paid to the DRLP (if the monthly fees did not cover the expenditures to be shared), or a refund would be paid to the RDA is the True Up showed that the RDA had overpaid for reimbursable services in their monthly payments to the DRLP.
Co-Op Agreement: 
The Co-Op Agreement stated the period of the Residential and Commercial Units operating periods.  The $420,000 loan to the DRLP would be paid in full by the year 2022.  At that point in time the DRLP, in writing to the RDA, could re-claim the rights of the RDA to sub-let the Commercial Units and cancel the RDA’s ability to lease the units and collect rent as a landlord, under the Sub Lease Agreement.  The RDA could also, in writing to the DRLP, return the Commercial Units to the DRLP and be free of any further lease payments to the DRLP for the right to sub-let the units, or any of the ancillary expenses involved with the units.
The Co-Op Agreement also spelled out how the Residential Units and the Commercial Units would pay City, County and School District Real Estate Taxes on the buildings. 
  • ·       Due to its mission of rehabilitating dilapidated housing units in the Downtown area, The Residential Units were given preferential taxation by the three taxing entities (City, County and School District)
  • ·       The Payment in Lieu of Taxes (PILOT) for the Residential Units was noted as a figure (my recollection) approximately $12,000 per year for tax year 2003, which would increase each year by 3%. 
  • ·       The Commercial Units were not to be taxed until termination of the Agreement which was stated to be 2042.

Mortgage Agreement and Mortgage Disbursement Agreement:
The Mortgage Agreement and Disbursement Agreement noted the various phases at which the funding parties would reimburse the DRLP for construction costs, and they also gave the RDA the right to request any documents from the DRLP that would confirm the safety of the properties (tax payments, payments to billing parties (etc) the purpose of which was to confirm that tax liens and vendor liens would not undermine the RDA’s interest in the properties, and denigrate the RDA’s position with first priority in the Loan Subordination.
In 2011 it was determined that the DRLP had routinely billed the RDA for the Commercial Units share of the taxes on the properties.  Apparently, the RDA paid the taxes to the DRLP or directly to the County in some cases (I was told) because the DRLP billed us (the RDA), and they wouldn’t have billed us unless we owed it.
At the same point in time the DRLP increased the Monthly Maintenance Fee on the Commercial Units by more than a 50% increase.  The RDA was asked to pay for the DRLP’s staff salaries, staff benefits, training, electricity, and many other expenses that were not noted in the Revised Master Lease.   The Revised Master Lease called for a Year End True Up, which would re-establish accurate Maintenance Fees due for the prior period and hence for the New Year.  True Ups were never provided to the RDA and the RDA was operating in 2010 with the Estimated Maintenance Fee from the 2002 Agreement.
It could be established, based on a schedule of the County’s records of taxes paid on the properties that the RDA’s tax payments, in some years, were the only taxes paid for these parcels.   The County noted that they (in 2011) would be willing to roll back to the original PILOT rate (2003) and begin increasing the figure by 3% in 2012 if the DRLP would agree to make the PILOT payments as agreed upon.
A review of the RDA’s vendor payments in 2005 showed tax payments directly to the DRLP, and other years the payments were either to the DRLP or to the County.  The RDA held up the tax payments in 2010 when questions about the authenticity of the Commercial Units tax payment requirements came up.  The DRLP denied and negated the Commercial’s Units tax free status; however the County Assessment Office confirmed that the RDA was reading the Co-Op Agreement correctly and tax payments were not due from the Commercial Units. 
A review of the expenses that should be reimbursed to the DRLP by the RDA also showed that the Annual Maintenance Fees that should be reimbursed to the DRLP were in the $3,000 to $5,000 range not the $11, 000 to $12,000 that the DRLP had established.
My estimate of monies due from the DRLP to the RDA for periods 2003 – 2010 are approximately $6,600 for Maintenance Fees (based on a $5,000 reimbursement to DRLP each year – which by my estimate is on the high side.  A more realistic figure appears to be in the $3,000 per year range), and approximately $60,000 due to the RDA for tax payments billed, but not due from the Commercial Units.
I had stopped paying the Maintenance Fee until a True Up for 2010 and prior periods was forwarded to the RDA, and confirmation of tax payments (copy of checks front and back) were submitted to the RDA.  The Chairman of the RDA, after my termination in October 2011, began re-paying the Maintenance Fee to the DRLP despite the RDA’s insistence on being provided True Up from prior periods.  I was told that neither True Ups nor confirmation of tax payments had been remitted to the RDA.
Has the RDA Chairman ceased requesting proof of the DRLP’s tax payments to the County for their share of the PILOT for prior periods?  Has he failed to assert that the DRLP refund the RDA tax payments that the DRLP seems to have called their own?
The DRLP initially stated that proof of payment could not be provided because their records were at Iron Mountain and could not be retrieved, and later they stated that the RDA did not have the right to demand proof of tax payments on the parcels.  The Mortgage Agreement / Disbursement Agreement gave the RDA the right to ask for delivery of any documents that would confirm the security of the properties.
Why did the RDA Chairman back off from demanding repayment of more than $60,000 due to the RDA from the DRLP? 
The RDA’s sustainability, as an entity, is in a critical cash position and the DRLP refunds which are due to the RDA could sustain the RDA for two more years until the RDA could hopefully develop the Flats and the Train Station. 
Why did the DRLP present the RDA payments as payments for the DRLP properties, in some cases?
Why isn’t the RDA Board holding the DRLP to the Agreements signed in 2002?
The RDA Board and the RDA Solicitor were well informed of the DRLP’s obligations in these regards, but they backed off of insisting upon True Ups, per the Revised Master Lease, and proof of DRLP tax payments (and RDA refunds for taxes paid) when I (Finance Director of the City and the RDA) was severed by the City.  Why?


Senior Project Manager (Development) at The Community Builders, Inc.

Tuesday, September 25, 2012


Guest Column

Stacy Bjorhus

Former Finance Director at city of coatesville

Is the City reporting their Financial Reports in Cash Basis Accounting Method, and why does it matter?
Cash Basis Accounting Method recognizes revenues when received and expenditures when paid. Cash Basis Accounting is widely used in the Private Sector, but discouraged by Governmental Accounting Standards Board (GASB) for governmental entities.  The City has reported their Audits and Financial Reports in Modified Accrual Accounting Method in prior periods, so using Cash Basis Accounting Method, as it appears the City Finance Department may currently be doing, and was used during the first months of 2012 (January & February), will give the false impression that City revenues in the first two months of the year were in a far rosier position than they actually were.
My belief that the City is  using Cash Basis Accounting Method, which presents the financial data with overstated 2012 Revenues by more than $500,000 through Feb 29, 2012,  is based on the January and February Financial Reports posted on The City’s web site: January 
Revenues that should be posted to December 2011 General Ledger and deleted from the 2012 General Ledger:
                                                                        January 2012                       February 2012                         Total   
Earned Income                                     $122,754                                $280,212                                $402,966
Local Service Tax (LST)                           1,400                                          5,700                                         7,100
Cable Television Franchise              22,448                                       17,430                                      39,878
State Grant, Econ Devel                                       51,424                                            -                                                51,424
Total                                                            $198,026                                $303,342                                $501,368
All of these revenues were earned in 2011, and received within the first 60 days of the New Year.  Earned Income and Local Service Tax for  1St Quarter 2012 were due to be filed with City’s collectors  by April 30 2012, and Cable Television Franchise Fees for 4th Quarter 2011 are paid in the 1st Q of the New Year.  These revenues will be accrued back to 2011 by the City’s outside auditor, however until then City Council will believe that there is far more revenue earned and received in the current year.  It is possible that other revenues reported in the January and February Month to Date Financial Reports should also be posted to the 2011 General Ledger; however identity of revenues earned in 2011 would only be possible with the accompanying check stub information or ACH memo for automatic deposits in the City’s General Fund Bank Account.  The revenues noted above are known to be 2011 revenues based on knowledge of their remittance schedules to the City.
Just some background on this:
In 1999 the Governmental Accounting Standards Board (GASB) issued Statement 34 which stated how municipalities throughout the United States were required to report their financial reports, capital assets, liabilities, long and short term debt.  GASB 34 was required to be complied with by 2004, at the latest.  The goal was to be able to measure municipal performance, with comparison to other municipalities, with comprehensive financial data that is easy to read and compares municipal performance on a level basis of comparison.
One of GASB 34 Statement’s major changes that affected municipal governments on a day to day basis was a requirement to change the accounting method from Cash Basis Accounting Method (revenues are recognized when cash is received, and expenditures are recognized when cash in expended and cash assets are diminished) and move towards Accrual Basis Accounting (revenues are recognized when earned, expenditures are recognized when the liability is established). 
The City of Coatesville, like many other municipalities, has opted to report their Annual Audits and Statements in Modified Accrual Basis Accounting which recognizes revenues earned in the period earned and received within 60 days of Year End, and expenditures are recognized in the accounting period in which the liability was incurred, if measurable.* (GASB accepts Modified Accrual Accounting Basis).   Barbacane Thornton, the City’s outside auditors, explain how they treat revenues and expenditures in the City’s Annual Reports.  See:  Notes to Statements in the Annual Audits and Statements pages 17 of 40 and 18 of 40:
Now based on the above, the following question needs to be raised:
Why is the City currently in a cash crunch and pondering another withdrawal from the Trust?  Has the City overspent their foreseeable revenues because the Financial Reports for January and February (and possibly March through current period) have presented financial data in Cash Basis rather than in Modified Accrual Basis and have overstated revenues?  Has City Council based their actions on incorrect financial data presented in Cash Basis Accounting Method and were duped as to the City’s financial condition until it was too late to turn back?
Is Council aware that their financial reports are prepared using a Cash Basis Accounting Method and not the method that the outside auditors use, and has been used for Financial Reporting by the City since September 2009?
The City’s current Month to Date Financial Reports for  2012 (January and  February) as they are posted on the City’s web site are reporting financial data to City Council using Cash Basis Accounting Basis rather than Modified Accrual Accounting Basis.   Why?  Is there a purpose for reporting in Cash Basis, or are the City’s Manager and City Council unaware of the requirements of GASB 34 and the City’s outside auditors?
Expenditures that should be accrued back to 2011 City Financial Software Module and Financial Reports cannot be picked out as easily as the revenues.  It is possible that the City is also reporting expenditures in 2012 that do not belong there.  The problem with expenditure misclassification is that the 2011 expenditures will be understated and will distort historical records, for budget preparation purposes in the future or Bonus Pay evaluation if Bonus Pay is paid out based on expenditure levels of 2011.
City Council may have made economic decisions in 2012 based on their belief that there was more revenue in the current year than there actually was.
One can only speculate what financial data Council Members are presented, for their decisions that are affecting residents, businesses and property owners alike.

For more information:

Summary of Statement No. 34Basic Financial Statements—and Management's Discussion and Analysis—for State and Local Governments (Issued 6/99)

"Governmental fund financial statements (including financial data for the general fund and special revenue, capital projects, debt service, and permanent funds) should be prepared using the current financial resources measurement focus and the modified accrual basis of accounting. Proprietary fund financial statements (including financial data for enterprise and internal service funds) and fiduciary fund financial statements (including financial data for fiduciary funds and similar component units) should be prepared using the economic resources measurement focus and the accrual basis of accounting."


In the addition the following was taken from Barbacane Thorntons Report presented to the City of Coatesville: 


Governments/ Funds

All governmental funds are accounted for using the modified accrual basis of accounting and the current financial resources measurement focus. Under this basis, revenues are recognized In the accounting period in which they become measurable and available. Expenditures are recognized in the accounting period in which the fund liability is incurred, if measurable.

Revenue Recognition
In applying the "susceptible to accrual" concept under the modified accrual basis, revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers property and earned income tax revenue to be available if collected within 60 days of the end of the fiscal period. Revenues for state and federally funded projects are recognized at the time all eligibility requirements have been satisfied. Eligibility requirements include timing requirements,

which specify the year when the resources are required to be used or the year when use is first permitted; matching requirements, in which the City must provide local resources to be used for a specified purpose; and expenditure requirements, in which the resources are provided to the City on a reimbursement basis.

Property tax and earned income tax receivables collected after 60 days from year end, though Measurable, are not available soon enough in the subsequent year to finance current period obligations. Therefore, property and earned income tax receivables are recorded and deferred until they become available.

Other revenues, including certain other charges for services and miscellaneous revenues are Recorded as revenue when received in cash because they generally are not measurable until actually received.

Expenditure Recognition
The measurement focus of governmental fund accounting is on decreases in net financial
resources (expenditures) rather than expenses. Most expenditures are measurable and are
recorded when the related fund liability is incurred. However, principal and interest on general long-term debt which has not matured are recognized when paid. Further, as provided in GASB Interpretation No. 6, Recognition and Measurement of Certain Liabilities and Expenditures in GovernmentalFundFinancialSfatements, certain governmental fund liabilities and expenditures, such as for compensated absences, are recognized to the extent the liabilities mature (come due for payment) each period. Allocations of costs, such as Depreciation and amortization are not recognized in the governmental funds."