Chester County's controller, in an audit report filed last week, expressed significant concern over how the county sheriff's K-9 unit has spent and accounted for nearly $200,000 in donations.
Controller Margaret Reif's report details how deposits into accounts associated with the unit from 2015 to 2017 were spent on meals, hotel stays, and other expenditures, including the leasing of night-vision goggles and the apparent reimbursement of personal credit cards. But Reif notes that her office's audit is incomplete due to a lack of requested records and has urged outside agencies to pick up the probe.
The report comes a little more than a month after Reif took the unusual move of issuing Sheriff Carolyn "Bunny" Welsh a subpoena for the K-9 unit's finances.
"It's not the responsibility of my office to prove fraud," Reif said Wednesday. "Our responsibility is to refer any concerns of potential fraud or misappropriation of funds that we find to the district attorney for further investigation. It's in his hands now."
District Attorney Tom Hogan said Wednesday that his office was sent the report but is unable to investigate due to a conflict of interest: His office donated $6,500 to the K-9 unit to help train one of its dogs. Instead, Hogan has referred the investigation to the state Attorney General's Office and the U.S. Attorney's Office for the Eastern District of Pennsylvania.
Michelle Mucellin, a spokeswoman for the U.S. attorney, said Wednesday that she cannot comment on referrals. Joe Grace, a spokesman for Attorney General Josh Shapiro, confirmed that Shapiro's office had received the referral and will "conduct a thorough and complete review."
Welsh has described Reif's report as full of "egregious misrepresentations," stressing that the money spent was not from the county's general fund. Her office has hired an independent public accountant to prepare a parallel audit, one that will take a more comprehensive look at the unit's finances, according to Dawson R. Muth, the solicitor for Welsh's office.
"When we turned our records over to the controller, we presumed she was going to do a complete audit, look at recipients, expenditures, ask questions as to what they related to," Muth said. "She elected not to do that, so we turned the same documents over to a CPA, and we'll release the results when they're done."
Muth declined to identify which accountant the sheriff's office has hired, saying only that his report is expected to be released "within the next week or two."
The entity at the center of this probe, the Friends of the Chester County Sheriff's K-9 Unit, registered as a corporation with the state in February, records show. Months later, it received official nonprofit status, a move that Reif commended.
But for at least nine years prior, the K9 unit operated and received donations on its own.
The audit found that the K-9 unit was not compliant with state standards for charitable organizations before its related charity was granted nonprofit status in July. Before that, the unit falsely claimed to be a tax-exempt organization and did not pay sales tax on retail purchases, according to the report.
Welsh has said that the purchase, training and care for the nine active dogs in the K-9 unit were funded by state and federal grants, an expense that would otherwise cost the county $100,000 annually.
The salaries, insurance, and vehicles used by the officers who are partnered with the dogs come from the county budget, according to Reif. And, as her report concludes, the money solicited by outside donations was used on a variety of other expenses.
Included in that accounting was $7,000 paid out in reimbursements to credit cards in Welsh's name. Those three cards, which "appeared to be personal credit cards," were paid directly from funds in one of the unit's accounts, according to the report.
Reif's office found no evidence of an authorization process for paying credit card debt. Instead, the records appeared to indicate that a lieutenant in the sheriff's office had "unchecked control and discretion of how and when funds were spent," the report states.
The report also questions other purchases documented by the unit, including $3,600 for leasing night-vision goggles from the Navy, a $1,000 Christmas dinner at a Maryland seafood restaurant, and a $4,700 stay at a Baltimore hotel for eight members of the unit during a national sheriff's conference.
"The controller has been quoted as saying that her review raised more questions than it answered; however, what's significant is that no questions were ever asked of anyone connected to the Sheriff's Office as would be done in a professional audit," Muth said. "In addition, no one bothered to take an inventory of items and assets that were purchased with K-9 funds, items that have since benefited all county citizens in numerous ways."