Harrisburg Controller Charles DeBrunner takes the oath of office two years ago.
An independent review of the Harrisburg treasurer’s office has split elected city officials, after City Controller Charles DeBrunner released a preliminary internal report on the findings over objections by the city solicitor and mayor.
The review, which encompassed the treasury’s general practices as well as specific activity during the 2014 calendar year, found the office lacked certain written policies and that aspects of its operations left it more vulnerable to fraud.
DeBrunner said Monday that the 20-page report, by the New York consulting firm Alvarez & Marsal, found “numerous serious accounting problems” encompassing both the treasury and the city’s finance bureau, as well as a “culture at the city where errors are accepted and expected.”
But Mayor Eric Papenfuse sharply critiqued that characterization, saying it was politically motivated and misquoted the report’s actual findings. He further accused DeBrunner, who published a redacted version of the report on his official website, of “short-circuiting” an ongoing investigation that was still in its early stages.
The report “seems to have been released for political purposes over the objection of the solicitor and the administration as the investigation is not yet complete,” Papenfuse said.
The city retained Alvarez & Marsal after former Harrisburg Treasurer John Campbell was arrested in August 2014 on charges that he had embezzled funds from a number of local non-profit organizations.
Those non-profits were unaffiliated with city government, but they led to Campbell’s resignation from his elected post and prompted Harrisburg to seek an independent review of the treasury’s internal controls and financial activity during 2014.
In its report, submitted to the city in late February, Alvarez & Marsal found that a lack of internal controls in the treasury in that period and perhaps earlier resulted in “an environment where the opportunity for fraudulent activity exists.”
The report also said that the deputy treasurer, Celia Spicher, performs “too many” functions, including both initiating and approving outgoing wire transfers and reconciling monthly bank accounts, a practice that “weakens checks and balances and negatively affects operations of the office.”
Spicher is on vacation this week and was unavailable for comment, according to a person at the treasurer’s office who answered the phone there Monday.
Though the review found no specific instances of suspicious activity, DeBrunner said, the state of the city’s controls and records made it “less likely” that such activity would be detected by the firm’s limited review.
DeBrunner also claimed the problems found in the report encompassed the administration’s finance bureau, and not simply the treasury, which is headed by an elected city treasurer. The report does not explicitly mention problems with the finance bureau, but DeBrunner said they could be “inferred.”
DeBrunner, an independently elected official who oversees certain aspects of city finances, said he released the statement because he believed that citizens deserved to see it and wanted to push the city to address the issues it raises.
“I am hopeful that this report will motivate the Mayor and the Treasurer to improve the city’s internal controls and change the default expectation to one where the city’s financial records are given the attention they deserve,” DeBrunner said.
Yet he and Mayor Papenfuse appeared to draw opposite conclusions about the implications of the findings. Papenfuse said most of the problems had been or were in the process of being resolved, and that the unauthorized release of the report hampered the investigation into possible abuses under past practices.
“He’s hindered our ability to go forward with Alvarez,” Papenfuse said, noting that the report was simply the first phase of a two-phase project that was later to weigh the benefits of a more expensive forensic investigation into specific account activity.
“In my opinion, he’s acted recklessly and irresponsibly and wasted $42,000 of taxpayers’ money,” Papenfuse added, citing the cost of the first-phase review.
Neil Grover, the city solicitor, said Alvarez & Marsal had taken the position that the city needed the firm’s permission before releasing its report to the public, based on clauses in its contract relating to disclosure to third parties. He said the issue had been “still under discussion” when DeBrunner released the report without the mayor’s blessing.
The mayor also denied that the city had a “culture” of tolerating errors, saying the statement did not reflect the administration and noting that most of the employees Alvarez interviewed during its review worked under the treasurer or controller.
Tyrell Spradley, the current city treasurer, said Monday that he had agreed with DeBrunner upon taking office in November 2014 that there were significant problems with the treasury’s internal controls.
He said the findings in the report were “no big surprise,” but that he was glad to have outside confirmation of the problems, which he said his office has made significant strides in correcting.
Spradley also concurred with the controller’s opinion that the problems extended beyond the treasury. He said he supported the controller’s release of the report, whether or not it had been approved by the administration.
“I honestly think the public should know,” he said.
Read the redacted report here.
This story has been updated with information about efforts to contact the deputy treasurer and with details from the city solicitor about a discussion regarding disclosure with Alvarez & Marsal.
