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HOi..MAN I FREN!A
ALLISON. P.C.
Certrfd rhl1c. ,1c:-aur.1nnt.:1 & Cons11iiano

EXECUTIVE SUMJ\llARY

The follcl,1,ing investiga::ion was conducted by Keith F. lngling, C.P.A., Forensics Manager, Holman &
Frenia, P.C., 10 Allen Street, Sui::e 28, Toms River. Nj, 08753, between July 23, 2012 ad October 26,
2012, at the Little Egg Harbor Townshir (LEHT) Tax Collector's Office (TCO). 665 Radio Road, Little
Egg Harbor, NJ, 08087, 609.296.7241, Extension 243. Also participating in this investigation were
Kevin Frenia, CPA, RM.A, CFE, Partner, Holman & Frenia; Rodney Hai nes, CPA, RMA, Partner,
Holman & Frenia; Michael Holt, CPA, Ri\lA, Partner, Hoiman & Frenia; Jayme Gatti, Accountant,
Holman & Frenia and Patricia Turin, Certified Tax Collector, New Jersey Department o f Community
Affairs, Office of Local Government Services, 609.292.6858. This investigation primarily centered
on information provided by the Tax Collector (TC), which included, but was not limited to,
documents generated by the TCO.
On July 19, 2012, we were advised by the Certified Municipal Finance Officer ( C MFO) for LEHT that
their TCO was missing approximately $4,322.36.
'vl/e conducted our fieldwork between July 23, 2012 and October 26, 2012. We were initially advised
by LEI-IT officials that they suspected that their Deput"j Tax Collector (DTC) was responsible for the
missin g funds. These initial missing funds pertained to a third part<; lien redemption transaction in
which the DTC participated in processing. The DTC had not been to work since the close of
business on July 5, 2012. LEHT officials believed that the DTC was scheduled to enter a drug
rehabilitation program, possibly as early as July 6, 2012. The DTC had been employed in the TCO
since 2005.
The scope of our investigation pertained to all transactions that were conducted by the TCO during
the time period of August 1, 2 0 1 1 through and including July 5, 2012, including the transactions
pertaining to the 2011 LEHT Tax Sale. Our investigation aJso included an examination of the
transactions pertaining to the 2010 LEHT Tax Sale. Our i nvestigation revealed that no funds were
missing from the 2010 LEHT Tax Sale.
Our investigation revealed that there were questionable circumstances surrounding 63
transactions that were conducted between November 15, 2 0 1 1 through and including July 5, 2012.
These questionable circumstances pertained to transactions involving third party lien redemptions,
regular tax payments and cost of sale fees and implicated the DTC in a theft of the taxes and fees
that were paid to LEHT in these transactions. Additionally, there was unpaid interest on regular tax
payments, thes from petty cash and a stolen fee related to a certificate of redemption during this
same time period. The DTC was also implicated with regard to these missing funds. It should b e
noted that the date o f November 15, 2011 is th.e date determined b y the documentation available
fo r examination. Since some documentation is missing, and since the majority of tax:payers were
unable to locate their receipts, many dates in these transactions could not be established.
The amount of money stolen is referred to as a theft in this report. However, our investigation
revealed that the DTC repaid some of the money she stole. The amount of money the DTC stole, but
did not repay, is referred to as a loss in this report. Our investigation quantified the theft as
$41,419.67, and quantified the loss as $5,318.87.
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OVERVIEW

The TCO is located on the firs floor of tbe LEHT municipal building. When ful!y staffed, the TCO is
comprised of the TC, the Depu Tax Collector (OTC) a: d t,N o Tax C!erks - Clerk 1 and Cierk 2.
There are five exterior doors the building. All five doors are outfitted with key fob pads, and there
are secu:-ity camer:is covering all five exterior doors. There is the main entrance, there is an
emp:oyee entrance, there is the entrance u:;ed by employees of the police depatment and there are
twn rear entrances. All employees are issued key fobs, and they use these key Foos to gain access to
the building. These key fobs only open certain doo,s at certain times, depending upon the
employee's position.
iobody other than police departm ent employees can enter the bui:ding via the police department
entrance and one of the rear entrances. The non-police department e:nployees gain a<:cess to the
building via the employee entrance, although their key fobs work on the other three exterior doors
as wll. Once inside the building, the employees use a time clock to punch in to work and punch out
of work. Members of the public can only gain access to the building via the main entrance.
There is only one door utilized to enter and exit the TCO, which is an interior door. This doer is
located next to two customer windows and is secured using a traditional key lock Each customer
window is cor:i prised of two pieces of sliding glass that slide open a:1.d closed. During non-business
ho;,;rs, the windows are closed and secured by a key lock. This key lock can only be accessed from
the inside of the TCO. All TCO employees have keys to the lock on the door and the locks on the
customer windows.
Besides the TCO employees, the Certified Municipal Finance Officer (CMFO), the Municipal Clerk
a:id the polic department have a master key to the lock on t:1 e door. Although this door is not to
be used by the public, and is appropriately marked as such, prior to the beginning of this
investigation the door was closed, but unlocked during business hours. This unduly subjected the
assets of LEHT to compromise, either through surreptitious or strong-armed tactics. It also unduly
subjected the TCO employees to potential physical harm. It should be noted that subsequent to the
beginning of this i nvestigation, the door remained closed and locked at all times. ft should also be
noted that the lock to this door was changed on July 19, 2 0 1 2. The TC, the two Tax Clerks and a
new TCO employee ha lfe keys to this lock. The DTC does not have a key to this lee!<.
Once inside the TCO, the primary work area is an open room with four work stations. Two of these
work stations are located at the two customer windows, which are located in the front of the office.
Both of these work stations are equipped with a desk top computer, computer monitor, printer,
telephone and "cash register". The two Tax Clerks are regularly assigned to work at the same work
station. There are no other customer windows besides these two windows.
Besides the two work stations located at the two customer windows, there are two other work
stations in the main work area. Both of these work stations are equipped with a desk top computer,
computer monitor, printer and telephone. One of these two work stations is also equipped with an
electric typewriter. Neither one of these two work stations has a cash register. When fully staffed,
the DTC was regularly assigned to work at the work station with the electric typewriter. Other
equipment in the main work area of the TCO are a copier, a letter folding machine, a printer, a
facsimile machine, a paper shredder, seven storage/filing cabinets, and a conference table.

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There are two offices located off of the m.1in work area of the TCO. 0,1e of these offices is beir.g
used as a storage room for files. It is aiso where a small floor safe assigned to the TCO is kept.
There are t11ree doors to this storage room. One doo, is the door that separates this room from the
main work area of the TCO. Therefore, anyone with access to the TCO has access to this storage
room through this door. This door is usualiy kept ope n. It can't be locked because nobody has the
key to unlock it. The second door ir. the storage room opens to the main hallway in the building.
This is the hallway that leads to the TCO door (described above) and two customer windows. It is
always closed and locked. It is never used; it is inaccessible because t:iere is a filing cabinet up
against it, blocking anycne from attempting to lean this room through this door. Th= police
department and the public works r.1a:.1.ager are the only ones who have a key to this door. The third
door to the storage room opens to the municipal courcoom. This door is always closed and locked.
The keyhole to the lock on this door is on the courtroom side of the door. i'iobody from the TCO has
a key to this door. The TC does not know who has a key to this door. However, we do know from
inquiry and observation tr:at the Municipal Clerk has a key to this door.
The second office located off of the main work area of the TCO is the office assigned to the TC. This
office is accessible only through the main work area of the TCO. There is a small closet located
inside of this office, but nobody has a key to this closet door. Therefore, the TC locks the door to
this office in order to secure the contents of the closet.
The TCO operates daily with $ 1,000 pew; cash, which is divided equally in increments of $250
among two removable cash drawers and two cash boxes. The two removable cash drawers and the
two cash boxes do not lock During business hours, the two removable cash drawers are kept in the
two cash registers by the two Tax Clerks. These two cash registers are the ones located at the two
work stations. Each Tax Clerk has her own removable cash drawer which is the same ren10vable
cash drawer assigned to her on a daily basis.
The two Tax Clerks are primarily responsible for handling tbe daily cash receipts, although all of the
employees are trair.ed to handle the transactions involving the TCO. Regular tax p ayments can only
be made by personal check or cash - credit card payments and debit card payments are not
accepted. Regular tax payments can be made in person or by mail - there is no drop box to receive
payments. The TCO accepts partial payment for regular taxes. Lien redemptions can only be made
in person, and they can only be made in full, by cash or personal checks. It should be noted that
although fully trained, Clerk 2 still has difficulties handling lien redemption transactions. It was not
uncommon for this Clerk to receive the lien redemption payment, but then put the payment in a
folder and leave the folder, with the payment inside, on the table where the electric typev.Titer was
kept. She would leave the folder there so the OTC could complete the transaction. Also, it was not
uncommon for Clerk 1 to follow this same procedure; however, this Clerk would handle the entire
lien redemption transaction when time permitted. She fully u nderstands how to process these
transactions and can do so will little to no assistance.
Sometimes, these lien redemption payments were made in cash. Therefore, the cash was left in the
lien folders, on the electric typewriter table, where everyone had access to the cash. The OTC
would process these payments and work on the folders as time permitted.
It should also be noted that lien redemption payment,;; are deposited into a separate bank account
from regular tax payments. There is also a separate bank account for special assessments. The TC,
CMFO and Municipal Clerk are the only people with access to the lien redemption account. The TC
is the primary person responsible for reconciling this bank account. Also, there are two signatures
required on checks that are drawn on this account. These signatures are hand signatures, not
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stamped s'.gnatures. The C MFO is the only person with access co the bJnk accounts for regu!Jr ta:(
payments and special assessrr.ents. He is the individual primarily responsible for reconciling these
accounts. The Consultant assists the CMFO 1,vith the reconciliatons. The TC h::is no access to these
bank accounts. The TC doesn't even ha'le "view only" access to these bank accounts.
The two Ta:< Clerks are assigned to the same customer window, and the;efore the same cash
register, every day. The two removable cash drawers are kept in the same o..vo cash registers on a
regular basis. The two cash registers are closed, but unlocked in between transactions. When it is
time to conduct a transaction, the Tax Clerks open the cash registers by pressing a rour.d black
button which is located on the front of the cash register drawers. Once the drawer is open:::!d,
although realistica:ly unlikely, a tall customer co 1 d p hysicaliy reach through the window and into a
cash drawer and remove cash from the drawer.
One cash register drawer signals an audibl= "ding" when it is opened up. The other drawer has no
signal upon being opened. The two cash registers operate independently from the two computers
that record the financial transactions as those transactions are being conducted. The software
doesn't trigger a cash register o pening, and there is nothing triggered in the computer system by
the cash register when it opens and closes to indicate that a drawer is opened or closed.
At the end of every forty to fifty bansactions, those transactions are "batched" together and the
batches are individually identified - by the name of the person who p u r portedly prepared the
batch. If the same person prepared multiple batches in the same day, the batches 1,vould be
identified as "Jane Doe 1", "Jane Doe 2", etc. Each transaction vvithin each batch is identified by a
transaction number. Each batch then has its own individual deposit slip, comprised of every
transaction within that batch. The total dollar amount deposited must equal the total dollar
amount of the batch. All receipts must be deposited in the bank within 48hrs. of the receipt of these
funds. However. it should be noted that each transaction representing a lien redemption is its own
individual batch and individual deposit - ir: this situation, an entire batch is comprised of that one
lien redemption transaction. Therefore, batches comprised of multiple transactions are primarily
comprised of quarterly tax payments.
During the course of our investigation we learned that all of the TCO employees knew each other's
computer log-on identifications and passwords. We also learned that if employee "A" was working
i n a batch, employee "B'' could work within that batch and close that batch for employee "A", but the
system would make it appear that employee "A" created the batch and subsequently updated (i.e.
dosed) the batch. Therefore, there was no value to the system identifying the actual employees
handling each one of the transactions in the batch, since that feature of the system was rendered
unreliable by the prai:tices employed by the TCO. Accordingly, the only way to determine who
actually conducted the transactions in the batches and who u pdated the batches would be to
examine the handwriting on the receipts, tax bill payment stubs, any other paperwork that might
exist pertaining to the transactions and the deposit slips. Our investigation revealed that it was a
common practice by the employees of the TCO to work in other emp!oyees' batches without
properly identifying the employees actually performing the work.
Our investigation also revealed that while working in an open batch, an employee cou Id record a
transaction, which then generated a receipt for the customer and a transaction number for that
p articular transaction, and then back that transaction out of the system. This would give the
appearance that this transaction never took place. All of the details of that transaction, along with
the transaction number for that transaction, were deleted. This could only b e accomplished if the
transaction that was deleted was deleted from an open batch, and that transactio n was not the last
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transaction in that particular batch. Although there is an audit trail feature within che software
system that would capture the derails of this deleted transaction, this feature had been disengaged
for quite some time, ,ind was most likely never used by the TCO. Acccrding to the TC, this feature
was disengaged for convenience purpos=s a:.cl ncthing else. Our iiwestigacion did not reveal
otherwise.
After deleting that transaction from the system, the employee could handle the next tr2nsaction and
ener that next transaction in the system. That ne:<t transaction would be assigned the tra:isaction
number that followed the transaction numoer that h:id been assigned to the deleted transaction; it
would not re-assign it the same transaction number that was assigned to the deleted transaction.
For i nstance, if you had a batch witr. forty transactions, and trar.saction number thirt<J -six was the
deleted transaction, the system would automdtica!!y assign transaction number thirty-seven to the
next transaction entered into the system - i would not assign the number thirty-six to that next
transaction. The batch detail report would show the itemized details of transactions number one
through thirty-five, and then thirty-seven through forty. Neither the n umber t1irty-six itself, nor
the details of transaction n umber thirty-six would be itemized and/or listed on the batch detail
report.
Therefore, if someone examined this batch detail report, one would see that transaction number
thirty-six had been skipped over and lft off of the batch detail report because it had been deleted,
but one would not know anything else about transaction number thirty-six. This same itemized
report would end with transaction number forty, but the report would ref1ect, in a different section,
that there were or.ly thirt,1 -nine transactions in that particular batch - not forty. Therefore, the
detailed batch report would end with transaction number forty, but it would reflect that only thirt<;
nine transactions were included i n that batch. This, combined with the fact that the number thirty
six would not appear in the itemized list of detailed transactions, are the only clues that a
trar.saction had been deleted. The only way to g2t some details pertaining to transaction number
thirty-six would be to examine the customer's receipt.
However, here is why, as we said above, the deleted transaction can't be the last transaction in the
batch. Presume the same details as the above-described scenario, except instead of deleting
transaction number thirty-six, the person deleted transaction number forty. In this case, the
detailed batch report would show thirty-nine itemized transactions with all of their respective
details, but neither the number forty nor the details of transaction number forty would be displayed
in the report. Furthermore, in that different section of the batch detail report described above, the
report would reflect that thirty-nine transactions were conducted and included in that batch, not
forty. Therefore, no one would ever know that transaction number forty ever occurred, unless the
customer produced their system generated receipt. All of the TCO employees had the capability of
deleting transactions from open batches.
Lastly, once a batch is updated, if someone alters a transaction in an updated batch, an exception
report is created. This audit trail feature is different than the audit trail feature that was
disengaged for identifying transactions deleted from open batches. The only employees with the
capability of deleting transactions fr om updated b atches were the TC and the DTC.
This particular problem of deleting transactions from batches is further complicated because there
is no separate report that identifies all of the receipts that are generated each day. Therefore, short
of a customer providing the receipt for a deleted transaction, there is no way of ever knowing the
details of the deleted transaction.
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Also, there is r.o cas;1 receipts jouriai. The TCO u::;ltze., th- col!ective daca ."rum i:ne i:ic.:v1du31 batch
reports i nstead of a general cash receipts journal. Again, this further com plicates attempts a:
reconciling ifidividual transactions in a particular day with to::als for that same day.
At the end of the day, the cash recei ;:its are batched, counced and the bank deposits are prepared.
Anyone of the four employees can prepare the deposits. And, as p reviously stated, the person who
updated a batch i,;n't necessarily the person wr:o conducted all of the transactions within that
batch. There 1s n o t a problem \.'11th this pr.ictice, as long as t:ie system can accurately identify which
employee conducted each transaction within the batch and which employee updated the batch.
However, regardless of wl:o updated the batch and prepared the deposit, that person had to make
su:e that the amount of the deposi equalec the amount of cash received in that individual batch.
The other significant issue here, beyond the issue of r.ot being able co accurately identify and
distinguish between employees working in and updating batches, is that there is no policy in place
precluding employee "A" from handling a transaction and then putting that transaction in employee
"B's" batch.
The daily deposits, along with the two removable cash dra,vers and the two cash boxes, are then
locked in the small floor safe. The daily cash receipts are kept in the safe untii the next business
day, when they are removed and deposited in the bai1k
Besides each Tax Clerk being assigned ber own removable cash drawer, the TC and the OTC are
each assigned one of the p reviously mentioned cash boxes. The two cash boxes are kept in the
small floor safe unless they are being used by the TC and/or the OTC. The TC, OTC and the two Tax
Clerks all have the combination to the safe, and they all have access to the safe. Prior to the
beginning of this investigation, the safe door was closed, but unlocked, during business h ours.
Subsequent to the beginning of this investigation, the safe door stayed closed and the safe stayed
locked.
The removable cash drawers and cash boxes are not counted at the end of each day; they are
counted on a random basis. This count is usually conducted by the TC, but it is sometimes
conducted by the OTC and/or the Tax Clerks. At the end of each day, the two Tax Clerks remove
their cash drawers from their cash registers and they place their cash drawers in the small floor
safe, where they are kept along with the two cash boxes and the daily cash receipts. The two
removable cash drawers stay i n the safe until the next work day, when they are removed from the
safe and brought to the two front customer windows and placed inside the two cash registers.
It should also b e noted that there is no count taken of the two removable cash drawers or the two
cash boxes at the beginning of the day. Additionally, there are times during the day when a Tax
Clerk will need to be relieved at the window by the DTC or by the TC for a brief period of time.
There is no count taken of the removable cash drawer prior to the DTC or the TC filling-in for the
Tax Clerk. Therefore, when all of these factors are considered in their totality, all employees of the
office have access to all of the cash at all times. Furthermore, when considering the issue of the
unlocked door to the TCO, along with the issue of the door that leads to the storage room from the
courtroom, cash could have been compromised by non-TCO employees as well.
FINDINGS

On December 9, 2011, the TC noticed that one of the two removable cash drawers "looked light" to
her, meaning that it appeared to be short of cash. At that time, the office was comprised o f the TC,
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the OTC and the two Ta;< Clerks - G:rk 1 and Clerk 2. The drawer which appeared to be shcrt was
the crawer assigned co Clerk 2. The TC counted that dra,ver a!'lcl discovered that the drawer 1Nas
short by $46.30. The TC said that this was the first time a removable cash d:-awer or a cash box was
short of cash. The TC does not know the most recent time prior to December 9, 2011, that the two
rer.iova::i!e cash drawers or the t'N o cash boxes were counted.
The TC had this count, and all subsequent counts of the other rem'.)vable cash drawer and the two
cash boxes, recorded by having a separate adding machine tape run for each removable cash
drawer and/or cash box being counted. The person conducting the count is supposd to initial and
date the adding machine tape at the conclusion cf the count. The add:ng machine tape is supposec
to be kept inside the removable ca,:;h drawer or the cash box for which that particular count was
conducted.
According to LEHT attendance records, the DTC and Tax Clerk 2 worked on December 9, 2011. Tax
Clerk l did not work that day. The TC worked forty ( 40) hours for the week ending December 13,
2 0 1 1.
December 11, 2011, was Tax Clerk l's last day of work.
On December 12, 2 0 11 , Tax Clerk 1 began her maternity leave.
On December 13, 20 Ll, LEHT held their annual tax sale.
On December 13, 2 0 1 1. at the end of the day, the TC counted the removable cash drawer assigned
to Clerk 1 and the two cash boxes. This count revealed that the removable cash drawer assigned to
Clerk 1 was $40.10 short and the cash box assigned to the OTC was $75 short. The cash box
assigned to the TC was even. Upon discovering these additional shortages, the TC spoke to the OTC
about the problem. The OTC blamed the shortages on Tax Clerk 2, saying that Clerk 2 was "stupid"
a:1.d "doesn't know how to count".
According to LEHT attendance records, the DTC and Tax Clerk 2 worked on December 13, 2 0 1 1 .
Even though Tax Clerk 1 was out o n maternity leave, the office procedure was to have her
removable cash drawer placed inside her usual cash register daily. This way, either the DTC or the
TC could attend to customers at that window if Tax Clerk 2 was busy helping other customers. Tax
Clerk 1 was out on maternity leave until June S, 2012, which was her first day back to work
Sometime on a Friday in December, 201 1, subsequent to discussing this cash shortage with the
OTC, but prior to the LEHT annua! audit taking place (making it most likely December 16, 2011), the
TC reported the shortages to the CMFO and to a consultant to LEI-IT. This took place in the office of
the CMPO.
The TC toid them that the two removable cash drawers and one cash box were short of cash. The
TC thinks she said the shortage was probably close to $150, giving them round numbers, saying one
was short $75, one was short $50 and one was short $30. The TC identified the shortage in each
particular removable cash drawer/cash box, and she also told them that hers was even. The
consultant then said "we have to contact the auditors". The TC then asked the consultant how she
was to reconcile the shortage and the consultant said the auditors would have to be called. It
should be noted that no contact was made with our office at this time.

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The TC then broke down her cash counts a s follow;:

DATE
12/9/11
12/13/11

TC
TC

12/28/11
1/19/12
2/1/12
2/1/12
2/J../12
2/7/12
2/14/12
5/8/12
5/15/12
6/8/12
7/6/12
7/6/12
7/11/12
7/19/12
7/26/12
7/27/12
7/27/12
7/30/12
8/2/12
8/3/12

TC
OTC
TC
Ul'J'<NOWN
TC
TC
TC
TC
TC
TC
1
TC
1
1
NEW
TC
NEW
TC
NEW
NEW

COUNTER

2 DRAWER

$46.30
46.25

1 DRAWER
$ N/A
40.10

DTC BOX
$ N/A
75.00

ff
15.ijjp::if[1fD--m.o."

LEGEl'sD:

49.67

48.61

48.64
50.54
59.66
43.69
50.45
24.18
EVE,\J

EVEN
.20

j"C BOX
I/A

EVEN

53.13
,13 .10

27.36
27.36
27.35
35.57
16.81
EVEN
EVEN
EVEN
10.00
10.00
10.00
EVEN

75.00

EVEN
75.00

EVEN

* 2 Drawer is the drawer for Tax Clerk 2

* 1 Drawer is the drawer for Tax Clerk 1
* NEvV is a new TCO employee as of 7 /23/12
An empty space means that that drawer wasn't counted that day
* A number in red means that that drawer was short by that amount
"' The OTC drawer remains $75 short as of the date of this report
"' The TC drawer has always been even
* There was one undated count of the TC d rawer; it was even
* There were other counts of the OTC drawer between 12/13/11 and 7/6/12

The entire 2011 annual financial statement audit took place without any discussions between the
TC and the auditors regarding these shortages in petty cash. This was because the TC was under
the impression that the matter was addressed by the CMFO and the consultant.
O n June 5, 2012, Tax Clerk 1 returned from maternity leave.
On July 17, 2012, taxpayer 1 came to the TCO. He reported that he noticed the word "lien" on his
most recent tax bill, which he received i n the mail that same day, and he was concerned because he
came to the TCO and paid $4,3 22.36 in cash on June 13, 2012 to redeem that lien. The TC and Tax
C lerk 1 attempted to find the file pertaining to this lien but the file could not be located. At that
point, taxpayer 1 left.
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The TC queried the computer system and could not find any evidence in the system that i ndicated
tha.t taxpayer l had redeemed this lien. According to their computer records, taxpayer l's lien
account status was "open". Tax Clerk 1 new tr.is was not accurate bcause she remembered
handling this tansaction for taxpay,!r l and remembered giving him a receipt Although Tax Cleil<
1 took taxpayer l's cash payment a:1d i'.;s1.:ed him his receipt, the OTC was th e emptoyee 1,vho would
ha 1e handled the remainder of the transaction, which included making the necessary computer
entry to redeem the lien and then prepari;-ig the bank deposit. Taxpayer 1 was then contacted by
phone and a message ,vas left for him, asking him to reti.;rn to the TCO th2 n2:{t day with his receipt.
1

The TC then queried the computer system and took a quick look at the lien redemption tran.,actions
handled by the OTC during her last week of work prior to entering reh::ib, \Nhich would have been
J1..:ly 2, 2012, July 3, 2 0 1 2 and July 5, 2012. The TC thought that the number cf i:en redemptions in
that short period of time, 16 in all, was unusual. She then pulled the lien redemption files
themselves and noticed that the 16 files were missing some of the origir.al documents. The TC now
suspected that the issue regarding taxpayer 1 might be a theft and she suspected the OTC of
committing the theft.
The TC had this suspicion because the DTC suddenly left for a drug rehab program on July 6, 2 0 1 2 .
J u l y 5 , 2 0 1 2 was the DTC's last day o f work. The T C h a d n o idea that the OTC was going into rehab
u ntil she received a text message at 7:41am on Juiy 6, 2 0 1 2 from the OTC. This text message was
followed up later that morning by a visit from the father of the OTC. The TC was especially
concerned about this because it was the DTC's third time to a drug rehab. The first time was in f uly
of 2010, and the second time was in January of 2011.
On July 17, 2012, after speaking to taxpayer 1 and conducting her preliminary investigation, which
was sometime between 4:30pm and 6:3 0pm, the TC contacted the Director of Public Works for
LEHT. She requested that he accompany her to see the CMFO. She requested the D irector's
presence because she wanted a witness when she notified the CMFO o f the current situation
regarding this missing money and the missing file. She felt that it was necessary to have this
witness because she notified the CMFO of certain drug problems regarding the OTC in the past, but
the CMFO took no actions in furtherance of the concerns expressed by the TC. The Director
honored the request of the TC and accompanied her to notify the CMFO of this situation.
On July 18, 2012, the TC continued her investigation into this matter. Taxpayer 1 came back to the
TCO with his receipt. The receipt indicated he paid $4,322.36 cash on June 13, 2012 and the receipt
confirmed that Tax Clerk 1 took this payment. The TC checked all deposit slips back through May
and could not find a deposit slip that included this payment. The TC also checked to see if this
payment had mistakenly been deposited into the bank account for regular tax p ayments. However,
the TC learned that ta:{payer l's payment had not been deposited into any of the bank accounts for
the TCO.
On July 18, 2012, the CMFO and the consultant wete in the TCO examining the 16 lien redemption
files in furtherance of their investigation into this matter.
On July 19, 2012, the Mayor, Deputy Mayor, Chief of Police and Ocean County Prosecutor were
notified of this matter.
Our office was notified sometime late in the afternoon or early evening of July 19, 2 0 1 2 .
On July 2 3 , 2012, our fieldwork began.
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On July 24, 20 12, Pat Turin joined the inve.stig:otion.

On July 24, 2 0 1 2 . r learned through Chief Richard Buzby, LEHT Pol ice Department, that the Nj
Attorney General's Office would be joining the i:westigacion.
On July 27, 2 0 1 2, Detective J o h n Scalabnni and Detective Sergeant Tanya Shultz, both of the NJ State
Police , joined the investigati on.
fn gene;-al, with regard to third party lier, redemptions, our investigation revealed th2t the OTC
stole third party lien redemption paymems from taxpayers and lienholders when the taxpayers
initially made these payments. The OTC accomplished this cy instead of posting the payrr.ents to
the lien accounts and showing the liens as being redeemed when the taxpayers made the
redemption payments, the OTC sto!e the payments and le the status of the accounts as open.
Although the DTC did not properly post these payments to the lien accounts, she did issue these
taxpayers receipts for their payments.
The OTC eventually repaid most of the lien redemption payments she stole. Sometimes she repaid
the exact amount she stole, and sometimes she repaid the amount she stol e, plus interest that
accrued between the brne she stole the funds and the bme she repaid the funds. In total,
$19, 902 .57 was stolen; $ 15,580.21 was repaid, of which $215.95 represented interest. As stated
above, $4, 322.36 was stolen from taxpayer 1 but was never repaid.
When the DTC repaid the funds, she made fictitious postings to the lien accounts in an attempt to
disguise the true circumstances surrounding these transactions. These fictitious postings indicated
that the taxpayers purportedly redeemed the liens on the posting dates. However, our
investigation determined that the dates reflected in these fictitious postings actually reflected the
dates the DTC repaid the funds she stole, n o t the dates the taxpayers redeemed the liens. These
true redemption dates could only be determined by the receipts and bank records provided by tl-ie
taxpayers.
This scheme is more particu1arly described as follows. The investigation conducted by the TC
i nitially focused on third party lien redemptions fictitiously posted by the OTC o n July 2, 2012, July
3, 2012 and July 5, 2012. Our investigation eventually expanded to include all third party lien
redemptions that the OTC participated in, dating back to August 1, 2011. Based upon the
documentation regarding third party lien redemptions available for examination, and the
availability of the parties involved in the third party lien redemptions, our investigation revealed
that 18 third party lien redemptions were compromised in this the, totaling the $19,902.57
described above. We identified these 18 files based upon 17 fictitious third party lien redemption
postings made by the DTC between June 29, 2 0 1 2 and July 5, 2 0 1 2. The other third party lien file
was the lien redemption file brought to the attention of the TCO by taxpayer 1. This file was never
posted as being redeemed because the OTC never repaid these funds. Based upon all of the third
party lien informabon available for examination, we did not find any evidence of third party lien
files being compromised between August 1, 2011 and December 13, 2 011.
Of these 18 files, we were only able to obtain customer receipts from 5 taxpayers. This includes the
receipt provided by taxpayer 1. These receipts allowed us to confirm the dates these liens were
actually redeemed by the 5 taxpayers. In addition, we were able to obtain bank records from 3
other taxpayers that allowed us to closely approximate the dates those liens were actually
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redeemed by those 3 taxpayers. Th. remaining 10 taxpayers either could not be located or were
not able to produce their receipts.
After investigating the thefts from third party lien redemptions, vve investigated thefts from regular
tax payments by examining all regular tax payments that were paid in cash to the TCO. We
.
examined all or these cash tax payments that were made between August 1, 2 0 1 1 and July 5, 2012.
Our investigation into this aspect of the overall theft scheme employed by the OTC revealed that she
stole 23 regu Jar tax payments. These payments were paid in cash ar.d totaled $20,1 13.76, of which
$19,283.16 was repaid. The difference of $830.60 represents a regular tax payment made by
taxpayer 2, in casr., on 5/10/12 that the OTC stole. The OTC repaid these stolen funds betweer.
June 29, 2012 and July 5, 2012. Of the 23 stolen cash tax payments, we were only able to obtain
receipts from 5 taxpayers, including the receipt from the payment made by taxpayer 2. The TC and
Pat Turin were able to calculae with some degree of certain!:;' the dates that 6 other taxpayers
made their payments, totaling payment dates for 1 1 of the 23 taxpayers. The dates of the other 12
regular tax payments could not be determined or calculated. These 11 dates represented the dates
their cash tax payments were stolen by the DTC, and ranged from 3/27 /12 through 7 /5/12. These
receipts and calculations were the only means available to determine when the tax payment; were
initially made by the taxpayers.
The OTC was able to accomplish this phase of her theft scheme by initially recording these
transactions in open batches, allowing the system to generate a receipt for the taxpayer. She would
then steal the payment and delete the transaction from the batch. This allowed the batch total and
the deposit total to equal each other; however, the taxpayer's account did not reflect this payment.
Therefore, in order to avoid the customer being made aware of the theft by receiving a delinquency
notice in the mail, the OTC either had to intercept the delinquency notice or bring the account
current prior to the notices being mailed out. There is no feature within the system that compares
delinquency notices required to be generated, to delinquency notices actually printed. However,
even if such a feature did exist, there would be no way to prevent a TCO employee from
intercepting and destroying a notice, unless the notices were generated and mailed by a different
department. Our investigation revealed that the OTC was responsible for generating the
delinquency letters that went out in May of 2012.
Unlike the OTC's repayment of the third party lien redemption thefts, when the OTC repaid the
thes of regular tax payments, she only repaid what she stole. She did not repay the interest that
had accrued on the stolen funds between the dates she stole the tax payments and the dates she
repaid the stolen tax payments. The amount of interest that accrued on the stolen tax payments
was $344.63. This includes interest that accrued on the theft from taxpayer 2, calculated to October
26, 2012.
Next we examined cost of sale fees that were to be charged in 22 transactions that took place
between 11/15/11 and 12/12/11 that allowed taxpayers to avoid having their properties go to tax
sale. In total, $872.31 in cost of sale fees is missing. Of these 22 transactions, we were only able to
obtain a receipt from one taxpayer, identified as taxpayer 3. According to the receipt, taxpayer 3
paid a cost of sale fee on 1 2/8/11 in cash in the amount of $65.91. This $65.91 was not deposited in
the bank; it is missing. This transaction was handled by the DTC. The OTC handled 20 of these 2 2
transactions herself. One transaction took place on 12/6/11, i n the amount o f $24-.59 and was
handled in part by Tax Clerk l. One other transaction took place on 12/7 /11, in the amount of
$75.76 and was handled in part by Tax Clerk 2. We are not sure how much of a role the OTC played
in these two transactions.
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Lastiy, our investigation revealed that o n 6/8/12 a certificate of redemption charge of $25.00 in
cash was received from ta:<payer 4 but w:is never deposited in the bank. This $25.00 is missing.
The records for this transaction indicate that the $25.00 is missing from Tax Clerk 2's batch and the
batch was updated (closed) by the OTC.
Therefore the theft can be summarized as follows:
Third party l ien redemptions
Regular tax payments
Interest due o n regular tax pay:nerics
Cost of sale fees
Certificate of redemption charge
Petty cash
TOTAL THEFT

$ 19,902.57
20,1 13.76
344.63
872.31
25.00
161.40
$ 41,419.67

The loss can be summarized as follows:

Third party lien redemptions (taxpayer 1)
$ 4,3 3 2.36
830.60
Regular tax payments (taxpayer 2)
Cost of sale fee (taxpayer 3)
65.91
Certificate of redemption charge (taxpayer 4)
25.00
P etty cash
75.00
TOTAL LOSS
$ 5,318.87
l t is important to note that the TC advised that sometime after this investigation began, she was told
by Tax Clerks 1 and 2 that they knew that the petty cash was short all along. They said that the OTC
told them that she knew the b oxes were short but not to worry about it and that she'd give them the
cash to put back in the boxes. The DTC also told the two clerks not to say anything to ti.1ie TC about
the shortages because the TC was busy and she already had enough to worry about The two tax
clerks did as they were told and they did not reveal any of this to the TC until after this investigation
begar..
Please feel free to contact our office for any further details of our investigation.
Very truly yours,
HO LMAN & FRENIA, P. C.

Kev n P. Frenia
Certified Public Accountant
Certified Fraud Examiner
RECOMMENDATIO NS
1.) The TC should have a staff comprised of a DTC and three Tax Clerks.
2.) The TC needs to be able to take a macro approach to managing the TCO.
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3 . ) The TC needs to be able to take more of a micro approach to the annual tax sale.
4.) The door to the TCO should be secured with a key fob pad instead of a traditional lock.
5.) The door to the TCO should remain closed and locked at all times.
6.) Due to non-TCO employee access to the safe room, the safe should be moved to the TC office.
7.) The cash drawers and boxes should be replaced with locking d rawers and boxes.
8.) Clerk 2 should be required to handle all transactions or be reassigned to a new department.
9.) All cash should be secured I M MEDIATELY upon receipt and not left lying in the open.
10.) A larger barrier should be installed between the customers and the Clerks at the indows.
1 1 . ) Both cash registers should have an audible indicator that the drawer has been opened.
1 2 . ) There should be an independent recording of each time the cash drawer is opened.
13.) The recording in #12 should be reconciled with the time of every transaction i n that drawer.
14.) Employees should be prohibited from divulging their log-on identifications.
15.) Log-on identifications should be changed every 30 days.
16.) Employees should be prohibited from working in the batches of other employees.
17.) Employees should be precluded from including other employees' work in their own batches.
18.) No employee should be able to delete a transaction from a batch without leaving an a udit trail.
19.) No employee, except the CMFO, should be able to disarm an audit feature in the software.
20.) If a n audit feature is disarmed, the date and time of this action should be documented.
21.) Any and all disarming of audit features should be disclosed to the independent a uditors.
22.) An independent report should be generated recording all receipts given to taxpayers.
23.) A cash receipts journal should be implemented into the system.
24.) The safe door should be closed and locked at all times.
ZS.) Only management should have access to the combination to the safe.
26.) The cash drawers and cash boxes should be counted at the beginning and end of each day.
27.) The TC should verify a n d document every cash count.
28.) The TC should conduct surprise cash counts.
29.) The TC should documen.t all cash discrepancies (shortages & overages) in writing to the CMFO.
30.) The TC should disclose to the independent auditors all cash discrepancies d uring the audit.
3 1 . ) The CMFO should i m mediately report all cash discrepancies to the independent auditors.
32.) The TC and CMFO should be vigilant regarding employees suffering from addictions.
3 3. ) The TC and CMFO should preclude employees suffering from addictions fro m a ccess to cash.
34.) The TC and CMFO should consider addicted employees as high risk employees.
3 5 . ) The TC and CMFO should disclose high risk employees to the independent aud itors.
36.) The CMFO should immediately report all suspected thefts to the independent auditors.
37.) Cash counts should be taken before and after a Clerk is being relieved during the day.
38.) Employees should not have access to any cash other than the cash in their own transactions.
39.) The door leading to the courtroom from the storage room should be closed a nd locked always.
40.) No one should enter the TCO from the courtroom.
41.) Reconcile delinquent accounts to delinquent notices printed to delinquent notices mailed.
42 . ) Print report of daily receipts generated and reconcile to daily deposits.
43.) Consider a better accounting of postage stamps generated by the postage machine.
44.) Ledger adjustments should only be made by m a nagement.
45.) All ledger adjustments should be regularly reviewed and signe d - off by two people.
46.) All employees should be required to punch in to work and out of work
47.) All missing time cards should be documented and accounted for.
48.) A separate cash log should be maintained and witnessed by a second employee.

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