Munhall awaiting decision on loan amid fiscal turmoil

Ex-manager at center of questions

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By today's end, Munhall officials expect to know if private financing for a tax anticipation loan will be available to the borough, averting the need for layoffs of police and public works employees.

Council was forced in recent weeks to advertise for private financing after it could not get a regular bank loan because the borough did not have its annual audits for 2011 and 2012 performed by an independent auditor and filed with the state Department of Community and Economic Development.

That revelation is one of a number of surprises that council members say they've faced since Matt Galla abruptly resigned as borough manager June 17. The other surprises include the fact that appropriate pension contributions were not made to employee pension plans in 2011 and 2012, that many borough records, including employees' salary histories, are gone from the borough offices, and that the borough lost $360,000 in regional asset district funds.

Since June, two interim managers and a certified public accountant have been trying to reconstruct the borough's records. That reconstruction has shown that Mr. Galla may have paid himself more than his approved $60,000 salary.

"It's a puzzle and we are all still trying to figure it out," Councilman Bernie Shields said.

During recent interviews with a majority of council members and Mayor Ray Bodnar, borough officials said they had no idea until after Mr. Galla resigned that there were problems with the borough's finances or that the annual audits were not performed for two years.

However, Mr. Galla said in an interview last week that council leadership knew he had not had the audits performed because he told them he was not bringing in auditors to look at books that were not legitimate. "I told them all that I'm not comfortable with this and I'm not going to call an auditor in. They said, 'Do what we told you' and I refused."

He also said he repeatedly warned borough officials there were financial problems and that at times the municipality had received shut-off notices for its utilities. "The former secretary and I had to sit and play games about what do we pay today," Mr. Galla said.

"It became obvious that taxes should have been raised. Anybody could look and see that expenses were up, but we never raised taxes. Every time we sat down for a budget meeting, they were against raising taxes," Mr. Galla said, adding that some council members feared what a tax increase would do to re-election campaigns.

The mayor said the first inkling he got that something was amiss was in the spring when he started to receive calls from state officials telling him that Munhall would not be able to receive its RAD funds unless audits for 2011 and 2012 were filed with the state.

DCED spokeswoman Lyndsay Kensinger said municipal audits are due to her agency by April 1 of each year. If they are not submitted by Dec. 31, the municipality is flagged within the system and that flag can prevent it from getting awards, grants and loans. She said an extra level of attention goes to municipalities that get RAD funds because the audits are needed to make calculations for the funding awards, and, some entities, such as lending institutions, use the audits as a resource as is the case with the tax anticipation loan in Munhall.

The mayor said when he received calls about the possible loss of RAD funding, he went to Mr. Galla and asked him to file the audits. He said he was told by Mr. Galla that they had been filed. The mayor said he had that conversation with the manager several times, with the last time being June 14, when he was informed that the final deadline had passed for the filing of the audit in order to receive RAD money.

Mr. Galla resigned June 17, leaving behind a letter stating that he was tired of being asked to do things he wasn't comfortable with. In a recent press release, he said he resigned "because I could no longer personally tolerate working under the unethical, immoral and illegal conditions."

In an interview, Mr. Galla said council members directed him to put money in funds where it didn't belong, including keeping pension contributions in the general fund. Mr. Galla also claimed that bids were rigged and that he was told to do campaign work for and against local candidates.

Joe Ballas, who was council president for four years until January when Dan Lloyd was elected president, denied all of Mr. Galla's accusations. He also denied knowledge of any other council member instructing Mr. Galla to place funds where they didn't belong or to not make the pension contributions.

Mr. Ballas' account was echoed by Councilmen Rich Votedian, Bernie Shields and Rob Falce. Mr. Lloyd also said he never directed Mr. Galla to place borough funds into accounts where they didn't belong.

Mr. Ballas said he asked Mr. Galla about a year ago whether annual audits were being completed because he had received a report from the borough tax collector that auditors had not visited her office as usual. Mr. Ballas said Mr. Galla said the audits were completed. The other council members said they never specifically asked about the annual audits and acknowledged that all of council should have noticed they weren't receiving annual audit reports.

"Everyone took it for granted that it was done. It's our fault as much as it is his," Mr. Votedian said.

Until Mr. Galla resigned and council discovered the problems left in the wake of his departure, officials said everyone thought highly of the manager and were especially impressed with his computer skills.

All of the councilmen interviewed said they did not find out that the borough did not make appropriate retirement contributions for police and employees until an auditor general's reports came out about two weeks after Mr. Galla resigned.

The audit reports indicate that the borough did not pay required balances of $61,862 for 2010, $62,916 for 2011 and $69,870 for 2012 for the police pension fund. Those payments were required to be made with interest. Also among the findings was that there was an inadequate record keeping system for the fund.

On the non-uniformed employees plan audit, the report indicates the borough understated the plan members payroll by $61,759 and so it received a state aid underpayment of $6,926 and failed to certify an eligible employee in 2012, which caused a state underpayment of $3,576 that year.

In the reconstructed payroll accounts, borough officials said IRS records indicate that Mr. Galla was paid $147,430 in 2011 and $147,146 in 2012 even though his budgeted salary was $60,000. Mr. Galla declined comment on his salary.

Council members said they did not authorize any additional payments to Mr. Galla and are uncertain why his salary appeared to be so high. They said it is among financial records that have been sent to the district attorney's office for review.

Mike Manko, a spokesman for the district attorney, said his office has received information from Munhall but that it is premature to say an investigation is taking place.

Council members say their most important order of business is to get a tax anticipation loan so the borough won't be forced to lay off 10 police officers and six public works employees as it was poised to do at an emergency meeting Jan. 27.

As of last week, the borough had received several responses to its request for proposals and officials were hopeful they would have a firm offer by today, the end of the advertising period.

Next, they plan to bring in the accounting firm of Hosack Specht Muetzel & Wood to perform audits for 2011, 2012 and 2013.


Mary Niederberger: mniederberger@post-gazette.com or 412-263-1590.

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