Luzerne County’s court branch court owes Pennsylvania $94,866 stemming from the alleged misappropriation of funds by a former magisterial district court employee, according to a state Auditor General’s Office audit forwarded to county officials.
The compliance audit focused on collections and disbursements in District Judge Thomas Malloy’s court office in Wilkes-Barre from the start of 2018 through the end of March 2023.
It said a former district court employee who was terminated in March 2023 allegedly misappropriated cash from the district court by failing to deposit all money collected.
While the audit does not name the individual, officials say it refers to Lisa Price because she worked in that office, was terminated in March and faces five counts of theft charges in the county Court of Common Pleas.
The state audit said the alleged misappropriation of approximately $126,467 resulted in the county court owing the state Department of Revenue $94,866 for the state’s portion of fines, costs, fees and surcharges collected by the district court. The remainder is due to the county, various municipalities, defendants and other entities, it said.
“We identified several deficiencies in the district court’s internal control system that allowed the alleged fraud to occur and not be detected for several years,” said the audit released by state Auditor General Timothy L. DeFoor.
According to the audit:
State auditors identified “unusual items” in the former employee’s bank reconciliation records and contacted the district court’s bank, which found numerous alleged checking account deposits logged in the former employee’s accounting records that were not actually deposited.
“The former employee documented erroneous reconciling items totaling $18,564.74 between the district court’s accounting records and its bank statements on bank reconciliations in an apparent attempt to conceal some of the alleged misappropriation,” it said.
The audit calls for improved internal control systems and policies as outlined by the Administrative Office of Pennsylvania Courts (AOPC), including segregating duties so the same employee is not both handling cash and accounting records.
Cross-training and rotating staff assignments are ways to segregate duties, it said.
Someone independent also should be reviewing reports and processes, which is “especially important for smaller staffed offices where separating duties can be a challenge,” it said. The AOPC’s guide said magisterial district judges should be reviewing and signing collections and reconciliations reports.
In the Wilkes-Barre magisterial court in question — District Court 11-1-02 — the former employee collected cash and checks, issued receipts, made deposits, prepared and logged disbursements, reconciled the monthly bank account and compiled reports and payments to the state Department of Revenue, it said.
The magisterial district judge did not ensure the former employee made daily deposits, review bank deposit slips to verify they matched the daily collections report or properly examine monthly bank reconciliations “to ensure accuracy rather than merely initialing them,” it said.
In the audit’s management response, the county court administration and magisterial district judge said they have been briefed on the findings and “recognize the importance of imposing corrective actions.” That includes meeting with staff to provide an overview of the audit findings, distributing the magisterial district court guide for audits and internal control procedures and reminding staff to follow those procedures.
Training internally and through the AOPC also is in the works, it said, promising compliance monitoring by court administration.
“We appreciate the district court’s efforts to correct these issues. During our next audit, we will determine if the district court complied with our recommendations,” the state audit said.
A second state audit finding said the magisterial court’s funds held for others are not timely disbursed.
As of March 31, the district court’s bank account had a balance of $1,653 for funds collected during the period Jan. 7, 2019, through July 29, 2021, in cases that have been adjudicated, and funds were not applied to the case or timely disbursed, it said, recommending monthly processing of undisbursed funds.
The management response said it will address the matter through staff education and training.
Pending court case
Price had a preliminary hearing in August, and the five counts of theft were advanced to county court. A dispositional hearing is scheduled Dec. 11.
County Court Administrator Paul Hindmarsh has said he sought an investigation by the county District Attorney’s Office when the state Auditor General’s Office conducted a routine audit of District Court 11-1-02 in 2022 and found 48 instances of deposits that were not made over a period of several years.
County Detective James Noone testified during the preliminary hearing that checks and money orders made out to District Court 11-1-02 were found in Price’s vehicle and residence.
Noone had said approximately $126,000 was unaccounted for in cash, money orders and check payments to the district court from 2018 through March 2023, and the investigation found Price was the only clerk processing payments to the office, a past published report said.
Price’s attorneys, Joseph F. Sklarosky Sr. and Michael A. Sklarosky, had argued a former clerk may be responsible as the former clerk never returned keys to the office located at Hazle Street and South Pennsylvania Avenue, the prior report said.
Noone had said surveillance cameras captured Price removing envelopes from a bank bag and placing them into her purse.
District court receipts are comprised of fines, costs, fees and surcharges collected on traffic, non-traffic, civil and criminal cases filed with the district court, the state audit said.
Hindmarsh said Monday he cannot comment on the matter because the court case is still pending.