Court Opinion

ID: 4574493
Source: CourtListenerOpinion
Date Created: 2020-10-08 16:11:24.96805+00
Date Added: 2024-06-11T09:28:06.412505
License: Public Domain

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

In Re: Mary Stitzer, Individually and             :
in her Capacity as Treasurer of East Union        :
Township, Schuylkill County, Pennsylvania         :
and John Dettery, individually and in his         :
Capacity as Supervisor of East Union              : No. 1339 C.D. 2019
Township, Schuylkill County,                      : No. 1340 C.D. 2019
Pennsylvania                                      : Argued: May 12, 2020
                                                  :
Appeal of: East Union Township                    :
Board of Auditors                                 :

BEFORE:        HONORABLE MARY HANNAH LEAVITT, President Judge
               HONORABLE MICHAEL H. WOJCIK, Judge
               HONORABLE J. ANDREW CROMPTON, Judge

OPINION NOT REPORTED

MEMORANDUM OPINION
BY JUDGE WOJCIK                                            FILED: October 8, 2020

               The East Union Township (Township) Board of Auditors (Board of
Auditors) appeals the orders of the Court of Common Pleas of Schuylkill County
(trial court), which granted John Dettery’s (Dettery) and Mary Stitzer’s (Stitzer)
petitions for dismissal of the surcharge actions against them.               The trial court
applied this Court’s decision in Watts Township Board of Auditors v. Raudensky,
200 A.3d 129 (Pa. Cmwlth. 2018), and held that the Township’s Board of Auditors
lacked authority under The Second Class Township Code (Code)1 to conduct the
audit underlying the surcharge actions.          For the reasons discussed below, we
affirm.

      1
          Act of May 1, 1933, P.L. 103, as amended, 53 P.S. §§65101-68701.
             The Township is a second class township located in Schuylkill
County, Pennsylvania. The Board of Auditors retained the public accounting firm
Lettich and Zipay to conduct the Township’s annual audits from 2014 through
2018. Reproduced Record (R.R.) at 86a-87a.
             Stitzer served as the Township’s treasurer from 2014 until her
resignation in July 2018.      On August 1, 2018, the Township’s Board of
Supervisors (Board of Supervisors) passed a motion directing the Board of
Auditors to appoint outside counsel for an audit of Stitzer’s pay. R.R. at 14a.
             The Board of Auditors submitted an application for the appointment
of outside counsel to the trial court. The trial court granted the application for
appointment.     On March 2, 2019, after completing an investigation, the
Township’s appointed counsel filed surcharge actions in the trial court against
Dettery, a Supervisor, and Stitzer for $63,011.60. R.R. at 18a-40a. On July 10,
2019, the trial court conducted a hearing to determine whether the surcharge
actions should be dismissed based on Watts.
             At the hearing, Board of Auditors member Robert Gabardi (Gabardi)
testified that the Board of Auditors had requested that Lettich and Zipay review
and sign off on the investigation, but Lettich and Zipay failed to do so. R.R. at
93a.   Gabardi agreed that the surcharge actions against Dettery and Stitzer
stemmed from the Board of Auditors’ investigation, not from the findings of an
audit or an auditor’s report. Id. at 94a. Gabardi conceded that the Board of
Supervisors could have requested Lettich and Zipay to investigate the payments
made to Stitzer. Id. at 99a.
             The trial court, applying Watts, found that the Board of Auditors
lacked the authority under the Code to conduct such an audit. By orders dated

                                          2
September 4, 2019, and September 5, 2019, respectively, the trial court dismissed
the surcharge actions against Stitzer and Dettery. The Board of Auditors appealed
the trial court’s dismissals. The appeals were consolidated by this Court’s order of
December 11, 2019.
              On appeal,2 the Board of Auditors argues that the trial court erred in
concluding that it lacked the authority to impose a surcharge against Stitzer and
Dettery based on Watts. The Board of Auditors asserts that the instant surcharge
actions stem from the audit of Stitzer’s accounts upon her resignation as treasurer,
which was mandated by Section 901(b) of the Code, 53 P.S. §65901(b).
              Further, the Board of Auditors contends that the audit it conducted is
outside the scope of authority given to the public accounting firm for conducting
annual audits under Section 917 of the Code, 53 P.S. §65917.3 Rather, the Board
of Auditors contends that Section 917(c) specifically requires that the Board of
Auditors “perform the other duties of the office” and does not provide the
appointed accountant the authority to determine compensation, leaving that power
with the Board of Auditors, 53 P.S. §65917(c).
              In response, Stitzer and Dettery argue that the trial court correctly
dismissed the surcharge actions because Watts held that a surcharge action must
flow from an audit, not an independent investigation of a board of auditors. Stitzer
and Dettery argue that the Board of Auditors’ appointment of Lettich and Zipay,
pursuant to Section 917(c) of the Code, divested the Board of Auditors of the

       2
        Because the issue on appeal is purely a question of law, our standard of review is de
novo and our scope of review is plenary. In re Appeal of 2012 Financial Audit for Greene
Township, 113 A.3d 372, 374 n.5 (Pa. Cmwlth. 2015).
      3
        Section 917 of the Code was added by the Act of November 9, 1995, P.L. 350.

                                             3
authority to conduct its own audit. Therefore, Stitzer and Dettery assert that any
surcharge action must flow from the audits Lettich and Zipay conducted.4
                In Watts, the accounting firm that the board of auditors had appointed
to conduct the township’s annual audits declined to investigate a particular
payment that the board of auditors had requested it review. The board of auditors
conducted its own investigation and filed the surcharge action at issue. Watts, 200
A.3d at 131-32. The trial court was charged with determining whether a board of
auditors is authorized to impose a surcharge only in connection with an audit, or
whether it may impose a surcharge at any time. The court reviewed Section 907 of
the Code5 and determined that it is “subject to two reasonable interpretations as to

       4
         Dettery’s argument that the surcharge action cannot be maintained against him under
Section 901(b) of the Code was not raised before the trial court and is therefore waived for
purposes of appeal. Pa. R.A.P. 302(a) (“Issues not raised in the lower court are waived and
cannot be raised for the first time on appeal.”); Siegfried v. Borough of Wilson, 695 A.2d 892,
894 (Pa. Cmwlth. 1997).

       5
           53 P.S. §65907. Section 907 provides:

                (a) The board of auditors shall surcharge any elected or appointed
                officer for the amount of any loss to the township caused in whole
                or in part by the officer’s act or omission in violation of law or
                beyond the scope of the officer’s authority. If the auditors find an
                absence of intent to violate the law or exceed the scope of authority
                and find the result of the officer’s act could have been achieved by
                legal means and authorized procedures, the surcharge imposed
                shall be limited to the difference between the costs actually
                incurred by the township and the costs that would have been
                incurred had legal means and authorized procedures been
                employed. Provisions of this section which limit the amount of
                surcharge do not apply to cases involving fraud or collusion on the
                part of the officers or to any penalty ensuing to the benefit of or
                payable to the Commonwealth.

(Footnote continued on next page…)
                                                   4
when [surcharges] may occur[,]” necessitating a comprehensive review of the
statutory scheme. Id. at 134.
            After a thorough review of Code Sections 901 through 917, the court
concluded that the Code requires a surcharge action to flow from an audit. 53 P.S.
§§65901-65917. Section 917 of the Code provides the procedures for an annual
audit of the Township’s accounts should a board of auditors elect to appoint an
accounting firm, 53 P.S. §65917. As this Court articulated in Watts on appeal,

            Section 917(c) serves to limit a board of auditors’ power
            to perform other duties. Specifically, Section 917(c) of
            the Code provides, in part, that when an accountant is
            appointed, “the board of auditors shall not audit, settle or
            adjust the accounts audited by the appointee but shall
            perform the other duties of the office,” and that “[t]he
            accountant or firm has the powers given to the board of
            auditors under [the Code], except the audit shall be made
            in accordance with generally accepted auditing
            standards.”
Watts, 200 A.3d at 136 (emphasis in original).

(continued…)

            (b) Any balance in any report of the board of auditors against any
            officer of the township constitutes a surcharge against the officer
            as fully as if expressly stated in the report to be a surcharge. The
            board of auditors shall direct the clerk of court of common pleas to
            certify the amount of every balance or surcharge from which no
            appeal has been taken under sections 909 and 910 to the court of
            common pleas, and the prothonotary shall enter the balance or
            surcharge as a judgment against the officer in favor of the
            township.

Id.

                                             5
             Section 917 of the Code details the process by which a board of
auditors can appoint an accountant to perform the township’s annual audits.
Should a board of auditors opt to appoint an accountant, Section 917(c) limits the
power the board of auditors retains. See Section 917(c), 53 P.S. §65917(c) (“[T]he
board of auditors shall not audit, settle or adjust the accounts audited by the
appointee but shall perform the other duties of the office.”). In this case, the Board
of Auditors appointed Lettich and Zipay, divesting itself of the authority to
perform audits.
             Here, like Watts, it is clear that the Board of Auditors did not impose
the surcharges in connection with an audit.         Rather, the Board of Auditors
conducted its own investigation and used the findings as the basis for the
surcharges. As this Court has previously determined, imposition of a surcharge
must flow from the findings of an audit. Watts, 200 A.3d at 136. Therefore, we
must conclude that the Board of Auditors lacked the authority to impose the
surcharges against Stitzer and Dettery. Accordingly, we affirm the trial court’s
dismissal of the surcharges.

                                       MICHAEL H. WOJCIK, Judge

                                          6
         IN THE COMMONWEALTH COURT OF PENNSYLVANIA

In Re: Mary Stitzer, Individually and        :
in her Capacity as Treasurer of East Union   :
Township, Schuylkill County, Pennsylvania    :
and John Dettery, individually and in his    :
Capacity as Supervisor of East Union         : No. 1339 C.D. 2019
Township, Schuylkill County,                 : No. 1340 C.D. 2019
Pennsylvania                                 :
                                             :
Appeal of: East Union Township               :
Board of Auditors                            :

                                  ORDER

            AND NOW, this 8th day of October, 2020, the orders of the Court of
Common Pleas of Schuylkill County, dated September 4, 2019, and September 5,
2019, are AFFRIMED.

                                    __________________________________
                                    MICHAEL H. WOJCIK, Judge