COUNTY OF HUNTERDON NOTICE OF DISCIPLINARY ACTION Monday, November 4, :00 to 4:30

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1 COUNTY OF HUNTERDON NOTICE OF DISCIPLINARY ACTION Monday, November, 0 :00 to :0 IN RE: MARGARET PASQUA COUNTY TREASURER OF THE COUNTY OF HUNTERDON and KIMBERLY BROWNE, COUNTY DEPARTMENT HEAD, DEPARTMENT OF ADMINISTRATION AND FINANCE 0 APPEARANCES: EDWARD J. FLORIO, ESQ. HEARING OFFICER CLEARY, GIACOBBE, ALFIERI & JACOBS, ESQS. Ramapo Valley Road Oakland, New Jersey 0 BY: RICHARD A. GANTNER, ESQ. and MATTHEW J. GIACOBBE, ESQ. Appearing on Behalf of the County of Hunterdon GAETANO M. DESAPIO, ESQ. 0 Harrison Street Frenchtown, New Jersey 0 Appearing on Behalf of Margaret Pasqua and Kimberly Browne 0 PHILIP A. FISHMAN COURT REPORTING AGENCY Headquarters Plaza North Morristown, New Jersey FAX -0- I N D E X

2 WITNESS: DIRECT CROSS REDIRECT RECROSS CYNTHIA YARD By Mr. Gantner 00, Mr. DeSapio, E X H I B I T S NUMBER DESCRIPTION PAGE PB- Data collection form PB- Data collection form PB- Data collection form 0 PB- from Margaret Pasqua to Cynthia Yard, /0/ PB- Letter from Donohue, Gironda & Doria to Shana Taylor, // HC- Document, Chief financial 0 officer HC- Document, "Director of Finance" 0 Letter, 0// 0 ::0 0:0:

3 0:: MR. FLORIO: Ready when you are, Mr. 0:: DeSapio. 0:: 0:: 0:: 0:: 0::0 0:: 0:: 0:: 0:: 0::0 0::0 0::0 0::0 0::0 0::0 0:: 0:: 0:: 0::0 0:: 0:: 0:: 0:: 0 0 MR. DESAPIO: Can we just talk about the schedule for a second? MR. FLORIO: Sure. MR. DESAPIO: I have that we are going until two o'clock today. MR. FLORIO: Okay. MR. DESAPIO: Thursday. Correct. MR. GANTNER: Yes. MR. DESAPIO: And then we are ending at one o'clock. MR. FLORIO: Thursday we are going from nine to one. MR. GANTNER: That's correct. MR. DESAPIO: Now, did we pick any other dates and do we want to throw out tentative dates now so we can check before we are done for today? MR. FLORIO: I can if you can. MR. GANTNER: I am hoping that I will be done by Thursday. Mr. Giacobbe will handle it from there. He is on vacation -- he has to catch a plane on Thursday and, I believe, he is going to be gone for a week. I don't want to speak for his schedule. We have to wait

4 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0::0 0::0 0::0 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0::0 0::0 0 0 for him to do that part. MR. FLORIO: All right. MR. GANTNER: Sorry. MR. FLORIO: We know we are going until two today, and then you are going to be ready, Mr. Gantner, to proceed on Thursday from nine to one. MR. GANTNER: I will. MR. FLORIO: When Mr. Giacobbe arrives today we will try to look beyond his return from vacation. MR. GANTNER: I appreciate that. Rather than me speak for him. MR. FLORIO: I am all right with that. Mr. DeSapio, it's :. Let's go right through until, like,, is that okay, go right through until and maybe take a half an hour then, and then we will finish up? MR. DESAPIO: Can I just ask who might have all of the exhibits in case we need them -- when we need to refer to them. The original exhibits are someplace. MR. GANTNER: Ms. Taylor is going to get them. CINDY YARD PREVIOUSLY SWORN. CROSS-EXAMINATION CONTINUED BY MR. DESAPIO: Q. Good morning, Ms. Yard. A. Good morning, Guy.

5 Yard - cross - DeSapio 0:: 0:: 0:: 0:: 0:: 0:: 0::0 0:: 0::0 0:: 0:: 0:: 0::0 0::0 0::0 0:: 0:: 0:: 0:: 0:: 0::0 0:: 0:: 0:: 0::0 0 0 How are you? Q. Who hires the County auditors? A. It's by resolution, the Board of Chosen Freeholders. Q. How familiar are you with the County audit and the County audit process? A. Very limited. Q. What is your understanding of what the County audit is designed to cover? A. I know the County is required to have an annual independent audit, and I know that they follow the standards of practice for auditing. I don't know all of the intricacies of what they audit and what their standards of practice are. I know that the Board of Chosen Freeholders passed a resolution to hire them. I know that they come in and they conduct the audit over several months. I know that they are assigned or work with the Department of Finance. That's where most of the audit takes place, although they do go out and do offsite auditing, and that's my knowledge of the extent of what is audited and the process. Q. Uh-huh. So is it your understanding then that they audit more than just the Finance Department? A. They audit the finance service delivery

6 Yard - cross - DeSapio 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0::0 0:: 0:: 0:: 0:: 0:: 0:0:0 0:0:0 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0 0 wherever -- you know -- those services take place, so it's not just the department. Right. Q. It's just not the department? A. It's not just the department, Guy, I am sorry, it is who ever delivers finance services, the areas. Q. Okay. I am going to hand you PB-. Do you recognize what that is? A. This is their audit findings. The title says, "Report on Internal Control Over Financial Reporting and On Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards." It's the Wiss report for the 0 audit. Q. And did I understand you to testify on direct examination that served as the basis for your filing disciplinary charges against Margaret Pasqua and Kim Browne? A. Yes. Q. All right. Is it your position that each and every item in there was their responsibility? A. Each and every item in this audit, as it states, "Report on Internal Control Over Financial Reporting and the Internal Controls" ultimately were with Margaret Pasqua and Kim Browne.

7 Yard - cross - DeSapio 0:0: 0::0 0::0 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0::00 0::0 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0 0 Q. Well, is it your understanding that document you have in front of you is not just limited to comments about internal controls? A. Yes. I do understand that. Q. Okay. Are there items in there that do not deal with internal controls that are not the responsibility or were not the responsibility of Kim Browne and Margaret Pasqua? A. The ultimate internal controls and the results of this audit, which are a barometer of our success in delivering financial services, ultimately rests with Margaret Pasqua and Kim Browne. Q. Okay. Look through PB-, please, if you would, until you get to the item that's marked in the margin as number one. A. What page? Q. I don't think that is paginated, but it would seem to me it's probably Page. When I say "it's not paginated," I don't see page numbers on my copy. A. It says "County-." Q. You have one that's Bates stamped. Okay. If I can just bother you for a second and take a look at it. I will make sure it coordinates with what I am asking you about.

8 Yard - cross - DeSapio 0:: 0::0 0::0 0::0 0::0 0::0 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0::0 0::0 0::0 0:: 0 0 That way we will save time. Okay. PB- -- A. Is it marked? Q. -- marked on the right-hand bottom where it says, "County-." A. Uh-huh. Q. Do you see item "0-"? A. Yes. Entitled "Material Weakness in Internal Control." Q. Right. Okay. Can you explain what that audit comment says? A. I can read what it says. It says -- you want the criteria, the condition or the context, Guy, what do you want me -- Q. No. I am not asking you to read it. A. Okay. Q. I am asking you if you understand it and can explain it, what it says. A. It says, if you have "A properly functioning financial statement close process provides an adequate internal control system to ensure that appropriate month and year-end internal controls are in place to ensure that financial statements are produced on a timely basis and are materially accurate." Q. Do you know what that means?

9 Yard - cross - DeSapio 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0::0 0:: 0:: 0::0 0:: 0::00 0::0 0::0 0:: 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0 0 A. Well, just what it says, that if you have a properly functioning financial statement, that is an adequate internal control to ensure that the appropriate month and year-end internal controls are in place and that they are produced on a timely basis and are materially accurate. Q. Can you describe how that would be set up, a "properly functioning financial statement close process"? A. No, I can't, because I am not licensed, nor is it my responsibility to do that. Q. Okay. Do I understand correctly you based your charges against Kim Browne and Margaret Pasqua just on the fact that these audit comments existed? A. No. That's not correct. Q. Let's go through 0-. Look at the first bullet point. I will call it a "bullet point." A. You mean the 0-? Q. 0-. A. I want to stay with you. That's all right. Q. The first bullet point, "Revenue Accounts Receivable-Hunterdon County Consolidated Transportation System," what is the "Hunterdon County Consolidated Transportation System"?

10 Yard - cross - DeSapio 0 0:: 0:: 0::0 0:: 0::0 0::0 0:: 0:: 0::0 0:: 0:: 0:: 0:: 0:: 0::0 0:: 0:: 0:: 0:: 0::0 0::0 0::0 0:: 0:: 0:: 0 0 A. That is our transportation services that we deliver to our citizens. Q. Okay. And by whom are those services provided? A. That's an outside -- we contract out with operations to deliver those transportation services. Q. And who made the decision to contract out transportation services? A. If my memory serves me correctly, I think years ago it was you, Guy, when you were the County counsel. I remember Mr. Freeholder Melick telling me that when we were going to provide transportation, at least that's my memory. Q. Does the County counsel decide to have an independent agency provide transportation services? A. No, but the County counsel certainly provides legal guidance to a governing body to protect the county's interest and, I believe, again, I am not 00 percent sure, but when the time came predating me, predating -- you know -- many of the people that work here when the counsel -- County decided that they didn't want to be in the business of transportation, delivering transportation, but they knew it was something that they wanted to provide the citizens, my recollection is that you guided the Board, but I may be wrong. Q. Did the Board of Chosen Freeholders make the

11 Yard - cross - DeSapio 0:: 0:: 0::0 0:: 0:: 0:: 0:: 0:: 0::0 0:: 0:: 0:: 0::0 0::0 0:: 0:: 0:: 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0::0 0 0 ultimate decision to contract with a third party? A. Absolutely. They are the policymakers of this County. Q. When they made that decision, did they decide where the financial records of the system would be housed and located? A. Again, it predates me. I don't know. Q. Okay. Do you know where the financial records of the system are housed and located? A. Yes. In Human Services. Q. Okay. And where is the Finance Department located, physically, where is that? A. The floor that we are on in this building. Q. Okay. And where is the transportation system located? A. It's over in Route. It's under the consolidated model of Human Services. Q. Now, presently, who is in charge of the financial records for the Hunterdon County Transportation System? A. It ultimately is the Finance Department. I believe there is a relatively new employee over there in Human Services, but it's ultimately the Finance Department's. Q. The Finance Department has the records for the

12 Yard - cross - DeSapio 0:: 0:: 0:: 0::0 0::0 0::0 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:0:0 0:0:0 0:0: 0:0: 0 0 transportation system? A. No. No. The actual finance and the financial matters is ultimately the Finance Department. Q. Who maintains the records for the transportation system? A. I believe it's out at Route. Q. And what's the employee's name who maintains it? A. It's a new employee. Her name escapes me right now, but the managerial executive out there is Jim Shore. Q. Does she oversee that person that maintains the financial records for the Consolidated Transportation System? A. Yes. It's part of her managerial executive duties, yes. Q. Okay. And do you know how that operation works? A. No, I don't. Q. You don't? A. No, I don't. Q. Okay. Is there anything in writing, as far as you know, that says the Finance Department is responsible overseeing Jim Shore or the operation of the Consolidated Financial System records? A. I know that the license of a CMFO and a CCFO

13 Yard - cross - DeSapio 0:0: 0:0: 0:0: 0:0:0 0:0: 0:0: 0:0: 0:0: 0:0: 0::0 0::0 0::0 0:: 0:: 0:: 0:: 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0 0 identifies the responsibility of custody of public funds, and there are other responsibilities, so ultimately all of the financial matters in Hunterdon County in our public service delivery system is ultimately the responsibility of Margaret Pasqua and Kim Browne. Q. Is there anything in writing that the County has adopted, freeholders or you have adopted internally, that says that the Finance Department is responsible for overseeing Jim Shore or the operation, the financial operation of the Consolidated Transportation System? A. The Finance Department is ultimately responsible for all of the financial matters in Hunterdon County, and the answer to your question is, "I do not know that there is anything in writing." Q. Okay. Now, do you understand this first bullet point comment to be that the -- strike that. Ignore the first part of that question. Who was the auditor prior to Wiss? A. Wiss? Q. Wiss. A. Samuel Klein, I believe. Q. Do you understand this first bullet point comment that we are talking about that Samuel Klein had reported as of December st, 0 that the transportation system

14 Yard - cross - DeSapio 0::0 0:: 0:: 0::0 0:: 0:: 0:: 0:: 0::0 0:: 0::0 0:: 0:: 0::0 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0 0 owed downtown $0,.? A. Are you asking me if I know what Samuel Klein's report stated? Q. Yes. Uh-huh. A. No, I don't know that. Q. Did you understand his first comment that Wiss reviewed the 0 audit and decided that instead of the figure being 0,., that the figure should have been zero? A. What I understand from these bullets is that Wiss, our auditor for 0, said that there were several instances that the audited account balances had to be restated because they were not materially accurate. That's what I know. Q. Okay. And did you do any investigation on your own to determine why it was that they were not materially accurate? A. No. Q. The next bullet item, "Golf Course," it was reported at -- is the golf course -- how is the golf course operated? By whom? A. It's a third party vendor who we are in a contract for operations to operate the golf course. Q. Who made the decision to have the golf course operated by a third party vendor?

15 Yard - cross - DeSapio 0:: 0:: 0:: 0::0 0::0 0::0 0:: 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0::0 0::0 0::0 0:: 0:: 0 0 A. Ultimately it would have been the Board of Chosen Freeholders. Q. Okay. And where are the financial books and records of the actual day-to-day operation of the golf course kept? A. I am not sure. Q. Okay. When the freeholders established -- put out a bid proposal in order to obtain an operator for the golf course -- A. Yes, they did. You, as former County counsel, were very involved in helping us go through the process. I remember there was a committee of people, and you were on it. Q. When that bid proposal was put out, did the freeholders adopt any policy or procedure that charged the Finance Department with maintaining the financial books and records for the golf course? A. I am not aware of it. Q. Was there actually, in connection with the golf course, some political controversy and difference of opinion between the freeholders about starting the golf course? A. That predated me, but there was -- there was some difference on the Board and our former governance is our

16 Yard - cross - DeSapio 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0::00 0::0 0::0 0::0 0::0 0:: 0:: 0:: 0:: 0:: 0::0 0::0 0:: 0:: 0:: 0 0 majority rules. Q. And did you have any sense in the years that you were the County administrator, or you have been the County administrator, that the political support, the people who politically supported the golf course on the Freeholder Board, wanted to keep the operation as detached from, what I will call, "downtown" from the administration as possible? MR. GANTNER: Objection; relevance. MR. FLORIO: Overruled. You can answer. A. Would you ask me again -- I am sorry -- Guy. MR. DESAPIO: Can you read that question back to the witness? (Whereupon, the court reporter reads as requested.) A. I don't know that I can answer why the Board makes the decisions they do, but the decision was to continue it as a third party outside vendor. Q. Uh-huh. Talking about bullet point one and two, were you aware that these entries, similar types of entries, had been on the County books for a number of years prior even to the appointment of Margaret Pasqua and Kim Browne to their positions? A. I don't know that I am knowledgeable about what

17 Yard - cross - DeSapio 0:: 0:: 0:: 0:: 0:: 0:: 0::0 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0::0 0::0 0:: 0::0 0 0 was on the books before, but I do know that this new auditing firm came in and audited, evidently by standards of practices in auditing and came up with these examples. Q. Uh-huh. Before deciding to file disciplinary charges based in part on these audit comments, did you investigate the meaning of them at all? A. This was an outside independent auditing firm that came in, audited our financial books in accordance with standards of practices, and these were their findings. No, I did not, nor am I licensed to do that, you know. Q. As the County administrator, do you need a license in order to evaluate whether you want to hold an employee accountable for a particular action or inaction? A. It's interesting you bring that up, Guy, because when you and I had a conversation in my office when I was asking for some guidance as far as supervising the assistant County counsel, and you were very, very resolved that only an attorney could supervise an attorney, and I remember wanting to talk with you, and you were giving me guidance, so, no, I don't manage professionals, but I certainly manage people, and as

18 Yard - cross - DeSapio 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:0:00 0:0:0 0:0:0 0:0:0 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0:0 0:0: 0:0: 0:0: 0::0 0::0 0:: 0::0 0 0 soon as things came to my attention, I reacted, and this was an independent audit by an audit group who audit within the standards of practice of auditing, and they found, whether they were there before or they were there when other people audited, this was their -- these were their findings. Q. And as a part of managing people, when an employee is criticized, do you feel you have an obligation to conduct an investigation before determining -- or at least review an issue before determining that they are responsible for the situation? A. It depends on the case and the situation. Q. The third bullet point says, "Engineering fees were reported as $,.0 as of December st, 0, but should have been zero." I take it your answer -- well, let me just ask. Did you independently ask what that was in regard to? A. No, because if you look at the condition of the material weakness, 0-, it states that they were not materially accurate and, in fact, they had to be restated, so my answer is the same. Q. If you had been told or knew that that third bullet point involved a check for that amount,,.0, which had been written by the Engineering

19 Yard - cross - DeSapio 0:: 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0::0 0::0 0:: 0:: 0::0 0:: 0:: 0:: 0::0 0:: 0:: 0:: 0:: 0:: 0::00 0::0 0 0 Department in December and transmitted to the Finance Department, and that check had not yet cleared the bank, and the Finance Department was still showing it as due on their books simply because the check had not yet cleared, would that change your opinion as to whether or not this was a serious problem for which the Finance Department officer should be disciplined? A. I believe that when the definition of a material weakness is severe enough that they gave examples, and if one of the examples or even two of the examples were not correct, that would be certainly in our plan of correction or Corrective Action Plan. A material weakness, from what I understand, is more of a systemic issue, and there are several examples of why that became a material weakness in internal control, but certainly we would correct it if -- if it was incorrectly stated. That would be -- the Corrective Action Plan would be the place, the forum, to make those changes. Q. But would that event in and of itself in your mind justify disciplining the two chief people in your Finance Department? MR. GANTNER: Objection; asked and answered. MR. FLORIO: Sustained. Q. Now, you know who Mr. Gannon is, right, Dave

20 Yard - cross - DeSapio 0 0::0 0::0 0::0 0:: 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0::0 0:: 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0 0 Gannon? A. Uh-huh. Q. Okay. Did you have any conversation with him about why he characterized these items as "material"? A. Did I personally have a conversation with him why the depth and breadth of these -- no, not personally. Q. Did he tell you or report to you at any time that the only reason that he characterized these entries, correction of these entries as "material" was because of the size of them? A. No, he didn't tell me that. Q. Did these entries, the correction of these entries on the books of the County, result in there being any missing money? A. No, these were mistakes on paper, I believe. Q. When you looked at this as the County administrator and you saw "golf course" was reported at,,0., but should have been zero, did you say to yourself, "I should understand that better given the size of how large that is"? A. No, I didn't. Q. Did any of the freeholders ask you to investigate that? MR. GANTNER: Objection. It calls for hearsay.

21 Yard - cross - DeSapio 0:: 0::0 0:: 0:: 0:: 0:: 0::0 0:: 0:: 0:: 0::0 0::0 0::0 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0::0 0::0 0 0 MR. FLORIO: Overruled. Q. Did any of the freeholders ask you to investigate why that figure in the 0 audit was,,0., but that Wiss wanted to restate it as zero, did they ask you to investigate or did they ask you why that was? A. The results of the audit are what resulted in the charges against Margaret Pasqua and Kim Browne. Q. Okay. Did Mr. Gannon say to you at any time that he was not expressing an opinion as to whether or not there was any fault or responsibility of any particular County employee, but that he was just reporting his accounting determinations and that the determination as to fault would rest with the County? A. He and I never had a conversation like that. Q. Now, the trust fund, County Clerk Trust Fund Cash and Reserve was reported at zero, but should have been,.. Does the Finance Department have any control over the County clerk's trust fund? A. The Finance Department is ultimately responsible for all of the financial items in the County, so even though that trust fund is under the County clerk, it still is calculated and still considered public funds where Margaret Pasqua and Kim Browne would have been the custody of public funds.

22 Yard - cross - DeSapio 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0::0 0::0 0::0 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0 0 Q. Do you know where the records for the trust fund are maintained? A. No, I don't, not for sure, no. Q. Uh-huh. "Planning Board Developers Escrow Fund Cash and Reserve," do you know where that's maintained? A. No, but I would imagine each department, even though it's a centralized finance delivery system, most likely keeps copies of their records in their own areas. Q. Is it not the case that some of these departments -- well, let's just talk about the ones you testified to already. The transportation and the golf course keep their own records, correct, not just copies of them? A. I believe so. Q. And the planning board, does it keep its own records about its development fund? A. I believe so. It's under the auspices of the Finance Department, though. Q. And is your answer going to be -- I shouldn't ask it that way. I apologize. Are there any County-written policies or procedures that say the Finance Department has any special responsibility in connection with overseeing the funds that are independently maintained by a County department or County clerk constitutional officer, any

23 Yard - cross - DeSapio 0:: 0::0 0::0 0:: 0:: 0:: 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:00:0 0:00:0 0:00: 0:00: 0:00: 0:00: 0:00: 0:00: 0:00: 0:00:0 0:00: 0 0 County-written policy? A. It's all part of the County budget and Finance handles the County budget. Q. So would it surprise you then that each year the auditors go out to these independent departments and the constitutional officers and look at their books and then come back and report the balance to the Finance Department? A. It's my understanding that they don't just go out to these independent departments. They go out to however they are conducting their audit, so it's not only the four constitutional officers. I am including the prosecutor as one of those, but many of the departments are visited, and then I don't know how they communicate their findings back to Finance, but there is -- they do go offsite to audit, and they come back and somehow come up with a report with their audit findings. Q. Okay. "Surrogate's office, guardianship account," is the surrogate a constitutional officer? A. Yes. The surrogate is a constitutional officer, as is the County clerk and the sheriff. Q. Okay. And haven't you personally and the freeholders collectively as a group over the years that you have been the County administrator had disputes

24 Yard - cross - DeSapio 0:00: 0:00: 0:00: 0:00: 0:0:0 0:0:0 0:0:0 0:0: 0:0: 0:0: 0:0: 0:0: 0:0:0 0:0: 0:0: 0:0: 0:0: 0:0:0 0:0: 0:0: 0:0:0 0:0:0 0:0: 0:0: 0:0: 0 0 from time to time as to the extent to which you as the administrator and the freeholders to the Board can supervise their operations? A. Certainly. Always referred to you as former County counsel for guidance, so that we are -- you know -- protecting the legal interest of the County, absolutely. Q. Haven't there been times with the sheriff for one, where you have personally tried to withhold bills for payment, checks for payment for bills of the sheriff, and you have gotten into a dispute with the various sheriffs as to whether you had the authority to do that? A. Yes, and the Board always looked to you for legal guidance. Absolutely. Q. Okay. Next, Page 0, item number two, 0-. A. Uh-huh. Q. Is that the issue that we spent some time talking about last time and probably the time before that in regard to the payment of health insurance bills? A. You want to direct me where you want me to look? Q. A third of the way down, Page 0 -- A. Okay. Q

25 Yard - cross - DeSapio 0:0:0 0:0: 0:0: 0:0: 0:0:0 0:0: 0:0: 0:0: 0:0: 0:0:00 0:0:0 0:0:0 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0:0 0 0 Is the issue that the auditors raise in 0-, this issue of payment of health insurance bills which you testified extensively to previously? A. Yes. Under the condition, but it also gives us examples. Halfway down the page which you directed me to look at under 0-, it talks about an overall internal control system which talks about "a process that assesses the quality of internal control performance over time. Examples of monitoring procedures include but are not limited to, the following," and then it gives examples of how internal controls should take place, and then under the "Condition," it does say about the health benefit provider, and the County was paying for those individuals to receive health benefits. Q. Prior to the receipt of this audit, the one you are looking at now, the "Comment" section, had you ever heard the term "internal control" as applicable to the financial operation of the County? A. Have I ever heard the term "internal control"? Q. Prior to the receipt of this audit, the one you are testifying to now. A. Uh-huh. Q. Had you ever heard the term "internal control" as applied to the financial operations of the County?

26 Yard - cross - DeSapio 0:0:0 0:0: 0:0: 0:0:0 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0:0 0:0: 0:0: 0:0: 0:0:0 0:0:0 0:0:0 0:0:0 0:0:0 0:0: 0:0: 0:0: 0:0: 0 0 A. It certainly is one of their responsibilities as the custodian of public funds and is part of their license, Margaret Pasqua and Kim Browne. Q. My question is, prior to the receipt of this audit, had you ever heard of the term "internal control" as applied to the financial operation of the County? A. Yes, I have heard of the words "internal control" as it refers to a Finance Department, our Finance Department. I know what the words "internal control" mean. Q. I understand. Had you heard of it prior to the receipt of this audit? A. With reference to -- Q. The Finance Department. A. The Finance Department. I heard the word "internal control" prior to the -- Q. Prior to the receipt of this audit? A. Yes. Yes. Q. Okay. Now, did you understand that the County purchasing policy was a form of internal control? A. You brought that to my attention the last time when I was up on the stand where you said Mr. Gannon testified that it was an internal control. Anything -- certainly when you look at the

27 Yard - cross - DeSapio 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0:0 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0:00 0:0:0 0:0:0 0:0: 0:0: 0:0: 0:0: 0 0 criteria when Wiss defines what "internal controls" are, it certainly is -- anything from the Purchasing Department is part of internal control. Sure. Q. Okay. Now, do you understand that there are two types of internal controls, one within a department, and one that crosses over various departments in the County? A. That's -- I would agree with that -- well, internal controls, it's the degree in which the controls are defined or prescribed, so internal controls, it's not really different. Internal controls as Wiss described are monitoring functions, and so it's not a different internal control. It's just, I know -- I believe what you're doing the internal controls for. I don't know that it's different, Guy. Q. So when the first bullet point says, "Ongoing monitoring built-in through independent reconciliations, staff meeting feedback, rotating staff, supervisory review and management review of reports," in regard to, say, like, the golf course, the Consolidated Transportation System, do you understand that comment as applying to those operations? A. I agree that that first bullet discusses the responsibility of Margaret Pasqua and Kim Browne to supervise and review and management review of reports,

28 Yard - cross - DeSapio 0:0: 0:0: 0:0: 0:0: 0:0:0 0:0:0 0:0:0 0:0: 0:0: 0:0: 0:0: 0:0:0 0:0: 0:0: 0:0: 0:0:0 0:0:0 0:0:0 0:0:0 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0 0 so if I haven't answered your question -- if I haven't, certainly ask it again, and I can try to answer it, but that looks appropriate for what the internal controls should be for a Finance Department. Q. How would you describe the freeholders' philosophy and your philosophy concerning staffing of departments? A. We make decisions based on need, not want. Certainly if a manager is able to represent a need and has demonstrated that they are effectively utilizing their available staff, I believe that the Board, through the years, have been supportive of requests for additional staff. Q. Uh-huh. Over the last few years, oh, going back, say, 00, 00, is the freeholders' philosophy because of physical crises to cut staff? A. We had a hiring freeze. As a matter of fact, the other day when you said about the points of light, Guy, I remember that was the manifesto, that you drafted for the Board when we knew that we were in the economic downturn and there were several points on that manifesto, but the Board put a freeze on hiring employees. However, managers had the right to come before the Board and substantiate or justify the need for

29 Yard - cross - DeSapio 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0:0 0:0:0 0:0:0 0:0:0 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0 0 additional staff, and then the Board -- the governing body made the ultimate decision whether the requests for additional staff would be adhered to or approved. Q. Bullet point number two, "Periodic site visits performed at decentralized locations and checks performed to determine whether procedures are being followed as intended." When it says, "decentralized locations," would you understand that to mean the golf course operation being someplace else, the transportation operation being someplace else? A. Any department, any service delivery system of the County, yes, absolutely. Q. As you understand the staffing of the Finance Department, did they have the personnel to be going out and making periodic site visits at decentralized locations? A. Are you asking me if they were adequately staffed? Q. No. I am asking you if they had the staff to go out and make periodic site visits at decentralized locations. A. All the managers here in Hunterdon County have to prioritize what's important and how they spend their time.

30 Yard - cross - DeSapio 0 0:0: 0::0 0::0 0::0 0::0 0:: 0:: 0:: 0:: 0::0 0:: 0:: 0::0 0:: 0::0 0::0 0:: 0::0 0::0 0::0 0::0 0:: 0:: 0::0 0:: 0 0 Obviously, internal controls is a very important part of a Finance Department, specifically Margaret Pasqua and Kim Browne. Q. Did you or the Board ever direct the Finance Department to go out and make periodic site visits at decentralized locations and check to perform whether procedures are being followed at these decentralized locations? A. There have been a -- conversations about technical assistance to departments and with finances, but if you are asking me if there is a written policy, there is no written policy. Q. Okay. The "technical assistance" means answering questions. Right? A. Not just that. Technical assistance in actualizing a budget, filling out a budget, any of the -- anything that falls under the Finance umbrella. Q. Uh-huh. Now, the third bullet says, "Follow up on irregularities and deficiencies to determine the cause." Isn't the case that when previous auditors determined in their "Comment" sections of the auditors that there was a deficiency that it was followed up on to determine the cause?

31 Yard - cross - DeSapio 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0::0 0::0 0::0 0:: 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0::00 0::0 0::0 0::0 0:: 0 0 A. DCA requires a Corrective Action Plan, so that's one of the ways that you could follow up on irregularities and deficiencies to determine the cause, but there are certainly other ways which is explained -- you know -- in some of their examples. Q. Uh-huh. What about internal quality control reviews performed, did you or the freeholders ever direct or put in a policy that the Finance Department was supposed to go out and do internal quality control reviews of independent operations at decentralized locations? A. It is part of the managerial executives. We talked about this the other day, Guy, about our new -- all of the job descriptions and the change since May of 0, but it's also part of the responsibility of their license, Kim Browne and Margaret Pasqua, but there is not a County policy that says they should follow the responsibilities of their license, no. Q. Now, the next bullet says, "Management meets with program monitors." Who are the "program monitors"? A. Well, anybody that monitors this program. Q. Well, who in particular are they talking about here, "program monitors"? A. I don't know what the intent of Mr. Gannon's

32 Yard - cross - DeSapio 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0::0 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0 0 statement is here, but, again, I can only tell you whoever monitors their programs. Q. So you don't know what the intent is, but you know the blame is with Margaret Pasqua and Kim Browne. Is that what you are saying? MR. GANTNER: Objection; argumentative. MR. FLORIO: Sustained. Q. Okay. Can management mean you, "Management meets with program monitors, auditors and reviewers to evaluate the condition of the program and controls," could he be criticizing you there? A. It's my understanding that when he -- I mean, this is about the management of the finance service delivery system in the County, but certainly I am a manager. Our first line supervisors are managers. Our middleman managers are managers, you are -- our senior managers are managers, and I am a manager, also. Q. Next bullet point, "Internal audit or a designated employee routinely tests for compliance." Does the County have an internal auditing department? A. No, but it's the responsibility of both Margaret Pasqua and Kim Browne as part of their license. Q. To conduct internal audits? A. It says, "Develop internal controls to protect

33 Yard - cross - DeSapio 0:: 0:: 0:: 0:: 0::0 0::0 0::0 0:: 0:: 0::0 0:: 0:: 0:: 0:: 0:: 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0::00 0::0 0:: 0 0 the county's assets," so internal controls, part of internal controls could be an audit, it could be as they explain further up, staff meeting feedback, independent reconciliations, rotating staff, supervisory review and management review of reports. "Internal controls" encompasses any check and balance that you would have to make sure that the county's assets are protected. Q. So the last bullet point, "The governing body reviews the results of all monitoring or audit reports and periodically assesses the adequacy of corrective action," how can that be a criticism of Margaret Pasqua or Kim Browne? MR. GANTNER: Objection. There is an assumption in the question that there is a criticism, and I don't think that there is an appropriate foundation for that. You say right in the report, "These are examples of monitoring providers." MR. FLORIO: Mr. DeSapio, do you want to be heard on the objection? MR. DESAPIO: I understand this witness' testimony that these comments serve as the foundation for her proposing to discipline and fire these two employees, and I am just trying to establish what in

34 Yard - cross - DeSapio 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0::00 0::0 0::0 0::0 0::0 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0 0 here really could be related to their responsibility and what is the responsibility of others, and this says on its face, and I just wanted her to acknowledge, I am asking her whether she acknowledges that it doesn't apply to them. MR. GANTNER: Actually, that's not her testimony. Her testimony is that the audit report drew her attention to numerous deficiencies. She didn't hone in on these particular bullet points and say she relied on each and every one individually and, again, they are not by definition, they are not criticisms, because the report itself says what they are. They are examples of monitoring procedures. MR. FLORIO: I understand your objection, but I will allow the question. The inquiry is within the scope of the nature of the charges. MR. DESAPIO: Can you read back the question and see whether it's inartfully asked, and, if so, I will re-ask it, but can you read back the question? (Whereupon, the court reporter reads as requested.) A. You want me to answer now? Q. Yes.

35 Yard - cross - DeSapio 0:: 0:: 0:: 0::0 0::0 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:0:0 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0 0 A. The statement, "The governing body reviews the results of all monitoring or audit reports and periodically assesses the adequacy of corrective action" is an example. It's not -- I don't view it as a criticism. I am not criticizing, and I did testify before that it was the totality of the audit report, not the individual examples. Q. Uh-huh. So could this whole section then -- strike that. Ignore that part. The freeholders adopted the County purchasing policy, did they not? A. In, yes. Q. Okay. Could this whole section be read to state that, "The freeholders should exercise their management responsibility to develop an internal control policy that covered these issues"? A. No. Q. Okay. Let's go to Page. Do you, in fact, understand that there are two parts to PB-, the first part, items one and two, "0- and 0-," being items that were material, and there being a second part which begins with the "0-"? A. The findings, yes.

36 Yard - cross - DeSapio 0:0: 0::0 0::0 0::0 0:: 0:: 0:: 0:: 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0::0 0::0 0::0 0::0 0:: 0:: 0::0 0:: 0:: 0 0 Q. General comments? A. Yes. Q. Did Mr. Gannon ever describe to you that these items listed in this section could not be considered significant deficiencies? A. Findings certainly have a different weight than a material weakness. Q. Did he ever use the words with you that "They could not be considered significant deficiencies"? A. Not that I recall. They are findings. Q. In your years as County administrator, have there been comments in each of the County audits that have been received during those years? A. As opposed to material weaknesses? Q. Yes. A. This is the first audit that there has ever been, to my knowledge, material weaknesses. Q. That was not the question. The question was, in the years since you have been County administrator, have there ever been comments made in the general "Comments" section of the audit? A. Yes. Q. Okay. And has anyone ever been disciplined for comments made in the general "Comments" section of an audit in years?

37 Yard - cross - DeSapio 0:: 0:: 0:: 0:: 0:: 0:: 0::0 0::0 0::0 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0::00 0::0 0::0 0:: 0 0 A. No. Q. Okay. Let's take 0-. What's your understanding of what happened there that resulted in that comment? A. My understanding is what would be written, which said there were three -- revealed three instances in which the County did not properly encumber funds prior to placing an order with a vendor for the procurement of goods and services. Q. Okay. Did you investigate what that meant or what that referred to? A. No, I did not. Q. Okay. Would you be surprised then if Mr. Gannon related to you that that was three instances where County employees, not Margaret Pasqua or Kim Browne, bought things prior to getting a purchase order? A. The overall internal controls rest with Margaret Pasqua and Kim Browne. Q. Would it surprise you then if Mr. Gannon had related that this situation involved County employees in three instances buying goods without getting a purchase order first, would it surprise you? "Yes" or "no"? A. No, finding that relates to any of the service delivery of financial services, no, it would not

38 Yard - cross - DeSapio 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0::00 0::0 0:: 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0::0 0::0 0::0 0::0 0::0 0 0 surprise me. Q. Okay. Can you explain for us, how in your estimation either Kim Browne or Margaret Pasqua can be responsible if a County employee goes out and orders something without getting a purchase order first? A. The responsibility of that particular instance that you gave would certainly preliminarily lie with the person who was doing whatever the finding said. However, the Finance Department, and before the bills are paid, that's the last stop and, perhaps, why the license is so specific as far as the responsibilities, so the actual "infraction," if you will, or "deficiency," or "finding," we seem to have a lot of words if somebody has done something wrong, somebody has done something wrong, but the actual checks and balances to prevent it from happening again lies with the Finance Department, specifically Margaret Pasqua and Kim Browne. Q. Uh-huh. How would you propose that Margaret Pasqua and Kim Browne could stop somebody from going out and buying something without a purchase order, how do they physically do that? A. Proactively they would not be able to do that, but reactively, and certainly preventively in putting internal controls in place, checks and balances, to

39 Yard - cross - DeSapio 0::0 0:: 0:: 0:: 0::0 0:: 0:: 0:: 0:: 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0::0 0::0 0:: 0::0 0::0 0:: 0 0 prevent it from ever happening, certainly lies with Margaret Pasqua and Kim Browne. Q. Okay. Even though the other day you weren't familiar with the total process for paying a bill, you are familiar that you need a purchase order before you order something. Correct? A. Yes. Q. Okay. And as County administrator, when you read an audit comment somebody has bought something without a purchase order, you didn't conduct any investigation to see who did it and what department, whether the department head took disciplinary action, whether people were going to be reminded that they weren't supposed to buy things without purchase orders, you didn't do any of that. Correct? A. That most appropriately would be done at the Corrective Action Plan when we take a look and see what has happened and we find out how it happened and what internal controls or checks and balances we can put in place to prevent it from happening again. Q. Page, 0-. What do you understand that comment to be in regards to? A. The condition, which is explaining what happened by this independent audit finding, said that NJAC

40 Yard - cross - DeSapio 0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0::00 0::0 0::0 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0::0 0::0 0 0 :0-. which also is part of the responsibilities of the license, sets forth the requirements of the chief financial officer or certifying finance officer must perform in order to certify the availability of funds prior to the County entering into a contract or executing a purchase order. The purchase order that the County currently utilizes does not adequately document that this certification is occurring for each of the county's purchases. Q. Now, are you aware of the fact that the County purchasing manual says that it's the responsibility of the freeholder clerk to ask the Finance Department for a Certificate of Availability of Funds? A. Evidently, that's not what NJAC :0-. says, but no, I am not. I am not. I know that the purchasing manual in, we went through several years of trying to update it, of which you and one of your associates in your office spent many, many hours with us bringing it up-to-date, and it never -- never seemed to get adopted, so I don't know if the old one says what the new one is supposed to say, but I do know that NJAC :0-. through. says something different. Q. Okay. Would you look at PB-, please.

41 Yard - cross - DeSapio 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:0:0 0:0: 0:0: 0:0: 0:0:0 0:0: 0:0: 0:0:0 0:0: 0:0: 0:0: 0:0: 0:0: 0:0: 0 0 Would you read Item on PB-. A. "The Finance Department is contacted by the freeholders' office to prepare a certificate indicating that sufficient funds are available for the acquisition." Q. When you read this audit comment, 0-, did you discipline or propose to discipline the freeholder clerk for not asking for a Certificate of Availability of Funds? A. As I said before, when the Corrective Action Plan is developed, certainly we are going to need to look at any of the situations, but -- that are cited, and if we want to -- you know -- decide that we should not follow the law. Q. But if you wanted to decide you should not follow the law -- is that what you just said? A. I just said the law is pretty clear, what this says -- you know -- the policy from. I don't know if this law has been updated since when we wrote the first purchasing manual. Q. But you decided to discipline Margaret Pasqua and Kim Browne? A. As a result of the gravity, as I have testified, as the gravity of the situation, the depth and breadth of this 0 audit and the ultimate responsibility of

42 Yard - cross - DeSapio 0::0 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0::0 0:: 0::0 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0::0 0::0 0:: 0 0 Margaret Pasqua and Kim Browne in delivering financial services and protecting the county's financial assets. Q. Are you saying or not saying that 0- is a basis for your wanting to discipline Margaret Pasqua and Kim Browne? A. No. Q. Yes. A. It was the totality of the 0 audit conducted by an independent auditor, a new independent auditor, and that was how -- how I decided to draft the charges and the ultimate recommended penalty of termination. Q. I show you PB-. Do you recognize that? A. Well, I don't know that I have ever seen it, but it coincides with :0-, which is referenced in this finding. Q. And you testified -- A. I am sorry. Q. That's okay. You testified that you felt that that regulation, :0-, is what governed the county's responsibility in connection with Certificates of Availability of Funds. Correct? A. That's what was cited by the auditor, yes. Q. Can you read on the top of Page what subsection

43 Yard - cross - DeSapio 0:: 0:: 0::00 0::00 0::0 0::0 0::0 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0::00 0::0 0::0 0::0 0::0 0:: 0 0 four on the first paragraph says? A. "Before a governing body approves a resolution or ordinance authorizing the entering into of a contract, the local unit attorney shall be satisfied that a Certificate of Availability of Funds has been provided." Q. The local who authority? A. The local unit's attorney. Q. Attorney, local unit's attorney. Okay. When you read this audit comment, did you propose to discipline County counsel for not making that determination prior to the freeholders acting in connection with any payment? A. I made a decision as a result of the totality of this audit to recommend discipline for Margaret Pasqua and Kim Browne and, I guess, would that also have applied when you were County counsel, Guy, because it says -- you're right -- it says the "local unit's attorney." I don't remember ever you saying that you were satisfied the Certificate of Availability of Funds had been provided. Q. I think you would be surprised, Ms. Yard -- A. I don't know. Q. -- if you were on top of what was attached to every contract that was signed.

44 Yard - cross - DeSapio 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0:: 0::0 0::0 0:: 0:: 0:: 0:: 0:: 0:: 0 0 A. All right. MR. GANTNER: Objection. MR. DESAPIO: Can I just say, if we can stop talking about, "Guy, you should know this," and, "Guy, you should know that," I am biting my tongue, but, I think, that the answers should be directed to the question and not directed to me. MR. GANTNER: Objection to that. MR. FLORIO: Counsel. MR. GANTNER: I object to the remark. The answers have been directed to the question, and it's sort of an unavoidable aspect of this case, given the circumstances. MR. FLORIO: I understand that those kinds of responses might strike a chord with you, Counsel. I have said several times on the record, though, that there is no jury here. I assure you that I will not be swayed by assertions that don't speak necessarily immediately to the issue, but I am not going to attempt to knuckle the witness in her effort to respond to your inquiries in a candid fashion. MR. DESAPIO: I understand that, Mr. Florio. I hope that was my one free shot. MR. FLORIO: I acknowledge you got it.