ORDER

TO Chester City Elected Officials, Solicitor and Employees

FROM Michael Doweary, Receiver
DATE March 2, 2022
RE Order re: Necessary Steps to Comply With Recovery Plan
________________________________________________________________________________

Background
I am issuing this order pursuant to sections 704(a)(2), 708(1) and (2) of the
Municipalities Financial Recovery Act (“Act 47”), 53 P.S. §§ 11701.101-11701.712.
Section 704(a)(2) mandates that the Receiver’s Plan of Recovery for the City of Chester
(the “Plan”), which was approved by the Commonwealth Court on June 7, 2021, shall
have the effect of “suspending the authority of the elected and appointed officials of the
distressed municipality or an authority to exercise power on behalf of the distressed
municipality or authority pursuant to law, charter, ordinance, rule or regulation to the
extent that the power would interfere with the powers granted to the receiver or the
goals of the recovery plan.” 53 P.S. §§ 11701.104(a)(2).

Pursuant to the Commonwealth Court’s June 7, 2021, Order approving the Plan and Act
47, the Plan is designed to ensure that the Receiver and the City can provide for
“continued provision of vital and necessary services” which is defined as “basic and
fundamental municipal services, including …payroll and pension obligations.” The City’s
Finance Department and Human Resources is integral to the Receiver’s and the City’s
ability to provide such vital and necessary services and to achieving the goals of the
Plan. The ability of the City and the Receiver to implement the Plan is thus directly tied
to the Receiver’s ability to receive cooperation from and to direct the City’s Finance
Department and Human Resources Division.

I must issue this Order to address repeated actions taken by Councilman William Morgan
in his capacity as the Director of Accounts and Finance that have interfered with the
powers granted to me and with the goals of the Plan. Furthermore, with Mr. Morgan as
director, I have lost confidence in the City’s Finance and Human Resources Departments
(which he oversees) to accurately carry out basic municipal services such as payroll, tax
reporting, financial reporting, and audit preparation. Finally, based on Mr. Morgan’s
actions (and as I explained to the City’s external auditors on February 25, 2022), I have
serious concerns about the internal controls and processes within the Finance
Department, which impedes my ability to fulfill my statutory duties under Act 47.

I have attempted to address my concerns with Mr. Morgan previously, even having to
issue orders on October 8, 2021, and November 8, 2021, which are incorporated here by

Receiver for the City of Chester

Commonwealth Keystone Building, 400 North Street, 4th Floor | Harrisburg, PA 17120-0225 | 717.231.5558 | dced.pa.gov
reference, but to no avail. Additionally, with great difficultly, I have directed the City to
contract with a qualified Interim Chief Financial Officer, Ms. Sheila Winfrey-Brown, but
Mr. Morgan has refused to fully cooperate with her and has impeded her ability to
function in her role.

The City’s Finance and Human Resources Departments are integral to the City’s ability to
provide vital and necessary services and to achieving the goals of the Plan. My ability to
develop and implement the Plan is thus directly tied to my and my team’s ability to
receive accurate information and cooperation from the City’s Finance Department and
Human Resources Division.

Rationale for Order

Chester is a city that is near bankruptcy and but for federal rescue plan money and an
emergency loan from the Department of Community and Economic Development
(DCED), would have run out of money last year. The City remains in a critical financial
condition. I and my team do not have the luxury of time to continue to struggle with
interference in fulfilling our statutory duties under Act 47. The City Finance and Human
Resource departments’ inability to complete basic tasks accurately and timely, and
outright refusal to comply with orders that I made in my role as Receiver, have a direct
financial impact on the City. The issues that led to this Order directly relate to and
impede my duty for the “continued provision of vital and necessary services” under Act
47.

Mr. Morgan has served as the Director of Accounts and Finance since September 2016.
The following is a representative, but not exhaustive, list of actions that Mr. Morgan
either personally took or which occurred while he served as Director of Accounts and
Finance and for which the departments he supervises are responsible:

1. In January, my team discovered that a significant number of police officers and

firefighters are being paid incorrect base salary and longevity amounts – with
some employees receiving more than contractually entitled and some receiving
less. See WF 08 on p. 74 of Amended Recovery Plan. In addition to having to
address the financial impact to the City and the employees, the time that my team
has spent uncovering these errors and attempting to resolve them is time which
we are not able to spend on implementing other important parts of the Plan.

2. Without any budgetary authorization and in direct contradiction of a directive, Mr.

Morgan verbally instructed payroll staff to make payments to certain employees
totaling $137,540 earlier this year. This amount was not budgeted for 2022,
meaning that we will need to find cuts in other areas to offset these costs. The
City remains in a situation where it could run out of money this year and
unauthorized and unbudgeted expenses such as these are completely
irresponsible. See FIN 03 on p. 60 of Amended Recovery Plan.

Receiver for the City of Chester

Commonwealth Keystone Building, 400 North Street, 4th Floor | Harrisburg, PA 17120-0225 | 717.231.5558 | dced.pa.gov
3. The City has incurred IRS tax penalties of approximately $750,000 due to late or
inaccurate W-2 and W-3 filings. These basic problems persist. In 2021, the City
incorrectly submitted W-3 information on a W-2 form. See FIN 02 on p. 60 of
Amended Recovery Plan.

4. The last audit that the City has completed was for 2018. Audit completion is being
delayed due to excessive time needed to provide basic data. See FIN 02 on p. 60
of Amended Recovery Plan.

5. Calculations to access money under the American Rescue Plan Act have been
delayed due to the excessive time needed to provide basic data. See FIN 03 on p.
60 of Amended Recovery Plan

6. Mr. Morgan has exhibited a blatant unwillingness to allow Interim CFO Ms. Sheila
Winfrey-Brown to fulfill her duties (which was the subject of a previous Order by
me dated November 8, 2021). Mr. Morgan:
a. Refused to give Ms. Winfrey-Brown access to the financial system until
ordered by the Receiver;
b. Refused to give Mr. Winfrey-Brown access to a City Hall pass until ordered
by the Receiver;
c. Refused to give Ms. Winfrey-Brown a city email address until ordered by the
Receiver;
d. Informed staff that they need to get his approval before giving Ms. Winfrey-
Brown information;
e. Continues to exclude Ms. Winfrey-Brown from meetings with staff.

7. I have learned of practices in the Finance Department that raise serious concerns
about internal control and processes including Mr. Morgan approving
reimbursements for himself for the purchase of $1,500 in gift cards in December
2021 and directing the accounts payable employee to reimburse him. Interim CFO
Winfrey-Brown requested the receipts for the items that were purchased with the
gift cards. To date, Mr. Morgan has not submitted the requested receipts or
sufficient documentation for the reimbursement.

8. In November 2020, while conducting a review of employees on the City’s health

care plans, my team discovered seven (7) City employees who were on a very
expensive health care plan that had been discontinued for active employees.
Those seven employees were Mayor Thaddeus Kirkland, Solicitor Ken Schuster,
then-CFO Nafis Nichols, Mr. Morgan and the three other employees of the City’s
human resources department. After this was brought to the then-CFO’s attention,
these individuals were moved to the plan that was offered to active employees.
See FIN 01 on p. 59 of Amended Recovery Plan.

Receiver for the City of Chester

Commonwealth Keystone Building, 400 North Street, 4th Floor | Harrisburg, PA 17120-0225 | 717.231.5558 | dced.pa.gov
Order
Based on the aforementioned incidents, and Mr. Morgan’s consistent interference with
the Receiver’s statutory duty and his actions which impede the goals of the Plan, the
Receiver issues the following order. This Order applies to Mr. Morgan in his role as the
Director of Accounts and Finance, and is not intended to restrict him from performing
any of his duties as a councilman, other than in his role as the Director of Accounts and
Finance.

1. Mr. Morgan shall not perform any duties, take any actions or make any
decisions that interfere with the duties of the Interim CFO (or her successor) or
the decisions of such person with respect to any such decisions or duties as
detailed in section 120.06 of the City’s Administrative Code.

2. Mr. Morgan shall not perform any duties, take any actions or make any
decisions with respect to the City’s day-to-day payroll, or the day-to-day
expenditure of funds for any reason without the approval of the Interim CFO, or
her successor. This does not prevent Mr. Morgan from voting on appropriations
or payments in his capacity as a council member.

3. Mr. Morgan shall not perform any duties, take any actions or make any
decisions that relate to the oversight of the Finance and Human Resources
Department.

4. Mr. Morgan shall not direct any employee to act or take any action that in any
way interferes with the operations of the City’s Finance and Human Resources
Departments or that interferes in any way with the decisions of the Interim CFO
or her successor unless such directive is approved by the Receiver.

5. Mr. Morgan shall not take any action to interfere with the duties of the Interim
CFO or her successor without the direct review and approval of the Receiver.

6. Mr. Morgan shall take all steps necessary to ensure that the Interim CFO and
her successor has access to all offices, files and all equipment that she or the
Receiver requests.

7. Mr. Morgan shall comply with all programs, policies, procedures, audit
recommendations, and monetary and financial controls implemented by the
Interim CFO and her successor.

8. Mr. Morgan shall not take any action to interfere with the supervision of the
Human Resources and Finance Departments and any other employee under the
supervision of the Interim CFO or her successor.

Receiver for the City of Chester

Commonwealth Keystone Building, 400 North Street, 4th Floor | Harrisburg, PA 17120-0225 | 717.231.5558 | dced.pa.gov
9. All City finance staff shall report directly to the Interim CFO or her successor.
a. Mr. Morgan shall not have the ability to direct finance staff and shall
make any requests of finance staff through the Interim CFO.
b. Mr. Morgan shall not hold meetings with or contact finance staff without
the approval of the Interim CFO.

10. The City’s Chief Operating Officer (COO) Cyrise Dixon shall become the
authorized signer of checks.
a. Mr. Morgan shall not be an authorized signer of checks.

11. City employees and elected officials shall provide the Interim CFO with any
information she requests and shall follow the directives she makes in her role
as Interim CFO.

12. The Interim CFO shall have the ability to approve invoices for payments.
a. Mr. Morgan shall not have the power to approve invoices for payments.

13. The COO shall have the ability to approve wire transfers.
a. Mr. Morgan shall not have the power to approve wire transfers.

14. Human Resources staff shall report directly to the COO.

a. Mr. Morgan shall not have the ability to direct human resources staff and
shall make any requests of human resources staff through the COO.
b. Mr. Morgan shall not hold meetings with or contact human resources staff
without the approval of the COO.

15. ARPA project coordination shall be transferred to the Interim CFO and COO.
a. All potential ARPA projects shall be listed on a document that is kept by
the Interim CFO and COO and shall not be added to, changed or removed
without the express written consent of the Receiver.
b. Mr. Morgan shall not contact UHY which is the third-party providing
professional services to the City to ensure compliance with ARPA.

Receiver for the City of Chester

Commonwealth Keystone Building, 400 North Street, 4th Floor | Harrisburg, PA 17120-0225 | 717.231.5558 | dced.pa.gov