Dismayed by the recent news of an unknown police department slush fund, the Dewey Beach Audit Committee is recommending town council conduct an investigation into the department’s management of a federal surplus equipment program that was the source of the money.

There’s clearly a lack of internal control, said Larry Silver, committee chair, during the Oct. 27 meeting. The town should have known about these funds, but they didn’t, he said.

Silver, a CPA since 1975, said there were two basic options for council. First, he said, council could direct an outside auditor to conduct an investigation with agreed upon procedures. Salisbury-based TGM Group, the independent auditor the town uses, could do this investigation, said Silver.

The second option would be to conduct a forensic audit, Silver said. In that scenario, he said, the auditor gets to decide what will be looked at. He recommended an auditor separate from TGM conduct this audit.

Mayor TJ Redefer said due to possible unintended legal ramifications, he doesn’t like the idea of a forensic audit, but he supported the town looking into how the police were conducting the program. He also said the town might have to investigate record-keeping practices of the beach patrol.

It’s time to hit the reset button in town, he said.

Redefer said the police department took some liberties, but he said he also supported them. He said he’s spoken with police Chief Sam Mackert about the issue, and Redefer said he believes the police department has been properly keeping records, just not sharing them with former Town Manager Marc Appelbaum because Markert didn’t trust Appelbaum.

Trust issue or not, committee members weren’t happy.

If this had been done in private business, they’d be fired, said Dennis Trencher.

Diane Tenhooper said council should have already acted. At this point, fraud can’t be ruled out, she said.

“This smells bad. It does,” Tenhooper said.

Silver explained as part of the the town annually approving its independent audit, the mayor and the town manager have to sign a representation letter saying to the best of their knowledge they’ve provided the auditor with all relevant information.

Redefer said all department heads, including the police chief, beach patrol captain and building inspector, will be required to sign the letter going forward.

In the end, the committee decided to recommend council start an investigation with agreed upon procedures, with the understanding more could be needed depending on what is found.

The committee also went over the year-to-date financials for the town.

Silver said six months through the fiscal year, which runs April 1 to March 31, the town’s expenses and revenues are tracking fine except for one area – legal fees. At $210,000, the legal fees are $180,000 over the $30,000 budgeted, he said.