Mercer County Paid Nearly $4.5 Million in Fines and Interest for Delinquent Taxes, Investigation Finds
An Office of the State Comptroller investigation reveals Mercer County regularly failed to make timely and sufficient payroll tax payments.
TRENTON – The Office of the State Comptroller (OSC) released a report today revealing that Mercer County paid nearly $4.5 million in penalties and interest for delinquent tax filings and payments between 2018 and 2021. During this period, the Mercer County Finance Department regularly failed to make adequate and timely payroll tax payments to both the Internal Revenue Service and the New Jersey Division of Taxation.
Employers are required to file quarterly payroll taxes to both state and federal tax agencies. For each delinquent filing, Mercer County was assessed penalties and interest charges. In total, the County incurred $5.5 million in penalties and interest for delinquent taxes. But with abatements of penalties from the Internal Revenue Service, the amount owed and paid was reduced to $4.48 million.
“Mercer County inexplicably wasted millions of dollars by failing to pay its state and federal taxes on time,” said Kevin Walsh, Acting State Comptroller. “When the government doesn’t pay the bills, the taxpayers pay the penalties.”
OSC’s investigation found that the county finance department, led by Mercer County’s Chief Financial Officer (CFO), lacked basic internal financial controls; it did not have an organizational chart, written policies, or a system of checks and balances to ensure that its financial system was properly managed.
During the investigation, OSC also discovered that the CFO did not have nor did he seek to obtain the statutorily required credentials to hold the position of CFO—for the entire time he was employed by the County. By law, the CFO is required to hold a county finance officer certificate, which involves training courses, prior experience as a finance officer, and certain higher education requirements. In August 2022, Mercer County informed OSC that the CFO was placed on administrative leave without pay for his failure to secure the credentials.
Appointed by the County Executive, the CFO operated independently, with minimal oversight by his supervisor, OSC found. The County Administrator, who manages day-to-day affairs for county government, told OSC that she gave the CFO substantial discretion in handling departmental operations. In the absence of effective internal controls monitored by executive level employees, the deference provided to the CFO allowed the waste to go undetected for years.
Mercer County failed to make timely tax payments for 13 consecutive quarters from July 2018 through September 2021. During that time, there was only one quarter in which the County was not charged interest due to late payments; during that quarter, the County had instead overpaid by more than $3 million. The IRS automatically applied part of that overpayment to the County’s prior delinquent taxes and returned the remainder.
“The County didn’t take basic steps to prevent these wasteful payments and didn’t catch that its unlicensed CFO wasn’t paying the County’s bills on time,” said Walsh. “This wasn’t a one-time mistake. It was a pattern that went on for years.”
Although OSC made several requests, the County did not provide a complete list of all of its bank accounts, the names of the individuals who had access to accounts, or any documentation establishing how penalties and interest were paid.
OSC recommended changes to increase financial oversight and prevent future waste. The County has agreed to implement OSC’s recommendations and has formed a Finance Committee to oversee the operations of MCFD.
Read the full report.
To report government fraud, waste, mismanagement or corruption, file a complaint with OSC or call 1-855-OSC-TIPS.
The Office of the State Comptroller (OSC) is an independent State agency that works to make government in New Jersey more efficient, transparent and accountable. OSC is tasked with examining all aspects of government expenditures, conducts audits and investigations of government agencies throughout New Jersey, reviews government contracts, and works to detect and prevent fraud, waste and abuse in Medicaid.
Waste or Abuse
Waste or Abuse