The Federal Bureau of Investigation is investigating the alleged misappropriation of $1.6 million and other malfeasance in Penn Forest Township.

The board of supervisors made the announcement at a public meeting Monday, alleging that previous boards and employees engaged in cover-ups to make residents believe the township was in good shape financially, when in reality it was floundering.

"This whole township is being investigated by the FBI, the same (agents) who went to Luzerne County. They are going to go through this whole accounting system from A to Z, starting from the auditors to the zoning department," Chairman Paul Montemuro said.

"We have been running negative numbers, and everyone thought we had millions," he said. "We've been flat broke for years."

Montemuro said he and his colleagues, seated in January, 2008, say they have uncovered what they describe as an elaborate web of deceit woven by previous boards and employees.

Supervisor Alan S. Katz offered as an example a parking facility that generated $286,614 in revenue that was listed in the 2006 audit report.

The parking lot never existed, he said.

As previous boards assured residents all was in order, the township was actually in the red. In 2007, the deficit came to $173,057. In 2008, it was $464,014. The deficits "snowballed," Montemuro said, but residents were kept in the dark.

Montemuro said that previous boards kept the money flowing despite the deficits "by taking from other departments. They were taking from all these departments to pay the bills. Sooner or later, Peter runs out to Paul, and Paul's bone dry, and that's the point where we got shafted, holding a bag of crap for $650,000."

By 2009, the township's fiscal health appeared to have rebounded, and there have been no deficits since. Katz said the township now has a surplus of $2,195,927.

Montemuro said the township is in the best shape financially of all Carbon County municipalities.

"People might not agree with how we're fixing it, but right now, we're in the number one spot in the county," Montemuro said. It took less than four years to fix the mess, he said, but it was difficult to piece together the chain of events that led to the shortfalls.

Montemuro held up an empty audit file book.

"Every piece of paper is missing out of it. No records, nothing," he said. "Thank God the state keeps records. We had to go online to pull them up. All the paperwork vanished for the whole township when it came to ... how we are financially.

"There was nothing mentioned in the minutes that the township was in a negative number," Montemuro said.

Vice-chair Judith Knappenberger said the last time she saw the records was in August 2010.

The new board of supervisors have fired most employees, from secretaries to the solicitor, firing longtime local engineers and code, sewage and zoning officers and replacing them with an outside firm, Barry Isett & Associates, Allentown. Isett representatives said they would explore the some 800 incomplete permits that have been sitting in the township offices, some of which go back 30 years, and will be contacting those property owners to bring them up to date.

In years past, Montemuro said, the township "catered to realtors and developers," who made a lot of money at the township's expense.

Supervisors also swore in new solicitor Gregory Mousseau, who replaced Thomas Nanovic, on Monday. Shortly after taking office, supervisors hired the certified public accounting firm Kirk Summa of Stroudsburg as auditors.

Katz said that auditors should have recommended taxation to help the township out of the deficit in 2007 and 2008. One former auditor, Ellen Kattner, said auditors did indeed make recommendations, but that they were ignored.

Residents' warnings were also ignored, supervisors said. Montemuro pointed out one man in particular, Walter Gibbons, who attended most public meetings and repeatedly questioned supervisors about disparities he saw in the figures.

Gibbons never received answers, Montemuro said.

Gibbons said he read the 2006-07 auditors' reports, and, "with the capabilities they had, they did an excellent job. They made recommendations, and just about every one that they made, you people (the current board) have implemented. But it took so long to implement them, it was tooth and nail, fighting over nonsense."

Katz said that auditors had to work with the figures they were given, and those figures were apparently wrong. Secretaries were not trained properly enough to be able to spot the errors, he said.

"This is a whole bunch of wrongs," Montemuro said. "This is not blaming one person. This is a group."

The township operates differently now, he said.

"Everybody now is held accountable for every penny," he said.