Point Pleasant Borough will impose 33 unpaid furlough days on all municipal employees except police, as it grapples with a fiscal crisis and a mess of 2010 financial records, Mayor William Schroeder said Monday.

The borough is prohibited by the state from furloughing police.

"We still have a long way to go," said Schroeder of the budget process. "It's been a challenge."

Councilman Chris Leitner, finance committee chairman, said recently, "This is easily the worst financial situation the borough has ever seen."

Layoffs and municipal service cutbacks also are possible as the borough begins to cobble together a new municipal budget, a process that has been delayed by months by shoddy record-keeping all of last year, according to an auditing firm that prepared an annual financial statement (see attached letter and statement under photos).

The financial statement, by Holman and Frenia, said the 2010 records, compiled by former Chief Financial Officer Judy Block, "were in complete disarray."

The "disarray" included "no bank reconciliations done for the entire year" and "a net amount of $3,691,375 was improperly posted or not posted to financial statements, including $49,858 in erroneous payroll charges," the statement says.

That amount of $3.6 million is more than the current total of assessed property in the borough, according to the statement. It says the borough reported to Ocean County in January that the net valuation of taxable property is $3,255,383.

Also, Block failed to record the entire municipal tax levy of $54 million, according to the statement.

"A major reconstruction of the records was necessary to complete the annual financial statement," according to the statement. "....General ledgers were not prepared, encumbrances weren't posted and internal controls weren't followed."

"Judy Block seems to have used a system of hieroglyphics that no one can seem to figure out," Schroeder said, referring to how Michelle A. Swisher, the borough's new part-time chief financial officer, and Business Administrator David Maffei are finding it challenging sorting out the records to figure out how much money the borough can apply to the next budget.

Thomas Fallon, a separate auditor, is analyzing the financial report to figure out how much money the borough actually has.

Schroeder and Leitner have each said in recent interviews that only after the audit is done will they know if the lack of financial accountability was merely gross negligence or if there is actually any money missing.

So it's unclear how much of the borough's dire budget picture is a result of the sloppy record keeping.

Schroeder, who became mayor in January, said budget decisions made during the past two years, under a prior administration, are also contributing heavily to the current crisis.

Block said on Tuesday that she retired in June from her full-time position, returned in August and left again in early December.

Although borough officials do not yet have the full budget picture, they have enough information to realize that at least some furlough days will be needed.

 The borough cannot raise municipal taxes more than 2 percent, as mandated by the state, with the exception of debt and pension payments, Maffei said.

And it's far too late for the borough to ask the state to allow a cap waiver, Maffei said. He said the borough would have had to introduce its budget by March to be permitted to ask the state for a cap waiver.

However, the borough still has not introduced a budget because it needed the financial and auditing work to reconstruct and examine last year's records.

 The council recently held budget workshop sessions to hear budget requests from department heads. The next budget workshop is scheduled for 7:30 p.m. Wednesday at Borough Hall.

There will be some discussion of department heads' capital budget requests at the regular council meeting at 7 p.m. Tuesday at Borough Hall.

The council had voted at a meeting last month to authorize its  finance committee to speak with the employees and bargaining units.

"Our hope is that we can find mutually agreeable solutions, perhaps even ideas we haven't contemplated yet," Leitner had said.

One of the many services the borough will have to plan carefully is collection of trash and recycling, all currently handled by private contractors.

The borough is contemplating having its public works employees provide those services and also weighing whether to continue twice-weekly pick-ups during the summer or to have weekly pick-ups all year.

"We are not pushing for any one option over another," Leitner said in a recent interview. "What we are doing is getting the pricing on all the options, from in-house trash collection to contracting trash collection out, so we can do a valid comparison and pick the best option for the borough."