ONA -- Bernie White wrote a check to pay for sewer service two years ago.

Now he is one of 450 customers of the Salt Rock Sewer Public Service District faced with letters demanding they write their checks once again.

The Public Service District recorded many of the customers' check numbers and amounts, but the actual payments were never deposited into the district's bank account between May 2006 and December 2007.

The total loss tallied $95,286.14 -- $27,807.19 cash and $67,478.95 in checks.

Investigators allege embezzlement and a defense attorney points to shoddy bookkeeping. That argument continues two years later, as the Public Service District copes with a critical cash flow problem.

The Public Service District has taken various paths to recover the lost monies, but $73,420 remains outstanding. District officials worry restitution will never be paid in full and fear insurers will only cover the missing cash. That means customers could be left holding the bag for more than $65,000.

White, a landlord and retiree, counts himself among the frustrated. His letter concerns two checks, both of which were posted on the district books Nov. 9, 2007. That payment tallied $81.84. He expects an apology.

"I did what I was supposed to do," he said. "I paid it once ... Why should I pay it again?"

The Public Service District already sent form letters to 325 customers with envelopes being prepared for 125 more. The letters demand customers to reissue checks to cover missing payments made during the time period. Those choosing not to issue new checks face delinquency fees and possible termination, the letter warns.

The ongoing effort has spurred anger and complaints, said Office Manager Denise Nida. Board Chairman Coleman Goodman said the letters are a last resort to avoid a potential rate increase at a time when the district is struggling to pay its monthly loan obligation.

District officials, along with Assistant Prosecutor Doug Reynolds, believe checks written during the time period may have disappeared, but the money remains in each customer's checking account. That means an actual payment never occurred and customers still owe the money for services received.

Goodman said he understands those complaints, but he said the sewer district cannot operate at a loss. Goodman vowed to mark any customers account as paid in full, if they can produce proof of a canceled check.

The missing money is linked to a pending embezzlement allegation facing former office manager Alma Adkins. Defense attorney Matt Vital said his client maintains her innocence. The long-delayed trial is scheduled to begin March 23, 2010.

Investigators and prosecutors believe an employee had been pocketing the district's cash payments. Many of the checks were deposited, but a significant number of checks were held back. The employee would use checks from its self-created reserve to balance deposit slips so the missing cash would go unnoticed.

The plan worked until one customer's passing comment at a monthly board meeting in December 2007. That customer complained about her check not being processed in a timely manner. Adkins was indefinitely suspended and eventually terminated. The grand jury indictment arrived in September 2008.

The amount alleged in Adkins' indictment is $27,807.19. The reduced tally represents the amount the prosecution confidently feels it can prove embezzled, Reynolds said.

The Public Service District's current campaign asking customers to reissue check is similar to an effort from last year. Customers were asked to voluntarily reissue payments, but they did so with minimal success to the tune of $13,445, said Wyatt Hanna, the Public Service District's attorney.

The money recovered from reissued checks is coupled with $2,889 received in insurance payments. That leaves the district still missing $73,420. Hanna explained that gaping hole, coupled with increased costs elsewhere, has left the district with a critical cash flow problem.

Board members are frustrated by delays in prosecuting Adkins' case, but Hanna said he worries a conviction will not result in full restitution. He said the district has sought help from its insurance companies and the state Public Service Commission with little luck.

State PSC spokeswoman Susan Small said her agency has no record of Salt Rock asking it for assistance. Hanna said the requests were informal discussions with PSC staffers.

Officials do not know the location of the customers' original checks. District officials said their Ona office was thoroughly searched, but the missing checks were not found. Reynolds said believes they were destroyed or hidden.

Either way, Reynolds and district officials believe today's banking standards would keep any financial institution from honoring the checks. Letters from the district inform customers most banks do not honor checks six months after the date issued.

Reynolds and district officials hope customers realize it is safe to issue another check.

The situation means the Public Service District has a difficult time with its loan obligations.

Nida said monthly operational bills are being kept up to date, but the district has missed two and a half payments in the past three months. She estimates that amounts to $75,000 - near the total currently missing from embezzlement scandal.

Faced with that, Hanna admits a rate increase may be inevitable. He issued a similar warning in December 2007 in speaking about increased chemical and electric costs. Two years later, he explained the size of any rate increase will be dependent upon the amount recovered from restitution, reissued payments and insurance claims.

Hanna said the Public Service District stands ready to take legal action against its largest insurance company, if does not cover an acceptable amount of the district's loss. A final decision regarding legal action will be made in coming weeks.

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