The only problem: Neither the city nor the county had an animal shelter for housing and euthanasia.

``So they released the dogs out into the woods, and the dogs knew their way back,'' newly hired Clerk Administrator Pat Anduze said. ``He was catching the same dogs over and over again.''

That isn't the only example of wasted spending that might explain some of the city's current financial woes, Mrs. Anduze said.

There also was the monthly utility bill for service to an abandoned city-owned trailer.

``We found out we had utilities on in the trailer that we don't even use anymore,'' she said. ``We found out that the old trailer that used to be the rescue trailer, some homeless people were in there or somebody. Not only was the electricity on, the phone was on.''

SUNDAY: The city of Denmark, S.C., is struggling to deal with debt and an IRS lien on the town. But if you ask Mayor Carolyn Davis, all is well. TODAY: An overpaid dog catcher, expensive Christmas decorations and electricity bills for abandoned buildings. Where did all the money go? Unchecked spending might explain some of the city's money problems. South Carolina's attorney general's office said it couldn't help. Neither could the state auditor's office. The question still burned within many people in Denmark: How did their financially stable town land three-quarters of a million dollars in the hole? One person finally listened. Today at 6 p.m. on television station WJBF (Channel 6), reporter Brian Farrell tells how the State Law Enforcement Division struggles to piece together a paper trail. Poor management or malfeasance? Agents hope to find an answer. COMING TUESDAY: State investigators are looking into the sale of city-owned timber in Denmark. Was the wood harvested illegally? COMING WEDNESDAY: Taxes have not increased, but the residents of Denmark already are feeling the pinch of the town's six-figure debt. What does the future hold for Denmark? What are the possible outcomes of the state investigations?

Records show a history of unchecked spending and mismanagement that has plunged the city into six-figure debt and sparked an investigation by the South Carolina State Law Enforcement Division.

Sizable surpluses quickly began disappearing in 1995 when city officials began to overindulge while bookkeeping was disordered and improperly maintained, according to audits and other documents. The records were in such bad shape that it was nearly impossible for an audit to be completed.

When money ran out of one account, city leaders ordered clerks to pay bills from other reserve accounts with little or no record-keeping, Mrs. Anduze said.

It was as if the city had a checkbook without knowing how much was in the account, said Eric Thompson, of the Lower Savannah Council of Governments, which was contracted by Denmark to provide temporary bookkeeping assistance from May 1999 to September 2000.

``If you don't keep up with that, you go out and write checks every day, and you don't know what's coming in,'' Mr. Thompson said.

SLED agents continue to investigate what happened to $1.2 million - Denmark went from a $600,000 surplus in 1995 to more than $600,000 in debt by 2000.

The $1.2 million is roughly the same as one year's worth of revenues to the city, which collected $1.3 million in fiscal year 1998 and $1.2 million in fiscal year 1999, according to city records.

Where did the money go? City documents and former consultants provide a number of clues:

Travel expenses were excessive, according to accountant Ann Causby, a volunteer who reviewed city files and conducted an internal control report for the city council last year.

``There are indications that there has been first class travel costs and high room service charges,'' she wrote in a document called Notes on Irregularities, City of Denmark.

Telephones bills were large and showed a high number of personal calls, according to Ms. Causby. Taxpayers footed the bill for call-tracing and call-blocking features at City Hall. Mayor Carolyn Davis alone racked up a $1,283 bill for a year on her cellular telephone and an additional $488 on her city-issued calling card, Ms. Causby said. (Both luxuries have since been taken away by city council.)

Denmark incurred $8,000 in bank fees for bounced checks in 1999 and $400 in 2000. Funds were not transferred properly from various city accounts before checks were written, according to Lower Savannah Council of Governments Roving Administrator Charlie Barrineau, who helped correct the problem.

The South Carolina Department of Health and Environmental Control fined the city $26,000 not only for violating state laws at the city's water and treatment plant but also failing to respond to the agency's warning letters, Mrs. Anduze said. The fine was later cut to $3,000.

The city received many bills that were questionable and paid them anyway, according to Ms. Causby. A local church billed the city $109 for a film rental. Another bill came from a trophy company for ``trophies and engraving of crosses.'' Both bills were paid.

IMPROPER BOOKKEEPING and failure to make timely deposits only added to the problem.

At the Denmark Police Department, authorities stashed money from court fines and forfeitures into a box because no City Hall employee would sign for the cash, according to Ms. Causby.

``The total cash accumulated to approximately $38,000, which was safeguarded in the police (department) until City Hall was instructed by auditors that the receipt of cash should be properly signed for,'' Ms. Causby stated in a document referring to the event.

To document that the cash was properly counted and transferred, city officials took several photographs of then-Clerk Administrator Thomas Robertson and police assistant Georgia Quinlan counting the cash.

Who was overseeing the city's finances? Mr. Barrineau summarized the situation he observed in a memo dated July 19, 1999: ``Mayor Davis currently administers the city on a day-to-day basis. She handles most if not all of the decision making. There is some council involvement, but not to the extent that is currently necessary by the city.''

Ms. Davis denied involvement in handling finances in an interview last week.

``I don't spend the money,'' she said. ``The money that was spent was spent because of the request coming from the departments. The money was spent for the operation of the city.''

CITY DOCUMENTS suggest otherwise. She signed contracts approving the sale of city-owned timber, and billing invoices to the city were sent ``in care of Mayor Davis.''

``The mayor would come in and tell people to pay for things,'' Mrs. Anduze said. ``Basically, she would just say, `Pay this.'''

Ms. Davis acknowledged direct involvement in spending $200 for a company to build a float for this year's Dogwood Festival though there was a committee set up to handle expenses.

City Councilman Giles Salvo - a vocal critic of the mayor - serves on the committee.

``We could have had the parade without (the float),'' he said. ``But it's typical of what she does.''

Mrs. Anduze said the mayor walked in the day before the festival and handed the $200 bill to the accounts-receivable clerk to pay. The clerk administrator reluctantly told the clerk to pay the amount.

Pat Anduze, Denmark's newly hired clerk administrator, found that monthly utility and telephone bills were still being paid on a city-owned trailer after it had been abandoned. Mrs. Anduze cites the bills as an example of the city's unchecked spending. CHRIS THELEN/STAFF

``The right way is to go to the committee. That's why you set up a committee,'' Mrs. Anduze said.

In previous years, a lack of leadership meant city employees created their own policies and procedures, Mr. Barrineau said. Some departments overspent their annual budgets but didn't know it because there was no communication and no regular department-head meetings, he said.

In June 1999, Mr. Barrineau recommended that the mayor and council make extreme cutbacks, budgeting only for the most necessary expenditures such as employee salaries and police and fire protection.

``I want to stress that the town cannot afford to give donations to various organizations, take various trips, pay for festivals or any other non-essential expenditure,'' he wrote in a memo.

HE ALSO RECOMMENDED that the mayor and city council relinquish their salaries to the city. But Ms. Davis, who acts as a part-time mayor, began her first term in 1993 with a salary of $200 a month and has since seen an increase to $400 a month.

Many of the financial woes came from late fees, bounced checks and fines.

According to Mr. Barrineau, city officials received a January 1999 letter from the Internal Revenue Service stating the city owed more than $30,000 in payroll taxes going back as far as 1997. Instead of taking action on the letter, the city filed away the notice.

Ms. Davis told Mr. Barrineau that she personally set up a payment plan with the IRS but that the city was not in financial shape to make the four lump-sum payments the mayor approved. That led to a federal IRS lien's being filed against the city in 2000.

Since Mrs. Anduze was hired in October, the overspending seems to have stopped and Denmark is catching up on its bills, Mr. Thompson said.

``(She) is very capable,'' he said. ``I think she will do a good job if she is allowed to do that.''

Next month, the city will make the final $13,290 payment to the IRS to remove the federal lien against the city, Mrs. Anduze said. Meanwhile, bookkeeping practices are in place to document every transaction.

``We have a purchase order system that is now going into the system,'' Mrs. Anduze said. ``Now we know who we owe and how much we owe. Running day to day, it's not an easy task. But we pay our FICA taxes every two weeks, we pay our employment retirement, and all reports are done on time.''

Reach Greg Rickabaugh at (803) 648-1395.