The Maryland state prosecutor has closed the mysterious case of the town of Emmitsburg, concluding that there was no mystery after all.

Two months ago, the town of 1,600 people near the Mason-Dixon Line was alive with rumors and intrigue, all centering on allegations that the modest town treasury had been bilked of as much as $10,000 between 1978 and 1980.

The state prosecutor pounced on the case and subpoenaed almost every official piece of paper in the three-room town office -- payroll registers, bank deposit and withdrawal slips, bank statements, passbooks, general ledgers, cash ledgers, salary ledgers, combined balance sheets, capital outlay records and more, some extending as far back as 1974.

Meanwhile, town officials insisted from the start that no money was missing at all, even as they privately suspected each other of the dark deed.

But last week, Emmitsburg's freshly inspected records were returned and the case closed. "The investigation conducted by this office failed to disclose any violation of the criminal law," assistant state prosecutor Charles Frey wrote to Mayor Richard Sprankle.

As it turned out, the money said to be missing from the town water department account wasn't missing at all. "It was a classic case of small-town bookkeeping," said a source familiar with the investigation. The money was scattered among a variety of accounts, the source said.

The intrigue began when town clerk Dee Stover found an old passbook in the town's ancient metal safe, and discovered thousands of dollars in unexplained withdrawals. She told town police chief Maurice Kerr, a newcomer to Emmitsburg who, recalling his big-city investigate training, immediately called in higher authorities.

At the time, Kerr came under considerable heat from the mayor and town commissioners, who insisted that he should have taken the case to them.

Town officials apparently have eased the pressure on Kerr. Asministrator Lanny Mummert siad the mayor had planned to discuss possible disciplinary action against the chief and clerk but probably will not do so now "in the best interest of the town."

But things have not really returned to normal in Emmitsburg, Mummert said. The unaccustomed scrutiny "created a lot of problems up here, a lot of frustrations, a lot of conflicts, a lot of people unnerved," he said.

"I believe there's a lot of people here eating crow," Mummert said. "I think we might have to have a crow party."