From missing invoices to incorrect cash account balances, findings in a 2017 audit of Colchester Center Volunteer Fire Company reveal holes in the fire district’s financials.
When the town announced consolidation of Fire District #2 (Malletts Bay Fire Department) and #3 (Colchester Center) under one town-wide department, the impetus seemed to focus on rising costs and a desire for centralization. While the town maintains these reasons, Fire District #3’s FY17 audit suggests another reason behind the consolidation.
The audit found two “Material Weaknesses”—deficiencies in the district’s financial reporting that can affect their ability to catch mistakes.
The first weakness found that fire department cash account balances were incorrect. As a remedy, the auditor recommended that accounts be “reconciled by a person not involved of the activities of the account in order to detect and recommend corrections to errors.” However, Fire District #3’s bylaws don’t allow for this kind of oversight.
District regulations authorize a board of elected firefighters to oversee their own financials instead of a prudential committee, which usually acts as a mode of checks and balances. Instead, Fire District #3 regulations authorize a departmental President and Vice-President to withdraw funds from the department Treasurer. If the withdrawal is less than $1,000, prudential committee approval is not required.
Regulations also require the Vice-President to reconcile the same funds, meaning only one set of eyes could potentially oversee and complete a transaction.
The second “Material Weakness” concerned violations of IRS rules. Auditors found the district was paying firefighter stipends for overnight shifts as contracted workers paid based on invoices instead of through the payroll system. According to the auditor, this means that “invoices could be posted to incorrect account or paid inappropriately or even fabricated.”
According to the audit, a sampling of 23 random invoices for a variety of purchases paid by the district discovered that six out of 23 invoices were missing; nine out of 23 had no supervisor’s approval; and none of the 23 invoices had account numbers.
This financial oversight was identified as a major conflict of interest, preventing Fire District #3 from addressing their inaccurate cash accounts or potentially suspect employee payment methods.
Management’s response? None.
Typically, management responds to the findings in an audit with a management letter, outlining what changes will be made in response to the audit’s findings or explaining why changes will not be made. In this case, no management letter was written.
“This information would not have come to light if not for the audit,” said Town Manager Aaron Frank. While the audit report is dated Jan. 4, 2018, Frank said that the town did not receive the report for review until Nov. 25 2018, ten months later.
On March 13, 2019, former selectboard chair Nadine Scibek sent a letter on behalf of the selectboard to Fire District #3 prudential committee Chair Jay Riedinger, outlining the selectboard’s concerns about the lack of financial oversight in the department.
“No audit has been completed for the year ending June 30, 2018,” Scibek stated. “Audit findings from the year ending 2017 had no responses from Management. It is unclear if anything is being done to address them.”
Frank also noted that it is unusual to be a whole year behind on audits. “We care about community accountability. This stuff is important,” he said.
On March 14, the selectboard sent letters to Fire District #2 and #3 notifying the chiefs that the town intended to modify the terms of their contracts, set to expire in the next three months. The selectboard then proposed two options for Fire District #2 and #3 to decide between: merge into one fire department or transfer services over to town authority.
Fire services make up the third largest expense for the town budget after police and public works. Since funding for the services began in 1951, annual contracted fire expenses have increased from two to 9.5 percent of total property taxes.
While costs for emergency services as a whole have steadily increased over the last decade, fire services expenses have risen significantly faster than the Colchester Rescue and police budgets, in the same time frame. In a letter sent on March 26 notifying the districts of forthcoming changes to the current fire protection model, the selectboard suggested looking at Colchester Rescue as the business model for the future: “a combination of paid employees and volunteers under the control of a single government. The town wishes to gain efficiencies through centralization.”
In the last few years, both Fire District #2 and #3 have asked the selectboard to hire weekday daytime firefighters to fill the need when volunteers are at their day jobs.
This year’s budget, presented at a selectboard meeting on Dec. 10, 2019, added three weekday daytime firefighters and a town-wide fire chief to the budget to serve under one unified fire department. Fire services across Colchester currently have about 90 volunteers, including St. Michael’s College Fire and Rescue.
According to a statement from the town, the selectboard is additionally concerned about the off-kilter budgets that Fire District #3 has submitted the last few years.
In FY18, a year left blank in the district’s audits, Fire District #3’s budget requested $162,200 for debt services, yet only $87,200 was spent; and fuel was budgeted at $54,000, yet only $12,409 was spent. This means that $116,591 was left in limbo—charged to the Town, “but not spent on the intended items,” according to the statement.
If the fire districts were town agencies like the public works or parks and recreation department, that surplus would have gone back into the town. But since they are separate entities from the town, funded by taxpayer money and under contract for services, Frank explained, “Under the contract, unspent money did not return to the town.”
This also means that if Fire District #3 was reprimanded for evading IRS regulations, and the town is the only entity funding the costs of fire protection services, Colchester residents would ultimately absorb the financial consequences.
“This is the sort of thing you avoid with public funds,” said Frank. “That’s just the expectation when spending millions of dollars.”
Leadership at Fire District no. 3 is pushing back against the plan to merge fire services under town-wide management, alleging that they’ve been excluded from the process and their volunteers have been left in the dust.
A post on the district’s Facebook page published Jan. 25 claims, “Our fire contract has been CANCELLED. We have agreed to consolidate because without funding, we are not able to operate as a contracted Fire service for the Town of Colchester. We are turning over all our assets to the Town of Colchester as we have no other options.”
The Facebook post goes on to raise concerns about the lack of a clear plan for how volunteers will fare in the new town fire department.
The town has pushed back on this narrative, arguing that leadership at Fire District #3 has been given every opportunity to participate in the process. A press release from the town argues that, “several important meetings regarding the merger agreement occurred with Fire District 3/Colchester Center,” yet according to the selectboard, Fire District #3 Chief Sandy Ladd, “chose not to attend the majority of these meetings.”
Ladd was not available for comment at the time this article was published.
Despite this, selectboard Chair Jeff Bartley noted that Jay Reidinger, Chair of Fire District #3 prudential committee put extra work into negotiating a good contract with the town for future fire services. “[Jay] is somewhat caught in the middle,” Bartley explained. “He deserves a lot of credit.”
Fire District #2, or Malletts Bay Fire Department, has stood by the town throughout this process. On their own Facebook page, the district wrote on behalf of its staff and members: “The Malletts Bay Fire Department fully supports the town merger of the three fire department agencies into one town-wide fire department. MBFD has been working alongside the town for the past year and our membership looks forward to working together with the three agencies as one going forward.”
The selectboard plan to discuss the future of fire services at their scheduled meeting on Tuesday, Jan. 28 at 6:30 p.m. at the Town Offices.
Fire District #3 is planning an informational meeting separate from the town for Wednesday, Jan. 29 at 7 p.m. at the Colchester Center fire station on Main Street. “We hope to share the current state of fire protection within our town, what we have experience throughout this process and our understanding of what the prescribed department will look like come July 1, 2020,” according to their Facebook page.
For coverage of those meetings visit www.colchestersun.com.