North Bend Eagle



Audit reports major concerns in fire department financial practices

by Nathan Arneal
published 12/17/08

An audit of the North Bend rural fire district found evidence of fraud and several “significant deficiencies in internal control over financial reporting.”

The audit was presented to the Rural Fire District 9 Board at its Dec. 10 meeting by Kent Speicher, a CPA with Erickson and Brooks accounting firm, and examined the fiscal year ending June 30, 2008.

Speicher said the two major findings of the audit concern the spending of grant money and unauthorized checks.

The audit identified six unauthorized and undocumented checks to the former fire chief totalling over $7,000 during the 2007-08 fiscal year.

Speicher also told the district board that they spent well over the amount they had budgeted for.

“This year you’re clearly over your limit and you’re probably going to get some correspondence from the state auditor on this,” Speicher said. “The limit is on expenditures. You can’t spend more than what you budget. That’s the law.”

The 2007-08 budget showed only one source of revenue, $87,475 in property taxes collected, and one expense, $95,000 for “operating expenses.”

The audit showed that the actual amounts were $382,605 of revenue and $258,797 of expenditures. This means that the rural fire district overspent its budget by $163,797. Speicher also found several bank accounts that were not being included in the district’s financial statements.

Members of the rural fire district board listened in surprise as Speicher listed the unlawful accounting practices he found.

“That’s kind of the way things were done when I started (on the board) and we just kept doing things the same way,” board president Brad Harms said. “As it turns out, we’ve been doing everything wrong for a long time now.”

The audit report made several suggestions to address what it called “significant deficiencies” in the district’s financial reporting. They included improving the organizational structure of the rural fire district and the volunteer fire department, establishing controls over cash receipts and cash disbursements, improving check signing policies, improving bank reconciliation procedures and making use of budgeting and bookkeeping software. The report also listed several suggestions on how each of those goals could be met.

In the past the board had made its payments by giving the fire chief signed blank checks without ever seeing a bill.

“The idea of presigning checks, and the idea of not having approval of anyone other than the bookkeeper or fire chief is not acceptable,” Speicher told the board.

Harms vowed that the rural fire district board would work hard to correct things as quickly as possible. The process began Tuesday, when the board held an emergency meeting to address the concerns brought up in the audit.

“We’re going to go through that letter from the auditor,” Harms said, “and we’re going to go through it paragraph by paragraph and we’re going to figure out how we can fix it.”

The board will be required to submit a letter to the state auditor explaining how it will correct the deficiencies addressed in the audit. Harms said the board will begin by hiring a secretary that has fire department bookkeeping experience.

The board also issued the following statement:

“Within the past 11 months, the North Bend Fire Department has been on a rebuilding mission. It is our goal to continue, as we have in the past, to provide the best fire protection and patient care to the members of our district. We are operating under new leadership and have goals and priorities within our department.

“As a department, our members have dealt with many challenges in the past few months. It has been a long and slow healing process for all of us. We continue to stay positive and strengthen our ‘family’ in these times of adversity.

“We want to remind everyone that our door is always open, and if anyone has any questions or concerns, please stop in and see us.”

The audit was performed at the request of North Bend mayor Karan Legler. She attended the rural fire district’s annual meeting in June as was alarmed at what she saw.

“As mayor of North Bend, I felt there were some problems there,” Legler said. “I had several people come to me (in June) and say they were going to resign from the fire department without any reasoning. I talked to the president of the rural board and told him my concern about the way the treasury was being run and who was signing the checks.”

After her conversation with Harms, Legler submitted an official letter requesting the audit. Because of the lack of organization and record keeping in the district’s financial records, the audit took five months and several trips to the bank by Speicher trying to track down information.

After attending Wednesday’s board meeting and hearing the audit report, Leger said she is convinced the board will get things straightened out.

“I think they are on the right track now,” Legler said. “This is what we needed. It has to be run according to the rules and regulations of the state of Nebraska.”

The board has a large task in front of it, Harms said, but the board members are eager to get things corrected.

“It’s going to happen as fast as we can get it done,” Harms said, “but it’s not something that can be fixed completely overnight. We don’t want to have any ill will toward anybody. We just want to fix the problems we got and do right by the people who put us in place to do this.”

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