Full text of Frenchtown Fire 2008-2009 audit report
The following is the full text of the audit report provided by the Missoula County Auditor Barbara Berens.
Frenchtown Rural Fire District
Audit Report For FY08 and FY09 thru March 2009
Executive Summary
At the request of the board of directors of the Frenchtown Rural Fire District (hereafter, the district), a review of various aspects of financial operations was conducted. The CPA firm of Denning, Downey & Associates, PC completed an audit of the district in May 2008 for the two fiscal years ending June 30, 2006 and June 30, 2007. Consequently, this review primarily covered the period from July 1, 2007 through March 31, 2009 and focused on processes relating to the general ledger, accounts receivable, cash receipts, cash disbursements, grants, and wildland fire reimbursements.
More than 75% of district revenues are derived from real and personal property taxes, state entitlement share payments, ambulance services, grants, and wildland fire reimbursements. With the exception of ambulance services, almost all the revenue from these sources is deposited directly with the Treasurer of Missoula County, which effectively serves as the district’s bank. Mineral County also collects taxes for a portion of the district. The office receives payments for ambulance usage, homeowner mitigation fees, donations, burn permits, proceeds from sales of surplus equipment, and miscellaneous other amounts. The district uses checks drawn on the Missoula County treasury to pay its bills. Checks are signed by two board members at the monthly board meeting; invoices or other documentation are presented for inspection with the unsigned checks.
To make a broad brush characterization of the district’s accounting and financial reporting, it could be said that:
The capabilities of the district’s accounting system have not been fully appreciated or utilized. As a result, the district has not benefited fully from the financial information and productivity savings which the system can provide.
The financial records and files of the district have not been maintained with adequate discipline, organization, or attention to detail. This puts the district at some risk in the event of an audit by grantor agencies.
The various elements of the review are discussed below. Each section contains background information; conditions, or findings, noted; and recommendations, if any.
General Ledger
The district’s administrative assistant performs the bookkeeping functions for the district. During the period under review, two individuals held this position: Kylee Hatfield (July 2007 to July 2008) and Lisa Gottula (August 2008 to present). A variety of issues connected with the bookkeeping functions were noted. In part, it seems that neither Kylee nor Lisa obtained comprehensive training on the Peachtree accounting system which the district uses. The situation has stabilized and markedly improved since Lisa Gottula was hired.
Although the Peachtree software is more than adequate for the district’s needs, it has been underutilized due to lack of training and insufficient familiarity with its capabilities. Prior to FY08, Peachtree was used primarily to pay bills and track accounts receivable related to ambulance billings. Deposits to the Missoula County Treasury were not recorded on Peachtree, and the modules for cash receipts, general ledger functions, bank reconciliation, job tracking, and financial statements and budgeting were not employed in any meaningful way. During FY08 and part of FY09, the district engaged the accounting firm of Junkermier Clark Campanella Stevens PC (JCCS) to assist with expanding the district’s use of the system, including assumption of the payroll functions previously performed by Missoula County. Such work is on-going.
Issues relating to general accounting functions are noted below:
Prior to FY08, Peachtree was not used as a full service general ledger system with financial statement capability.
A new company was created each year, eliminating the ready availability of year to year comparative data and details of customer transactions from earlier periods.
The administrative assistant has not been trained on the bank reconciliation process.
Inadequate consideration was given to importance of the structure of the chart of accounts for purposes of summary reporting, departmental reporting, and compliance with the state of Montana’s Budget and Reporting System (BARS).
It did not appear that a standardized package of financial reports was prepared for the board every month.
Income statement accounts proliferated leading to inconsistent classification or errors in classification of revenue and expense items. Financial statements have become lengthy and difficult to interpret.
The sheer volume of accounts unnecessarily complicates the budgeting process and detracts from a focus of budgetary control at the personnel, operations, and capital level.
Conditions noted:
The bank reconciliation through the end of FY08 was force balanced without identifying the underlying causes of reconciling items (customers double billed, revenue double booked, check issued twice, etc.) so that corrective action could be taken.
Adjusting entries from the Denning, Downey audit were not documented.
There were no procedures to close out activity for a month so that balances remained fixed. Entries were backdated to the transaction date even though several months had elapsed.
A journal entry for $39,035 was booked in 6/08 to transfer cash from Mineral to Missoula County; the cash receipt was booked as revenue in 7/08 when the deposit was made to Missoula County Treasurer. The result was the double booking of revenue—once in FY08 and again in FY09.
Recommendations – General Ledger and Financial Statements:
Identify a reporting structure to accommodate the needs of the board, chief, and departments of the district.
Develop a simplified chart of accounts to reflect the desired structure, and adopt an approval process for adding new accounts.
Develop a standard financial reporting package for the board, chief, and departments.
Involve departments in budget to actual performance management.
Obtain training, if needed, on Peachtree capabilities to improve productivity, control, and data collection activities.
Require review and approval of monthly bank reconciliations.
Develop a timetable for the monthly accounting cycle. Identify the point at which time no further entries will be made to a particular month.
Note: Peachtree will accommodate two year’s history. It is not necessary, or even desirable, to create a new company each year. Once the reporting entity structure has been established to the satisfaction of the various users, the system can be used on an on-going basis; the history for periods older than two years will drop off but can be recovered from backup files.
Accounts Receivable
Accounts receivable are created primarily through use of the district’s ambulance service; homeowner billing for mitigation work is the only other major source of charge activity. Healthcare Billing, Inc (HCB) has been engaged to administer the billing and collection of ambulance receivables. A Medical Field Report is prepared for each ambulance transport and faxed to HCB. A call number is assigned, and information on the insurance carrier obtained. Insurance proceeds are sent directly to the district for deposit and posting to accounts receivable. Every month HCB sends the district various month end activity reports: patients transported, payments received, adjustments posted, as well as a receivables aging. Accounts are transferred to CBM Collections Inc (CBM) once HCB determines that the limits of its own collection efforts have been reached. With the exception of transfers to CBM, the administrative assistant posts activity to customer accounts.
Conditions noted:
As of an April 30, 2009 Peachtree report, the district’s outstanding receivables balance was $66,596.96; almost 30% were more than a year old and another 35% were between 6 months and a year old. By contrast, HCB’s receivables for the district totaled $18,197.96 with 31%, or $5,714.03, more than 180 days old.
A report for month end January 2009 shows $84,883.28 has been transferred to CBM since 1996. 16% of this balance has been collected over the 13 year period but only 3% ($2,871.32) was recovered during the period 7/1/07 to 3/31/09.
Various errors were noted in posting transactions to customer records in Peachtree which included missed calls for service, payments posted to the wrong account or for the wrong amount, and adjustments not posted.
The customer ledger in Peachtree did not balance to the accounts receivable balance in the general ledger. (See items marked with an asterisk (*) under the discussion of cash receipts.)
Recommendations – Accounts Receivable:
Create 2 general ledger accounts for receivables—one for ambulance billings and another for all other miscellaneous charges. Balance the ambulance A/R to HCB, which will necessitate the write off of old accounts.
Continue to balance ambulance receivables to HCB’s aging on a monthly basis. This will provide some assurance that all calls, payments, and adjustments are posted. Periodically, compare the customer balances per Peachtree to the balances per HCB. Investigate and resolve any discrepancies.
Write off accounts as they are transferred to CBM and record recoveries as revenue when received.
Every month balance the customer ledger in Peachtree to general ledger control account.
Monitor the aging of the newly created miscellaneous A/R account and write off old balances at least annually.
Cash Receipts
Payments received at the district office primarily consist of burn permits; donations; payments for CPR classes, address signs, and ambulance accounts receivable; homeowner mitigation fees; some grants; proceeds from insurance claims; and other miscellaneous amounts. Deposits are taken monthly to the Missoula County Courthouse.
Conditions noted:
Some customer accounts were set up with an incorrect offset for posting payments so that cash rather than accounts receivable was credited resulting in many adjusting entries on the bank reconcilement. This has created an out-of-balance condition between the customer ledger and the control account for accounts receivable in the general ledger.*
Some adjustments to ambulance receivables posted to cash instead of A/R.*
A number of receipts were booked twice in Peachtree.
Some cash receipts appeared on the monthly report of deposits to Missoula County but were not posted to Peachtree.
Receipts were held until approved at the monthly board meeting before deposit.
Pre-numbered receipts are issued to walk in customers but are not reconciled in any systematic way.
A number of payments for multiple customers were not fully applied creating reconciling items on the bank reconciliation.
It was not always possible to trace transactions from the deposit report to Peachtree.
Recommendations – Cash Receipts:
Review topics relating to customer set-up, cash receipts, and bank deposits in Peachtree User Guide.
Deposit items with Missoula County Treasurer at least twice a month to maximize interest earnings.
Use bank deposit feature of Peachtree as transmittal to Missoula County Treasurer which serve two purposes: it will ensure that all items have been posted and that items can be traced from the Peachtree to the deposit report.
Run a control report of postings to customer accounts to ensure that the report total balances to the check amount.
Maintain numerical control over pre-numbered customer receipts to ensure that all amounts collected are included in bank deposits.
Cash Disbursements
Claims against the district are paid monthly. Invoices, statements and other documentation are presented for inspection with the unsigned checks at the monthly meeting of the board of trustees. After review, two board members sign the checks. The checks are tri-part and consist of top and bottom remittance advices with the check in between. The top remittance advice is attached to the vendor invoice and filed alphabetically. The check and second remittance advice are mailed to the vendor.
Checks issued for amounts greater than $1000 were reviewed for the period July 1, 2008 to March 31, 2008. Using this selection criterion, 85% and 81% respectively of disbursements were reviewed for the two fiscal years. Especial attention was given to Gateway Federal Credit Union and Wright Express due to the high dollar volume paid to the two vendors. The treatment of voided checks was also reviewed.
Conditions noted – checks greater than $1000 and voided checks (excluding Gateway Federal Credit Union):
Invoices to support 2 out of 132 payments in FY08 and 3 out of 75 payments in 3/09 YTD could not be located, and numerous payments were filed in the wrong fiscal year.
Many invoices were not coded with expenditure classification, and the check remittance advice attached to an invoice does not show account coding. Such information is available on Peachtree, but it is not always convenient or efficient to look up the coding on the general ledger.
One check in the voids file did not have “void” written across its face.
Two checks were marked “void” in the voided check file but were still outstanding in Peachtree.
Check #19461 for $4,500 was issued twice—in 6/07 FY07 and again in 9/07 FY08.
Recommendations – Checks greater than $1000 and voided checks:
File all original invoices by fiscal year in the vendor files.
Write the account coding on the face of all non-recurring invoices.
Deface voided checks to prevent reuse.
After manually voiding a check, verify that it has also been voided in Peachtree to eliminate it as an outstanding item on the bank reconciliation and to reduce the related expenditure account.
Gateway Federal Credit Union
Gateway Federal Credit Union is the issuer of the credit cards which the district uses. Six employees are permitted to carry cards on a full time basis for purchases of fuel, food, postage, supplies, on-line transactions, etc. Recurring monthly bills from the Dish Network and Northwestern Energy are charged automatically to the Gateway account. The district has maintained the practice of paying charges ahead (incurred after the statement cut-off date) so that its $10,000 credit line is not exceeded during the fire season.
Conditions noted – Gateway:
Numerous charges were paid without supporting receipts.
In June 2008, $3,332.40 incurred after the statement cut-off date was paid ahead; the same amount was paid again in July 2008.
In July 2007, $4,598.74 was paid on a statement balance due of $2,501.26. Rather than apply the entire payment to the charge account, $2,097.48 was credited to a “shares savings” account at Gateway Credit Union. It is not clear if this had been authorized by anyone at the district. (It should be noted that the balance in the Gateway shares account has now been applied to the outstanding credit card balance.)
In October 2007, nothing was paid on the current balance while $2,803.88 was paid for the next month. The October charges were finally paid in March 2008.
Because Gateway’s due date generally falls close to the date of the monthly board meeting, late payments are frequent. Despite the amount carried in the savings account, the district incurred $961 in finance charges from September 2007 through January 2009 while earning less than $2.00 per quarter on the shares savings account.
Numerous charges for “fire food” were coded to “fire fuel” and vice versa.
Numerous receipts provided no explanation or coding for the expenditure incurred.
It was unclear if employees complied with district per diem policy while traveling on district business.
Recommendations – Gateway:
Discontinue practice of paying charges incurred after the statement cut-off date.
Request a change in statement cut-off date so that the payment due date falls at least a week after the second Tuesday of the month board meeting. If such a change is not feasible, develop a board policy to allow prepayment of this particular vendor or consider switching to another card issuer.
Require receipts for all charges, and require the employee incurring the charge to provide an explanation for the expenditure. If receipts are needed to support reimbursement requests on grants or wildland fire assignments, make copies. Original receipts should be filed with the vendor statement.
Control access to credit cards when not in use.
Issue a travel advance when an employee travels on district business (other than to or from a wildland fire assignment). The advance consists of an estimate of allowable expenses for meal per diem, lodging, and vehicle mileage. Upon return from the trip, the employee files a travel settlement based on the actual expenses. If actual expenses are greater than the advance, the employee is paid the difference. If the actual expenses are less than the advance, the employee returns the difference.
Federal, State, and Local Grants
Over the years the former fire chief, Scott Waldron, obtained grants for the district and acted as the principal grants administrator. Grants are available from various federal, state, and local agencies to fund equipment purchases, fuel mitigation efforts, volunteer recruitment and retention programs, and other activities of rural fire departments. Applications may be submitted on-line directly to the granting agency or on paper to a local grants administrator such as the Montana Department of Natural Resources. Grants have been awarded to the district itself or as a member of the Missoula County Fire Protection Association, a consortium of rural fire districts.
Costs charged to federal grants must meet the following general criteria:
The costs must be allowable under the grant program.
The costs must comply with applicable Federal requirements and must be reasonable, allowable, allocable, and necessary.
Procurement of labor, services, supplies, materials etc. must be conducted according to applicable statutes.
Items must verifiable.
Records for all expenditures related to cost sharing or matching must be kept in the same manner as those for the grant funds.
A cost sharing or matching requirement may not be met by costs borne by another federal grant, and the source of the match must be identified in the grant application.
Any claimed cost share expense can only be counted once.
Costs are subject to monitoring and/or audit by the grantor agency.
Files were reviewed for the larger grants to the district. To obtain a better understanding of district grants, the review was not limited to the period between July 2007 and March 2009. In general, the files were poorly organized and missing documents such as the grant application; the grant award letter; signed contracts relating to the grant; the granting agency; the amount and duration of the award; clearly identifiable reimbursement requests with dates submitted and dates payments received; spreadsheets showing how amounts charged to the grant were calculated/derived; progress reports; grant closeout documents; etc. Some files contained documents that were clearly misfiled.
Despite these deficiencies, it is possible that entirely adequate project reports were submitted to granting agencies. For example, a copy of a final report for the Frenchtown Fuels Mitigation Grant (the second item listed below) was obtained from the DNRC, and it is a professional product quite unlike anything contained in the file reviewed. It is also possible that more complete information about a grant exists elsewhere at the district office, such as in the notebooks containing monthly board reports and minutes (where a report for the 2007 Wildland Urban Interface grant was located). In any case, one must assume that the documentation submitted was sufficient to satisfy the grantor agency’s requirements for payment.
Discussion follows for the grants listed below:
Program Cash Receipt Date Amount
Assistance to Fire Fighter Grant (Exhaust System) Nov 2007/Mar 2008 $120,175
Western States Wildland Urban Interface
(also known as the Frenchtown Fuels Mitigation Grant) Jul 2006 $ 64,885
Apr 2009 $109,024
SAFER Act Grant Feb 2007 $ 10,349
Community Protection Fuels Mitigation Program Aug 2007 $ 12,500
(Gus Creek Project)
Missoula County Mitigation Feb 2008 $ 34,762
The costs charged to each grant were primarily evaluated according to the standard of verifiability. Documentation which can be used to substantiate verifiability include: payroll records, including timesheets; equipment timekeeping records; vendor invoices and receipts; and written statements about methodologies used to allocate costs, determine estimates, value match amounts, etc. If work was performed between a range of dates, labor and equipment charges can be compared to the date range as a test of reasonableness.
Assistance to Fire Fighter Grant - $120,175; received FY08
The primary goal of the Assistance to Firefighter Grants (AFG), a FEMA program, is to meet the firefighting and emergency response needs of fire departments and non-affiliated emergency medical organizations. Departments may submit applications in one or both of the AFG program areas: firefighter vehicle acquisition, and firefighter operations and safety, which includes modifications to fire stations and facilities. A 5% cash cost share is required of applicants serving areas with populations of 20,000 or less. AFG are subject to a variety of grant requirements such as maintaining operating expenditures at a level equal or greater than the average of the preceding two years and ensuring procurement provides for free and open competition (in the absence of established policy, at least 2 bids must be obtained and documented). Application, periodic reporting, and reimbursement requests are all submitted through a FEMA e-grant website.
The file for the “AFG 2008” contained information on a number of grant applications. For the 2006 grant year, the district applied to upgrade the exhaust system at 4 stations and was awarded and received $120,175 on a total project cost of $126,500. Based on invoices charged to the project, the cost to the district appears to have been $123,914.97, but the grant file provides no further details of how the remainder of the local match requirement was met. The file also contains no definitive evidence that at least two bids were obtained. A quote from one vendor and a brochure from another were found but may relate to projects for other grant years. No copy of the required closeout report was located. The file appears inadequate to satisfy other compliance requirements of the grant.
Western States Wildland Urban Interface Grant Program - $64,885; received FY07;
Since 2001, Congress has provided increased funding to states through the USDA Forest Service State and Private Forestry programs. The focus of much of this additional funding was mitigating risk in the Wildland Urban Interface (WUI) areas. In the West, the State Fire Assistance funding is available and awarded through a competitive process with emphasis on hazard fuel reduction, information and education, and community and homeowner action. Proposals must meet hazard mitigation criteria in one or more of three areas. Project partners, such as rural fire districts, homeowners, the MT DNRC, US Forest Service (USFS), and local communities contribute to the total cost of the project. Grants are administered through the MT DNRC and contain a 50/50 match requirement.
The district was the project sponsor for a grant which totaled $127,385. The original grant of $62,500 was subsequently amended and increased by $64,885, which was received in July 2006. A copy of the final report for the original grant was obtained from the DNRC. It states that “work included watershed protection for the Town of Alberton (population 383) and hazardous fuel reduction around homes, along access/egress routes, and federal and state boundaries in that area and others.” Crews treated the properties of 72 homeowners and some 200 acres of land. With the grant amendment, 30 additional homeowners participated in the mitigation efforts.
The documentation for the reimbursement request was reviewed, which consisted of a cover letter and financial report. Other than these two items, it is unclear from the file contents what other information was provided to the DNRC. The file contains: handwritten calculations of personnel costs and engine use, pages from the general ledger which show payments to vendors, a list of contributions from property owners, and spreadsheets which show employee payroll distribution records for FY05. The file did contain a signed copy of the grant amendment and a copy of the 2004 grant application.
The financial report provided information for FY05 and FY06 on resident donations, staff personnel costs, cost of supplies, and in-kind contributions from use of district engines. The following items were noted:
The spreadsheet for resident donations was not totaled and included more property owner donations than were shown on the financial report.
A handwritten sheet provided the amounts for staff personnel costs, which did not tie out to the attached payroll distribution records.
The same handwritten sheet provided a value of $146,860 per year for the district’s in-kind donation for district engine use; the engines were not identified, and no equipment use timekeeping records were provided as substantiation. The amounts were doubled to $293,760 per year (for a total of $587,440) when carried forward to the financial report and included the explanation “Engines and Pickups NRCG (Northern Rockies Coordinating Group) rates/60days”. Using the NRCG hourly rate of $51 for an unoperated Type 6 engine, this equates to 12 engines for 60 days for 8 hours per day for each of the two years.
A new Western States grant was obtained for the period 7/1/07(?) to 6/30/10 with Missoula County as sponsor with the district, Missoula Rural Fire, Missoula City and County, homeowners, and other fire agencies as participants. The files contain reimbursement requests for work performed during the summers of 2007 and 2008. The first, prepared by former Chief Waldron and submitted on May 12, 2008, requested $26,484.58; the second, prepared by Operations Chief Steve Roy and submitted on December 16, 2008, requested $82,539.23. Payment of $109,023.81 for both requests was received April 23, 2009. Several problems were noted with the documentation attached to the bills:
May 12, 2008 invoice:
According to the list of participant homeowners, mitigation work was performed during the period 6/1/07 through 8/30/07; mitigation wages covered the period 7/1/07 to 9/22/07.
Mitigation wages were not supported by employee level detail.
Charges for supplies and fuel were not documented with receipts.
No backup was provided to substantiate the district’s local in-kind match of $26,000 or another in-kind match for $3,500 labeled “Other.”
December 16, 2008 invoice:
100% of temporary salaries and overtime was charged to the grant for the period 6/29/08 to 10/18/08. Mitigation work was performed during the period 5/22/08 to 10/9/08. Wages were not supported by employee level detail.
119 days (952 hours) were charged for a Type 6 Engine which accompanied crews to mitigation projects. The dates of service on the homeowner listing indicate 84 days (672 hours) worked. No equipment timekeeping records are available to substantiate the charge.
50% of the salary of the Prevention Specialist for 952 hours was charged to the grant as administrative wages. The position description for the Prevention Specialist assigns at most 30% of time to mitigation activities.
Homeowner Cost Share
The homeowner cost share has become an increasingly important component of the match requirement on the Western States grant. To sign-up homeowners for mitigation work, the prevention specialist went door to door or scheduled appointments on a first come, first serve basis. Prior to 2008, homeowners paid a relatively small amount toward the cost of mitigation on their property: 2004 - $100/homeowner; 2005-2007 – between $200-$400/homeowner. In 2008, the cost share was increased to 50% of the actual cost of mitigation work based on the wages of the temporary employees assigned to the project. Before work began, the prevention specialist and homeowner completed and signed a Fuels Mitigation Project worksheet, which includes cost share information.
Mitigation crews kept weekly timesheets recording the project address and number of hours worked each day. Information was summarized by property and a bill prepared which showed the days worked, cost per day, and a total. In 2008, the district collected over $22,000 in homeowner cost share compared to $10,200 in 2007.
The 2008 homeowner billings were reviewed. A typical homeowner billing package consisted of an invoice, a copy of the payment, a Fuels Mitigation Project worksheet, a Right of Entry and Work License signed by the homeowner, property ownership information from Missoula County, and a summary sheet showing the names of the crew assigned to the project, days and hours worked, and the calculation of the cost share. Although the crew information was not always found in each homeowner’s file, calculations were tested where possible. As this was an entirely manual process, a number of calculation errors were noted.
Community Protection Fuels Mitigation Program - $12,500; received FY07
This program is a subset of the Western States Wildland Urban Interface Grant Program discussed above. Eligible projects fund on-the-ground fuels reduction on non-federal lands adjacent to federal lands with a planned fuels reduction project pending. The primary objective is to minimize damage to private property in the event a fire crosses onto private property from adjacent federal property. A minimum match of 25% is required in the form of cash or in-kind contributions. Funding is provided by the USFS and passed through the MT DNRC.
The district applied for the grant in May 2005 and identified John Zunski, Blackfoot Telephone, and John Babcock as qualifying property owners. $12,500 was requested from the DNRC with $6,200 in local match to be provided by the district. The grant was awarded on July 5, 2005, and the work was performed during the spring of 2007. Apparently, John Babcock did not participate in the project after the grant was awarded. The district received $12,500 from the DNRC in August, 2007.
The file for the grant contained the grant application, the grant award letter, a summary spreadsheet showing costs allocated to the project, and supporting documents (employee timekeeping records and vendor receipts). Timekeeping records were compared to the summary spreadsheet, and it was noted that information for the week of May 13 to 19 and the day of June 22 were missing. The payroll records available in the Missoula County accounting office were consulted, and the employee timesheets made reference to work on the Zunski property for the days in question. It is unclear what documentation was submitted to the DNRC to initiate payment for the project. No information was located to determine if local match requirements were met. Paula Short at the DNRC was contacted for a copy of the final project report, which apparently contained the match documentation, but she was unable to locate it.
SAFER Act Grant - $34,200 grant awarded November 2005; $10,347 received FY07
The SAFER (Staffing for Adequate Fire and Emergency Response) is a program of FEMA and was created to provide funding directly to fire departments and volunteer fire interest organizations to help them increase the number of trained, “front-line” firefighters available in communities. The program has two allowable activities—the hiring of firefighters and the recruitment and retention of volunteer firefighters, which latter activity appears to have been the focus of the district’s application. Application, quarterly reporting, and reimbursement requests are all submitted through a FEMA e-grant website.
The file for this grant contains an award letter for $34,200 for the five year period January 2006 through January 2010 for disability insurance for volunteers and contracted services such as billboard advertising and the printing of a community newsletter. Some of the required quarterly narratives were also found. Two reimbursement requests were paid in FY07--$5,900 in February 2007 and $4449 in April 2007. Evidence indicates which invoices support the second payment, but it is unclear which invoices support the first.
Missoula County Fuels Mitigation Program - $34,762.50 received January FY08
Missoula County receives Title III Forest Reserve money which has been distributed to local fire agencies to fund mitigation work. The funds are allocated based on an application process. Reimbursements to local agencies are based on invoices presented for payment either to a third party vendor or to the agency itself. From September 2002 to January 2008, the district has received at least $105,400 of Forest Reserve receipts through Missoula County.
The file contained various documents relating to Missoula County’s Title III program. Of particular interest was an invoice to Missoula County for $34,762.50 with a handwritten notation “mailed 6/18/07” on the face. Attached was a cover letter to Bob Reid of Missoula County Disaster and Emergency Services dated May 16, 2007, a list of properties on which mitigation had been completed in 2006, and a spreadsheet entitled “Payroll Distribution Fiscal Year 2007” to support the amount billed. The spreadsheet reported aggregate amounts for each pay period with no employee level detail. A handwritten box was drawn around the row for Total Mitigation, which showed a total of $25,314.79. On the second page, $34,762.50 was handwritten with no indication of how that amount was derived.
Because Missoula County finally paid the district in January 2008, the claim for payment was pulled from the files in the Auditor’s Office and compared with the invoice cited above. Attached was a cover letter dated December 17, 2007 the content of which was otherwise identical to the one mailed May 16, 2007. The payroll spreadsheet was entirely different and showed a total of $44,077.61 on the row labeled Total Mitigation. When Bob Reid was asked about the two invoice packages, he said he had no recollection of receiving the first one. As the amount of mitigation payroll exceeded the amount allocated to the district, he was not particularly concerned about the difference between the spreadsheet and invoice amounts.
Conditions noted – Grants
Files were poorly organized and incomplete.
Documentation to support reimbursement requests was inadequate.
Documentation to support match amounts was inadequate.
Written statements to describe allocation methodologies had not been developed.
Dates of work billed to homeowners for mitigation projects were inconsistent with dates for labor allocations.
Work crew time reports did not allocate hours to homeowner addresses on days with multiple projects.
Errors were noted on the calculation of some homeowner mitigation fees.
Recommendations - Grants
Organize a file for each grant to include: a copy of the grant application, grant award and amount, contract, term of grant, local match, if any, reporting requirements, periodic and closeout reports, reimbursement requests submitted, dates and amounts of reimbursements received.
Assign individual(s) to be responsible for grant compliance.
Develop familiarity with basic concepts governing costs charged to federal grants, whether received directly from a federal agency or passed through a department of the state of Montana.
Develop documentation to support charges to a grant, and be able to substantiate such charges. If costs are based on estimates or allocations, develop a written statement of methodology used. Labor allocations should be consistent with written job descriptions.
Document all amounts used to satisfy match requirements.
Use Peachtree capabilities to track grant costs. Job costing can be used to track labor costs as well as supplies and other expenses. A job could be an entire grant such as an AFG or SAFER grant, a homeowner address for tracking mitigation cost share, or a resource order for wildland fire.
Clearly identify copies of compliance reports and other information submitted to grantor agencies.
Maintain separate inventory records for equipment acquired with federal money with a cost of more than $5,000. Be aware that special rules apply to the disposal of such assets.
Wildland Fire Revenue
Over the years, the district generated additional revenue through the deployment of district resources to wildland fire incidents. Annually, an Emergency Equipment Rental Agreement was executed between the district and the MT DNRC which set forth each piece of equipment subject to rent, the number of operators required, and the applicable rental rate--hourly or daily plus mileage depending on equipment type. Rates are either “operated”, which includes the cost of personnel, or “unoperated” which excludes such costs. When the equipment is rented at the unoperated rate, the equipment operators are either paid by the incident as emergency firefighters or by their home unit. Because wage payments to personnel were not made on a timely basis, equipment was rented at the operated rate in recent years, and the district paid their employees while deployed at the incident. If the incident was out of state, the district was reimbursed for travel costs such as fuel, meals, and lodging. The fire activity during the summers of 2006 and 2007 brought $256,211 and $417,375 to district in FY07 and FY08 respectively.
Personnel and materiel are dispatched to incidents based on resource orders issued by a dispatch unit (locally, the Missoula Interagency Dispatch Center). Resources present at an incident are tracked via Equipment Shift Tickets or Emergency Fire Fighter Time Reports. The daily shift tickets are summarized on an Emergency Equipment Use Invoice, which becomes the basis for billing the incident for the operated cost of the equipment. The time reports document the time to be paid to district personnel assigned to the incident.
A review of the files for billings for the 2006 and 2007 fire season was conducted. In 2006 most of the files were labeled with the incident name but others were labeled by equipment number. Because of the inconsistent method of filing, information was either incomplete or available in duplicate. Copies of travel receipts were poorly organized and/or illegible. In 2007, files were labeled by incident only and were more organized and complete.
Incidents were billed by resource order. Reimbursement requests were reviewed for accuracy against Emergency Equipment Use invoices and travel related receipts. In the majority of cases, the reimbursement received equaled the amount invoiced. However, on occasion the amounts did not match. An explanation was apparent in some cases; in others, it appeared that the district attempted to determine the cause of the discrepancy, but resolution was not documented. In February 2007, a payment of $86,780 was credited to the district, but it was not possible to identify which incidents were included even though elaborate spreadsheets were maintained to track amounts invoiced and payments received.
These spreadsheets also attempted to calculate the net benefit to the district from wildland activities, and considerable effort was made to match the personnel costs with incident revenue to obtain the “net income” for each incident. While these activities did make money for the district, it is difficult to quantify the impact of incident wear and tear on the useful life of district assets. Also, a value cannot be placed on the risk to the district should an incident occur while engines and personnel are deployed elsewhere.
Conditions noted – Wildland Fire
Files were incomplete.
Departure/return times and dates for equipment and personnel were difficult to determine.
Invoices submitted for reimbursement were complicated, difficult to interpret and time-consuming to prepare.
Some discrepancies between amounts billed and reimbursements received were not investigated and resolved.
Recommendations – Wildland Fire:
Create a file for each fire to include: fire location, dates, resource order numbers, and list of personnel and equipment dispatched to incident.
Use Peachtree capabilities to track incident costs and to invoice reimbursements. Create a job code for each resource order, and code related costs to the incident job code (employee time, incidentals, equipment repairs, fuel, etc). Use Peachtree invoicing to bill the reimbursing agency.
Maintain a log of resource orders issued to the district. Document amount billed to incident, date payment received, and resolution of any differences between amounts billed and paid.
Compare accumulated costs for each job/incident with reimbursement received to determine net benefit to district from wildland activity.
Monitor repairs made to equipment dispatched to wildland fires.
FEMA Wildland Revenue – Black Cat Fire
Note: This discussion has been included due to concerns about the amount that the district received from FEMA from the 2007 Black Cat fire: the district incurred $53,127.90 of out of pocket costs reimbursable at 75%, or $39,853.43. However, $69,224.18 was received. The explanation below describes how this occurred. (The reimbursement paperwork was found to be in good order and had been subjected to a thorough review by a representative of the MT DNRC prior to payment authorization.)
Through the FEMA Fire Management Assistance Grant (FMAG) program, the President of the United States is authorized to provide assistance to state and local governments to control fires that threaten to cause major disasters. Upon award of FMAG, FEMA will reimburse state and local governments 75% of the eligible fire management costs. A 25% local match is required, and the value of “in-kind” contributions of donated resources may be used as a credit toward the match. An agency has the potential to recoup 100% of its total out pocket costs if it has donated resources with a value of at least 25% of that total.
The Black Cat fire qualified for a FEMA FMAG. During the incident, the district requested mutual aid from other fire departments. Although the Montana mutual aid system does not provide reimbursement to the sending agency, the value of such assistance is considered a donated resource. Missoula County applied for assistance under FMAG and submitted requests to recover its own costs of $98,629.37 plus those of the district, which included out of pocket costs of $53,137.90 and the “donated” mutual aid resources of $29,370.75. FEMA, consistent with Disaster Assistance Policy 9525.2, placed a value of $39,191 on the donated resources and used it as a credit toward the combined local match required of Missoula County and the district ($37,941.83). The district was subsequently reimbursed 75% of its out of pocket costs and received, in essence, a refund of the value of the donated resources. Missoula County did not share the “refund” because it had contributed none of the donated value.