By ARNOLD S. PLATOU
The 27 volunteer fire and rescue companies in Washington County spent nearly $13 million in 2010, the most recent year for which all are on record.
But a yearlong investigation by The Herald-Mail showed that details of what happened with a lot of that money are elusive.
For starters, the association that represents all of the companies over the years has taken a large chunk of the millions in public gaming money that lawmakers say they originally intended to go to the volunteer companies.
Their 1995 law — because it has no restrictions — gave the Washington County Volunteer Fire and Rescue Association the right to do whatever it wants with the money — without telling local government.
That is in large part what has happened. The association provides a range of services to benefit the volunteer companies, sets standards for fire and rescue safety, and supervises the distribution of most of the gaming money to the companies themselves.
However, the association doesn't tell the county government what it gives each of the volunteer companies, or how it spends up to half the money it keeps, or why it has more than a half-million dollars in cash and investments.
The county government is not totally blind to what the association has not been reporting.
At the same time, the county requires volunteer companies to file annual financial reports.
However, in the county office that receives those reports and releases county funding based on them, no one routinely examines them.
The newspaper discovered that one of the county's busiest volunteer companies filed a report last year saying it suspected someone was embezzling money in its gaming operations.
The newspaper's investigation found that the lack of enforcement on various reporting levels raises such questions as:
- Why has one local fire company that knowingly has filed incorrect financial figures for years escaped question by the county government — while other companies have had to go for months without county funding because they waited to file accurate reports?
- Why have the county government and the volunteer fire and rescue association been giving another fire company more than $50,000 a year in aid — even though that company's volunteers aren't going out on fire calls and it has a wealth of money on hand?
- Why must a volunteer fire chief worry about a public safety issue — how his rural company is going to afford the $35,000 it will cost to hire fire engine drivers for the daytime hours when volunteers aren't always available?
These are samples of the differing financial situations and inconsistent practices The Herald-Mail found in an investigation that involved examining thousands of pages of financial records and interviewing dozens of officials.
The newspaper also found that several companies are making efforts to open their financial books to public scrutiny.
And many ideas emerged during interviews of people within and outside the ranks for improvements in the area of financial accountability.
Such matters loom large these days in the often-behind-the-scenes struggle to keep the county's fire and rescue service going.
The heart of the system is its volunteers — about 1,050 people — in a confederation of 27 independent volunteer companies, supported by a complex web of revenues, much of it dependent on government and gaming.
The issue is accountability.Financial reporting requirement
In late summer 2005, the Washington County Board of Commissioners unanimously approved standard operating procedures for what is called the Financial Reporting and Auditing of Volunteer Fire and Rescue Companies.
In that document, the commissioners said they wanted to "establish a policy to monitor the proper and appropriate use of public funds raised by and distributed to Washington County Volunteer Fire, Rescue and Ambulance Companies."
The commissioners at the time were James Kercheval, John Munson, Doris Nipps, Gregory Snook and William Wivell.
The commissioners said in that document that to enable them "to make informed decisions" in budgeting money and "to ensure confidence" among residents donating to the companies, each was being required to file a financial report at least once a year.
"Annual financial reporting plays a major role in fulfilling the fire and emergency service's duty to be accountable to citizens, local elected officials, regulators and creditors," the commissioners said.
Since then, every company has been required to give the county's Division of Emergency Services an annual report intended to cover all the company's revenues, and its expenses, investments and liabilities.
If the report isn't filed to the Division of Emergency Services within three months after a company's budget year ends, all of its county funding is withheld until it does file the report.
That can mean a company must go without tens of thousands of dollars in the meantime.
In all, the county budget called for providing the 27 companies more than $3.7 million during fiscal 2011, which ended June 30. And, during the current 2012 fiscal year, it's budgeted to send them another $3.7 million.Who's checking the reports?
So, when the financials come in, taxpayers might expect the Division of Emergency Services would examine the reports — before sending more money.
But that hardly ever happens — not then or even later in the year.
"I don't have the staff or the time," Division of Emergency Services Director Kevin Lewis said.
"I mean, I would love to have a financial accountant, just to develop and to do all these checks and balances," Lewis said.
"We have the structure in place. We have these policies ... but again, there's not really direct policing per se, you know, trying to figure out" whether the companies are spending money wisely, he said.
Lewis and his deputy director oversee five departments, including the county's 911 emergency communications center, and supervise a complex plan for emergency medical services (EMS) staffing. In addition, Emergency Services receives the annual financial reports directly from the volunteer companies or their accountants.
And Emergency Services authorizes the payments of more money.
"We're not an accounting firm. We're the Division of Emergency Services," Lewis said. "I don't necessarily go through and review each individual report. By far, no. I don't have the time. I mean, it's me."
The way the Division of Emergency Services system is structured, the authorization of more money for fire and rescue companies is based on when the companies' reports come in — not on the information they contain.
When a company or its accountant brings in its report, often on a portable USB flash drive, Lewis said he gives it to an assistant who "picks up and puts down" the company's latest column of line-item numbers onto a computer grid. The grid shows three or four years' worth of numbers for that company.
Then, Lewis contacts the county Office of Budget & Finance and, he said, authorizes it to release another quarterly allotment of county aid to that company.
If the company's report came in before its due date, the payment will go out along with all the others that made the three-month deadline, Lewis said.
If the company's report misses deadline, "we withhold their quarterly allotment until they've satisfied the completion requirements."
What are the requirements?
Just that the report comes in, Lewis said.
"Basically, at that point, when we receive the information, we release the checks that we've been holding," he said.
Are the reports reviewed before the checks are released?
"No," he said. "As soon as they provide us with the appropriate records, we release the funds we've been holding."
Usually, that same week or the next, the county's Office of Budget & Finance will write the check and send it to the company, he said.
Lewis said the only time that he would review the reports would be if someone were to complain about a company or if there were an investigation.
He does have the right to request that a company's records be audited.
But, he said, "we don't get into the auditing or the validating of the files unless it comes to us by citizen complaining, a gaming problem — something that would raise a flag."
Lewis said he does look at the reports occasionally "from a generalistic standpoint for overall general costs," if he thinks money might be saved.
For instance, such general reviews led him to propose what's now become standard practice — the county allows the companies to buy electricity at the county's rate, as well as to obtain office supplies through the county's contract.
Furthermore, he said, he seldom compares the reports to those the companies, as tax-exempt organizations, must file every year with the Internal Revenue Service.
The IRS reports, which are called Form 990s and are available online, offer more specific information. Sometimes, they even show a company's private bingo and tip jar profits — numbers that Lewis said he has urged the county to require the companies to report.
Lewis said he thinks the county should have such information, but his division is not structured or funded to examine the IRS reports routinely.
"We don't actually get into doing the 990s unless there's a concern or an issue," Lewis said.Expectation vs. reality
There is a difference between what Lewis says he does and the expectations that County Administrator Greg Murray seems to have for his office.
For instance, Murray said that Lewis looks intently at the annual financial reports the county Volunteer Fire and Rescue Association gives the county.
But Lewis said that's not the case.
Murray said the report "is audited by the Fire and Rescue Association and by (Emergency Services Director) Kevin Lewis." He said Lewis vouches for the figures by looking at association receipts.
"There (are) actual receipts to back up all the expenditures, as well as for the companies, all the utilities, medical supplies, service billings," Murray said.
He said Lewis would even know the breakdown of the $125,126 the Volunteer Fire and Rescue Association lists as "miscellaneous" expenses during its 2009 fiscal year.
The association works "with Kevin Lewis to identify the area where they've spent the miscellaneous portion ... like turnout gear," Murray said. "Kevin takes that information, ties it in to all the disbursements ... the 990s and all the (IRS) schedules."
Lewis said he does see the EMS companies' receipts for medical supplies and reports on service billings. He said he does talk to the association about companies' utility payments.
And, Lewis said, he does see the receipts EMS companies file to be reimbursed for fuel and for maintenance of their ambulances. He said he does review the receipts all fire and rescue companies file to show how they spent Maryland's so-called 508 grants his office oversees.
But Lewis said he doesn't usually examine the company financial reports that are the only form of accountability provided for most of the money the county gives each company.
Lewis said the reports are the sole way EMS companies tell the county the cost of employee salaries and benefits — an expense key to the county's new EMS Plan for the Future.
"They're not currently being reviewed in fine detail," rather just for overall general costs, Lewis said.
And, contrary to what Murray said, Lewis said he doesn't see receipts for any other purchases by any of the companies, let alone the Volunteer Fire and Rescue Association.
Lewis said he has "no idea" how the association spent the $125,126 in "miscellaneous" listed on its 2009 financial report.
"How can you have a 'miscellaneous' expense category of $125,000?" Lewis asked. "I mean, what are those? I don't think the auditors" would like seeing that.
"Miscellaneous" is one of 13 categories of operating expenses listed on the county form that the companies file. Each category is one line on the form and does not indicate space for details or explanation. However, at least one emergency medical services company has modified the form to offer more details under the "miscellaneous" category.Signed statements
Does Lewis think the County Commissioners know his division is set up only to collect the fire and rescue reports, not to evaluate them?
"I have not approached them relative to this level of accountability," Lewis said.
To examine all the financial reports to that level, an accountant would have to be hired, Lewis said. And, he said, that would incur an expense he's not sure the county would want now, given the economy's ongoing weaknesses.
"The county's attempt at this point is to keep to no cost increases, just to maintain it as the current budget, as it currently exists," Lewis said.
Asked whether the commissioners have ever told him to review the companies' reports, or to compare them to the federal 990 forms or to the county Gaming Office report on tip jar sales, Lewis said they haven't.
He said he relies on the signed statement that must accompany the financial report each company gives him. In the statement, two representatives of each company verify the report is accurate.
So in the area of accountability, his division's job is to authorize funding only after a report arrives and to keep the report on file, in case someone has a complaint or launches an investigation, Lewis said.
"But that's basically where it is now — assuring the receipt of the report so we can authorize Finance to distribute the funds," he said.
"I would love to have a person that is just basically monitoring and overseeing the funds, with an accounting background, to make recommendations," Lewis said.
"But if the county — are we in a position for that type of management structure, at the same time as we are trying to get employees back to work?" he asked.
Lewis said that if he did announce he was going to hire a financial analyst, "I can imagine what people would say."
But he would take such action "if it's the expectations of people," he said.
Citizens must understand that "with these levels of accountability and deficiencies, there also is a cost," he said. "The public has to understand it comes with cost."