Purpose of Audit

The purpose of our audit was to evaluate the Company’s financial operations for the period January 1, 2007, to July 31, 2012.

Background

The Monterey Fire Company, Inc. is a not-for-profit organization incorporated in 1952. The Company, located in the Town of Orange in Schuyler County, has approximately 40 members. The Company is governed by its Constitution and bylaws. The officers of the Company are a seven-member elected Board of Directors: the President, Treasurer, Fire Chief, and four directors. During our audit period, the Company’s revenues ranged from approximately $77,000 to $99,000 each year and its disbursements totaled $551,402.

Key Findings

• The Board did not oversee purchasing, audit claims, obtain written monthly financial reports from either Treasurer, require reconciliations of the bank statements with Company records, or obtain an independent audit of the Treasurer’s financial records.
• The Treasurer made purchases, paid bills, wrote checks, and made ATM cash withdrawals for personal purposes with no oversight. As a result, the Treasurer and Fire Chief were able to initiate non-Company transactions without detection by making purchases with the Company’s bank debit card and on the Company’s credit with vendors. The Treasurer also issued Company checks to herself, her husband (the Fire Chief), her father-in-law, and their related businesses, and made ATM cash withdrawals of Company funds. Additionally, the Fire Chief used the Company’s accounts to make sales tax-exempt purchases for his contracting business – some of which he paid with the Company’s debit card – and used Company funds to help purchase a personal vehicle. These personal purchases, payments, and cash withdrawals totaled $113,098.
• We identified another $26,386 in questionable payments and purchases that appeared to be personal in nature.

Key Recommendations

• Take immediate action to strengthen the Company’s control environment and develop, adopt, and implement written policies and procedures to control and monitor Company operations.
• Seek reimbursement for the improper payments to the Treasurer, her husband and father-in-law.
• Investigate and determine if any of the $26,386 in questionable purchases were legitimate and seek reimbursement for all inappropriate payments.