County, fire department at odds over finances
An audit of the Parkwood Volunteer Fire Department’s books for fiscal 2011-12 has county officials questioning whether the south Durham organization has cash-flow problems.
The annual financial audit found a so-called “material weakness” in the department’s business practices, namely a shortage of cash to cover reserves for EMS, the Firefighters Relief Fund and a benevolent fund.
The audit also found that the department wasn’t holding money for the Firefighters Relief Fund – a disability and life insurance policy for firefighters – in a separate bank account as required by state law.
Its findings spurred a two-round exchange of letters in recent months between Deputy County Manager Lee Worsley and Parkwood Fire Chief William Colley. The chief has had the last word to this point; Worsley said he’s now “deciding what next steps the county should take.”
Worsley began on Aug. 26 by saying the audit had raised “serious questions about the cash management and financial stability” of the department. He added that some of its practices appear “reckless” to county officials.
The issue with the Firefighters Relief fund by itself showed the department was using reserves to cover operational expenses, he said.
The department also delayed a vehicle purchase by a full fiscal year after receiving county money to pay for it, and may have been using county fire district tax revenue to cover the expenses of its nominally separate ambulance service, he said.
Worsley demanded explanations and said the issues, if not resolved to the county’s satisfaction, could prompt a move by it to ask for the appointment of a trustee to manage Parkwood’s finances.
Colley responded on Sept. 10, with a letter as toughly worded as the deputy county manager’s. He said Worsley’s use of the term reckless was “insulting and unfounded.”
The chief acknowledged that “restrictive funds” – meaning reserves – “were used” to offset cash shortages brought on by delays in the payment of EMS fees by insurance companies that were implementing new federal patient-privacy rules.
That problem was “beyond the control” of the Parkwood department, Colley said.
He added that Parkwood “for several years” has warned county officials it’s had to subsidize ambulance operations with funds from its fire division, and hinted that it sees competition from county EMS as a contributor to the problem.
Colley additionally faulted Worsley for relaying his concerns to the state fire marshal. Neither the audit nor its supporting documents “should have been shared with anyone outside the county” absent permission from the Parkwood department, he said.
Worsley responded on Oct. 16 and stuck to his guns.
He said the department’s fiscal 2010-11 audit had also reported cash-management issues, indicating that “this was not a one-time occurrence.”
Using restricted reserves for operational expenses “is simply unacceptable,” and it also appears the department has shuffled debt payments from fiscal year to fiscal year for cash-flow reasons, he said.
County officials also question an ambulance purchase that cost more than they’ve typically paid, and a practice of selling old vehicles to department staffers on no-interest terms, he said.
Worsley noted that the audit was a public record, and that he has a “fiduciary responsibility” to report problems to county and state officials. He also said the county has the legal authority to make decisions about fire and ambulance service.
“Fire protection for the citizens of the Parkwood fire district is ultimately Durham County’s responsibility and your role in the relationship is [as] a contract agency to the county,” he told Colley.
After requesting and being granted more time to answer, Colley wrote Worsley again on Nov. 15. The second letter was markedly different in style and tone and at one point referred to the chief in the third person.
It said the department now “acknowledges its error in using restricted funds to cover operational shortfalls” and agrees such practices are prohibited.
Parkwood wants meetings between Colley, the department’s treasurer and bookkeeper and county budget analysts to, among other things, create “a collaborative discussion to agree to methods to fund shortfalls, if any,” and maintain necessary cash reserves.
The ambulance cost more than the county would normally pay because it has more safety equipment than county-owned ambulances typically would, Colley said.
Parkwood’s end-of-fiscal-year, June 30 cash balances ordinarily will be low because it’s awaiting receipt in July of fire district tax money from the county, he said.
The department is “striving to structure EMS services so that they are self-sufficient” and don’t rely on money earmarked for firefighting, Colley said.
It’s also holding open three full-time positions “in an effort to reduce current expenditures,” he said.
Auditors said Parkwood ended fiscal 2011-12 with $47,065 in cash. It received $4 million that year and spent $3.9 million.
Its before-audit cash-flow statement for fiscal 2012-13 said it ended that year with $122,305 in cash, counting in that money for the Firefighters Relief Fund. In round numbers, it received $4.1 million and spent $4.1 million.
Worsley in his Oct. 16 letter said the department’s cash supplies appear “woefully insufficient” to county officials. He added that county administrators wouldn’t consider an increase in the Parkwood fire district tax until “operational efficiencies” are addressed.
Residents of the district, which covered portions of south and southwest Durham the city hasn’t annexed, pay a surcharge of 11.5 cents per $100 of assessed value on top of the county’s general rate of 77.44 cents per $100.
The county relays the surcharge’s proceeds to the Parkwood department.
Parkwood like all but one of the county’s “volunteer” fire departments is owned by a nonprofit corporation. Its firefighters are mostly part- and full-time professionals.