Auditor General Jack Wagner Recommends Marcus Hook Trainer VFRA Improve Oversight After Theft

HARRISBURG, Pa., Feb. 15, 2011 /PRNewswire-USNewswire/ -- Auditor General Jack Wagner today recommended that the Marcus Hook Trainer Volunteer Firefighters' Relief Association in Delaware County strengthen controls over its finances after a former treasurer stole over $11,000 from the VFRA and its predecessor.

Wagner made the recommendation after his special investigation found that the VFRAs' former treasurer misappropriated $11,639 in funds from two VFRAs by writing checks to himself. The treasurer, Jay Smith, cashed 19 checks written to himself from the Marcus Hook VFRA from 2004 to 2008, totaling $9,276; and wrote four checks in 2008 from the Marcus Hook Trainer VFRA totaling $2,364.

Wagner said the treasurer was able to carry out his scheme because the VFRAs were lax in a number of ways, including that the checks were routinely pre-signed and given to the treasurer by the VFRA president. Additionally, the treasurer had complete control of the VFRAs' finances, and no other VFRA officers or members questioned the treasurer's handling of the finances until the theft was discovered in 2008.

"The treasurer of the VFRA is responsible for ensuring that funds are spent efficiently, but he abused his position for his personal gain," Wagner said. "The VFRA should implement tighter controls over its funds to prevent a similar incident from happening again."

Wagner's report made five recommendations to correct the deficiencies, including:

• Discontinuing the practice of pre-signing VFRA checks and giving these pre-signed checks to the treasurer;
• Requiring all bank statements to be reconciled on a monthly basis by a second officer in addition to the treasurer;
• Ensuring that no expenditures are made without a purchase order or other supporting documentation;
• Verifying the authenticity of all documentation submitted as supporting documentation for VFRA expenditures; and
• Requiring that all checks include accurate memo line information.

Wagner's Office of Special Investigations initiated the investigation after receiving a referral from his department's Bureau of Firefighters' Relief Association Audits, which found questionable case withdrawals and expenditures.

Based on the findings of Wagner's investigation, the Office of the District Attorney of Delaware County filed a criminal complaint against the treasurer on March 16, 2010, in which he was charged with multiple counts of forgery, theft and receiving stolen property. The charges were subsequently consolidated to one count of theft by unlawful taking and one count of forgery.

Prior to trial in the Court of Common Pleas of Delaware County, the Office of the District Attorney of Delaware County made a motion to have the case considered for Accelerated Rehabilitative Disposition. After a hearing on Oct. 12, 2010, the treasurer was accepted into the ARD program and was ordered to make full restitution to the VFRA. Upon successful completion of the program, which has a duration of 12 months, the treasurer will be entitled to have all charges dismissed and to have the record of his arrest expunged.

Wagner said he would have objected to the granting of ARD to the defendant because the punishment is too lenient, but neither his department nor the VFRA were given the opportunity to participate at the hearing.

The Marcus Hook Trainer VFRA was formed on Jan. 1, 2007 following the closeouts of the Lennox Park and Trainer VFRAs, which disbanded and combined all of their assets with the Marcus Hook VFRA. The treasurer of the Marcus Hook VFRA subsequently became the treasurer of the newly created Marcus Hook Trainer VFRA.

VFRAs are non-profit organizations established to afford financial protection to volunteer firefighters who suffer misfortune as a result of their participation in the fire service. VFRAs receive state aid from a 2-percent state tax on fire insurance purchased by Pennsylvania residents from insurance companies incorporated outside of the commonwealth. These funds are used to pay for insurance to protect volunteer firefighters, to purchase fire equipment and to cover volunteer training expenses. VFRAs are distinct separate legal entities from fire companies.

The Department of the Auditor General is responsible for auditing VFRA funds to make sure they are spent according to state law. The department also conducts workshops to help local firefighters comply with VFRA regulations.

The Department of the Auditor General distributed on behalf of the commonwealth more than $71.5 million to almost 2,000 local VFRAs in 2010.

Wagner stated that his department would follow up at the appropriate time to confirm that all recommendations have been implemented. 

Auditor General Jack Wagner is responsible for ensuring that all state money is spent legally and properly.  He is the commonwealth's elected independent fiscal watchdog, conducting financial audits, performance audits and special investigations.  The Department of the Auditor General conducts thousands of audits per year.  To learn more about the Department of the Auditor General, taxpayers are encouraged to visit the department's website at www.auditorgen.state.pa.us.

SOURCE Pennsylvania Department of the Auditor General