ROGERSVILLE — A Tennessee Comptroller’s report released Tuesday states that more than $2,500 in undocumented gasoline purchases was charged to the Clinch Valley Volunteer Fire Department during a period when the department was operating only three diesel vehicles.
The report acknowledges, however, that between 2016-19, members received a $10 gasoline allowance per call, and former Chief Steve Seal was authorized to purchase gasoline for his personal vehicle to conduct VFD business.
But the report also identifies seven deficiencies in internal control and compliance which allowed undocumented purchases to take place.
The CVVFD investigation is one of four identified last week by Hawkins County Mayor Jim Lee as his justification for demanding financial information from all nonprofit organizations on the Hawkins County Commission’s annual charitable contribution list.
The comptroller’s report has been forwarded to Third Judicial District Attorney General Dan Armstrong.
‘Allegations of malfeasance’ at CVVFD
The comptroller’s office was requested to investigate “allegations of malfeasance” at the CVVFD from Dec. 6, 2016, when Seal became interim chief, through Aug. 19, 2019, when Seal resigned.
During that period, the CVVFD used three diesel trucks as its primary fire and emergency vehicles.
The comptroller’s report states that investigators reviewed VFD records for the time Seal served as chief and found undocumented gasoline purchases charged to VFD accounts totaling at least $2,501.14.
“The VFD likely paid for additional gasoline purchases during the period, but investigators could not verify such purchases due to inadequate supporting documentation,” the comptroller report states. “VFD personnel did not complete fuel reimbursement sheets or fuel logs; therefore, investigators could not determine that all fuel purchases were for the benefit of the VFD.”
The report further states that Seal told investigators that he purchased some of the gasoline for his personal vehicle, but he did not purchase all of the gasoline used by the VFD.
Lack of internal controls over fuel purchases
Seal reportedly stated that multiple VFD members had access to fuel cards, which allowed them to purchase fuel from a local business, but there was no documentation to identify who possessed the cards at any given time or who made fuel purchases.
“The former chief stated he made gasoline purchases from various businesses for trips to conduct VFD business, use in the VFD brush truck and equipment, and to have his personal vehicle fueled for emergency calls,” the report states. “He stated that, because of his personal and financial issues, he began to use VFD funds to fuel his personal vehicle approximately once a month near the end of his tenure. According to the former chief and certain officers, the board informally approved the chief’s use of VFD funds to purchase gasoline for his personal vehicle in lieu of driving a VFD-owned vehicle for travel on emergency calls.”
The report further states, “They also stated such purchases were allowed before the former chief’s tenure, and approval was likely not documented in board minutes. Due to a lack of internal controls over fuel and supporting documentation for fuel purchases, investigators could not determine the use and appropriateness of fuel purchased during and prior to the former chief’s tenure.”
The seven deficiencies identified by the comptroller
1. The VFD board did not establish adequate controls over fuel purchases and use.
Adequate controls over fuel purchases can include developing and adopting a fuel use policy, using fuel logs in vehicles, and using board-approved expense reimbursement sheets. The lack of adequate controls over fuel increases the risk of fuel theft.
2. The VFD board did not segregate duties adequately.
The board members responsible for maintaining records were also involved in collecting, depositing, and/or disbursing funds. Allowing one board member complete control over a financial transaction increases the risk of fraud.
3. The VFD board did not maintain accounting records properly.
As a result, their accounting system did not provide a credible and complete record of VFD transactions and balances.
4. The VFD board did not reconcile bank accounts.
The reconciliation of bank statements and the monthly preparation of accurate lists of outstanding checks are necessary procedures to ensure that all collections and disbursements are recorded accurately in the accounting records.
5. The VFD board did not require dual signatures on checks.
Requiring dual signatures on checks provides evidence that more than one individual verified the check payment was both appropriate and reasonable.
6. The VFD board did not maintain supporting documentation for many disbursements.
Investigators found no supporting documentation such as receipts or invoices for 93 of 138 check disbursements examined during the period. In addition, VFD officials could not provide supporting documentation for the use of $990.21 from cash withdrawals or checks written to cash.
7. The VFD board did not ensure that pre-numbered receipts were issued or fundraiser collections were documented properly.
Investigators could not determine if all funds donated or collected from fundraisers were remitted to the VFD. In addition, investigators found no cash counts or other documentation confirming amounts collected for fundraisers. Therefore, investigators could not verify that all fundraiser collections and related cash used for change were properly deposited into a VFD bank account.