BOONE—On Wednesday, May 7, the Watauga County Board of Commissioners unanimously voted to have Watauga County Sheriff Len Hagaman examine the financial records of the Todd Volunteer Fire Department.
“The county is still waiting for our auditing firm to complete the audit,” said Watauga County Manager Deron Geouque. “I think part of the Board’s frustration was the fact it has taken Todd so long to respond to the auditors and that is the concern they have. They directed me, as county manager, to contact the Sheriff to request that the SBI (State Bureau of Investigation) come in and start an initial investigation.”
Geouque said the county is not making allegations against the fire department, which covers both Ashe and Watauga counties, but to complete an audit, which Watauga requires the fire districts to submit every year.
“The Board’s concern is that it has taken Todd so long to respond,” he said.
Nathan Miller, the Watauga Board of Commissioners chairman, and representative for the Todd district, said he had previously approached the North Carolina SBI about investigating (the department’s finances), but said they would typically not initiate an investigation at the request of a County Commissioner.
“They weren’t real keen on looking into a fire department,” he said. “They said it doesn’t get them anywhere and it’s just more trouble than its worth.”
The SBI will only investigate when a request is made by a district attorney or sheriff’s department, according to Miller.
Miller said the Board has been receiving calls from Todd residents in both Ashe and Watauga counties, and the county’s fire board, comprised of the Watauga County fire chiefs, passed a resolution requesting the county to withhold Todd’s funding.
Todd VFD Fire Chief Chris Welch acknowledged Watauga is withholding the money for now.
“Recently, our fire commission voted to ask the county to hold all money from Todd until they got their act together,” he said. “It’s a nonbinding resolution, but it would be all fire chiefs in Watauga County voting that way.”
Welch provided emails and other documents to the Jefferson Post showing the Todd VFD has been in continuous contact with Watauga County about the questions surrounding the department’s financial situation.
“They told us they had everything that they needed,” he said. “We did not hear a word from them until May 6 at 4:58 p.m. requesting more copies of receipts.”
Welch said delays in providing the information requested by the auditor resulted from a computer malfunction, which required the VFD to search for the required information manually, to help complete their audit.
Watauga’s Commission Chairman Miller said questions were raised about large payments from the department to Welch.
According to an audit submitted to Watauga County by Bryce Holder CPA in April 2013, the Todd VFD had purchases of $35,212 which included “turnout gear, I Book computers, a new station sign and other equipment, for the year ending June 30, 2012.”
“A portion of the amount paid for equipment acquisitions was paid to FRP Electronics, which is owned by the Department’s fire chief, Chris Welch. The total amount paid to the electronics company during the June 30, 2012 year was $9,178 for computer equipment and installation of the equipment,” according to the audit. “The Department also paid $22,595 of the repairs and maintenance amount to firefighter Matt Royal for renovations to the fire station. All transactions were approved by the membership and completed at fair market value.”
According to an invoice provided by Welch, the $9,178 was used for a 150 watt amplifier, duplexers and other items used for communications. These purchases were made Feb. 3, Feb. 27 and May 24, 2012.
“That is a VHF repeater that is sitting on top of Laurel Knob, ” Welch said. “It’s the same repeater system Watauga County uses. They are about $18,000, and I sold that to them for $9,178.” Welch said the additional money for repairs and maintenance occurred after a hail storm damaged their roof and was covered by insurance.
In addition, Welch said all computer systems used by the Todd VFD are Dell Computers. Welch said he has never sold computers to the fire department.
According to IRS rules on inurement/private benefits for charitable organizations, a 501 (c)(3) nonprofit cannot benefit a person affiliated with the organization.
“You can do that, we do it all the time,” Welch said. “So does every other fire department…We are under no obligations to bid anything out, or to offer anything.”
The rules go on to say “No part of the net earnings of a 501 (c)(3) organization may inure to the benefit of any private shareholder or individual. A private shareholder or individual is a person having a personal and private interest in the activities of the organization.”
Welch said the VFD does bid out work when state grant monies are involved, due to conflict of interest requirements. Other than state grants, Welch said there are no rules with conflict of interest. In addition, the Todd VFD Board had to approve using Welch’s company for the purchases.
“We are a private corporation and we are being treated as a public entity,” Welch said. “Even the (Watauga) County Commissioners are treating us as a public entity. We are a private corporation, and we are not subject to the information. We are a nonprofit, but we are not a public entity. We serve (Ashe and Watauga) counties under a contract.”
Welch said he was not familiar with IRS laws and that was part of the reason they are hiring a CPA.
“We are behind on filing a couple of years tax returns and that is true, we are behind and we don’t deny that,” he said. “We don’t know anything about filing 990 forms.”
Miller said there were other “things that did not look right” in his or the Watauga Commissioners’ view. Also, Miller talked to William R. Jones, Chairperson for the Todd Board of Directors, making him aware of the investigation.
“It’s a good thing we’re going to have law enforcement look at (the fire department),” Miller said. “They’re going to clear the air as to whether what was done was appropriate or not. I don’t know, I don’t want to imply Todd Volunteer Fire Department is doing anything wrong, because I don’t know. There were things they had that raised red flags.”
Welch said he will cooperate with the investigation.
“They are more than welcome to investigate,” he said. “We don’t have anything to hide, and we have done nothing illegal at all to our knowledge. It’s the same way we’ve operated since the beginning.”
Still, Welch said his department, as well as the state firemen’s association is “curious” about how the investigation will be handled.
“(The association) is confused by this because we were paid the money to do the contract, to honor the contract,” he said.
Ashe County Manager Sam Yearick said he has been contacted by a county resident about the Todd VFD.
“(His) point was the 990s (tax forms) were not showing up online (through Guidestar),” Yearick said.
In addition, Yearick said the county is monitoring the situation and hoping it is a misunderstanding. Ashe County provides between $100,000 and $110,000 per year to the Todd VFD, with an additional allocation of $12,000.
“As (the money) comes in, we send it off to them,” he said.
In addition, the allocated money sent by Ashe County to Todd comes in five payments of $2,100, according to the Todd VFD audit from 2012.
According to the Todd VFD’s Budget Request for the 2014-15 fiscal year, the department is seeking $30,000 in allocations from Watauga County and $12,000 from Ashe County. In addition, they expect to receive $68,000 in Watauga County taxes and $123,000 from Ashe County taxes.
Welch said while they receive taxpayer money, they do not fall under public records law.
According to data provided by Welch, quoting North Carolina School of Government’s David Lawrence, “In many cases the nonprofit organization is clearly separate from the local government, and its relationship to the local government is that on independent contractor.” It continues, “In such a case, the nonprofit organization is is not an agency under the public records law, and its records are not subject to that law. This is true even when all or nearly all of the revenues of the nonprofit entity come from one or more government contracts. A good, common example of such a nonprofit is a volunteer fire department.”
Watauga County Manager Geouque said he expects the audit for the county to be completed within the next few weeks.
The Todd Volunteer Fire Department held its annual department meeting on Monday, May 5. The Jefferson Post was denied access to the meeting by the fire department’s Board of Directors. Welch, before the meeting, told the Jefferson Post that he did not have an issue with having the press present, but the Board of Directors decided against allowing our attendance.
According to the Department’s by laws, only members of the “corporation” can attend the meeting, where the members report on activities, financial status and “any other pertinent matters deemed appropriate.”
According to the by-laws, “The members of the corporation shall be those persons, age 18 or older, residing in or owning real or personal property in the Todd Fire District, whose boundaries are defined by the map located within the Certification Papers. Firemen who have maintained their 36 hours, even if they live outside the district, are considered members of the corporation and can serve on the Board of Directors.”
Wil Petty can be reached at (336) 846-7164 or on Twitter @WilPetty.