Audit details fiscal issues at fire department
The results of an audit of the Washington Township Volunteer Fire Department show many problems involving possible financial mismanagement by the former fire chief. Problems began in 2004, when members of the fire department realized they were in financial trouble that was so serious, they might have to close.
At that time, members of the fire department appealed to the board of supervisors for financial help, and while the board refused to institute a tax to help the department with financial troubles, they did organize a fire board to oversee the finances of the department.
Firefighters and members of the public became suspicious of former Fire Chief Randy Smalley, since the financial crisis had come about under his direction. The public wanted to know why the department was suffering financially since they had received grants and they had several other means for raising money.
Members of the department removed Smalley from his position, and replaced him with Robert Bennett. The new chief and the newly appointed board, along with other department members hired the Nottingham Group of Pittsburgh to help them determine what had gone wrong with the department’s finances. James Fellin, an accountant with the company who has extensive experience in fraud investigation, released the unfavorable findings of their audit.
Among other things, Fellin told the public about questionable circumstances surrounding a FEMA grant that the department had received to purchase equipment.
Fellin said that $63,000 of the $75,000 grant had been paid to Tri-State Fire Apparatus, a company owned by Smalley, where he purchased the items for the fire department.
The investigation found that only about $47,000 worth equipment was ordered for the department, so more than $16,000 of the grant money was unaccounted for. Fellin said that Smalley had until March 1 to pay that amount back, which he did.
Fellin also discussed the 2001 decision to sell the fire department’s club, “Slammin Sammies,” with the assessed value of roughly $100,000, to Michael Latkanich, son of Supervisor JoAnn Latkanich, for $35,000.
“The department took a financial loss of no less than $70,000,” said Fellin, explaining that the next step would be to figure out why the department approved that transaction.
Fellin’s report also pointed out that the department had voted to sell the property to Thomas Latkanich, JoAnn Latkanich’s husband, and the final sale of the club to Michael Latkanich was never approved by the department. Fellin also said that two adjacent lots were included with the sale, but members of the department never voted to include those properties.
Recently, the club was advertised for sale, with the price listed at $229,000. Michael Latkanich transferred the property to his sister, according to Fellin.
Fellin also pointed out that for the first few years of ownership, the Latkanich family continued to hold the nonprofit status the fire department had for the property, thus avoiding property taxes during that time.
Later, at a township supervisors meeting, local residents asked the board what they planned to do to collect back taxes, and one person asked JoAnn Latkanich if her family ever paid taxes that were owed.
“The auditors findings showed that when the Latkanich family bought the club, they kept the nonprofit status, even though it was a for-profit business,” said local resident Kyle Miller, questioning Latkanich directly about whether the family paid their back taxes.
JoAnn Latkanich replied that her name was never on the deed to the property, and anyone with questions would have to direct them to her husband and her son.
“To my knowledge they paid the taxes when they received them,” said Latkanich. “Go to the courthouse if you want to see what they paid.”
She added that Nottingham Group should have checked courthouse records to see when her family’s taxes for the business were filed.
Fellin said that everything about the transaction was “clearly suspicious and irregular.”
Attorney Joseph Paletta of Pittsburgh was hired to determine if the department can pursue civil or criminal charges against Smalley for this transaction, as well as other possible wrongdoing the audit discovered.
Other findings of the investigation indicated that a house that was owned by the department was leased to Smalley and his girlfriend, Roxanne Ceccarelli, for 30 months, and records showed that no rent was ever paid.
Fellin said the investigation was inconclusive on whether or not there was an outside winner of a $30,000 boat that was supposed to be the prize in a 2001 raffle the department conducted to raise funds. Fellin’s report said that members of the fire department made allegations that Smalley kept the boat for himself, since he obtained a new boat at the same time the fundraiser took place. But investigators could not yet determine if a boat was given to an outside prizewinner.
Fellin said the investigation also indicated that Smalley, owner of an electrical business, purchased $13,000 of electrical supplies with department money, and the supplies did not appear to have been used for the department. Fellin said it might be possible that Smalley used the department account to avoid paying sales tax, then reimbursed the amount paid. Fellin said that no reimbursements appeared to be made, but investigators are still uncertain of that.
Fellin said they also investigated the possible theft of bingo money, but the results were inconclusive, since there is no paper trail, and the money collected from bingo always varies.
“We could not determine if there was an increase or decrease in deposits made from bingo since former chief Smalley’s departure,” said Fellin.
Bennett said that Paletta is reviewing the findings of the investigation and the department will follow his recommendations about filing civil or criminal charges in an effort to reclaim the funds that were lost over the years. He said that copies of the report have been sent to several law enforcement agencies, including the state police, the IRS, the FBI, and Fayette County District Attorney Nancy Vernon’s office.
Vernon said she got a copy of the forensic audit that was conducted, accompanied by a letter from Bennet asking her to investigate the allegations.
“We’ll be reviewing it for possible criminality and meeting with the state police and the forensic accountant,” she said.
Smalley did not return calls to comment on the allegations.
Fellin said the current leadership of the department is taking steps to make sure that their finances will be much more secure in the future.
Bennett said that this was “not the end of the line” as far as the investigation is concerned, and the department will do as much as they can to recover what was lost.
At the supervisors’ meeting, Miller praised the fire department for trying to get the lost money back, and for bringing the findings of the audit to the public’s attention.