State audit finds unauthorized spending by Arnold's fire relief association, other concerns

The relief association for Arnold’s two volunteer fire companies improperly paid nearly $5,000 in death benefits for members who had not died, a state audit found.

The unauthorized expenditures, meant to help members who encountered financial difficulties, were repaid.

The expenditures were among five concerns the state Auditor General’s Office had with the operations of the Arnold Volunteer Fire Department Relief Association from 2018 through 2020, according to the results of a compliance audit for those years released this month.

Relief associations provide training, buy equipment and insurance, and pay death benefits for volunteer firefighters. The auditor general distributes state aid to the associations and audits how they use the funds, which are raised by a 2% tax on fire insurance policies sold in Pennsylvania by out-of-state companies.

The associations risk having state aid withheld if they do not comply with state laws, contracts, bylaws and administrative procedures, the auditor general said.

The Arnold relief association is a separate entity affiliated with Arnold Engine Company No. 1 and Citizens Volunteer Fire Company No. 1, also known as Arnold No. 1.

According to the audit, Arnold’s relief association received about $54,430 in state aid for 2018 through 2020.

It had about $625,650 in cash and investments as of Dec. 31, 2020.

Over the three years covered by the audit, the association spent about $94,000, with most of that, about $46,300, on insurance premiums and death benefits and another $31,500 on equipment and training.

In addition to the unauthorized expenditures, the audit’s findings included untimely receipt and deposit of state aid, failure to maintain a complete and accurate membership roster, inadequate relief association bylaws and failure to adhere to those bylaws, and an inadequate financial record-keeping system.

“We are concerned by the number of findings noted and strongly encourage timely implementation of the recommendations noted in this audit report,” states the report signed by Auditor General Timothy DeFoor.

The report said the association made two $1,500 early death benefit payments in June and July 2018, and a $1,550 payment in December 2018. Because they were not authorized, the payments are considered personal loans, depriving the association of money that could have been invested or used for authorized spending.

Fire department spokesman Chris O’Leath, a former president of the relief association, said the payments were made to help three members who had run into financial difficulties and asked the association for help. O’Leath said the association’s officers got different answers on the appropriateness of the payments.

The $4,650 has been returned to the association, as the auditor general recommended, O’Leath said.

In another finding, the audit found the City of Arnold received about $18,500 from the foreign fire insurance tax in September 2019 but did not send it to the association within the required 60 days. The state aid was sent to the association in September 2020, and the association deposited it in October 2020.

There were no documents showing the association tried to get the money, the audit states.

According to the audit, association officials said new city officials didn’t know the money was to be given to the association, but they did not give a reason for not asking about it or depositing it in a timely manner after getting it.

City Manager Mario Bellavia could not be reached for comment.

The untimely distribution deprived the association of funds to pay expenses and invest and “increases the risk that funds could be lost or misappropriated,” the audit states, recommending that procedures be adopted to ensure the timely receipt and deposit of funds.

O’Leath said they are awaiting word from the auditor general on whether the city is responsible to pay interest on the funds that were delayed.

The audit also found that the association’s failure to keep a complete and accurate roster of its members could result in benefits being paid to nonmembers and eligible members not getting benefit payments. The association’s management said it would comply with the recommendation to compile and maintain a membership roster.

The association said it will comply with a recommendation to review and update its bylaws, which the audit says do not address the number of required signatures and provide for a $2,000 death benefit where it has been paying $2,450.

The association’s management agreed with a recommendation to establish and maintain a financial record-keeping system so it can monitor its finances.

The audit found that the association did not maintain a journal to record receipts and disbursements; ledgers were not used to record transactions; and documentation to support spending was not available to be examined for the audit.

The auditor general said it will check for compliance with its recommendations through its next audit.