Editor’s note — This is part 1 of a two-part series looking further into the financial situation and the retirement of Chief Bruce Lacher of the El Dorado County Fire Protection District.
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Last month’s articles on the personnel and financial woes of the El Dorado County Fire Protection District (EDCFPD) drew kudos as well as complaints with some readers, saying it was too one-sided and only addressed issues from the union’s perspective.
Former board members Dr. Curt Weidmer, Tom Mahach, and Dennis Edwards, along with El Dorado County Auditor-Controller Joe Harn and CPA Michael Ocenosak have since weighed in on the topic of what they believe happened over the past few years that resulted in last year’s $1.6 million deficit, the resignation of Chief Bruce Lacher and the possibility of Cal Fire taking over the district.
Board members claim their decisions were based on what they knew at the time and accuse the union of only going after Lacher after he asked them to make cuts to their compensation.
However it appears that there were plenty of early warnings of financial problems in the district, which the board and chief ignored almost until it was too late.
One of those saying as much is Joe Harn.
Harn’s office is privy to much of the district’s financial information because it keeps the district’s books, although EDCFPD develops its own budget and decides how to spend its money. The Auditor-Controller’s Office also receives a copy of the district’s annual audit.
Harn claims Lacher had a hands-off approach to the budget and said it appears John Walshaw, the retired county fire chief, was the one who actually prepared the district’s yearly budget.
According to Harn, “From 2005 through 2012, (Walshaw was) the only employee that communicated to the Auditor-Controller’s Office regarding County Fire’s budget. When we called County Fire with questions regarding the budget, we were told that our question would be referred to John Walshaw and he would call us back when he was in. Until 2012, no County Fire board member nor Chief Lacher ever demonstrated any interest in the district’s budget to this office. I am not saying they were not interested in the budget. It was just never demonstrated to the Auditor-Controller’s Office.”
This hands-off approach to budgeting by the chief may have been the reason behind a major financial mistake that wasn’t discovered for several years. According to Michael Ocenosak, in the 2009-10 fiscal year, $700,000 was transferred from a retiree health insurance fund to another account by office staff, but it was never deducted from the first account and no one — including Lacher — caught the mistake. That plus deficit spending may have led the chief and board to believe they had $1 million in carryover funds available to them when, in fact, they had no such reserve.
Edwards and Mahach question why none of the audits picked up the $700,000 mistake. But Ocenosak pointed out that technically all the audits were correct. He suggested that the complexity of the audit findings may have prevented Lacher or the board from understanding the true financial situation of the district.
However, Harn believes the board wasn’t paying all that much attention, given that the audits clearly stated that the district’s finances were in decline. He said that at the beginning of the audit report for August 2010, the first item mentioned after the auditor’s opinion was the statement that net assets decreased approximately $2.4 million from the prior year. Another audit dated January 2012 stated that net assets decreased approximately $3.24 million from the prior year.
“That’s the first line — your financial position dropped $3.2 million in one year,” said Harn. “The Board of Directors and fire chief ignored the clear concise communication they got from their CPAs. Outside audit reports sent clear, very loud warning signs for the Board of Directors about adverse financial trends in the district.
“My take is that no one was reading their audited financial statements. It’s that simple,” Harn said. “Those who want to make it complicated are silly. They were down over $5.5 million in two years. There were no material mistakes that had any effect on this situation in the accounting records,” he claimed, noting that those who said that mistakes in the office were responsible for the district’s budget problems are incorrect.
“The problem got serious in July 2009 but the board of directors and chief were asleep at the switch. The fire board got clear written evidence that there was a problem, that they were spending a lot more money than they were taking in and they took no action until 2012 to deal with that,” Harn said.
Harn said he met with former board members Mike Dennis and Tom Mahach and told them the district was facing a “very adverse financial trend based on the audit results. Back in 2008 you had a lot of money and now you don’t have much money left,” he told them.
“Dennis tried telling the chief and the board they had a big problem,” said Harn. “I believe in 2009-2010 they were informed they had been overbilling County Service Area 7 for paramedic services. Did they change their budget at that point? To the best of my knowledge, they did not. That was a pretty big warning sign in addition to what their audit reports showed. To best of my knowledge, they weren’t taking enough action to cut spending to balance their budget.”
Protecting the district
On the other side of the issue are three former board members. They defend the chief’s as well as their own actions, saying they believe they acted in the best interests of the district and the decisions they made were based on the information they had at the time.
Weidmer, who was on the board until 2010, said as the bad news about declining property taxes came in, he advocated reducing firefighter salaries or requiring them to pay a portion of their retirement or health care costs. But he claims the board voted not to because it meant renegotiating the union contract. He said the chief and board also wanted to maintain the firefighters’ income. He believes some cuts were made between 2010 but he wasn’t sure what they were or how much.
Weidmer said contrary to what the board’s critics said, they were fully informed about the district’s finances and it was the office staff’s fault for making the $700,000 mistake. He claims there was a second mistake in the transfer of funds, along with the first, that resulted in last year’s $1.6 million deficit.
However, Ocenosak said there was only one transfer mistake and that was for $700,000. Harn agreed, saying that one mistake was not the cause of the district’s financial problems and all one had to do was read the audits to understand the extent of the district’s financial decline.
Tom Mahach said he and other board members believed the economy would turn around and thought they had $1 million in carryover funds to cover any budget deficit. But in 2011-2012, they found they had no carryover when the Auditor’s Office informed them that there was a major discrepancy in their budget between projected and actual revenue. That information was confirmed when the district hired CPA Michael Ocenosak and he reiterated what the Auditor’s Office told them.
Dennis Edwards claims the chief cut back on expenses every year in order to maintain the benefits and salaries of the firefighters but the district was caught up short when it received a bill from the Joint Powers Authority for $500,000 or $600,000. Originally they were told they only owed $200,000 or $300,000. He said the district also had to fight a frivolous lawsuit from another district that cost them $150,000 in legal fees.
He complained, “How could board and administrators in the fire district know about something that paid professionals didn’t catch? I’m not saying some bad management decisions weren’t made on the board’s part and on the chief’s part, but those decisions were based on the audited statements we had at the time.”
Former Fire Chief Lacher was asked to comment, but failed to return several phone inquiries.
Next, in part 2 former board members discuss the district’s finances further and the chief’s efforts to bring the budget in line.