‘A clear picture’: Fire Safe Council, former accountant clash over nonprofit’s financial information | TheUnion.com
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‘A clear picture’: Fire Safe Council, former accountant clash over nonprofit’s financial information

A letter written by an attorney on behalf of a former accountant for the Fire Safe Council of Nevada County alleges that the nonprofit is losing money, suffers from poor budgetary management, and is at risk of being investigated for fraud by the IRS.

In the letter, the nonprofit is described as suffering from “diminishing financial viability,” as having “neglected proper non-profit accounting,” and being in an overall “fragile position” as an organization.

The letter was sent on June 14 by Grass Valley attorney Susan Kay McGuire to the Fire Safe Council’s Board of Directors on behalf of McGuire’s client, Roby Pracht, a former accountant for the council.



Pracht is expected to file a civil lawsuit against the council, multiple board members have said. The letter McGuire sent to the council on her client’s behalf is considered a “precursor” to this anticipated civil suit, according to council Director Don Thane.

The nonprofit parted ways with Pracht earlier this year for undisclosed reasons, informing the accountant that her services were no longer needed, McGuire said.




The council is currently awaiting the results of an independent organizational audit by an outside accounting firm that is expected to clarify a number of the allegations made in the letter, board members said in a council meeting held last week.

McGuire in an interview said that Pracht’s goal is not to damage the council but to shed light on what she feels is neglect of the organization’s finances.

“The whole purpose of this isn’t to destroy Fire Safe, but to ensure that it remains viable,” McGuire said. “The people in control of the financial situation were all warned and they didn’t do anything, and that’s what’s frustrating.”

Thane disputes the allegations, calling them untrue.

A particular point of concern highlighted in McGuire’s letter is what appears to be an attached statement of the council’s financial position as of November 2020, which shows that the organization’s total liabilities at that point in time — $791,823 — significantly exceeded revenues and money owed to the organization — $419,190 — totaling a net liability or loss of $372,633.

According to the letter, the council also ignored reports provided by Pracht showing how much money the organization was losing, with the council’s Chief Executive Officer Jamie Jones understating the organization’s losses on its public website.

Pracht alleges that between July 2020 and November 2020 the council lost $155,808. However, Jones submitted a purportedly inaccurate report on the board’s website, showing a much smaller loss figure of $79,023.

“In contrast to Dir. Jones’ substituted statement of financial position, the monthly trend provides a clear picture of how the losses continued to grow and mount each month,” McGuire’s letter states.

Jones could not be reached to comment, but has previously claimed that Pracht was not the council’s accountant but rather a bookkeeper, with less intimate knowledge of the council’s finances than an accountant would have had.

McGuire’s letter also alleges that Jones created a fraudulent 401K retirement plan for the nonprofit’s employees. Numerous employees apparently had money deducted from their paychecks for an organizational 401K put together by Jones, but those employees never received any contributions in return, the letter states. Conversely, Jones did write checks from the council — marked as matching contributions from the 401K — to herself; her husband, also a Fire Safe Council employee; and one other employee, but these checks went to an individual Fire Safe account, not into any retirement plan account. The “contributions” received by Jones and the other two recipients were also in excess of what they should have been paid in accordance with the 401K, with Jones receiving an extra $4,100 from these checks, the letter alleges.

Pracht also claims that budgetary flubs have exposed the council to potential investigation by the IRS, with the council failing to report numerous “advances” the organization paid to Jones herself, totaling $14,500 from 2019-20, as payroll.

“Both ‘advances’ should have been shown as payroll. Failure to do so could again expose Fire Safe to allegations by the IRS and (State Franchise Tax Board) of payroll tax fraud,” the letter states.

DISPUTE

Asked about the letter’s allegations, Thane said the letter “embellished” some very minor issues, and added that he expects the ongoing audit to clear the council of any wrongdoing.

“I think that the audit is going to clear the Fire Safe Council of all these accusations, and hopefully totally put that letter to rest. There’s accusations in there and they’re not true,” Thane said.

Thane added that the records don’t tell the full story and inappropriately imply intentional misconduct by Jones and the other directors.

Financial documents attached with the letter show that the largest source of the organization’s liabilities was the Ponderosa Project, a $3.3 million fuel abatement project initiated in 2019 aimed at clearing 1,200 acres of hazardous brush and vegetation from the properties of Nevada County landowners.

Nevada County assisted the council by providing advance loans of $200,000 per month, from July 2019 to November, according to McGuire’s letter.

According to Thane, the council had to accrue temporary debts in order to invest the funds required to complete the Ponderosa Project.

In particular, he said that labor and equipment costs associated with the project made the council’s financial statements look significantly worse than they actually are. Once the council is reimbursed in accordance with the invoices it sent to the county for the project, the financial statements will look significantly more balanced, Thane said.

“There were numerous expenses that we had, and in that particular process we weren’t getting grant funding for the entire thing,” Thane said of the project.

The council receives between $2 million to $3 million annually in state and local government grant funding, Thane said.

“There were a ton of outgoing expenses … the way the books were showing it, is that we were way over budget … that happens with a lot of projects we have, that’s part of the nonprofit hurdle,” he added.

Thane’s claim is disputed by McGuire’s letter, which asserts that the $200,000 monthly advances the council received during the Ponderosa Project far exceeded the actual costs that the nonprofit kept track of in its invoices, leaving the council presently liable for a total of $531,259 to the county.

Nevada County officials have said they are currently investigating the claims made in McGuire’s letter, but have declined to confirm or deny the veracity of the financial statements presented in the letter.

On Tuesday, County Executive Officer Alison Lehman said in a statement that the county will await the preliminary results of the ongoing audit — expected to be available in August — before taking any further action in regards to the claims made in the letter.

“The county is awaiting the results of the current internal audit of the Fire Safe Council before expressing any opinion related to concerns brought to our attention,” Lehman said in a statement.

“The county has requested documents and financial information in coordination with the county auditor relating to our contracts and the financial reports with the Fire Safe Council. The concerns expressed are under the purview and governance of the Fire Safe Council Board. However, the county has a duty to oversee the funds contracted with the Fire Safe Council and account for every dollar.”

McGuire said that the allegations Pracht has raised deserve a thorough investigation on the part of the county, saying that more urgency was needed in addressing potential wrongdoing by an organization that receives so much taxpayer funding.

“The board members on the Fire Safe Council shouldn’t just be looking at these numbers saying, ‘OK, whatever, sounds good,’ and move on — this should be of great importance to taxpayers, like what is the county auditor doing? … this needs to be cleaned up,” she said.

Stephen Wyer is a staff writer with The Union. He can be reached at swyer@theunion.com

McGuire_FullLetter.pdf

Full statement from Alison Lehman, county executive officer

The county received the letter from Susan Kay McGuire listing several concerns regarding the Fire Safe Council’s financial status and operational activities. In addition, the county received feedback from members of the public regarding similar and additional concerns.

The county is awaiting the results of the current internal audit of the Fire Safe Council before expressing any opinion related to concerns brought to our attention. We have met with the Fire Safe Council chair and executive director. The county has requested documents and financial information in coordination with the county auditor relating to our contracts and the financial reports with the Fire Safe Council. The concerns expressed are under the purview and governance of the Fire Safe Council Board. However, the county has a duty to oversee the funds contracted with the Fire Safe Council and account for every dollar.

We do not have any concerns about the Fire Safe Council meeting grant deliverables. The county views the Fire Safe Council as a critical and valued partner in preparing our community for wildfire.

The Fire Safe Council has been very responsive and cooperative to the county’s request for more information related to the concerns brought forward by Ms. McGuire and others. An independent third party will be reviewing each concern in McGuire’s letter and preparing a full report for the Fire Safe Council Board. Fire Safe Council is meeting with the county weekly, or as needed, and will share the annual audits as soon as possible after they are reviewed and approved by the Fire Safe Council Board.

We are still reviewing McGuire’s claims as they relate to county contracts. We plan to review these thoroughly in coordination with the county’s Auditor’s Office. The Fire Safe Council Board is looking into all of the claims, and we expect them to come to a conclusion soon.


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