PRESS RELEASE
TO: ALL NEWS MEDIA
FROM: PROSECUTOR JOHN MOLINELLI
Bergen County Prosecutor John L. Molinelli announced the arrest of John LaForgia of 216 Westervelt Place Apt. B, Lodi, New Jersey on charges of False Public Alarms, Unlawful Possession of Handcuffs and Handcuff Key and Unlawful Possession of a Weapon. LaForgia was arrested at his home during the execution of a search warrant on March 11, 2010, without incident.
The arrest came about as a result of an investigation conducted by members of the Bergen County Prosecutor’s Office Computer Crimes Task Force and the Sex Crimes and Child Abuse Squad, under the direction of Chief Steven Cucciniello and the Lodi Police Department, under the direction of Chief Vincent J. Caruso.
The arrest stemmed from an Internet investigation in which LaForgia was using the Internet and his cellular telephone to transmit e-mails, instant messages and text messages about an impending sexual and physical assault of a child. Those messages were transmitted to random people that he did not know and to others that he met while in internet chat rooms. The investigation revealed that LaForgia had no children of his own and had at no time been in contact with any children.
Prosecutor Molinelli states that the defendant is presumed innocent until proven guilty beyond a reasonable doubt. Prosecutor Molinelli would like to thank the Lodi Police Department for their assistance with this investigation and arrest. Additionally Prosecutor Molinelli would like to thank the following Police Departments who provided additional support in the form of Computer Crimes Task Force personnel:
Fort Lee Police Department
Maywood Police Department
CHARGE INFORMATION FORM
DEFENDANT: John LaForgia DOB: 10/01/1984
LAST KNOWN ADDRESS: 216 Westervelt Place Apt.B Lodi, N.J.
MARITAL STATUS: Single
PLACE OF EMPLOYMENT: Unemployed / Part time student
ARREST INFORMATION FUGITIVE: NON FUGITIVE: X
ORIGINATING AGENCY: Bergen County Prosecutor's Office Computer Crimes Unit / Lodi Police Department
DATE AND TIME OF ARREST: 3/11/2010 @ 10:30 am
AGENCIES AFFECTING ARREST: Bergen County Prosecutor’s Office Computer Crimes Unit / Lodi Police Department
CHARGE AND STATUTE CITATIONS
2C:39-3(e) Unlawful Possession of a weapon, 4th degree
2C:33-3(a) False Public Alarms, 3rd degree
2C:39-3K Unlawful Possession of Handcuffs and Handcuff Key, Disorderly Persons Offense.
ARRAIGNMENT INFORMATION
ARRAIGNMENT DATE: 3/12/2010 @ 09:00 am
JUDGE: CENTRAL MUNICIPAL COURT
BAIL AMOUNT & CONDITIONS: RELEASES ON SUMMONS
PRESENT STATUS: RELEASED ON SUMMONS
PRIMARY INVESTIGATOR ASSIGNED: Det. Brian Reich
Analyst Michael Palumbo
CASE NUMBER: BCP10-00540B
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PRESS RELEASE
March 9, 2010
REPORT ON THE FUNDRAISING ACTIVITIES AND EXPENDITURES OF
REPRESENTATIVE VOLUNTEER FIRE DEPARTMENTS THROUGHOUT BERGEN
COUNTY AND RECOMMENDATIONS FOR IMPLEMENTATION OF ADDITIONAL
FINANCIAL ACCOUNTABILITY
EXECUTIVE SUMMARY
This report represents the findings, conclusions and recommendations of the Bergen County Prosecutor’s Office after an extensive investigation into the financial practiceof representative volunteer fire departments throughout Bergen County. This investigation was launched after questions were raised regarding the expenditure by some members of a local fire company of publicly solicited funds to take a trip to Cancun, Mexico. After an initial review of the facts of that case, it became apparent that there is little statutory regulation and guidance with regard to the raising of funds from the public and expenditures of those funds by the numerous volunteer fire departments within the county as well as statewide. To ensure the integrity of the financial practices of the volunteer fire departments within Bergen County and to ensure the public’s continued trust in and support of such a system, this broader investigation commenced.
To obtain a thorough understanding of the practices in place county-wide, we selected for our review eighteen different volunteer fire departments of varying representative sizes and from a representative geographical cross-section of the County. Each volunteer fire department reviewed had several fire companies within so the actual number of volunteer fire companies whose finances were reviewed totaled fifty.We did not conduct professional financial audits but rather performed reviews of each company’s sources of revenue and expenditures to understand county-wide the various methods in which volunteer fire companies raise money and the types of
expenditures made with those funds.
While our review of various fire departments did disclose certain violations of both tax reporting and the statutorily required audit for departments that raise, in total receipts, in excess of $70,000.00, we do not believe that any occurrence that has taken place within the various fire departments reviewed warrants criminal charges or prosecution. However, and as was our office’s prior practice when declining prosecution in the face of certain election frauds that took place within the Borough of Palisades Park, New Jersey several years ago, we have decided to disclose various results from our investigation so that the various stake holders in Bergen County can learn of our objective findings and perhaps give due consideration to the conclusions reached at the end of this report. These stake holders referred to consist of the contributing residents and taxpayers of Bergen County, the various elected officials responsible with the appropriate operations of municipal government within their jurisdiction, the various firefighters, both volunteer and paid who devote their time and dedication to performing a valuable service to the community and, finally, to the media, as it is hoped that many of our findings and recommendations will be relayed to the public for these purposes. In general, we wish to make it clear that it is neither illegal nor inappropriate for any firefighting agency to solicit funding for either professional or personal firefighters support. By professional support, we refer to those contributions that are placed towards the acquisition of clothing, safety equipment, gear or other property customarily utilized by the firefighter in the performance of their official duties. Indeed, in light of the significant public purpose being served by the volunteer firefighter, we place considerably less weight on the manner of solicitation if the funds received in the solicitation were ultimately earmarked towards the professional purpose. In this regard, all due consideration should be given to the firefighters and great latitude and leeway should be given to them in a manner so as to supplement those costs that otherwise could not be paid for through municipal taxes. The benefit of the professional solicitation is significant in that it provides for an essential public purpose while at the same time reducing the costs associated with the providing of that purpose to the taxpayers.
The solicitation of a personal expense is the area where the public must be made aware. Again, we emphasize that it is not inherently unlawful to make a solicitation of funds which ultimately will go towards the acquisition of equipment for personal purposes, including but not limited to food or other resources utilized in a celebration, equipment utilized in weight training rooms, kitchens and other non-essential portions of a firehouse and, lastly, for the providing of vacations and other pleasure destinations paid for through the personal solicitation. In this area, a significantly greater scrutiny must be involved. The reason for this is that while the solicitation of funds for purely personal purposes is not inherently unlawful, it is essential that the public be aware of the solicitation and further aware that the monies that they give will be used for that exact purpose. Indeed, some time immediately following the initial publication of the issue that arose in the Fairview Fire Department, a letter to the editor that appeared in the Record was from a resident of Fair Lawn, New Jersey, who stated that he had no difficulty giving money to a firefighter to go on a trip based upon the hard work that these dedicated volunteers perform. Our office does not disagree with the opinion expressed by this resident. However, our function is to ensure that the actual solicitation to the public be clear and concise for the purpose for which the money is to be expended, and that a solicitation not confuse the public into thinking that they are supporting the firefighter by providing for a professional based expenditure as opposed to a personal one.
We have seen examples of solicitation that say “support your local fire department” or “help us protect your home and family safety” in a solicitation. On its face, such a solicitation would normally not be inherently wrong. However, if the money derived from this solicitation is earmarked for a vacation or cruise for certain members of the fire department, one can certainly question whether or not a member of the public that writes a check or gives money consistent with this solicitation knows exactly what the money is being used for. This amounts to a fraud on the public and is wrong and should immediately cease in Bergen County. If the solicitation makes it clear that the money is to be used towards some type of leisure fund or other non professional purpose, then the solicitation is perfectly appropriate as it allows the public to understand exactly what their contribution will go towards. If they choose to make such a contribution then so be it and certainly such a contribution should be encouraged based upon the work done by the volunteer firefighter. One should not measure the value of the public service being provided when the problem being sought to be avoided is a fraud on the stake holder, that being the public person that is making the contribution.
Of further concern is the occurrence or receipt of non-professional solicitations and its effect on the tax status of the otherwise tax exempt Firefighter Association. Receipts that are earmarked for professional services are clearly consistent with the purposes and intent of the internal revenue code as well as regulations within the State of New Jersey concerning the payment of taxes, and each fire department or Association is certainly well within their right to take advantage of their tax exempt status in this regard. While this office does not give a tax opinion nor do we intend to state whether or not the law has been violated under tax codes when money is being solicited for purely personal or pleasure purposes, we believe that both the governing body and the Firefighter Association should exercise strong caution in this regard so that the public may continue to have trust and confidence in its firefighters and their association and so that both current and future volunteers can be free from entanglements that might otherwise distract them from the services that they intend to perform.
The following pages represent the objective analysis of our review and sampling of the various fire departments. It should be noted, that with rare exceptions, most of the fire departments cooperated fully with this office in providing information and data in order for our office to evaluate this matter. We did, regrettably, experience some obstacles in the providing of such records, which we attribute towards certain individuals with local attitudes that a fire department or association should be beyond review and should not be questioned by any government agency based upon the valuable public service that it performs. This type of attitude is wrong in today’s society and it is hoped that volunteer firefighters throughout the County understand the need for their self-review so as to avoid problems associated with its internal policies and public confidence.
TABLE OF CONTENTS
PAGE
I. Introduction 9
II. History of volunteer firefighters in New Jersey 11
III. Fundraising 13
IV. Tax-exempt status 16
V. Organizations/Associations/Agencies
A. New Jersey State Firemen’s Association 17
B. New Jersey State Exempt Firemen’s Association 17
C. New Jersey State Mutual Benevolent Association 18
D. New Jersey State Fire Chief’s Association 18
VI. Bergen County Prosecutor’s Office Investigation
A. Fairview Fire Department 18
B. Investigation 18
C. Private vs Public ownership 20
D. Summary of revenue and expenditures 22
E. Revenue findings 23
F. Expenditure findings 24
G. Regulatory reporting requirements 25
H. Internal accounting procedures 27
I. Travel expenses 27
J. Public solicitations 29
VII. Recommendations 30
VIII.Conclusion 33
INTRODUCTION
In the wake of the public awareness of the perceived breach of public trust committed by some members of the Fairview Volunteer Fire Department when they used donated funds for a trip to Cancun, Mexico, (The Record, by Monsy Alvarado, March 2, 2007), an understanding of the background of volunteer firefighting is beneficial prior to outlining recommended policies intended to ensure the proper use of solicited funds. This report highlights the history of volunteer fire departments in New Jersey, the tax-exempt status of such organizations, their respective organizations and associations in the State of New Jersey as well as practices concerning fundraising and expenditures. To fully appreciate the good services the vast majority of volunteer firefighters provide, the fundraising and expenditure issues must be presented in context.
It is widely recognized that volunteer firefighters and their departments provide professional, essential services to their communities. Indeed, from a cost/benefit analysis, volunteer firefighters save American communities an estimated $36.8 billion per year according to a 1993 study (Washington Post, January 10, 1999, pg. A-1). One can only imagine the amount volunteer firefighters save their communities today. Clearly, examples of the questionable use of donated funds, such as the Cancun trip, are the rare exception rather than the norm. Most volunteer firefighter companies raise funds to spend on the necessities of maintaining their organizations and equipment.
However, the long-standing practice of the near unfettered
discretion of local volunteer firefighters to raise and spend funds donated by the public has been a cause for concern. In most cases, outside reviews or audits simply do not exist.
When public taxpayer funds are involved, however, there are much tighter controls. N.J.S.A. 40:5-2 Mandates an audit if an emergency or rescue squad association receives more than $70,000 from the municipality or county. In relevant part, N.J.S.A. 40:5-2 states:
[w]henever the total annual county or municipal contribution to an association exceeds $70,000, the chief financial officer of the county or municipality shall receive an audit performed by a certified public accountant or a registered municipal accountant of each association’s financial records for the current year which shall certify to the governing body of the county or municipality that such records are being maintained in accordance with sound accounting principles.
Legislation has been proposed in the New Jersey Senate to raise the monetary floor for a required audit from $70,000 to $125,000. Oversight through professional auditing does provide some procedural safeguards against the misuse of public funds given to volunteer fire departments. However, many departments rely on a combination of taxpayer monies and publicly solicited funds and it is the publicly solicited funds that are not scrutinized in any meaningful way. Thus, potential for abuse exists, particularly in some smaller municipalities where taxpayer contributions do not necessarily exceed $70,000 to the fire department, and therefore neither the taxpayer monies nor the publicly solicited funds are formally scrutinized. The recommendations offered in this report are intended to address these deficiencies.
HISTORY OF VOLUNTEER FIREFIGHTERS IN NEW JERSEY
Numerous historical accounts of the beginnings of volunteer firefighting in New Jersey have been written. The County Clerk of Monmouth County, New Jersey wrote the following: Eighteenth century New Jersey residents were well aware of the devastating effects of fire, but the State had no involvement in fire fighting until 1826, when a law was passed to encourage the formation of fire companies. Under the December 14, 1826, “Act for the encouragement of fire companies,” fire companies were granted charters, provided that the fire company had one fire engine and between sixteen and thirty men. As an incentive to attract volunteers, firemen were exempted from military duty in time of peace. Twenty years later, through an “Act relative to juries and verdicts”, passed on April 17, 1846, members of fire companies also were declared exempt from jury duty....
To read the entire historical account, please visit their website at http://co.monmouth.nj.us/print.asp?id=1702.
Although the law stated that certificates were to be filed, Monmouth County fire companies continued to submit lists of active members to the County Clerk’s office. It was not until 1890 that firemen actually began filing their individual certificates in the Clerk’s Office.
Certificates were granted to provide volunteer firemen with a reward and incentive for serving. Early certificates often reference specific exemptions from jury duty and service in the state militia. Some early certificates mention a reduction in taxes. Others simply state that all exemptions provided by law are granted.
Regardless of the style of the certificates, they are always signed by several officials, such as the officers of the fire company, mayor, and County Clerk. Certificates after 1935 usually cite Chapter 176 of the Laws of 1935, as amended by Chapter 117, Laws of 1936, which standardized their form.
Although firemen still are required to file their certificates in the County Clerk’s office today, they no longer are entitled to military, jury, or tax exemptions.
Currently, a distinction remains between exempt voluntary firefighters and non-exempt voluntary firefighters. N.J.S.A. 40A:14-56 governs the eligibility requirements to qualify for exempt firemen status. A person who joins a municipal fire department and attends 60% of fires and drills for seven years is entitled to an exempt firemen’s certificate. For more details, go to www.njsefa.org
Histories of specific fire departments/companies may be found in their respective municipalities’ websites. The following website has compiled many of the municipalities’ fire department websites. (www.metrojersey.com/firedepartments.htm)
A couple of the better historical accounts of a municipality’s fire department are from Hackensack and Dunellen. Their respective websites are www.hackensack.org/content/49/142/229/default.aspx and www.dunellenfd.com/history.htm.
It is clear from a brief review of the history of volunteer fire fighters in New Jersey that the public recognized the valuable contributions made by volunteer firefighters through the years and created incentives to encourage participation.
FUNDRAISING
Despite their role as public servants, many firefighters are volunteers. Departments receive some contributions from municipalities and the state, both in monies and the use of
facilities but the departments raise much of the money for upgrades and equipment themselves http://www.njskylands.com/clfirefighters.htm.
Moreover, volunteer firefighters need to raise money each year in order to meet their annual budget. http://cms.firehouse.com/content/articl ... p?id=45604§ionId=46. Volunteer firefighters raise money in two ways: grants and fundraisers. Insurance companies, endowments and foundations award grants to some needy and/or worthy fire departments. http://www.foremansfund.com/wps/dcms/ht ... ndly.html. A good website for all things related to grants and fundraisers for volunteer firefighters is www.volunteerfd.org/topics/.
Firefighters employ a myriad of fundraising methods. One of the most effective appears to be the charitable gaming fundraisers. The more recognizable charitable gaming includes bingo, raffles, and pull-tabs. These seem to be the most profitable fundraisers, but tax related issues come into play if the profits are not used for the right purposes. http://www.volunteerfd.org/grants/articles/245109, (The Washington Post, Jan 10, 1999, p. A-1). Moreover, over-saturation could be a concern if these games are offered too frequently.
Food-sale events are also popular fundraising events.
Barbeques and pancake breakfasts are effective ways to raise money and popular with local communities. These fundraisers, however, are very labor intensive and not as profitable as charitable gaming. The numbers and types of fundraisers are only limited by one’s imagination. As long as the funds are raised and used for “charitable purposes,” the funds are tax-exempt.
One fundraiser that is being used more frequently lately is the renting of firehouses and the hosting of private social events there, such as birthday parties, weddings, retirement parties and bridal showers. http://www.njskylands.com/clfirefighters.htm.
Firehouses and other firefighting-related property are exempt from both state and local property taxes. Before 2002, if a firehouse or other firefighting property were used for fundraising purposes in excess of 120 days per year, the property would not qualify for property tax exemption status. The law was amended in 2002 to eliminate this threshold. Currently, firehouses are not subject to a time constraint with respect to the amount of fundraising/hosting activities. N.J.S.A. 54:4-3.10 and N.J.S.A. 54:4-3.13 are the two statutes that govern property tax exemptions for firefighter associations.
TAX-EXEMPT STATUS
Initially, it bears emphasis that for fundraising and tax purposes, both “firefighters” and “firefighting” qualify as a “charitable organization” and “charitable purpose” respectively, pursuant to N.J.S.A. 45:17A-20. However, the provisions of 501(c)(3) and 501(c)(4) of the Internal Revenue Code (“IRC”) actually determine whether an organization or association is exempt from federal taxation.
Under IRC 501 (c)(3) and 501(c)(4), the key test is whether the organization “relieves the burdens of government.” A statutorily created organization that helps retain volunteer firefighters does relieve the burdens of government.
NJSFA is funded through a restricted fund that comes from a 2% tax levy on foreign (i.e., states other than New Jersey) insurance premiums. All benefits paid from this restricted fund are tax-exempt. Tax-exempt issues could arise, however, when benefits are paid from the general fund.
The general fund is funded through the traditional fundraising and grant efforts that were previously mentioned. The logical inquiry then becomes: what is the primary purpose of the funds and the association? Does the association exist primarily for the benefit of its members? Or does the association use its general funds to “relieve the burdens of government?” If it is the former, like the PBA, then the organization is not tax exempt. But if it is the latter, then it may be tax exempt.
This is where charitable gaming can raise eyebrows. Because they are so profitable, it is difficult to trace all the funds to their ultimate use. In any event, the proper inquiry is the ultimate purpose of the funds and the association.
In sum, organizations will qualify for exemption under IRC 501(c)(3) and 501(c)(4) because they are “relieving the burdens of government” by implementing the provisions of the state statutes. But some associations will continue to be taxable because of the payment of member-supported mutual benefits.
ORGANIZATIONS/ASSOCIATIONS/AGENCIES
The following are firemen’s associations in the State of New Jersey.
New Jersey State Firemen’s Association (“NJSFA”)
This is the largest firemen’s association in New Jersey. They provide a myriad of benefits; notably the cash death benefit. If a voluntary firefighter dies in the line of duty, then he or she is entitled to treble death benefits.
New Jersey State Exempt Firemen’s Association
This is a sub-organization under the umbrella of NJSFA. They also provide other benefits in addition to the NJSFA benefits. Exempt firemen status is available only to firemen who have logged a certain amount of years and percentage of emergency responses. http://www.njsefa.org/about/index.htm
New Jersey State Mutual Benevolent Association
This organization is for career firefighters and not for voluntary firemen. This organization is the career firemen’s version of the PBA. It is not tax-exempt.
New Jersey State Fire Chief’s Association
This association is only for officers within the fire department. Thus, fire chiefs, deputy chiefs, captains and lieutenants may join this association. It is not tax exempt but it does provide more benefits.
BERGEN COUNTY PROSECUTOR’S OFFICE INVESTIGATION AND REVIEW
As mentioned, in February of 2007, members of the Fairview Fire Department-Grandview Company were brought under scrutiny for allegations that funds collected on September 11, 2006 were used to vacation in Cancun, Mexico. The matter was investigated by the Fairview Police Department. It was determined that 9/11 funds and municipal funds were not used to fund the trip. However; the investigation confirmed that seven members of the Grandview Company of the Fairview Fire Department had traveled to Cancun, Mexico in January 2007 and the trip was paid for with fire company funds. Their fund drive included fire department members going door-to-door on several consecutive Mondays including September 11, 2006. Mondays are the customary fire department work days. The allegations that 9/11 funds were used to pay for the Cancun trip were proven to be false. The Cancun vacations were funded with monies raised by the volunteer fire department for the AGerman Feast@ which had not been held for several years. After careful consideration of all the facts, the Bergen County Prosecutor=s Office declined prosecution.
Although the Fairview Fire Department investigation did not lead to any criminal charges, in March of 2007, the Bergen County Prosecutor authorized an investigation into the financial workings of volunteer fire departments in Bergen County, given the issues raised in the Fairview Fire Department investigation.
On March 20, 2007, subpoenas were issued to the following eighteen (18) randomly selected volunteer Fire Departments: Bergenfield, Carlstadt, Cliffside Park, Dumont, East Rutherford, Edgewater, Elmwood Park, Englewood Cliffs, Fort Lee, Franklin Lakes, Lodi, Lyndhurst, New Milford, Paramus, River Vale, River Edge, Rutherford and Tenafly to obtain their financial records for the two year period of 2005 and 2006 The purpose of the investigation was to review fire department revenues and expenditures for legal compliance and later issue a report informing the public as to how donations and municipal/taxpayer monies are being spent by the volunteer organizations. In addition, the findings would determine the recommendations to be made to volunteer fire departments to enhance financial accountability.
The review of the eighteen volunteer fire departments for the years 2005 and 2006 included obtaining the following records: Bank records, treasurer=s reports, audit reports, solicitations, fund raising records, revenue records, municipal funding, tax returns and state filings.
Each fire department had separate social organizations which were responsible for the fund raising activities. Many towns had more than one fire company with separate social organizations. In some towns, one annual fund drive was conducted and the funds were dispersed among the fire companies. In other towns, each individual fire company conducted its own fund drive independently.
PUBLIC vs. PRIVATE OWNERSHIP
Fire companies were either publicly or privately owned, meaning the municipality owned the land and building (publicly owned) or the fire company owned the land and building (privately owned). The Paramus Fire Department was the only department that had both, with two fire houses publicly owned and two fire houses privately owned. Depending of the type of ownership, additional areas were reviewed; i.e. A determination if public owned fire houses were renting the fire house to the general public for social events or using the property to secure loans. Privately owned departments were reviewed to ensure municipal monies (or capital debt) were not being used to make capital expenditures to the property owned by fire departments.
OVERALL SUMMARY
After each fire company was reviewed, the financial data was merged into an overall summary to identify liquid assets, sources of revenue and expenditures.
REVENUE FINDINGS
The majority of the fire department revenues (approximately 60%) came from public fund drives and fund raisers. Fund raising activities and solicitations were reviewed. In most cases, the mailers were vague in terms of what donations were to be spent on as most fire companies simply requested the public=s Asupport.@ Some flyers stressed that fire fighters receive no pay for their services, but many firefighters receive annual clothing allowances and Length of Service Award Program (“LOSAP”) retirement plans funded by municipalities.
The second largest form of revenue (approximately 26%) was from the municipality for clothing allowances, rent of firehouse, social events such as annual fire department dinners as well as training, conventions, equipment, meetings and the operation of the fire department. The investigation revealed towns handled the payment of member clothing allowances in several ways. In some cases, a lump sum was paid to the volunteer fire department who deposited the monies and then issued checks to it=s members based on their own guidelines. In some cases, member dues and/or fines were deducted from the payment to the fire department member. The majority, if not all, of the clothing allowance monies were given back to the members. Some towns issued the checks directly to the member and the monies were never deposited in the volunteer fire department bank accounts.
Privately owned fire companies often received rent from various sources such as cellular tower rent, building usage and hall rentals. In addition, municipalities often paid rent for the housing of its fire trucks. Publicly owned fire companies generally had small rental amounts for use of the fire house to its members.
EXPENDITURE FINDINGS
The volunteer fire departments largest expenditures were for the fire house itself for repairs, maintenance, landscaping, monuments and capital improvements. Social events such as annual chief or installment dinners, wet downs, holiday events, anniversaries, and company dinners made the second largest expense. The third largest expenditure was stocking the fire house with food, beverage, office supplies, cleaning supplies, and food at fire scenes and meetings. Member stipends represented monies for clothing allowances and officer pay. Monies spent for fund drives usually represented printing fees for mailings and/ or fire department calendars and return envelopes. The next largest expenditure, clothing and equipment, was comprised of specialty fire equipment, computers, uniforms and fire department clothing. One department had purchased an antique fire truck. Other expenditures were for conventions, utilities, good and welfare of its members, awards, gifts, charitable donations, insurance, loan payments, training, professional fees, professional dues and fees, postage and bank fees.
The investigation revealed that several towns passed ordinances for a bond issuance for capital expenditures to privately owned fire houses. An argument might be made that the capital expenditures were necessary for the operation of the municipal fire truck being housed there. However, these funding methods need to be reviewed carefully.
There were instances where fire companies purchased alcoholic beverages. The amount was minimal in comparison to the total amount of expenditures, but it was identified as a potential problem or liability. Most fire companies collected member dues/fines that could be spent on alcohol purchases but the amounts collected were usually less than the amount spent on these purchases.
REGULATORY REPORTING REQUIREMENTS
The investigation encompassed checks to ascertain whether Fire Companies had filed the required regulatory reporting documents for tax exempt status, annual tax returns and fund raising activities.
Pursuant to Section 501 (c) of Internal Revenue Service (AIRS@) tax-exempt organizations are required to file IRS Form 990 or Form 990-EZ annually if gross receipts exceed $25,000.00. An IRS Form 1023 Application for Exemption must be filed to gain exempt status. The IRS guidelines further state that organizations should make certain documents available to the public including IRS Form 990. The review determined that several departments may not have filed tax returns as required by the IRS or was still in the process of preparing to file.
Division of Consumer Affairs Charities Registration Section-Pursuant to the Charitable Registration and Investigation Act (N.J.S.A. 45-17A-18 et seq., charitable organizations which received annual gross contributions that exceeded $10,000 must file an initial registration form (CRI-200 or CRI-150I). In addition, annual renewal is required along with a copy of the organization’s IRS Form 990, Return of Organization Exempt from Income Tax. The review determined that several departments and companies have not registered with Consumer Affairs as required by the Charitable Registration and Investigation Act.
INTERNAL ACCOUNTING PROCEDURES
The investigation found that a few fire departments did not prepare treasurer reports for it=s members. Although members of the fire department are not expected to have extraordinary accounting skills, treasury reports to it=s members should be prepared and periodic bank reconciliations should be done. Fire department bylaws should assign members within the fire company to review the books (minimally once a year) to ensure that monies are safeguarded against theft, especially since the majority of their revenue comes from donations and municipalities. It should be noted that most fire companies had detailed monthly treasurer reports that reconciled to bank statements. In many cases the services of certified public accountants were obtained for year end financial statements, tax returns and consumer affairs filings.
In addition, towns may be mandated to conduct certified audits of volunteer fire departments based on municipal funding levels.
FIRE DEPARTMENT TRAVEL EXPENSES
As mentioned, this investigation commenced due to allegations that members of the Fairview Grandview Fire Company had traveled to Cancun, Mexico in January of 2007 and vacationed, utilizing monies obtained from solicitations made on September 11, 2006. During the investigation, trips taken by members of two other town’s fire departments were closely scrutinized. One company used monies from their 100th Anniversary celebration to fund vacations for its members. Over a ten year period, the Fire Company held numerous fund raising activities to fund their 100th Anniversary celebration. The fund raising activities were advertised as 100th Anniversary celebrations and did not include any mention of vacations, but the fire department did place an advertisement inviting members of the public to attend these trips at their own expense. Approximately $80,000 was raised for the celebration and the municipality provided $10,000 towards the celebration. 100th Anniversary monies funded vacations in the amount of approximately $15,000 for its members who received one trip to either Las Vegas, Cancun or the fire convention in Atlantic City. No fund drive donations were used for the celebration.
In another town’s fire department, in September of 2006, three fire chiefs attended the International Association of Fire Chiefs Convention in Dallas, Texas. The town reimbursed each chief for all the expenses including air travel, car rental, hotel accommodations, meals and the cost of the conference. Included in the expenses was the cost of the spouse of each chief for air travel and meals. The cost of the spouses’ expenses has since been reimbursed.
PUBLIC SOLICITATIONS
As mentioned, the fund drive flyers used to obtain donations from the public were reviewed. In most cases, the need for the donation or how the monies are to be used was vague. Some flyers stressed that fire fighters receive no pay for their services, but a closer look revealed that although volunteer firefighters are not salaried employees, they did receive annual clothing allowances and LOSAP retirement plans funded by municipalities. The fire department provides a vital service and, at times thankless service to their community. When public funds and donations are involved, the public needs to be better informed of their operations. Most residents are aware that the volunteer fire department contains a social organization. Special fund raisers such as for the 100th Anniversary celebration should be clear and concise as to what the donated funds are to be used for as required by Consumer Affairs. This will ensure that persons making donations make informed decisions knowing that their donations are funding specific and appropriate purchases.
RECOMMENDATIONS
The purpose of this investigation and subsequent report was to inform the public of how their charitable donations are being spent by volunteer fire departments and to make recommendations to give volunteer fire departments better guidance in the future. With that in mind, the following are recommendations to volunteer fire departments and municipalities where relevant:
1. Fire departments should ensure that they are in compliance with all federal and state tax and consumer
affairs laws and regulations. It is recommended that
volunteer fire departments consult with a tax specialist
and visit both the IRS and State tax websites for information. It is also recommended that they visit the
State Consumer Affairs website.
2. Fire departments and municipalities should consult IRS regulations, specifically regarding the issuance of 1099 forms as many clothing allowances were in excess of the $600.00 limit.
3. Depending on the public funding levels provided to volunteer fire departments, municipalities should ascertain whether they are mandated to have certified audits done of the financial records of their volunteer fire departments.
4. Municipalities with privately owned fire companies should seek the legal opinion of their borough attorney to ascertain whether capital expenditures by the municipality on privately owned fire company buildings is appropriate and legal.
5. Travel paid for with public or donated funds should be for training and educational purposes and not merely for pleasure or personal trips unless specifically referred to in the solicitation as being sought for trip or vacation purposes. Only member costs for legitimate travel can be reimbursed, not the costs for other travel companions.
6. All volunteer fire departments should require at least two officer signatories on checks.
Checks, rather than cash, should be used to pay for most expenses, with the exception of very inexpensive purchases, where petty cash can be used. Receipts for all expense should be kept.
Treasurers reports should be prepared monthly and a
periodic bank reconciliations should be done.
Fire department bylaws should assign members within
the department to review the books periodically, at
least once a year.
7. It is recommended that if members choose to purchase alcohol for fire house activities, no public or solicited funds should be used but rather members should pay the cost of providing same,
8. Solicitation letters and flyers must contain accurate information and must specify the purposes for which the money being solicited from the public is being raised for. The public has the right to know how their donated money will be spent.
CONCLUSION
It is our hope that this report offers guidance to the members of the volunteer fire departments throughout Bergen County and offers information to the public as how funds are being raised and spent by volunteer fire departments. Full disclosure of how funds are raised and spent by volunteer fire departments will ensure the public has the confidence to continue to support these worthy organizations.
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