A financial meltdown: Inter-Canyon Fire board missed chances to prevent alleged theft

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By Ann Imse, For the Courier

The Inter-Canyon Fire Protection District board failed to investigate serious overspending for five years, records show — and that allowed $643,000 to vanish before the fire chief was indicted on embezzlement charges.

The board did not discover the alleged theft until there was no money left in the bank, in December 2012.

Yet board members had numerous opportunities to notice problems, district records show. Board members could have stuck to budgets, read annual audits showing overruns, insisted on receipts, and stopped reimbursing the chief for vague purchases on PayPal and Amazon.

The district overspent its budget every year from 2008 through 2012, a violation of state law. But board minutes contain no record that the board knew that. And several board members said they don’t remember ever being told — not by the board’s accountants, lawyer or auditors — until after the disaster surfaced.

David MacBean, the once-popular fire chief for the small volunteer department, was removed in January 2013 and indicted in the fall. He is awaiting trial on charges he took about one-quarter of the district’s budget each year for three years from 2010 to 2012 — without the board’s noticing the loss. MacBean did not respond to knocks and a note on his door.

All six men who served on the board from 2009 through 2012 bear responsibility for financial stewardship, including president Michael Reddy and board members Roy Crawford, Ralph Dreher, Joseph Marcus, Ted Fandel and Richard Berninzoni.

Former treasurer Roy Crawford did not require receipts before paying out hundreds of thousands of dollars a year to the former chief. Crawford also repeatedly reported that the finances were fine in 2009 and 2010, when they were not. Crawford was asked to resign a month after the alleged theft was discovered. He declined to comment for this story.

A small district with big financial problems

Inter-Canyon is a small volunteer fire department, with just 1,900 voters during the last tax election. Most of its calls are for crashes on U.S. 285 between Morrison and Conifer. The board is insular, with members Dreher and Marcus serving since the 1960s, off and on. Marcus and accountant Richard Barnes go back even further, to grade school together, and Barnes did the books at the fire department for two decades.

MacBean became chief in November 2008, after volunteers objected to his predecessor. He was well-liked and trusted, a corporate manager in his paid career. Red-haired and ruddy, he was sporting a short beard at the time of his arrest.

“He’s a very smooth talker,” says Diana Roder, who took over for her father as accountant in 2012, and raised questions that went unanswered.

Those who worked long and occasionally dangerous hours with MacBean without pay now feel betrayed — by both MacBean and treasurer Crawford.

District officials and Roder refused to answer many questions for fear of jeopardizing the criminal case. The district also refused to release most financial records from 2010 to early 2013 — claiming they stopped being public records once prosecutors took copies. Barnes did not return calls to his joint office with Roder.

However, earlier records from 2009 show MacBean’s departmental credit-card charges jumped late that year, from near nothing to as high as $8,000 in one month. Crawford sometimes had to make two payments in a month on the chief’s credit card to stay under the credit limit, the indictment says.

As chief, MacBean was allowed to approve his own expenses. District records show MacBean would scribble a few words like “firefighting” or “memory cards — training” after each charge on some credit-card bills. One bill from 2009 had no explanations at all, even for a $1,000 purchase at Staples. Without receipts, numerous purchases on Amazon could have been spent on any of the literally millions of products that it sells.

During four months of hunting season in 2012, MacBean charged $24,000 at the Big R store in Conifer, according to the indictment. His purchases included guns and ammunition, typically not standard equipment for a fire department.

But the chief’s high expenses were buried in a blizzard of overspending by the district after voters approved a tax increase for new fire trucks in May 2008.

Overspending started at $64,000 in 2008 and reached $902,000 in 2012 after the alleged theft was discovered.

Nothing in the board minutes indicates that the five directors noticed the district’s overruns in 2008 and 2009. In following years, overspending was dismissed as a result of heavy investment in fire trucks.

Board president Reddy said he accepted reassurances from treasurer Crawford and longtime accountant Barnes. “We didn’t see it as a huge issue because our accountant didn’t see it as a huge issue,” Reddy said.

Board member Marcus said treasurer Crawford would drone on about details. “You could find yourself gasping for air,” Marcus said. But he now realizes that Crawford skipped the big picture. “No alarm was raised by that guy.”

Fandel, who was on the board for most of the time of the alleged theft, didn’t remember any talk about lack of receipts. All three men said finances were not their strong points, and they relied on others. Veteran board member Dreher and short-timer Berninzoni did not respond to requests for comment.

Reddy said last fall that the theft was not noticed because it had taken all of the reserve funds set aside for new fire trucks. However, audits clearly show the budget overruns had wiped out the reserve by the end of 2011. Only $22,000 remained, and it was soon gone, too.

In fact, the district would have run out of cash in early 2010 and again in 2011, if it had not taken out loans, according to records. “Crawford said, ‘We have to borrow,’ ” Marcus recalled. He found that uncomfortable but went along.

In 2010, the chief was over budget in four categories by a total of $138,000, according to the audit. The indictment charges that MacBean stole $193,000 that year.

Throughout 2012, Roder, who had taken over district accounting from her father, Richard Barnes, warned that MacBean’s spending should be supported by receipts. But she was telling MacBean himself and treasurer Crawford, later records say.

“Diane had asked the former treasurer countless times, ‘Where are the receipts?’ and the treasurer would wring his hands and say, ‘I’ll ask for them again. He says he has them at home,’ ” according to Marcus.

Nothing changed. Until the money ran out.

Marcus vividly remembers the December 2012 board meeting, when Crawford said they were out of cash — with three months to go before tax receipts would show up. “I was so bewildered,” Marcus recalled. “I said, ‘What the …!? What happened?’ ”

“And no one had an answer,” Marcus said.

Marcus told Reddy, the board’s chairman, who had been out of town. “He quickly smelled out that something’s not right” and called prosecutors, Marcus said.

The district had to borrow $110,000 to get through the next several months. In January, the board relieved MacBean and the next month asked Crawford to resign.

The board switched auditors from Richey May to Poysti & Adams, which found $282,000 of questionable spending in 2012. Reddy said in the fall that the board was surprised to find out from the indictment that its loss was far higher — $643,000 over three years.

State was late in warning district about overruns

It was not until March 2013 that records clearly show Inter-Canyon was told that its budget overruns were illegal. That’s when the state auditor sent a formal letter of warning — and the letter concerned overspending from 2011. State officials missed the illegal overspending in 2008, 2009 and 2010.

The law allows the state to hold up tax money if districts fail to send their audits on time. But there’s no penalty on districts for what the audits find, such as Inter-Canyon’s extreme overspending.

The only penalty is on board members, who can be removed for malfeasance. Any voter may request an investigation by the district attorney.

“Typically,” said Scott Olean of the state Department of Local Affairs, “audits will say something like, ‘The district may have exceeded appropriations, which may be a violation of state budget law.’ ” None of the bound Inter-Canyon audits from Richey May said anything like that for four years from 2008 through 2011. Only the new auditor gave the department such a formal warning, last summer.

Richey May’s management letters could not be found in district files. When retrieved from the auditor, they said — three years in a row — that the treasurer had too much authority and the bank statements should be sent to the accountant.

Asked if this kind of overspending is common among Colorado’s many fire, water and sanitation districts, Olean hesitated. And then he replied: “It’s not rare.”