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Unclear fire contract leads to state auditor investigation

Due to confusion over what money should have been deposited in Menahga's fire equipment fund, the Office of the State Auditor conducted a lengthy investigation and released its findings earlier this month.

Although the report concluded there was no wrongdoing, the auditor gave the council a choice to either transfer money to the fund or leave it as is.

The council met Wednesday to review the auditor's report and decide what should be in the fire equipment fund - also known as the "sinking fund."

The fund was part of an agreement between the city of Menahga and Blueberry, Huntersville and Shell River townships.

From 1997 through 2007, the city and the townships made annual deposits in the sinking fund to be used for future fire truck purchases, according to the agreement.

In 2008, the city deposited $20,450 from fire call fees collected between 2003 through 2007.

It is unclear whether the council in 2008 intended to use the fire call fees to make the sinking fund whole for the contractual obligations, or whether the council intended to supplement the contractual obligations with the fire call fees, the auditor's report states.

"I think fire call money is above and beyond contractual obligation," said councilwoman Kim Rasmussen. "I don't think it's tied into what the contract is, and I don't think it was ever intended to be."

All city council members - except for Dennis Komulainen - came to a consensus that those fire call fees were intended to be deposited in the sinking fund as an additional bonus to the contract payments.

The state auditor concluded that the sinking fund should have totaled about $48,000 by the end of 2007. Instead, it had approximately $34,000.

However, the council didn't make a motion to move any amount of money from the general fund to the sinking fund because there are still some missing pieces from the puzzle.

According to the auditor's report, $5,150 in fire calls was never collected, which means it can be subtracted from the amount the city owes to the fund.

Additionally, the state auditor questioned whether $5,497, that includes a Department of Natural Resources grant, was properly deposited into the sinking fund in August 2007.

City Administrator Teri Osterman told the council that $5,497 was transferred from the fire department's own checking account, when it was closed in 2005, into a fire department investment 4-M fund.

"The transaction was something that I think should've actually been corrected with the audit for that year," Osterman said. "There is no way that it should've been the grant money that got transferred into the 4-M fund."

Since documentation for that grant is missing, the council didn't make a motion to either keep that money or take it out of the equation.

If that money came out of the fire department's funds, which means it's general fund money, then it's OK for that $5,497 to be in the sinking fund, said city attorney Jeff Pederson.

"The issue from the auditor's standpoint is whether or not these are restricted funds," he said.

The council directed Osterman to further research the grant before moving forward.

An additional issue that was unclear to the council was how the interest rate was calculated in the sinking fund.

Osterman will also get information on the interest rate along with the DNR grant and provide it to the council at next month's meeting.

The next meeting will be held at 5:30 p.m. Monday, Sept. 14.