The Grand Jury released a report titled “Fire Safe Council of Nevada County – Growing Pains and Best Practices.” In it, the jury dives into concerns raised by former Fire Safe Council (FSC) employees and Nevada County who receives and distributes federal, state, and local funds, as well as grants, to agencies such as FSC.

Grand Jury reports in Nevada County are traditionally focused on local government agencies. A report on a non-profit is unusual, but prior juries have issued reports on outside service providers who received local, state or federal tax dollars.

How it started

According to the report, “The County and the FSC Board of Directors received a letter from Susan K. McGuire, attorney, dated June 14, 2021, written on behalf of a former FSC financial contract employee. The letter raised issues of mismanagement concerning bookkeeping and payroll practices, a retirement plan, and personal use of company funds. To clarify issues, the FSC Board ordered an internal control report from a third-party accounting firm for the Fiscal Years (FYs) 2019 through 2021. The audit report dated July 8, 2021, identified significant deficiencies in internal controls.”

Nevada County, in their first response letter to McGuire and the FSC, stated “The County is not expressing any opinion related to any concerns brought to our attention. The County does not have any concerns of 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 County also requested documents and financial information relating to both fiscal and operational concerns. The county’s Auditor-Controller was to review documents requested in the letter because “The concerns expressed are under the purview and governance of the Fire Safe Council Board, however the County does have a duty to oversee the funds given to, and the contracts that we have with, the Fire Safe Council (FSC).” [source: YubaNet story “Apparent growing pains at local Fire Safe Council need addressing” on July 14, 2021]

A second letter dated August 23, 2021, by Nevada County clarified the county’s expectations of any nonprofit working with or providing services for the county: “These findings [by the FSC’s external accounting firm] indicate a weakness in financial management and controls as well as deficient payroll practices and observance of tax laws. The Internal Controls report addressed only a few of the concerns identified in the County letter, and given the significant findings in the initial report, we would like the remaining concerns addressed by the independent auditor.”

The Grand Jury report continues: “The FSC responded that many of the allegations were inaccurate and based on incomplete information; nonetheless, the nonprofit did initiate an improvement program in the summer of 2021 with the addition of a Controller and an Accounting Technician to the financial staff. They also hired an independent auditor, as requested by the County.

The new Controller and Accounting Technician began recommending changes which included segregation of duties, remediation of identified control deficiencies, and presented the Board with a review of the financial management process.

Then, in mid-June 2022, the Jury unexpectedly learned that both the newly hired Accounting Technician and the new Controller, were no longer employed by FSC. The Jury is very concerned about the continuing pattern of high turnover of financial employees given the FSC’s financial challenges. In addition, the Jury’s investigation determined that many of the allegations as reported in the 2021 letter from Susan K. McGuire, continue.

Financial Reporting lagging

Nonprofit organizations are required to file a Form 990 with the IRS. It is to include salaries of officers, directors, and key employees, along with the FY financials. The filing due date is the 15th day of the 5th month following the end of the organization’s fiscal tax year.

Both the IRS and the nonprofit corporation are required to disclose the information to the public. As of June 22, 2021, the IRS website listed the last FSC Form 990 filing was for FY 2019. The 2020 filing appears to be in arrears.

Failure to file the Form 990 may result in up to $50K in fines. An organization that fails to file the required information for three (3) consecutive years will automatically lose its tax-exempt status.

In addition, the Jury has found that financial statements submitted to the Board are consistently two to four months in arrears, thereby limiting the Board’s ability to make informed decisions.

Board of Directors Best Practices – Needs improvement

While limited progress has been made in response to the County’s concerns, the Jury’s investigation has not revealed the development of a strategic plan to address the full magnitude of the issues. The Board has a responsibility to ensure applicable laws and regulations are adhered to. Incompetence or ignorance of legal and regulatory requirements is not an acceptable excuse for non-compliance.

While FSC states that significant progress and improvement has been made, the Jury was unable to verify these claims. The Jury issued multiple document requests and reminders to the Executive Director and a member of the Board without result. As of June 22, 2022, the Jury has received none of the requested documents. The Jury found that issues identified by the County, auditors, and the public are far from resolved, and the continued financial employee turnover may put the organization at serious financial risk.

Source: 2022 Nevada County Grand Jury report

Not all is bleak – but more work needs to be done

The Grand Jury recognized the importance of the Fire Safe Council concept and wrote: “The FSC provides critical wildfire mitigation support to the County through many services, i.e., Chipping Program, Firewise USA®, Green Waste, Defensible Space Advisory Visit (DSAV), Address Signs, Scotch Broom Challenge, and Low-Cost Defensible Space Clearing Services. In recent years fire danger in our community has exploded, and so has the need for organizations such as FSC.

The Fire Safe Council of Nevada County is a significant part of Nevada County’s safety net. The Nevada County Grand Jury recommends that continued and sustained development as outlined by Nevada County will allow the Fire Safe Council of Nevada County to achieve their stated mission: “To make Nevada County safer from destructive wildfire.”

The full report is available for download from the Grand Jury’s website.