Rules for Missouri Fire Protection Districts - Page 7

VI. Treasurer Powers and Duties

Parenthetical numbers in the text refer to sections of the current Revised Statutes of Missouri, abbreviated as RSMo.

Options for selection

The treasurer does not have to be a member of the FPD board. If the board chooses to have the secretary be a non-board member, it may want to consider combining the secretary and treasurer roles. Statutes specifically authorize this combination (321.170). The arguments for and against this are similar. Combining the administrative and financial operations is more efficient where they are operating well. But having a secretary and a treasurer who cross-check one another also has merit. The board should discuss the pros and cons of these options.

Duties

Other Treasurer Duties and Responsibilities
• Keep accounts of FPD money received and disbursed in permanent records according to policies, regulations, statutes and generally accepted accounting principles (GAAP) — no comingling of funds, for example, pension, debt service, etc
• Ensure all bank accounts, open merchant accounts and credit card accounts are reconciled timely (perhaps by the 10th of each month)
• If audited, prepare fiscal year financial reports for auditor and authorizes auditor access to bank account statements and other requested information.
• Ensure filing of federal, state and local tax forms, for example, W-9, 1096, 1099, etc.
• Fulfill financial reporting covenants with lenders, bond holders, lessors and patrons

As custodian of an FPD’s money, the treasurer has the care and responsibility for all moneys coming in any manner to the FPD (321.180; 321.242.4; 321.246.4; 321.247.5) and keeping all moneys in the different funds required by law (105.662; 321.290) or authorized by the board. Because of this, bonding is required before the treasurer can function. The board establishes the amount of bond necessary, with a $5,000 minimum set by statute. (For many similar public positions, this bond is set at the largest amount handled during any month of the preceding year plus 10 percent.) The FPD pays for the bond, which must be a “corporate fidelity bond” (321.180). Instead of a bond set at the largest amount handled by the treasurer, the board may choose instead to purchase an employee dishonesty insurance policy; however, the treasurer must still have the $5,000 minimum bond.

“The treasurer shall keep strict and accurate accounts of all money received by and disbursed for and on behalf of the FPD in permanent records” (321.180). An example of an Accounts Payable and Payroll Check Register is provided in the Sample Forms section of this manual.

Financial statements and penalties

The treasurer should provide written, monthly reports to the board that include a report of revenues (money coming in) and disbursements (money going out), a balance sheet report (showing what is owned and owed), and comparisons of actual versus budget amount. Unlike the minutes prepared by the secretary, the board should never approve the treasurer’s report otherwise the report becomes the board’s report. Instead, the motion would be to receive the report and place it on file. The board should approve annual financial statements, but approval of the financial statements is usually based on the recommendation of its auditor, who often has malpractice insurance or may be subject to discipline from a state professional registry board.

The state auditor provides an electronic spreadsheet and printer-friendly format (PDF) financial form in the Local Government Forms and Reports section of its website.

Two statutes require FPDs to file an annual financial statement (105.145 and 321.180). Found in different sections of the statutes, each has slightly different requirements. Combined, these requirements are:

  • A “detailed financial statement” must be prepared (321.180) “in such summary form as the state auditor shall prescribe” (105.145).
  • The annual financial statement must be filed by April 1 with the county clerk of each county in which the FPD has territory.

The annual financial statement is due to the state auditor’s office four months after the end of the fiscal year if unaudited, or six months after the end of the fiscal year if audited by a certified public accountant (CPA) (15 CSR 40.3.030). If the annual financial statement is overdue, beyond the four- or six-month deadline, no pay or expense reimbursement for members of the governing body is allowed while the statement is overdue (105.145.5).

Bill paying

Unless prepayment authority has been granted, the treasurer presents bills for board approval, informing the board if a bill will exceed the budgeted amount.

Because government predates our modern banking system, the procedures that have evolved for government finance are often more complicated than modern banking practices and banks may not understand them initially.

Only the treasurer can write checks on the FPD’s account. To do so, however, the treasurer must receive instructions from the board. Traditionally, a “warrant” has been used to instruct the treasurer. The warrant sometimes takes the form of a “list of bills” and a “motion to pay the bills,” which are voted on by the board and then given to the treasurer, who writes the checks. In some traditional local governments, the board members or maybe the board secretary and board president sign a warrant that is given to the treasurer, who then writes and signs the checks. The multiple signatures discourage theft or financial mismanagement.

Some FPDs use a single document as both warrant and check, which must be signed by the secretary and countersigned by the president. It is a warrant, but it becomes a check when the treasurer signs it. Separate warrants and checks can be used, but using one document for both purposes is easier.

Some banks have balked at accepting checks with multiple signature lines. If an FPD’s bank complains, explaining that the two signatures are for FPD purposes usually suffices. Only the treasurer’s signature is needed on the bank’s signature card, but the additional signatures warrant that the expenditure was authorized and that the account on which it is drawn has sufficient funds.

Unless prepayment authority has been granted, the treasurer presents bills for board approval, informing the board if a bill will exceed the budgeted amount. If a bill falls within the specific amount approved by the board in an annual budget, further board approval is not required, but can still be done as a matter of practice and internal control.

Personal liability

The Story of the Fayette City Treasurer (City of Fayette v. Silvey, 290 S.W. 1019)
• Early in the 20th century, the depository bank failed that held the City of Fayette’s funds. The City of Fayette sued its treasurer for return of the funds
• The courts found “... The general rule, which is the rule in this state is that one of the duties of a public officer intrusted with public money is to keep such funds safely, and that duty must be performed at the peril of such officer. Thus, in effect, he is an insurer of public funds lawfully in his possession.”
• Some of the lost funds were from the City’s electricity fees, but the court found that the treasurer was responsible for all public money, not just tax revenue
• The court did however, order the company that provided the treasurer’s bond, to pay the City
• After paying the City, the bond company successfully sued the treasurer for repayment (the bonds protect the taxpayers, not the custodian of public monies)

The treasurer of any local governmental body, including an FPD board, is personally liable for the safety of all public money, with two minor exceptions: (1) acts of God, including earthquakes, forest fires and floods; and (2) acts of a public enemy, such as the other side in a declared war. This means if the bank fails or the money is stolen, the treasurer can be personally sued to make up the loss. (Fortunately for a treasurer who is married, a spouse does not have the same liability and jointly owned assets cannot be seized to pay the debt.)

A corporate fidelity bond does not relieve the treasurer of this personal liability risk. The purpose of the surety bond is to protect the taxpayers, not the treasurer. Some homeowner’s insurance may protect a treasurer who has financial responsibility for an FPD. Those who are considering this role should research their options. They may need to purchase a special policy or an additional rider on a homeowner’s policy to protect themselves from the risks of this type of public service. Similarly, the treasurer should ensure that all recommendations from the FPD’s audit are scrupulously followed, because doing so will reduce the treasurer’s liability risk.

Collateral pledges

Because of this risk of personal liability, the treasurer should ensure that all moneys are promptly deposited in a bank and must ensure that the money is adequately insured by the Federal Deposit Insurance Corporation (FDIC), National Credit Unions Share Insurance Fund (NCUSIF), or by a bank’s pledge of collateral for any money above the FDIC or NCUSIF coverage limit (110.010.1). (Regardless of how many different bank accounts an FPD has, the FDIC insurance limit applies only once, not to each separate account. In other words, the FDIC rules are different for government bank accounts than for individual accounts.)

To ensure FPD funds are not at undue risk, the law requires that the FPD can only accept collateral pledges that are also used for state funds (110.010.1). The FPD should require the bank to update the collateral schedule periodically, at least once a quarter.

The law for securing state funds lists 16 different types of collateral pledges plus FDIC/NCUSIF coverage (30.270):

  • Bonds and other obligations of the US government, for example, treasury bills;
  • Missouri bonds of cities with population over 2,000, counties, school districts, or special road districts;
  • Bonds of any other state;
  • Bonds, etc., issued by farm or agricultural credit banks;
  • Bonds of, or irrevocable standby letter of credit issued by, the federal home loan banks;
  • Bonds of any political subdivision established by the City and County of St. Louis section of the Constitution;
  • Tax anticipation notes of first class counties;
  • Surety bonds from highest-rated insurance companies;
  • Out-of-state municipal bonds with highest-ratings;
  • Certain mortgage securities.
  • FDIC/NCUSIF coverage

State auditor concerns

The Missouri state auditor performs audits on public entities (29.200), including FPDs, randomly, by order of the Missouri governor, or when enough taxpayers have signed a petition for such an audit paid for by the FPD. Several FPDs have been audited based on such petitions (29.230). An FPD board of directors should review those audit reports, which are available on the Missouri State Auditor’s website.

Audit Petition Requirements

Last Election% of Voters
0-99925%
1,000-4,99915%, but not less than 200
5,000-49,99910%, but not less than 750
50,000+5%, but not less than 5,000

An example of an inventory record is provided in the Sample Forms section of this manual.

The state auditor recommends that an FPD establish certain policies and good auditing practices that cannot be found in any Missouri statute. For example, the state auditor believes public entities should always have a current inventory of all their equipment and other property. That is good practice for any organization. An FPD should inventory not just its firefighting apparatus, but all the equipment owned by the FPD, including computers, chairs and file cabinets. Each item should be labeled and put on an inventory list, either electronic or paper, that is kept current. To establish a value threshold for what is put on an inventory list, the FPD board should work with its accountant to follow generally accepted accounting principles (GAAP) for governmental accounting set by the Government Accounting Standards Board (GASB).

Embezzlement
Without audits or an independent review of bank reconciliations, the treasurer for 15 years of the Wellington Napoleon Fire Protection District and the Wellington Napoleon Special Road District, was able to embezzle $1,530,159. He was sentenced in 2014 to three years in jail without parole for two counts of mail fraud and ordered to pay full restitution.

In the reports, the state auditor has chastised FPDs for not having a travel reimbursement policy, not bidding health insurance every three years (as required by law) and not having a vehicle, credit card or wireless phone use policy. The auditor has also criticized FPDs for not keeping close records on maintenance for trucks and other vehicles.

The board might ask the FPD’s accountant to download some of these audit reports, which can be used to educate the directors and office employees on sound financial management. FPDs have suffered losses (including by embezzlement) when basic accounting practices were not followed, or when the FPD had little or no segregation of duties.

Some FPDs may be required to hire their own auditor (MO Constitution Article VI, Section 24 and RSMo 321.690); however, the grammar used in the law has led to some confusion about the requirement. Regardless of legal requirements, there may be practical reasons for a board to hire its own auditor, for example, to ensure integrity of the FPD’s accounting practices. Bond holders and organizations providing grants may also require audits.

The board should make sure to select a competent, insured auditor who specializes in governmental accounting and performs true audits, not just lesser “compilations” or “reviews.” Check with the local school district or public water supply district to find out which auditors are being used by these districts.