A nonprofit Nevada fire safety group mismanaged $2.7 million in federal grants and should repay the money issued for fuel reduction projects at Lake Tahoe, federal auditors recommended in a scathing report released by the Office of Inspector General for the U.S. Department of Agriculture.
The report condemns lax oversight and internal controls by the Nevada Fire Safe Council, a group established in 1999 that serves 130 communities by helping to reduce the risk of catastrophic fires.
"It's very clear that the management of grant funds was in violation of rules, procedures and protocol. It was really not good at all and it's put the Fire Safe Council in a very precarious situation," said Elwood Miller, a retired professor at the University of Nevada, Reno who served as the council's first executive director early last decade and is now a consultant to the group.
Federal auditors began investigating after a hotline caller complained in July 2011 that competitive bidding wasn't used to hire contractors.
During that review, auditors questioned the council's ability to account for $3.6 million in federal stimulus grants received through the U.S. Forest Service, as well as $6.2 million in other grants.
"Funds from these (and other) federal grants were commingled with the council's own funds and used to pay unauthorized expenses," the report said.
It also criticized the practice of allowing the council's executive director to handle "all aspects of transactions involving the grants," despite federal regulations that require those duties to be segregated "to reduce the risk of error and fraud."
Auditors said there was nothing to indicate fraud had occurred but added their review of the council's accounting was ongoing.
The report also found that the council "was routinely requesting reimbursements for expenses it had not yet paid," and that required audits were not conducted.
Contacted by telephone Friday, former executive director Andrew List said all expenses were submitted to the U.S. Forest Service for approval.
"We thought we were doing everything appropriately," List told The Associated Press. "The Forest Service had a duty to look at everything that was processed and OK it for payment."
List said he voluntarily left the job last year.
"As far as I know we spent the money on appropriate projects," he said.
Besides recommending repayment of $2.7 million, auditors recommended that the Forest Service withhold future grants until the council can show adequate procedures are in place; and that it seek reimbursement for any money spent that cannot be justified.
In its response, the Forest Service said it has asked the council to provide information on how the disputed funds were spent by Feb. 29. It also said the agency will postpone further grant awards or reimbursements until the council has adequate safeguards in place, and will enhance its own review process of reimbursement requests.
"We're going to do our best to comply with whatever the Forest Service needs us to do to remedy this situation," said Joan Presley, fire marshal for the city of Reno who serves on the council's volunteer board. "Then we'll see where we go from there."
The Fire Safe Council was organized in 1999, a year when wildfires burned about 3,000 square miles in Nevada. Funded largely through grants, it coordinates with local, state and federal agencies to evaluate wildfire risk and help communities reduce the threat by promoting defensible space.