As part of a routine audit, the state Auditor General’s Office found three issues with the business practices and financial accounting of Lower Burrell Volunteer Fire Company No. 1, which serves the city’s Kinloch neighborhood.

In an audit covering Jan. 1, 2018, to Dec. 31, 2020, the auditor general concluded that Kinloch’s relief association had unauthorized expenditures, inappropriate ownership of a rescue vehicle and an inadequate financial record-keeping system.

The fire company has 60 days to fix the problems.

Future state aid to the city’s two volunteer fire companies could be withheld if the audit issues aren’t fixed, according to the audit report.

“We’re going to solve the issues,” said Ted Hereda, Kinloch’s fire chief and vice president. The fire company is working with the state Auditor General’s Office.

The accounting problems flagged by the audit stem primarily from a fire truck purchase in 2014, according to the audit and Hereda.

“When the truck purchase is set up as the Auditor General’s Office wants, the unapproved expenditures will become approved expenditures,” Hereda said. “There’s no theft of money or fraud.”

In previous audits where the rescue truck was listed in Kinloch’s finances, there were “zero” findings, Hereda added.

State aid for firefighting operations is sent to the city, which distributes the money to its two volunteer fire companies, Kinloch and Lower Burrell No. 3 (LB3).

“It’s concerning,” said Lower Burrell Councilwoman Brandy Grieff. “We need to a greater look at operations at Kinloch and LB3.”

There are no pending state payments on hold to the fire companies because of Kinloch’s audit, according to Hereda and Mark Marmo, chief of Lower Burrell Company No. 3.

Both companies received their annual state aid late last year.

“The audit issues are between the city and Kinloch,” Marmo said.

He hopes that in the long run, a hold on state aid won’t impact his fire company. Marmo said LB3 will provide the city with additional financial and operational information that they might need.

Kinloch’s relief association, known formally as the South New Kensington Volunteer Fireman’s Relief Association, was established decades ago when Kinloch was still a part of New Kensington. Kinloch’s relief association is a separate legal entity that was established to receive state money for firefighters’ protection and activities.

Volunteer fire companies’ relief associations receive state funds from a fire insurance tax levied on fire insurance policies held by out-of-state companies.

The auditing issues stem from Kinloch’s purchase of a $287,000 rescue truck in 2013, according to Hereda and the audit report.

The truck is one of Kinloch’s main trucks used for fires and other emergencies.

Kinloch financed the truck in the name of the fire company and its relief association. Because some of the money for the truck comes through the relief association, the Auditor General’s Office wants the truck’s ownership to be under just the relief association, Hereda said.

Hereda said ownership of the truck had to be split to secure financing. The relief association didn’t have the assets to qualify for the loan.

The fire company drafted an agreement to change the truck ownership solely to the relief association when the truck was paid off, which will be in about five years, he said.

There are about 1,900 volunteer firefighters’ relief associations in the state, according to the Auditor General’s Office. In 2019, the state distributed about $60 million to those relief associations.

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