Third-Party Review of CFD Books Proves Inconclusive
In a nearly 3.5-hour meeting of the Colchester Fire Department (CFD) Board of Trustees Wednesday evening, with numerous backand- forth conversations and questions with audience members during the course of the meeting, the external audit of the department’s books, which was conducted by Greg Butler of Butler & Associates of Macomb, was presented. The audit included no hard evidence of criminal wrongdoing, though the report criticized poor financial controls and recommended reforms.
Trustee Mike Weaver received the report Wednesday afternoon, and read most of it aloud during the meeting. The trustees plan to further review the audit findings and then determine next steps at a future meeting.
According to the report, “The principal problem disclosed by the records is primarily one of the financial structure, internal controls and accountability, rather than presently established theft or misappropriation. The district allowed a system to develop under which members could personally purchase goods or services for district purposes, obtain reimbursement through the memorial account, and thereafter submit the same expenditure to the district for reimbursement of the memorial account from the general fund. The memorial account therefore functioned, at least in part, as an informal revolving or bridge account for ordinary district expenditures. That practice should end.”
Numerous recommendations were provided by Butler, as well as the board’s attorney, Dustin Clark of Bougher, Krisher & Clark of Macomb, some of which are already in motion, including complete board oversight of the district’s accounts and purchases. The final recommendation, “refrain from making a criminal referral on the present record, unless additional evidence establishes a transaction that was knowingly unauthorized and accompanied by the requisite criminal intent.”
“This recommendation should not be read as a conclusion that every historical transaction was proper. It is instead a conclusion that the available accounting evidence does not presently establish the specific loss, a specific recipient of any improper benefit, of any improper benefit, or the state of mind necessary to reasonably characterize the matter as theft,” the audit report continued as read by Weaver.
Report Explained
While there is still a matter of around $2,500 that has not been accounted for, Weaver stressed that the report looked at the records that were available, and that the funds that remain unaccounted for do not necessarily point to any wrongdoing. Butler, as well as Clark, also recommended that a limited transaction-level reconciliation focused on the expenditures most capable of producing an actual recoverable loss. The district’s treasurer has been directed to complete a spreadsheet outlining purchases and reimbursements to determine if there is an actual loss.
“Theft requires more than an accounting irregularity. Theft requires that a person knowingly obtains or exerts unauthorized control over another’s property and acts with the intent to permanently deprive the owner of its use or benefit or engages in the equivalent conduct specified by Illinois statute,” the auditor concluded. “The present record is problematic for proving both knowing lack of authority and intent to permanently deprive.”
The report goes on to state, “It is difficult to prove criminal intent when trustees knew about transactions and were reimbursing for said transactions. Thus, the method was not inherently clandestine. The board and district personnel appear to have permitted a practice under which a member could be reimbursed through memorial account first, after which the underlying expense would be presented through the district’s normal financial process. That practice was poor financial management.”
Clark hired Butler & Associates to conduct the audit of the district’s finances following allegations of the misuse of, and missing, money, tools and fuel by former members Robbie Phelps and Michael Phelps, who served as chief and assistant chief, respectively. Both men resigned their positions in June. At the July trustees meeting, it was determined that the external audit would commence as the job was too unwieldy for trustees to complete on their own and because some discrepancies were found in the district’s records.
“The accounting evidence presently makes a criminal characterization even more difficult. Butler could not identify a definite amount that should have been reimbursed but was not. We gave him our bank statements, memorial account paperwork, our board meetings, and our treasurer reports, so basically, they’re looking at figures and they’re trying to get a conclusion based on these figures,” Weaver added. “There is not yet a transaction specifically showing that a particular individual knowingly engaged in prohibited conduct for personal advantage. He also does not recommend that the board presently characterize the historic memorial account activity as theft, fraud, or official misconduct, nor does he recommend a criminal referral based solely on existing aggregate accounting records. Basically, he’s saying, ‘Your accounting records suck.’” Since the August meeting, the trustees now have complete oversight of the district’s Memorial Account, which is going to be split into separate bank accounts for purchases, fundraising and donations with numerous checks-and-balances put into place. In addition, a department-issued credit card will be obtained so purchases can be authorized and tracked.
ISP Improvement
At last month’s board meeting, audience members, including department firefighters, suggested bringing in the Illinois State Police to conduct an investigation. During that meeting Weaver said he would ask the attorney, and at Wednesday’s meeting, he shared he had discussed the possibility with Clark. However, according to Weaver, before the audit was released, a private citizen who is not part of the fire department reportedly has turned over to the Illinois State Police the numerous documents received from the fire protection district through various Freedom of Information Act requests. The Community News Brief cannot currently verify if the Illinois State Police has the documents and will subsequently conduct an investigation.
The Community News Brief inquired about the ISP submission, and subsequently received Thursday morning the following from Evan Schmalshof, who previously worked with Robbie Phelps at the McDonough County Sheriff’s Office: “Yes. On August 14, 2026, I submitted information and supporting documentation concerning the Colchester Fire Protection District to Illinois State Police Crime Tips and requested an investigation/review of the matter. ISP acknowledged receipt of my submission by email at 4:34 p.m. that day. For accuracy, I can confirm only that I submitted the request and that the ISP confirmed receiving it. I have not received confirmation from ISP that a formal investigation has been opened, so I don’t want to characterize the current status beyond that. I submitted the information because I believed the records and circumstances warranted review by an independent law-enforcement agency. Whether an investigation or any further action is warranted is for ISP to determine.”
The Community News Brief cannot currently verify if the Illinois State Police has the documents and will subsequently conduct an investigation. An email inquiry has been submitted to the ISP FOIA officer.
In Other Business
In other business, trustees discussed filling the vacant trustee position following Kory Nichols’ resignation at the July meeting. Following a closed session, the board voted to move John Purdy forward to the McDonough County Board for vetting and approval as a Colchester Fire Protection District Trustee.
