Volunteer Fire Fighter and
Emergency Medical Technician
Service Award Program
Department of Administration
December 2005
Report Highlights
The Volunteer Fire Fighter and Emergency Medical Technician Service
Award Program—commonly referred to as the length-of-service award
program—was created under 1999 Wisconsin Act 105 to assist the fire
and ambulance departments of smaller municipalities in recruiting and
retaining volunteer staff. The program offers tax-deferred retirement
benefits to volunteer firefighters and emergency medical technicians who
meet the eligibility requirements established by their departments.
Funding is provided by municipalities and the State.
As of September 1, 2005, 5,388 eligible volunteers were enrolled in the
program by 182 public or private fire departments or ambulance services.
The program had assets of $10.3 million, including $4.0 million funded
with general purpose revenue (GPR).
An eight-member board appointed by the Governor and attached to the
Department of Administration (DOA) for administrative purposes
provides general program oversight but contracts with private vendors
for account administration. 1999 Wisconsin Act 105 included a statutory
provision requiring the Legislative Audit Bureau to complete an
evaluation of the program no later than February 2006. To review
operations and evaluate the program’s performance, we:
reviewed documents related to the board’s initial request-for-proposals process;
analyzed investment plan documents and fee structures, as well as program
expenditures and changes in program assets; and
interviewed board members and DOA staff, local officials and volunteers,
interest groups, and program vendors.
Participation and Funding
Among the 860 fire departments operating in Wisconsin in 2005, 703 operate exclusively with volunteers,
while another 102 use a combination of volunteers and paid staff. Volunteer staffing information
is not available for Wisconsin’s 734 ambulance services.
During the length-of-service award program’s first five years, participation increased from 85 emergency
services departments in 2001 to 182 as of September 1, 2005. During the same period,
individual enrollments increased from 2,420 to 5,388, or 122.6 percent.
In the future, individual enrollments are expected to increase more modestly because fewer departments
are expected to enter the program.
Participating emergency services departments establish eligibility rules, and municipalities determine
the amount they will contribute to each eligible volunteer’s account on behalf of participating departments.
Most municipalities contribute the maximum amount the State will match, which is specified in
s. 16.25(3)(d), Wis. Stats., and was $274 per eligible volunteer in July 2005.
However, local government contributions can vary widely. For example, in 2004 they averaged
$100 per volunteer in the Town of Mercer and the City of Montello, but $1,114 per volunteer in the Town
of St. Germain. Statutes limit state matching funds for the program to
$2.0 million annually.
Vendor Selection
Municipalities are responsible for making final investment decisions under the program, but under
ch. VFF-EMT 1, Wis. Adm. Code, the board is required to select vendors and review investment
plan options and fee disclosures. In August and September 2001, the board signed three-year contracts
for account management with vendors that were selected in a competitive bidding process. From
2001 through 2004, these vendors were paid a total of $601,600 for program administration.
In 2004 and 2005, the board extended its contracts with two vendors, but not with a third. Its
primary justification was concern about the types of investment options provided by the third vendor
and the vendor’s failure to meet reporting requirements. However, the investments available through
the vendor had not changed significantly since its selection in 2001.
Because the board did not extend one of its initial contracts, departments enrolled with that vendor
were required to select a different vendor or discontinue participation in the program.
As a result, departments serving three municipalities that had purchased life insurance policies—the
Village of Suamico, the Town of Townsend, and the Village of Athens—forfeited a combined total of
$119,000 paid for nontransferable policies, which was nearly all of their program
contributions. The Village of Kimberly forfeited $22,200 when it discontinued its
investment plan with the third vendor before the board made its decision to not extend the vendor’s contract.
In the future, 117 of the 182 departments participating in the program could face financial losses if they
choose or are required to transfer annuity investments purchased through one of the two remaining
vendors. Fees related to such transfers may limit the board’s flexibility in negotiating new vendor
contracts in 2006, when current contracts expire. The board plans to issue a request for proposals in
February and to enter into new multi-year contracts with vendors at the end of June 2006.
Future Considerations
Available investment options are complex, and participating municipalities and emergency services
departments generally do not have either the time or the expertise to monitor investment performance.
Therefore, the program’s board plays an important role in ensuring program success by selecting vendors
and by:
determining whether vendors’ materials clearly describe available investment options
and their costs before the materials are distributed to participating departments;
ensuring that departments understand the full costs of available investment options
by annually reviewing vendors’ disclosures of all direct and indirect fees and other costs
of investment; and
reviewing the performance of all investment options to ensure that earnings expectations are met.
While the initial contracting process met all legal requirements, the process was not effective because it
did little to simplify vendor selection for participating emergency services departments. Furthermore,
it did not ensure that all investment options were best suited for the length-of-service award program
before making them available to participating departments.
It should be noted that while the board’s primary responsibilities are related to complex financial
decisionmaking, seven of its eight members are not required to have expertise in this area. Instead,
they are required to be volunteer firefighters, volunteer emergency medical technicians, and
representatives of municipalities that use volunteer firefighters.
The eighth board member is required to be an individual with financial planning experience. However, the
subcommittee that evaluated vendor proposals in 2001 was not required to and did not include this board
member.
Currently, limited administrative support is available to the program through DOA, which has
0.1 fulltime equivalent position to provide staff support to the board. Because
DOA’s responsibilities as a state agency relate to budgeting, centralized purchasing, and managing
capital projects, its staff generally are not expected to analyze benefit or investment programs.
The Department of Employee Trust Funds (ETF), which administers the Wisconsin Retirement System, does
employ staff with expertise in those areas. When 1999 Assembly Bill 187 was introduced to create the
lengthof-service award program, the program was to be attached to ETF for administrative purposes.
However, ETF officials expressed concern about the adequacy of available funding to support program
administration, and the board was instead attached to DOA.
We believe that the board requires immediate assistance with its 2006 vendor-selection process in
order to ensure needed program changes are effectively addressed. Given the range and complexity of
improvements needed, our report includes recommendations for the board to obtain ETF assistance and
adequate independent financial expertise before it begins its new request-for-proposals process.
Recommendations
Our report includes recommendations that the board:
determine whether it will need to extend current vendor contracts to ensure it has obtained
adequate financial expertise before moving forward with its next request-for-proposals process
(p. 29); and
improve its annual reporting to the Legislature
(p. 31);
We also recommend that DOA:
work with ETF to develop an interagency agreement that will make ETF staff available to assist
the board during its next request-for-proposals process
(p. 29); and
report to the Joint Legislative Audit Committee by March 31, 2006, with a plan
for conducting a request-for-proposals process that addresses concerns raised in this audit
(p. 29);
Finally, we recommend that the Legislature:
revise board membership requirements to enhance financial expertise, and change
the due date for the board’s annual report
(p. 30).