The mission of Bedford County’s Emergency Management Agency in Tennessee is to prepare for and recover from “natural, manmade, or technological disasters upon its people or property,” according to the office’s Web site. But auditors found something other than a commitment to preparedness and homeland security when they arrived in 2008 as a result of allegations the state had received. There was a cash shortage in the Bedford County agency’s bank accounts of more than $117,000. After digging through financial records, investigators discovered a total of 27 checks worth $107,000 payable to “Midstate,” “Mid-S” and “Mid St.” that actually went to the Midstate Finance Company for a series of personal loans taken out by an agency deputy director named Eugene Nichols, according to a Nov. 2008 report. Another $10,000 repaid money to a second loan service. All of the checks were prepared by Nichols, and for eight of them, the agency chief’s signature had been allegedly forged. The auditors also discovered over $33,000 in additional payments that were signed to Nichols “for various reimbursements, overtime, or payroll advances.” Investigators were not able to determine the legitimacy of those transactions. “The lack of oversight and supervisory review by [emergency management officials] contributed to the failure to properly account for agency funds, the lack of internal controls resulting in the misappropriation of funds, and several questionable expenditures,” their report said. Local authorities admitted that the “improper financial activity” of Nichols, who was also in charge of federal homeland security grants for the county, appeared to span four years and past audits had not detected it. But they insisted that once problems were uncovered, county personnel were the ones to report it and a repeat of the findings would not occur again. “The Bedford County Department of Finance will continue to strengthen internal controls over public funds to safeguard against future losses of taxpayers’ money not only to fraud, such as this crime,” a finance director promised in response, “but also from any identified waste and inefficiency in Bedford County government.” Also discovered were allegedly fraudulent invoices forwarded to the Tennessee Emergency Management Agency, which oversees federal anti-terrorism and preparedness grants for the entire state, to cover purchases of safety gear and services. Auditors were unsure how much money was involved, but the county stated it would review records for an answer. The report does cite one $37,000 payment to a company called Cybercats Computers for surveillance cameras that emergency response leaders planned to mount on towers. The equipment had never been received, however. Nichols was indicted by a grand jury in late 2008 on 44 counts of theft and 26 counts of forgery. He pleaded guilty to embezzlement during the spring of 2009. Meanwhile, the Tennessee Emergency Management Agency had its own trouble in recent years. Some staffers at the state agency were required to hold hazardous materials certifications as part of their day-to-day jobs, and under federal mandates, certain responders participating in emergency drills at nuclear facilities needed to attend annual courses. But beyond those rules, according to an Oct. 2007 report from the state’s comptroller, TEMA had few training requirements for its own staff and no formal policies or procedures outlining them, such as specific classes and hours of continuing education. While some training existed, auditors found, it was not monitored by the agency “to ensure [personnel] have the skills and information needed to act in an emergency.” State officials said in response to the finding that requirements would be articulated and added to the emergency management agency’s strategic plan. The report also found that funds from one federal homeland security grant were not distributed to counties based on which of them faced the greatest risk and that there was no formal process for prioritizing the money. Instead, the cash was allotted in accordance with regional wish lists. Counties “do not formally apply for the grant” but rather hold “informal discussions” with state officials, auditors added. Government watchdogs since Sept. 11 have emphasized the need to determine risk and other factors for awarding readiness grants, because the likelihood of disaster and levels of preparedness differ around the country. “There is little documented objectivity on record to support TEMA’s decisions or to suggest that the grant funds are being disbursed most effectively to meet the state’s emergency management goals and needs,” the report concluded. Counties were scheduled to receive $2.6 million from that one program during 2006 alone. The state answered by vowing to create an assessment tool that would allow it to rank counties based on past performance and risk. When it comes to Tennessee’s use of homeland security grants, we hit an unanticipated roadblock after trying to obtain records from the state showing how the money’s been spent since 2001. We submitted an open-government request under the state’s Public Records Act, but a spokesman informed us that only Tennessee citizens were eligible to use the law for receiving such records. Our letter was sent from California. In response, we pointed to a 2006 federal Third Circuit Court of Appeals decision known as Lee v. Minner that declared a similar law in Delaware unconstitutional, which also, in turn, made a related provision in Pennsylvania’s right-to-know laws unenforceable. The spokesman, Jeremy Heidt, countered that the Minner ruling did not apply to Tennessee, because it was located in a different federal court district. We have uploaded accessible audit documents here, including a third that examined the Homeland Defense Equipment Reuse Program at the Department of Energy’s Oak Ridge Office in Tennessee.

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G.W. Schulz is a reporter for Reveal, covering security, privacy, technology and criminal justice. Since joining The Center for Investigative Reporting in 2008, he's reported stories for NPR, KQED,, The Dallas Morning News, the Chicago Tribune, the San Francisco Chronicle, Mother Jones and more. Prior to that, he wrote for the San Francisco Bay Guardian and was an early contributor to The Chauncey Bailey Project, which won a Tom Renner Award from Investigative Reporters and Editors in 2008. Schulz also has won awards from the California Newspaper Publishers Association and the Society of Professional Journalists’ Northern California Chapter. He graduated from the University of Kansas and is based in Austin, Texas.