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"ÁñÁ«ÊÓƵ were very bad off," Montee said Tuesday. "ÁñÁ«ÊÓƵ were not on a path that was going to be able the sustain the expenditures that they had."

Montee's office began auditing the Northeast Ambulance and Fire Protection District in north St. Louis County in late 2008 but ran into resistance from the then-board and its attorneys. Those problems led to a halt in the audit and a lawsuit against the district that has yet to be resolved.

Still, the auditor's office released a scathing partial audit in November, at which time Montee called Northeast the worst of more than 300 agencies the state had audited.

Montee issued cautions but painted a more encouraging picture of the district's future Tuesday night at the University of Missouri-St. Louis, where about 70 district residents, employees and others gathered to hear what auditors had uncovered after resuming the audit in May.

The three-member board's new makeup has been open to the auditors. (Since November, St. Louis County Circuit Court judges have ousted one director and appointed two others).

The new audit's starkest finding is that the district's cash balances plummeted by about $2.3 million — or 54 percent — from June 30, 2008, through this past June 30. During that span, the district's revenue remained fairly constant, but spending increased dramatically.

The most significant surge in spending was employee salaries, which have since been sharply reduced. From calendar year 2007 to 2009, salaries jumped by $965,286, or 28 percent. Further chipping away at district coffers were sizable expenses approved by the board during a 15-month span that ended in October 2009. They included $512,000 for an asbestos-laden administration building, $367,500 for new ambulances and at least $335,479 in attorney fees (the recipients, former board attorneys Elbert Walton Jr. and Bernard Edwards Jr., no longer represent the board).

In detailing the latest findings, Montee stressed that auditors did not have enough records to piece together a complete picture of the district's financial history. "Some were just not located," she said.

While the district's most significant problems are tied to the previous board, the audit notes problems under the current board, including deficiencies in internal controls, noncompliance with legal provisions and "the need for improvement in management practices and procedures."

The audit says the board has failed to implement 17 recommendations stemming from the previous audit and has partially implemented 13 recommendations. It says the district has succeeded in putting into place 15 recommendations.

Among the criticisms was the district's handling of sick leave. The audit says that as of July 2010, three employees had "negative sick leave balances" — one of which totaled 610 hours, or $13,036. That employee agreed in January to repay the unearned leave, but as of July, no payments had been deducted from her paycheck and the employee had since taken paid leave, Montee said. The agreement "appears to be a loan from the district" and could be a violation of the state constitution, the audit says.

Montee said the district failed to maintain adequate accounting records. The audit says that lists of bills approved for payment by the board have not included electronic payments — for example, credit card, phone, insurance and pension payments — and payroll figures. From last May through July, electronic payments totaled about $32,000, according to the report.

Montee said the board did not realize that an office employee whose salary was decreased from $29 an hour to $19.25 an hour instead ended up receiving an overpayment of $2,475.

"They need to have tighter oversight, and they need to make sure the board sees all of the expenditures," Montee said.

The audit also wags a finger at the handling of legal services — a major criticism in last year's audit. The report says the board obtained new attorneys last December without soliciting proposals and that the new contracts contain the same termination clauses as were in the previous attorneys' contracts.

In a written response to the criticism, the board wrote that legal services "are expressly exempt from bidding requirements" under state law and that the board's legal services are constantly under review.

In concert with a court order, the district has been working with an accounting firm to straighten out its finances. The board also has become more open to the public and has been chipping away at issues in its sometimes-volatile board meetings.

Board chairman Derek Mays said that some of the previous audit's recommendations haven't been implemented because of the lack of records. He said, however, the new board has made progress. "I don't know if the audit adequately reflects the progress that we've made," he said.

Board member Rhea Willis called the findings "a foundation for us to follow," and Chief Angelia Elgin said the district was taking steps forward. "It's not doom and gloom for us, but it's not something that we're going to fix overnight," Elgin said.

Oct. 20 will mark the one-year anniversary of a court order restricting use of the district's funds.