City auditor warns ambulance fund may require cash transfers or a qualified opinion; council calls special meeting

An auditor’s letter presented to the International Falls City Council on July 7 warned that recurring operational deficits in the city’s ambulance fund have grown to the point that the amounts borrowed from the general fund “cannot and will not actually be repaid,” and said auditors may require either permanent cash transfers or a modified opinion in the city’s year‑end audit.

The letter, authored by Ryan Schmidt of Schleiner Wenner & Co. and read into the record at the meeting, said the ambulance fund has been treated as holding short‑term loans from the general fund but that accounting may no longer reflect facts on the ground. “If no action is taken to address the situation, we as the city auditors will soon be forced to conclude that the amounts borrowed from the general fund to the ambulance fund cannot and will not actually be repaid,” Schmidt wrote.

The finding matters because a permanent transfer would reduce the general fund balance or require other funds to be used, while a modified audit opinion would be a deviation from the clean opinions the city has historically received. The letter listed two near‑term audit outcomes auditors could present: recording permanent cash transfers into the ambulance fund, or issuing a modified opinion specific to the interfund borrowings.

Council members and residents responded at length during the meeting’s new‑business and public‑comment segments. Councilor Kaler’s earlier letter (filed in the meeting packet and dated Oct. 11, 2023) was read aloud; that letter urged the council to set a timetable to relieve the ambulance fund deficit and listed a menu of possible responses, from forming an ambulance taxing district to moving to a basic life support (BLS) model. “If we don't solve this problem, we will bankrupt as a city and we won't have money to run ambulance service or anything else,” the letter said.

Residents and councilors raised operational and accounting questions. Alan Cruz, a resident, asked the council to quantify how much ambulance calls for International Falls residents cost versus runs outside the city, saying that better cost allocation information is needed before pursuing county help. Resident Glenn Davis asked about service levels and staffing. Fire Chief Manasa, who also oversees ambulance operations, was present and members of the public were directed to the special meeting for more technical questions.

Council leaders said they had tentatively scheduled a special city council meeting for the Monday following the committee‑of‑the‑whole session to begin working through the options the auditors outlined and to develop a timeline for action. No final financial decisions—such as approving transfers, changing service levels, or establishing new revenues—were made at the July 7 meeting.

Background details: council members reported the ambulance staffing level had declined from six paramedics to four paramedics by attrition; the council has previously discussed potential county cooperation and state funding programs but said those options were uncertain. A council member who attended a recent state webinar said limited state aid for EMS would be distributed across many systems and may not provide a long‑term solution.

The council directed staff to post an agenda for the special meeting and to prepare supporting materials. The meeting notice will specify the time and items to be discussed; councilors asked for decorum and for time to review materials before the special session.