The city might have to pay $164,000 back to the federal government after the money was mixed with funds in an "off-the-books" log intended to circumvent oversight rules, an audit of Fire Department spending revealed.

The department's training academy made more than $237,000 in unauthorized purchases from Draeger Safety Inc. over a four-year period, according to the audit, which was prompted by a 2007 investigation by The Baltimore Sun.

Some funds granted by the Department of Homeland Security were mixed with rebates from Draeger in the clandestine account, Robert McCarty, the city auditor, told the city's spending board Wednesday.

"Since these funds lost their identity when commingled with other transactions on the log, it is quite possible that these funds were used improperly, for example, to acquire three laptop computers at a cost of $8,500 for a former academy chief," McCarty said.

A low-level firefighter charged with purchasing supplies, who is now retired, began the account in 2001 with money left over from authorized purchases that were not shipped. Rebates, discounts and interest were added to the account over the next four years.

The firefighter destroyed the log when he retired, but a copy of some of the records was given to The Sun in 2007.

Department supervisors either condoned the use of the off-the-books account or were unaware of it and showed an "apparent lack of due diligence," according to the audit.

The fire chief at the time, William J. Goodwin Jr., who retired in 2007, told The Sun that he had known about the account but thought that it was smaller and had been closed years before. The head of the training academy during the time the purchases were made also has retired.

There is no indication that the money was used to buy anything other than supplies and equipment, although in some cases Draeger bought items, including an $11,300 public-address system and a $3,900 set of tables and chairs, from third parties and resold them to the department, according to the audit.

"I don't think there was anybody pocketing any money," Fire Chief James S. Clack told the Board of Estimates. "This was a gentleman, who is no longer with us, who was trying to circumvent the rules because he didn't like the rules."

The chief stressed that a number of policies that the city has implemented in recent years would "make it possible to ferret out this type of activity much easier."

"We don't operate like this anymore," he said.

Fire and police officials are meeting with Homeland Security representatives to determine the amount of money that must be paid back and have pledged to report their findings to the spending board within the next several weeks.

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