CHARLESTON, W.Va. -- Legislative auditors told state Treasurer John Perdue last week to withhold any state payments to the Chesapeake Volunteer Fire Department, after the department refused to cooperate with an audit, lawmakers were told Tuesday.

According to the report from the legislative auditor's office, the division sent a certified engagement letter to the fire department on July 5, 2012, notifying the department of the audit of financial records from Jan. 1 through Dec. 31, 2010.

Members of the legislative post audits subcommittee were advised Tuesday that the audit could not be conducted because the Chesapeake VFD failed to submit the required financial documents.

Under state law, legislative auditor Aaron Allred notified Perdue's office on Jan. 2 to withhold all state payments to the VFD. That includes the VFD's share of a 0.5 percent surcharge on fire and casualty insurance premiums that goes to help fund volunteer fire departments statewide.

Records with the state auditor's office show the Chesapeake VFD received $9,584 in payments from the state in 2012.

Tuesday's announcement echoes issues the Kanawha County Commission has had obtaining financial data from the VFD, whose officers have been reluctant to provide financial records for bingo games, raffles and ancillary businesses operated by the VFD.

Last fall, commissioners withheld an annual $20,000 payment to the VFD for failing to submit financial records. In November, the general manager of the Kanawha Valley Regional Transportation Authority said his agency has been in a constant battle with the Chesapeake VFD to pay the department's fuel bill.

Under state law, the Post Audit Division audits financial records for all volunteer fire departments in the state.

Also Tuesday, an audit of the Public Employees Insurance Agency recommended that PEIA stop allowing West Virginia University to escrow PEIA premiums for employees who are paid on a nine- or 10-month salary schedule.

The audit found that PEIA allows WVU to deposit employer premium payments into an escrow account during the months when those employees are not receiving pay.

The payments, which cover partial-year employees at the main campuses, as well as branch campuses at WVU-Parkersburg, WVU-Tech and Potomac State, totaled about $2.7 million for fiscal 2010-11.

Payments from the escrow account were submitted to PEIA in September 2011.

The audit concludes that the arrangement allowed WVU to collect some $34,000 in interest earnings on the funds in the escrow account, interest that could have been earned by PEIA had it required monthly premium payments for the partial-year employees.

The audit also recommended that the PEIA change the way it credits state agencies for premium overpayments by individual employees.

Under the current "use all" option, an agency may issue the credit to the employee, apply it to other employee's account, or use it to reduce the employer PEIA premium payment.

Reach Phil Kabler at ph...@wvgazette.com or 304-348-1220.