PORT ANGELES — The state Auditor’s Office is preparing to issue a “substantial finding” that takes issue with how Clallam County officials reported, on financial statements, $1.9 million in state money for licensing and Superior Court victim compensation that is collected by Clallam County and spent by the state, county commissioners learned this week.
In Clallam County, “they are not alone in having problems with reporting these funds,” Auditor’s Office spokesman Kelly Collins said.
“The reporting is accurate now.”
At the same time, the state Auditor’s Office has cleared county officials of wrongdoing after investigating three anonymous 2016 hotline complaints involving funding and expenses for the Carlsborg sewer system and expenditures for the Peninsula Housing Authority, commissioners learned at an exit conference with state auditors.
“It was never reported we had a fiduciary responsibility for that money on our statements,” said county Administrator Jim Jones, referring to the upcoming finding.
A state Auditor’s Office representative discussed the complaints and outlined the preliminary finding at a 90-minute exit conference Tuesday on the agency’s draft audit of 2016 county finances, Jones said.
The final audit report will be released today, Collins said late Thursday.
State officials are clarifying procedures for reporting the funds “and trying to make it easier for counties to report,” Collins said.
The two complaints that focused on the $9.2 million Carlsborg sewer project alleged the county had illegally paid a contractor more than was called for in a bid and that the county illegally appropriated $4.5 money from the county Opportunity Fund for the project.
The Opportunity Fund is comprised of sales tax proceeds that are returned to the county from the state’s portion of the proceeds.
The complaints “were meritless,” Jones said Thursday.
“Nothing was done illegally.”
In the third complaint, it was alleged that the county illegally gave $902,200 in Opportunity Fund money to the Peninsula Housing Authority by not having a contract or agreement with the Housing Authority.
The county had a memorandum of understanding with the Housing Authority that is a contract, the Auditor’s Office said, according to Jones.
Auditor’s Office Audit Manager Carol Ehlinger agreed Thursday that there was no basis for the complaints.
But the state agency suggested, as as an “exit item,” that the agreement should have included a date by which the Housing Authority had to return the funds if they were not used for their intended purpose.
The state licensing and victim compensation funding has been put into a separate account for more than 20 years without any notice from the state that it must now be put into a county account, Jones said.
“Our feeling was that it wasn’t our money and we had no role in doing anything but depositing it every day and they take it out when they take it out,” he said.
“There is no fraud or accusation of wrongdoing.
“It’s a function the county performs on behalf of the state.
“Their point was that it is not our money, but we have a fiduciary relationship to the state of whose money it is, and we should have been reporting that on our financial statement.”
Commissioners Chairman Mark Ozias of Sequim said the county has been reporting the state funding the same way for decades until being told this year they were doing it incorrectly.
“There are a number of counties who have had similar findings related to these similar types of accounts,” he said.
“We were very surprised that this came up.”
Correcting the finding “will take a bit of extra work, but it won’t be that big a deal.”
Ozias said he is pleased that the whistleblower complaints were found to be warrantless.
“I’m glad they found that when they looked into things here in Clallam County, that our processes and procedures are being implemented in an appropriate fashion,” Ozias said.
The Auditor’s Office was represented Tuesday by audit lead Melody Schneider and assistant audit manager Amy Strzalka, Jones said.
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Senior Staff Writer Paul Gottlieb can be reached at 360-452-2345, ext. 55650, or at pgottlieb@peninsuladailynews.com.
