The clerk-treasurer of the City of Morton misappropriated more than $900,000 in public funds over nearly a decade, according to a news release from the Washington state Auditor’s Office.
The misappropriations occurred despite warning signs that improper activity was occurring, the office stated in a report released Monday.
Auditors noticed more than $10,000 in ATM cash withdrawals from the city’s bank account, an uncommon and questionable activity in government, according to the release.
The subsequent fraud investigation uncovered a variety of misappropriation schemes dating back nine years and totaling $937,584.
“What is so incredible in this case is that the leadership of Morton took no action when they had been informed of two different problems with the clerk-treasurer. We say, ‘trust but verify,’ for a reason,” state Auditor Pat McCarthy said in the release. “Blind trust doesn’t protect the public’s money. Proper controls do.”
The auditor’s office released four audits of Morton Monday: one fraud investigation report on the clerk-treasurer's activity, a second fraud investigation report on a smaller misappropriation, an accountability audit and a financial statement audit.
The clerk-treasurer, who was not named in the release, was hired in 2012. The following year, the clerk-treasurer authorized a $2,400 city check to herself.
“Auditors questioned the payment in 2014, but the then-mayor described it as an approved personal loan,” the auditor’s office stated. “The audit, published in 2015, took exception to this, and recommended the city require repayment and refrain from loaning public funds.”
Morton mayor in 2014 was Jim Gerwig. Dan Mortensen served two terms after his tenure. The current mayor is Ricky M. Mead.
In 2019, the clerk-treasurer reported to the state Department of Retirement Systems that she had left the city and withdrew her retirement funds, according to the auditor’s office. The next year, the state agency discovered she was still working at the city and questioned city management about the withdrawal.
“Despite these warning signs, the city council and mayor did not detect these misappropriations,” the auditor’s office stated. “Auditors found the clerk-treasurer was solely responsible for processing payments, writing checks and reconciling bank accounts. This allowed her to initiate payments without approvals, then process those payments without management oversight. Exploiting the lack of independent reviews of her work, the clerk-treasurer hid her activities since 2013, including taking customer cash payments that she did not deposit at the bank and writing checks to herself, then recording them as payments to legitimate vendors.”
The full fraud investigation report, including the city’s response, can be found on the state auditor's office website at https://tinyurl.com/27z8sftb.
In a separate fraud investigation report, auditors investigated concerns regarding credit card purchases by former Morton Police Chief Roger Morningstar, who resigned last year amid claims he lied about his background and sexually harassed staffers and others.
“The police chief also had maintained access to a bank account that was outside the city’s control but had been holding donations for police-related activities,” the auditor’s office stated. “Auditors found the police chief made $199 in personal purchases on a city credit card, as well as additional questionable purchases.
The full report can be found at https://tinyurl.com/evx6psfm.
“This case is an important reminder that the first line of defense against public fraud is having strong financial controls in place today, not having an audit after the fact,” McCarthy said. “I sincerely hope this painful experience inspires other governments to double-check their statements and insist on reviewing payments.”
The accountability and financial audits that first detected the misappropriations can be found at https://tinyurl.com/4dvcxuyw and https://tinyurl.com/mr49n2rj.
Morton’s is the third six-figure loss of public funds reported by the State Auditor’s Office this year. The others involved the state Office of Administrative Hearings and the town of Cusick.
This article will be updated.
