OLYMPIA — A worker at the state's Office of Administrative Hearings improperly spent nearly $900,000 through fraudulent credit card purchases, the state auditor said Monday.
The Office of Administrative Hearings resolves disputes between state or local government agencies and Washingtonians. It has more than 200 employees.
Auditors found about $878,000 in misappropriated credit card payments at the agency in a roughly four-year period beginning in mid-2019.
Most of that — about $860,000 — consisted of charges to business names created by the employee, a management analyst at the agency, who was not identified in the report.
The incident is the largest internal misappropriation of funds at a state agency since at least 2009, the state auditor's office said, and the second case of six-figure losses the auditor's office has reported this year.
State Auditor Pat McCarthy said she was "greatly concerned by the increasing boldness of misappropriations of public funds at all levels of government."
Auditors' investigation
In late May 2023, as part of a routine audit of the agency, state auditors chose certain credit card charges paid to a consulting business and asked for supporting records.
The agency's chief financial officer didn't recognize the business and couldn't find any records, but working with the auditor's office, learned the business was registered with the state Department of Revenue, in the name of a management analyst working in the fiscal department.
The chief financial officer pulled a list of all the payments to that business and found about half a million dollars in credit card charges between late August 2021 and May 11, 2023.
The state auditor's office opened an investigation and analyzed all credit card charges for a six-year period between mid-2017 and mid-2023, when the analyst was employed by the agency. Auditors obtained a court order for his personal and business account records.
Auditors found the office paid about $860,000 in misappropriated funds to four business names the analyst had created, but there weren't any records to show business activity "other than charging the agency for no clear purpose."
The analyst also racked up about $17,000 in personal charges, according to the report.
Auditors found the agency paid nearly $5,000 in "questionable charges" to a fifth business between July 20, 2017, and March 13, 2018, that could not definitively be linked with the analyst. The agency didn't have any supporting records for that business or the reason for the charges.
Not enough internal checks on spending
Auditors found that the Office of Administrative Hearings didn't have enough oversight internally to prevent the loss of public funds and pointed out a few ways the agency fell short.
No one in management at the agency oversaw credit card activity, and no one independently reviewed the analyst's monthly reconciliation of its credit card charges or payments.
The management analyst was the agency's credit card custodian and the only employee who could access its credit card account online.
While other staff reviewed credit card payments, the analyst only presented parts of the statement, which allowed him to hide the misappropriated charges while still getting permission to pay the credit card bill.
The analyst could both upload and release payments to the credit card company. No one reconciled the payments before their release or monitored them, which auditors said prevented the agency from noticing the analyst undertook conflicting duties that enabled him to conceal the spending.
In a response, the Office of Administrative Hearings says it took action quickly after the misappropriation was discovered to prevent more money from being taken, including canceling the credit cards and stopping the analyst from accessing accounts, systems and facilities.
The office also hired a consultant to review its financial processes and says it's taking all of the steps recommended by the consultant and the state auditor to increase oversight of credit card spending.
What happens next
The management analyst resigned from the agency in June 2023.
The Office of Administrative Hearings filed a report July 12, 2023, with the Olympia Police Department. A spokesperson for the Olympia police could not be reached for comment Monday afternoon.
Typically, the Office of Administrative Hearings undergoes an accountability audit by the state auditor's office every four years. But because of this incident, the state auditor plans to conduct another audit in the spring of 2025, said Adam Wilson, a spokesperson for the state auditor.
___
(c)2024 The Seattle Times
Visit The Seattle Times at www.seattletimes.com
Distributed by Tribune Content Agency, LLC.
