Washington State Auditor and Lawmakers Target 'Unauditable' Local Government Districts


OLYMPIA — Burrow deep into the most obscure of Washington's local governments and you'll find boutique districts that control spending for cemeteries, drainage infrastructure, mosquito management and fire protection.

Dozens of these districts over the years have broken state law by failing to file annual financial statements, according to the state auditor's office. But with few enforcement options, little could be done to force districts to document how they spend taxpayer dollars.

But in recent years, pressure has built to bring rogue districts into line. The effort gained momentum after a news investigation last spring and subsequent review by the state found a longtime commissioner for King County Drainage District No. 5 allegedly misused taxpayer dollars.

Shortly after a KING 5 investigation in 2019, the auditor's office determined about $413,000 of roughly $500,000 of the drainage district's funds went to a bank account created by family members of former commissioner Allan Thomas. Thomas was later arrested along with his wife on investigation of mail fraud. His trial is scheduled for the fall, according to court documents.

"It was the classic example you could ever want of how people who have been in these positions for many, many many years ... and you can be in a position where fraud can happen," said state Auditor Pat McCarthy.

McCarthy and state lawmakers banded together this year to pass a law to help compel governments to provide their financial information.

That pressure now appears to be paying off.

The number of unauditable governments has declined to 15, down from 40 in May 2019, the auditor's office said last week. With audits underway in some of those 15 governments, that number could drop even further.

In previous years, the number had been even higher, McCarthy said.

At the same time, McCarthy's office released its audit on Drainage District No. 5, which had been deemed unauditable due to unavailable financial reports from 2016 and 2017.

The office this month also released what it described as the first audit in 15 years of Pierce County Drainage District No. 23.

"There shouldn't be anyone who is receiving public dollars, whether it's local, state or federal, and not being held accountable for the expenditure of those dollars," said McCarthy. "You just can't say 'well, trust us, we've got it under control.'"

Washington law requires local governments to submit financial reports annually and to be audited once every three years.

Many of these are very small governments, often with people who aren't necessarily trained or equipped to do the work.

Compelling reluctant governments to file their financial reports to show how they're spending taxpayers dollars hasn't been easy: The auditor's office doesn't have enforcement authority.

Before this year, the only real action available would be having the Attorney General's Office seek to dissolve the district, said Scott Nelson, director of legislation and policy at the auditor's office.

Nelson described those options as "the death penalty or nothing."

That's a tough choice for state officials, he said, when many very small unauditable governments "mean well but are just flummoxed by the need to comply and actually do accounting."

"Little cemetery districts, mosquito districts, sometimes they barely have a computer that are run from somebody's kitchen," he said.

So the auditor's office worked with lawmakers to pass House Bill 2588, which became law this summer.

The new law allows counties and the state to withhold funding if they have been notified that a government has been deemed unauditable.

"You don't get your tax money if you're not filing your financial statements with your auditor," said Rep. Gerry Pollet, a Democrat from Seattle who sponsored the bill.

Pollet says there's more work to do. The initial version of his bill required officials sitting on special-purpose districts to file financial-disclosure forms, just like lawmakers and other officials in politics.

That provision was dropped when the Senate approved his bill, Pollet said, but he wants to reintroduce it.

Commissioners of drainage districts and other local governments make decisions that could potentially increase or decrease property values, Pollet said. And without financial disclosure, "we don't know if the commissioners are beneficiaries" of local projects or contracts.

Metropolitan King County Councilmember Reagan Dunn said he would support a requirement like that.

"There's never a downside to increasing transparency and oversight," said Dunn.

The Legislature can also do more to streamline the complex and sometimes dizzying layers of local taxing districts, he said, and help train people serving on small governments to handle the responsibilities for what can often be a thankless job.

"You've got farmers, PTA representatives, sometimes teenagers" serving in such posts, Dunn said. "They're not trained in municipal law."

News researcher Miyoko Wolf contributed to this report.


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