State says more than a dozen hotline calls inspired audit
October 12, 2010 · Updated 8:38 AM
More than a dozen calls to the Washington State Auditor’s Office hotline for fraud, waste and abuse triggered the early audit of Langley, an agency spokeswoman said Thursday.
City officials were told this past week that the state was going to conduct a preliminary audit within the next few weeks, well ahead of the expected audit that was scheduled for November-December 2011.
Mindy Chambers, spokeswoman for the state auditor, said state law prevents her from identifying the people who called the hotline until a report is issued. She also declined to go into the specifics of the complaints until representatives of the auditor’s office have a chance to meet with city officials and talk about what the early audit will cover.
The hotline was set up in July 2007 — callers can also use it to report examples of good government, or suggest ways to improve efficiency at the state and local level — and Chambers said the number of calls about Langley was well above the norm.
“This is a lot of calls on a single entity,” she said.
“Most of [them] had to do with the mayor and all manner of things,” Chambers added.
She also said that the audit would not be devoted to a financial review of the city’s books. Instead, it would be an accountability audit.
“We’ll be focusing on legal compliance issues,” Chambers said.
Calls for audit
Langley residents and others have been calling for an audit in recent weeks since city hall has been dogged by questions about spending and management issues.
Controversy first flared publicly in early July, sparked by news that City Finance Director Debbie Mahler had asked County Prosecutor Greg Banks to investigate possible “improper actions” by Langley Mayor Paul Samuelson.
Concerned that the mayor was getting paid full-time while on vacation in California, and using more vacation time than he was allowed under the benefits package approved by the council, Mahler asked Banks to investigate. Banks declined, saying he didn’t see enough evidence of corruption or criminal wrongdoing.
City officials subsequently learned that the ordinances the city council passed to regulate the mayor’s pay and make him a city employee ran afoul of state law, and the council passed new ordinances that better detailed Samuelson’s pay and benefits.
Other concerns, mostly centered on spending, have also swirled around city hall in recent months, including over-budget spending on attorney fees and work at the Second Street fire hall.
Bring it on
The mayor said Thursday he welcomes the upcoming audit.
“I think these issues need to be addressed and we’re happy with that,” Samuelson said.
“There’re no secrets; there’s nothing that we’re overly concerned about,” he said. “If there are any issues, we’ll address them.”
Though the city will be pulling together its 2011 budget while the audit is conducted in the weeks to come, Langley will be able to accommodate the review, he said.
“If this relieves people who are concerned in the community, then that will be great,” Samuelson added.
And while some in Langley government had originally expressed concern over the cost of the review — the audit is expected to run roughly $22,000 — the state has said Langley will not be expected to pay for the audit until next year.
Chambers said representatives of the state auditor’s office will meet with city officials to decide how to conduct the audit so it is done efficiently and without disruption to city business.
“We don’t just go in there with audit pens a-blazing,” Chambers said.
The Village by the Sea is audited by the state on a two-year cycle.
Langley was last audited in 2009, and that review covered the span between January 2007 and December 2008.
Although the audit, released in late September 2009, contained no “findings” — significant problems that the state makes public — the state auditor’s office did list a number of concerns over payroll and payment issues in a “management letter” sent to city officials.
Officials in government entities that are audited by the state are expected to promptly address issues raised by the state auditor in management letters.
“I generally refer to a management letter as sort of an early warning or a yellow light, that if you don’t correct this condition it could be a finding next time,” said Chambers of the state auditor’s office.
The management letter from Langley’s last audit, sent by audit manager Casey Dwyer on Sept. 25, 2009, said auditors had noted “areas in which the city’s controls over disbursements could be improved.”
The management letter said the council and mayor were responsible for providing oversight of payments to vendors and city employees “to ensure they are allowable and to safeguard against misappropriation of public funds.”
The letter said auditors found seven instances where a series of warrants — 251 in all — were not documented on claim vouchers or mentioned in the minutes of council meetings.
Warrants are basically checks that a city issues for payment; they function the same as, and look nearly identical to, a typical bank-issued check for payment.
Auditors also discovered that the council did not properly approve three months of payroll expenditures in 2007 and 2008.
The payroll problems were in October 2007, March 2008 and June 2008.
Chambers said minutes of the council meetings did not show the council approving those payroll expenditures.
During the last audit, state auditors also discovered 15 payments that were made to vendors that totaled $216,242, but those payments — called manual warrants — were paid before the council approved the expenditures.
Manual warrants are basically hand-written checks. The city’s process, the state noted, requires the mayor to pre-approve manual warrants, and all such warrants must be approved at the next council meeting.
State officials said some warrants weren’t approved until later meetings.
Manual warrants are typically used when a bill must be paid before the council has a chance to approve the expenditure, and Chambers said manual warrants are usually issued during times when money must be spent immediately, during a time of crisis. She used the example of buying sandbags during a flood.
The management letter said the state found eight manual warrants that totaled $214,046 that “did not appear to be a reasonable use of the manual warrant process.”
Chambers said those payments included a payment to a construction contractor ($165,275) and a bond payment ($20,0000). Other examples included payments for a copier lease and antique photos for city hall.
“None of which, we believe, constitutes an emergency,” she said.
The auditors also found two warrants for $56 that were paid for birthday cakes for city employees in 2008.
“This is not an allowable expenditure,” the management letter stated. Auditors asked the city to adopt a policy to guarantee that warrants would be used only for “reasonable and legal purposes.”
Samuelson said he couldn’t remember the details of the 2009 management letter and wanted to review it before commenting.
Mahler, the city’s finance director, said the city did make changes after the last audit. She took responsibility for the mistakes involving the three months of payroll expenditures that were not properly noted.
“That was just my screw up. I just didn’t put them on the agenda,” she said.
Mahler said the format of the council meeting agendas was changed in early 2008, and the first meeting of the month became the council’s “business meeting.”
Payroll, however, was supposed to be approved at the second meeting each month.
“I just kept forgetting to attach them [to the council packet],” Mahler said.