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Audit tells the toll on Freeland Water and Sewer District

One of the commissioners elected to clean up financing within the Freeland Water and Sewer District sums up a state audit by saying, “There really wasn’t any fraud, nothing criminal, nobody made money or took money, it was just ignorance and incompetence.”

Marilyn Abrahamson was, in fact, pleased that the audit is ready to be presented to the public before being finalized by the state.

A special meeting of the commissioners will be held Monday, March 25, at 1 p.m. for an exit conference with the state auditor to discuss results of an audit conducted from the period of 2009 to 2011.

The board, which serves about 500 customers, has three elected commissioners and the audit covers the time when Rocky Knickerbocker, Eric Hansen and Jim Short were in charge. A voter revolt in 2011 led to Abrahamson and Lou Malzone taking over for Knickerbocker and Short. Also serving during the audit period was Chuck Maddox, who resigned in 2010.

On Monday, Abrahamson, Malzone and Hansen will listen to a litany of concerns uncovered by the auditor’s office.

In the preliminary audit released last week, the audit reported three “findings,” which are considered significant instances of noncompliance. They include:

• Freeland Water and Sewer District did not comply with its inter-local agreement with Island County, increasing the risk of unallowable use of restricted funds.

• The district received grant funds from both Island County and the state Department of Ecology for the same purchase of land resulting in additional cost to the district.

• The district did not follow state law wen it charged “ready to serve” fees to landowners of unimproved land.

The Freeland Water and Sewer District was intent on building a sewer system for the community, and received $2.5 million for an Island County rural economic development fund. From that money, the then-commissioners submitted $34,407 in expenses that the county partially reimbursed but were not allowable under the agreement, the auditor found.

Among the improper charges were $15,550 in expenses accrued before the agreement took effect; $8,836 in invoices that did not adequately explain the relation to the sewer project; airline tickets to Washington, D.C., totaling $2,228 for which the auditor “could not determine how the trip was related to the project; and reimbursement to a Freeland Chamber of Commerce employee’s travel expenses totaling $672.

In 2011, the county, following its own audit, recovered the funds by reducing the district’s reimbursement.

In another finding, the district incorrectly used both the county’s rural development money along with a $1 million Department of Ecology grant to purchase 80 acres to become part of the sewer system. The grants should not have been used for the same purpose, the audit states. In 2012, the district repaid the county $533,679 but still owes $32,511 for the remaining balance plus interest.

The auditor also finds the district “did not follow the law” after purchasing the private Harbor Hills Water System in 2007 for $1,475,100. The district started charging unimproved lots “standby fees” for water, which is legal for private systems but not for public systems. Fees and liens from this process totaled $115,674 which apparently must be paid back.

“It goes on and on,” Abrahamson said of the audit. “It’s a mess.” What the district still owes the county and must make up in standby fees and other costs may exceed $250,000, she said.

“We’ve been waiting for this audit to come out,” Abrahamson added. “Everybody knew all this, but this makes it official. He (the auditor) did an excellent job.”

Accounting and billing has been turned over to Whidbey Water Services.

Now, Abrahamson said, the district is fully up to date on past practices and can continue making up for mistakes.

“Part of it is knowing what you don’t know and how to find out what you don’t know,” she said.

Monday’s exit meeting with the auditor is open to the public and starts at 1 p.m. at the Whidbey Water Services building, 5421 Woodard Ave., Freeland.

 

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