State auditors keeping an eye on Tri-City government bodies

If fraud is going on in any local governing agency in the Tri-Cities, a team of state auditors based in Kennewick will be looking to find it.

"It is an integral part of what we do," said Kent Zirker, manager for the state Auditor's Office in Kennewick. His team audits dozens of entities annually in the Tri-Cities, including the counties, cities and school districts and special districts. Most of what they do is routine review, checking accounts and verifying reports.

When something suspicious is found, the auditors pay close attention to whether the public entity has good oversight and internal controls on finances and segregates duties on managing finances, Zirker said.

And occasionally, they find situations that need immediate correcting.

Such was the case with the Franklin Irrigation District.

The routine state audit determined there was inadequate documentation to explain how thousands of dollars were spent for three years ending in 2010. The auditor reviewed almost $3 million in expenditures, tracking almost $500,000 as individual payments.

While there was no evidence of misappropriation, there had been significant opportunity for loss of taxpayer money.

"Typically, with smaller public entities, there is not enough staff," Zirker said.

In the irrigation district's case, one person was secretary-bookkeeper and did all the financial operations.

Smaller agencies need to have governing boards that will pay more attention to the finances and be more proactive and knowledgeable, Zirker said.

"Take a close look at the claims and warrants payable, and look at the sequence of numbers," Zirker said, adding that having a finance committee reviewing monthly expenditures can help safeguard the public funds.

Following the money is one thing, but keeping an eye on the vendors is wise too.

Verifying vendors is relatively easy with smaller public agencies, but it can be a challenge with larger entities, Zirker said.

One way is to be sure every vendor is legitimate is to require each to submit a business identification number, which is required by the Internal Revenue Service.

Zirker said fraudulent activity within public agencies is a nothing new, just "old schemes applied to new situations."

But it can be difficult to find, especially when collusion is involved, he said.

Co-workers themselves can be the best weapon against fraud.

A Benton County employee at the fairgrounds was credited last summer with uncovering an alleged internal fraud involving a maintenance worker at the fairgrounds.

James H. Boyd III, 35, of Pasco, was accused of using two county credit cards to buy about $1,900 in fuel for his personal use and pocketing $1,500 in scrap metal sales.

The fairgrounds office manager noticed that the fuel purchases appeared excessive when compared to the previous year's records. That led to an investigation and brought felony charges of misappropriation and falsification of accounts against Boyd.

Boyd lost his job and is awaiting a Superior Court trial in March.