'Lesson learned': State auditor shines light on big issues in small Central Washington city | KNKX

'Lesson learned': State auditor shines light on big issues in small Central Washington city

May 20, 2019

Editor's note: This story has been updated to include comments from Wapato City Administrator Juan Orozco. KNKX reached him after our broadcast deadline.

State auditors don’t normally make house calls. But the unprecedented findings in a small Central Washington city earlier this month required a higher level of attention, Washington State Auditor Pat McCarthy says.

“Wapato is a city in pretty dire crisis right now,” she told KNKX’s Ed Ronco. “This one really did rise to the level.”

McCarthy took the unusual step of sitting in on an exit conference with Wapato city officials, following financial and accountability audits that resulted in a total of eight findings and “revealed an alarming disregard” for accountability and transparency, the reports state. The long list of problems ranged from inadequate financial controls to a lack of competitive bidding for city projects, purchases and services, as well as nepotism and improper spending of restricted funds.  

McCarthy followed the meeting with another unusual step: a news conference publicly announcing the high number of findings.   

“It should be a lesson learned for all other local governments,” McCarthy said.

The reports follow months of outcry from citizens and a fraud investigation that found the city had misappropriated more than $300,000 between 2011 and 2017. Kathleen Cooper, a spokeswoman for the auditor’s office, said that body of information was considered during the routine audits.

In a letter to Wapato Mayor Dora Alvarez-Roa — issued May 2, along with the audit reports — McCarthy outlined 10 concerns reported by citizens over the previous several months. Among the complaints was a claim that former mayor Juan Orozco resigned and was improperly appointed to a city administrator position that pays nearly six figures.

The state found that Orozco had, in fact, used his position as mayor to create the city administrator position he was later appointed to fill, records show. His replacement, Alvarez-Roa, was appointed by the City Council immediately following his resignation in a meeting Sept. 4, 2018. At that same meeting, the new mayor appointed Orozco to the newly created administrator position — for which he created contract terms while mayor. The seven-year contract comes with an annual salary of $95,000, a lucrative amount that the auditor’s office noted is “much higher than the market rate.”    

“None of the Council members commented on these topics during the meeting other than to approve of the appointments,” according to the audit report.

McCarthy says all of that action took place in a single meeting, in violation of the Open Public Meetings Act. What’s more, Orozco appointed his daughter as his deputy, she said. And the audit revealed that the city spent $243,000 in restricted funds on general fund activities, including nearly $126,000 in construction costs for a swimming pool — money that came from the city’s garbage fund.

“You have to follow your own policies and rules and laws,” McCarthy told KNKX Public Radio. “You can’t rob Peter to pay Paul, and you can’t hire your family members. That’s the way it is.”

Orozco, reached by phone, said the city’s problems stem from inexperienced staff in previous city administrations. Since the period covered by the audit, he says the city has taken steps that include hiring a new finance director. He also says missing money — some $300,000 separate from the misappropriated amount — is being recovered through the city’s insurance company, and the city now understands it can’t divert money from utility funds.

As for the process by which he became city administrator, Orozco said the city followed its own rules, even though the auditor’s office said the process violated the state’s Open Public Meetings Act.

“Certainly we’ve made some errors, and we’ve taken measures to correct those errors and make sure those errors don’t reoccur,” he told KNKX. “We’re past that now, and moving forward.”

Wapato, a farm town of 4,500 residents located south of Yakima, has 36 full-time employees and an annual budget of $7.4 million. It resembles any number of smaller jurisdictions spread across Washington state where similar issues could arise. McCarthy stresses that government does more good than not. But when people believe wrongdoing is happening in their backyard, the auditor is there to help.

“If they really have heartburn, if they’re really concerned about something going on in their government,” she said, “we will do our due diligence.”

Citizen complaints, reporting from the Yakima Herald-Republic and other sources, and previous investigations from the auditor's office brought attention to Wapato.

The Washington State Auditor has a host of tools for people looking to voice concerns about local or state government entities. The citizen hotline, for example, is how 10 residents in Wapato — a higher-than-average number, according the auditor's office — were able to voice their concerns about their government. And McCarthy says her mission since she was elected more than two years ago has been to make these tools more accessible and user friendly, so someone doesn’t “have to be a CPA or an auditor to be able to understand the work that we’re doing.”

McCarthy says the state auditor’s office is a “well oiled machine” that maintained its important function despite the turmoil surrounding her predecessor Troy Kelley, who was convicted of multiple felonies in 2017. Still, she says the office lacked a strong leader back then.

McCarthy used to be on the other side of the audits conducted by the office she now runs, as an auditor and executive in Pierce County as well as a school board member in Tacoma.

She says government always does better when officials shine a bright light on what they’re doing, even when there are issues.

“I feel strongly that if you have a problem, you’re better off embracing it, owning it and trying to turn it around,” McCarthy said.

Listen to the state auditor’s full conversation with All Things Considered host Ed Ronco above. The Associated Press contributed to this report.