WEBVTT
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Support for TVW podcasts provided by the Washington Indian Gaming Association.
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Who watches out for your tax dollars? When public officials
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use public money for personal gain, the state auditor's office
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is often the agency that finds out. The state auditor
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has a hand in tracking how tax dollars are spent
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at many levels of government, from state agencies to cities, counties,
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school districts, and special purpose districts. Most audits don't turn
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up fraud, but some investigations do expose violations of public trust.
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Recent reports published by the auditor list allegations of public
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officials buying clothes with tax dollars or purchasing vehicles with
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public funds, then selling them to friends or family at
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a steep discount. The state auditor reported finding $ 145, 000 in
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misappropriated funds at Mason County Fire Protection District 12 between
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April of 2018 and November of 2024. Additionally, the auditor
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flagged over 200 unaccounted-for assets, reportedly including 14 computers and
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three generators. That's not an isolated incident. Other audits focused
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on small towns reportedly found $ 225 thousand in misappropriation between
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July of 2019 and June of 2025 in the small
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town of Medellin, and then $ 57, 000 in misappropriation between 2020
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and 2025 in the town of Springdale, as well as $ 656, 000
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in questioned payments. Previous audits reported $ 878, 000 in misappropriation at
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the State Office of Administrative Hearings in Olympia between 2019
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and 2023, and $ 900, 000 in losses in the small city
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of Morton between July 2012 and March 2022, including $ 10, 000
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in ATM cash withdrawals from the city's bank account. Last year,
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the State Auditor's Office reported a significant increase in the
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number of fraud investigations and a jump in total losses. Recently,
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State Auditor Pat McCarthy created a formal Special Investigation Division
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in response. Joining me now is Brandi Pritchard, Director of
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the New Special Investigations Division at the State Auditor's Office.
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Thank you for your time today. Let's start with talking
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about some of the cases that the Auditor's Office has
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uncovered in recent years, particularly with small-town fraud. There's one
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city that stands out in some of the recent reporting,
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and that's Springdale. You're talking about a town of a
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few hundred people had prior misappropriation findings. criminal charges against
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a former elected official in one case, and then now
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its third big fraud investigation in one decade. At what
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point does this become a pattern of systemic failure as
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opposed to isolated misconduct?
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Yeah, I mean, that's a great question. I definitely think
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in this case, we're there, right? It's definitely a pattern.
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So the way that our office works, anytime we do
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a fraud investigation, I think sometimes people just think of
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you're going to figure out what happened, how did it happen,
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what was the dollar about, who was responsible. And sure,
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that's a big piece of it, but what we think
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is the other probably more important piece is what were
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the internal control weaknesses that allowed this to happen? And
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we partner that with specific recommendations to the governments for
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the purpose of hoping that it won't happen again. That said,
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we of course follow up on those recommendations to make
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sure they're implemented, but we don't, you know, we we're
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a reporting agency, and so we can't force things to change.
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So unfortunately, in the case of Springdale, it's a small town,
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and so that automatically kind of limits the number of
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people maybe available to hold some of these positions, whether
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it be finance positions, mayor and elected. And so we
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haven't really seen that change quite yet in those internal
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control processes. One thing we like to say, we call
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it the trust trap. It's when electeds and management put
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a lot of trust in their finance folks and others,
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sometimes because there's only one person to do those positions.
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And so rather than having a lot of folks that
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you can separate these duties amongst, so, you know, person
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A can check person B's work when it's one person,
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they tend to put all of their financial trust in
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those folks. And unfortunately that doesn't always work out the best,
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which I think is what happened in Springdale.
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In a minute, maybe we can talk about some of
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the other smaller government entities, the types of situations you've
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come across. But at times, state agencies are also the
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victims of fraud. So there was a pretty large theft
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or fraud investigation at the Office of Administrative Hearings here
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in Olympia where the audit report said that one employee
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with access to an agency credit card steered upwards of $ 800, 000
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to companies that that person owned over the course of
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a few years. When you hear, you know, that's a
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lot of money. So for taxpayers that may be wondering,
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how could that possibly slide that long? Why wasn't this
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reported sooner? What would you say to those folks?
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Again, a great question. It's very similar to what we
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talked about in Springdale. It's when that trust is put
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in that person. In this case, somebody unfortunately had the
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ability to manipulate some things on the back end. So
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specifically with this case, we're talking about a purchase card.
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This person was the purchase card custodian. He was able
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to initiate these purchases. And when it was time to
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present the purchase card, documentation to his supervisor for review,
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he unfortunately was able to manipulate that a bit. So
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rather than presenting the whole statement of all of the activity,
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he was able to kind of cherry pick just the
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things that he wanted his supervisor to see. I know
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the agency has since made recommendations, but it's one thing
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I think that's interesting about internal controls and setting up
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processes is sometimes what might seem like just a seemingly
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small thing is a all the window that somebody might
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need to take advantage, and that's what happened in this case,
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was just that one little ability to manipulate those statements
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was all he needed to be able to hide what
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he was doing.
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So concentrating power, authority, is that one risk? What are
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some of the basic, you know, sorts of safeguards that
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you're looking for? in a government operation with taxpayer money? Sure.
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I think right off the bat, segregation of duties is
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how we describe it. So exactly like you're saying, not
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having one person do everything. Or in the case of
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small government, sometimes maybe that's all there is, is one person,
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and that's okay. But where you can't separate out key duties,
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you have to replace that with effective monitoring. So let's
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go back to Springdale. If they have one clerk treasurer
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doing that, the mayor, the council, somebody else needs to
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be looking very, very closely at everything that they're doing
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so that we can check things. So segregation of duties
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right at the top. The other thing that our office
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talks about a lot is, it seems simple, but reviewing statements.
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So reviewing bank statements and credit card statements. Our office
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actually has found a large number of these cases. Office
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of Administrative Hearings, our office found that during one of
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our audits. And the way we found that is by
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reviewing the statements. We have Pierce County Housing Authority. That's
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the largest government misappropriation in Washington's history. Our audits found
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that by simply looking at a bank statement and it
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just popped out. So we've been doing whole campaigns, really,
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for our governments to really try to encourage, if you
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don't do anything else, review the statements because it's amazing
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the story that those statements can tell. So I would
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say those are probably our top two. Separating out key duties,
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having somebody reviewing the bank statements would catch a lot
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of these.
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And, you know, there could be any number of things
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going on in someone's life, you know, who's in one
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of these positions. But, I mean, one of the cases
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that your office reported involved a person who allegedly continued
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misusing public money after resigning during the audit. I mean,
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is that unusually brazen, or does it speak to sort
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of the mentality that happens? I mean, is that a one-off?
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Maybe not, maybe a two-off. Maybe not quite a one-off.
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It does happen occasionally. More often than not, and in fact,
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there's actually studies on this.
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It's an 80-20 rule.
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80% of folks that make this choice aren't what we
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would consider to be these terrible people. They have the
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dark triad personality that we talk about. There's narcissistic and
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psychopathic and Machiavellian. And there are these people, when we
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think of somebody that's a fraudster, that tends to be
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what we picture in our mind is these really horrible
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people that make these horrible choices. Studies show that that's
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the case maybe 20% of the time. The other 80%
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are usually people that have pressure in their life. So
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it kind of brings us back to what we call
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the fraud triangle. Some type of a financial pressure. They
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have an opportunity to make this choice because they have
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access to, and then they're able to rationalize. And one
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of the rationalizations that we hear a lot is that
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they don't really think that what they're doing is stealing.
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They say it's temporary. I just needed to borrow some
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money to get me through a hard time and I'll.
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Pay it back.
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So to your question, people that tend to do this
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after we've gone there, I think that's a lower number
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of people. That would be more in the 20%. Most
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times it really is what we would classify as an
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otherwise decent person who had some pressure. They're able to
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rationalize because they have the opportunity and unfortunately they make
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this choice.
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And let's talk about the scale of the number of
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just government entities out there that get audited, that your
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agency is responsible for auditing. Just give me some examples.
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We talked about small town, one state agency. What else
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is there?
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So we do a lot of auditing. We audit about 2,400
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governments across Washington and And again, I mentioned that our
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office finds a lot of these cases. And so we're
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finding them all across from the biggest of the big
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to the smallest of the small. But I would say
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the same thing holds true with our fraud investigations. We
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do have a higher concentration at cities and towns. That's
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where we're finding most of the losses. But school districts,
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public utility districts, water, irrigation, all the way up to
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our state agencies. So we've definitely seen that huge swath of,
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nobody is safe from it. The scope of how big
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some of these could grow might be dependent on how
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big the agency is and how developed their internal controls are,
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but we really have seen it at all levels of government.
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Let's talk specifically about your new role. So the Special
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Investigations Division and the whistleblower connection here. How important are
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whistleblowers in uncovering fraud that either routine auditing or has
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either missed or hasn't gotten to yet?
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So incredibly important. And I don't think that could be overstated. Very,
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very important. In fact, the Association of Certified Fraud Examiners,
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they come out with a study every couple of years
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where they did the survey across the whole globe. And
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all this information is coming together and it helps us
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understand fraud. And continually, year after year, the number one
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way that things are detected on the fraud side is
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through tips. And tips come in usually through whistleblowers. We
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attend a lot of conferences from that same agency, and
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they usually bring in whistleblowers from a lot of cases
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that we've all heard of. And it's admirable and inspiring
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to hear these folks talk about what they go through
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to be a whistleblower, but the effect of the things
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that they're bringing up is so incredibly important. So we
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take our work in this area incredibly seriously, their confidentiality,
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we take that seriously, and we're really happy to be
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a part of that program that allows this opportunity for
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state agency employees to speak up.
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What can turn a vague suspicion that's reported or what
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kind of details make a tip more of a valid
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peg to begin an investigation? Details.
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That's exactly what it is. I mean, you know, sometimes
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we might get something coming to us that says we
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think something's being run poorly. That would be a very
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difficult thing to follow up on.
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It's vague.
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We wouldn't know where to start. Who do we talk to?
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What do you mean by poorly? That's really subjective. So
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the ones that tend to get more traction are, you know,
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here's the person that I think is involved. Here's my
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specific allegation, potentially the law that we feel like has
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been broken, a time frame. So the more specifics that
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they can give us gives us the trail that we
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need to be able to go in there and be
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really effective. Otherwise, it's You're just kind of going in
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without any context to really know what's step one when
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we walk in the door.
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And then, so what are some of the red flags
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that tell you, okay, this is not just sloppy bookkeeping.
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This is something more sinister or more serious.
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Yeah, yeah. I think sometimes, I mean, it kind of
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depends on the case, but one of them that would
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just jump into mind immediately would be if we feel
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like there's some type of a concealment. So, for example,
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if say we see a disbursement that looks like it
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could be a potential personal payment and all you can
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imagine there's vendors that say Amazon, say Walmart, that could
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be a valid government purchase, could be personal, kind of
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hard to tell just on its surface. But if we
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start to partner that with. well, the person also didn't
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record it appropriately in their accounting system, or also the
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receipt is missing for this one. That is usually what
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kind of gets our red flags up of, like, there
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might be something more going on here.
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And do you find that a lot of times people
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just don't know the rules in these, you know, an
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irrigation district or a fire district, or is it just
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that there's really nobody watching in the near term? What's
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more common?
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I feel like more often than not it's, I would
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peg it as they're doing the best they can. So
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a lot of folks, especially in these smaller agencies, these
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aren't finance professionals that have decided to take a role as,
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you know, whether it's an elected or an appointed at
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a small district, they're people working in the community who
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wanted to volunteer to be a part of public service.
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So when they walk in, I really feel like they're
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just doing the best that they can and they might
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not realize what all the rules and laws are, or
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they're just, um, again, kind of doing the best they can.
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I think in the Springdale case, one thing that's interesting
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there was the main focus started out with the clerk treasurer.
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But in our report, we actually also talk about some
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questionable activity with the mayor. And that was kind of
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what the mayor has described to us as, you know,
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all of a sudden she's the one who detected this
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issue with the clerk treasurer. So now she's short a
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clerk treasurer while she's also the mayor. She does their
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code enforcement. She does other duties as assigned. Now she's
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taken over this clerk treasurer role, excuse me, clerk treasurer role. She's,
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I think, trying to do the best that she can,
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but in the meantime, wasn't paying herself really appropriately. We
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have some questions about the way that that was set up,
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but it's hard to know how much was intentional or
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how much was her just really doing the best she
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could in the situation she was given.
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And what did these cases reveal about just the cost
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of weak controls to society in general, to these towns
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that probably don't have all that much of a tax
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base to begin with?
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It's been pretty remarkable in the last several years. We've
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had some cases that have wiped out some of our
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small governments. I would think of town of Cusick, for example.
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That one came with a small town, again, only like
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200 some people in population. They have an average bank
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balance of between $ 200, 000 to $ 300, 000, and all of a
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sudden they go to the bank and they have $ 294
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to their name. So the gentleman there, their clerk treasurer,
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completely wiped them out. Town of Medellin was another recent
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one where they got wiped out pretty hard. So it's
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been pretty significant. But setting aside even the financial losses
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that these folks are dealing with, there's the loss of
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public trust, which I think sometimes can be even the
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bigger issue is how do you now– build that relationship,
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build that trust back with the citizens that have given
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you their trust. You've become the steward of their public funds,
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and then unfortunately somebody betrays that trust. How do you
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gain that back?
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Well, if you could give one piece of advice to
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every newly elected official out there, what would it be?
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I would say lean in to the financial statement side
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of things. We've heard when we've talked to elected officials,
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I'm not really here on the finance side. I'm here
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because I have a passion for whatever the public service is.
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that they're performing. And I appreciate that. And of course,
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that's a great reason to get into public service. But
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once you've made that choice to be there, you also
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have an obligation on the financial side. So I would
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say come to trainings, participate in your audit. We invite
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all elected officials to our entrance and exit conferences. Engage
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in that process. Hear what we have to say. Take
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our recommendations seriously. Don't be afraid to ask for more
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from your finance folks. If you don't understand what you're
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being given to review, ask questions and don't settle with
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anything short of being fully satisfied in what those answers are.
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Now, you guys also audit law enforcement organizations too, periodically, right?
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Financial via municipal audits, that sort of thing.
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Sure, yes.
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Does that get tricky with the, if you did find
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something that went above the, you know, bad bookkeeping to
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something possibly criminal. How do you keep the integrity of
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the investigation when you're dealing with local prosecutors? How does
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that work? Or are you dealing with local prosecutors?
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So as far as prosecutors go, they get our work
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at the very end of it. So we don't work
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for the prosecutors. We don't partner with them. Our role
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in fraud investigations is strictly civil. So our goal, again,
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is to answer the questions, who did it, how much.
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We help the government seek civil restitution. At the end,
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we hand our work off to a prosecutor, and then
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they independently make the decision if they're going to prosecute
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or not. Sometimes they ask us to come be expert witnesses.
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So we come if called. But as far as our investigations,
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we really haven't had that issue. We have investigated some
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law enforcement divisions, usually at either the town or the
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county level. And it hasn't been a problem. Whenever we've
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needed assistance, sometimes we would reach out to maybe somebody
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from a different jurisdiction. But we're pretty self-contained. We have
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subpoena authority. So in the process of performing those investigations,
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we don't often need to call for law enforcement. And
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I mean, we respect all of our clients and try
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to treat them with respect, but we also wouldn't not
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do something we need to do just because it's a
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law enforcement agency.
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So going back to the whistleblowers and the importance of tips,
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if someone out there maybe suspects or has good reason
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to believe there's something untoward happening, but they're worried that
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it would fracture their community. Maybe it's one of these
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smaller communities, or just there could be blowback that they
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are not prepared to deal with or don't want to risk.
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What's your advice to them? What should they know?
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Yeah, I would say think about the pro-con of what
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you're going through. That's the classic story of a whistleblower, right?
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It can be hard to be a whistleblower. But what's
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great for citizens and what I would offer them is
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we do have our citizen hotline program and they don't
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have to tell us their name. So they can go
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just right onto our website, tell us what's going on.
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Don't fill out the name field and nobody would ever,
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we would have no way to know it was them,
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nor would anybody else. But when we think about the
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last effects of some of these things, so, you know,
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take some of our fraud investigation cases that start with
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maybe somebody doing something that's $ 100 here or there, and
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next thing you know, we're millions of dollars into this investigation.
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I would encourage them to consider where could this be going,
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how could it expand beyond And just a quick side
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note there, that is one thing that we know about
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people who make this choice to misappropriate funds is it
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starts small and it grows. And so if they see
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something small, please consider saying something now before it has
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a chance to get larger.
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So for people that are worried about this, I mean,
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are there protections in law for whistleblowers as far as retaliation?
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So maybe this investigation doesn't pan out or something like that.
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What then?
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So we do have protections in law specific for the
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program that we run for state employees. So if you
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are a current state employee and you're filing something to
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us through our whistleblower program, there absolutely are provisions under
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RCW Chapter 4240 that protect them. So we, again, take
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that incredibly seriously. We protect their identity and there are
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recourses for them in law should they feel like they
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were retaliated against. There's also a chapter specific to the
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local government side. Our office doesn't run that program like
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we do with the state side, but they also have
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protections as well.
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And, you know, for people that may be thinking, well,
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you know, you know, a few thousand dollars here, a
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few thousand dollars there in the middle of nowhere, you know,
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or some middle of the state, someplace they're not going to.
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Why should people care about small scale fraud?
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I think we should care about any fraud when it
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comes to government. And maybe this is just my. My
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entire service has been in government, so maybe this is
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where my heart lies a little bit. But again, when
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we think about what could that $ 1, 000 be used for,
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if you compare this to a business, like, I don't
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know what it could be used for, probably a lot
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of things. But in government, it's going to go to
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serving the public. And that's always an admirable cause. So
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whether it's $ 5, $ 1, 000, or $ 1 million, those are funds
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out of the pockets of your taxpayers, and it's being
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funds taken away from the public services that those governments
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are set up to provide, and I feel like that's
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always important.
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And then just lastly, in this new role, what will
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this bring to the agency, and how will this help
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make these cases, you know, crack more of these cases?
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00:22:10.849 --> 00:22:13.849
Yeah, we're really excited about this change because it's just
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adding more attention to it. We've been doing a lot
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of great work, in my opinion, over the years. One
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of the things we've been trying to do is move
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from the reactive side. So somebody calls us or we
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find a case and we investigate it. And that's great
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and that's an important part of what we do. But gosh,
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wouldn't it be nice if we could help prevent more
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of it? So we have a big focus on external trainings. Honestly,
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we've done it all across the nation, but specifically in
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Washington to so many associations As you can imagine, we've
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been spending a lot of time with small towns. We've
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been going on the road, having these small get-togethers with AWC.
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They do these.
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They're called small city connectors with mayors from these small
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towns so that they can hear directly from us. Here's,
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you know, review your bank statements. Look at the credit
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card statements. So doing what we can to try to
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be more on the preventative side. And having this change
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just gives us a little bit more time and capacity
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to do that.
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Just lastly, who audits the auditor's office? Who's watching the
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auditor's office? Yes, good question. We do get audited as well.
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We have a peer review every few years, and so
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there's this organization, the National State Auditor's Association, and they
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all put folks together. So we do get audited every
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few years, and those reports are on our website.
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Okay, we'll have to leave it there. Thank you very much,
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Brandi Pritchard. We do appreciate your perspective. Thank you so much.
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Still ahead on The Impact, another spike in health insurance rates.
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00:23:33.829 --> 00:23:37.269
And new pushback to a federal plan to save endangered
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owls by killing other owls. Details after the break. For
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00:23:52.609 --> 00:23:55.049
the second year in a row, there will be double
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00:23:55.269 --> 00:23:59.589
digit increases for health care plans sold on Washington's exchange.
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00:24:00.079 --> 00:24:04.359
The state insurance commissioner has approved an average 22.2% rate
444
00:24:04.400 --> 00:24:10.039
increase for the 13 insurers offering plans through Washington's individual marketplace.
445
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According to the insurance commissioner's office, the rate increase is
446
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due to more substantial health care needs for people covered
447
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by individual health plans and an increase in the basic
448
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costs of healthcare overall. Last year, insurers requested a 21%
449
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rate increase. State law requires the insurance commissioner to approve
450
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rate increases when companies can prove they are actuarially justified.
451
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Animal rights groups are launching a PR campaign in Seattle
452
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and other West Coast cities aimed at turning the public
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against a plan to save endangered owls by shooting invasive owls.
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The Hoot Don't Shoot campaign is a project of the
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Center for a Humane Economy and Animal Wellness Action, and
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it targets a plan by federal wildlife officials to kill
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hundreds of thousands of barred owls over the next few decades.
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Though native to the eastern United States, barred owls are
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now in the west and are considered invasive. The Fish
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and Wildlife Service argues they pose a major threat to
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the survival of struggling northern spotted owl populations. The U.S.
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Fish and Wildlife Service announced plans to shoot barred owls
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found encroaching on northern spotted owl territory. Proponents of the
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plan argue barred owls are larger, more aggressive, and more adaptable,
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out-competing the endangered spotted owls, sometimes killing them outright. Critics
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of the plan claim that it's cruel, costly, and unlikely
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to work. That's a wrap for this week. Thank you
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for joining us. We'll see you next Wednesday for more
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in-depth interviews you won't find anywhere else. Take care.
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Support for TVW podcasts provided by the Washington Indian Gaming Association.
2
00:00:22.160 --> 00:00:25.160
Who watches out for your tax dollars? When public officials
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00:00:25.600 --> 00:00:29.260
use public money for personal gain, the state auditor's office
4
00:00:29.320 --> 00:00:32.840
is often the agency that finds out. The state auditor
5
00:00:32.880 --> 00:00:35.920
has a hand in tracking how tax dollars are spent
6
00:00:36.340 --> 00:00:40.840
at many levels of government, from state agencies to cities, counties,
7
00:00:41.119 --> 00:00:45.979
school districts, and special purpose districts. Most audits don't turn
8
00:00:46.039 --> 00:00:51.460
up fraud, but some investigations do expose violations of public trust.
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Recent reports published by the auditor list allegations of public
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officials buying clothes with tax dollars or purchasing vehicles with
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public funds, then selling them to friends or family at
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a steep discount. The state auditor reported finding $ 145, 000 in
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misappropriated funds at Mason County Fire Protection District 12 between
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April of 2018 and November of 2024. Additionally, the auditor
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flagged over 200 unaccounted-for assets, reportedly including 14 computers and
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three generators. That's not an isolated incident. Other audits focused
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on small towns reportedly found $ 225 thousand in misappropriation between
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July of 2019 and June of 2025 in the small
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town of Medellin, and then $ 57, 000 in misappropriation between 2020
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and 2025 in the town of Springdale, as well as $ 656, 000
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in questioned payments. Previous audits reported $ 878, 000 in misappropriation at
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the State Office of Administrative Hearings in Olympia between 2019
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and 2023, and $ 900, 000 in losses in the small city
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of Morton between July 2012 and March 2022, including $ 10, 000
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in ATM cash withdrawals from the city's bank account. Last year,
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the State Auditor's Office reported a significant increase in the
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number of fraud investigations and a jump in total losses. Recently,
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State Auditor Pat McCarthy created a formal Special Investigation Division
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in response. Joining me now is Brandi Pritchard, Director of
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the New Special Investigations Division at the State Auditor's Office.
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Thank you for your time today. Let's start with talking
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about some of the cases that the Auditor's Office has
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uncovered in recent years, particularly with small-town fraud. There's one
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city that stands out in some of the recent reporting,
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and that's Springdale. You're talking about a town of a
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few hundred people had prior misappropriation findings. criminal charges against
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a former elected official in one case, and then now
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its third big fraud investigation in one decade. At what
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point does this become a pattern of systemic failure as
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opposed to isolated misconduct?
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Yeah, I mean, that's a great question. I definitely think
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in this case, we're there, right? It's definitely a pattern.
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So the way that our office works, anytime we do
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a fraud investigation, I think sometimes people just think of
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you're going to figure out what happened, how did it happen,
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what was the dollar about, who was responsible. And sure,
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that's a big piece of it, but what we think
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is the other probably more important piece is what were
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the internal control weaknesses that allowed this to happen? And
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we partner that with specific recommendations to the governments for
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the purpose of hoping that it won't happen again. That said,
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we of course follow up on those recommendations to make
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sure they're implemented, but we don't, you know, we we're
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a reporting agency, and so we can't force things to change.
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So unfortunately, in the case of Springdale, it's a small town,
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and so that automatically kind of limits the number of
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people maybe available to hold some of these positions, whether
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it be finance positions, mayor and elected. And so we
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haven't really seen that change quite yet in those internal
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control processes. One thing we like to say, we call
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it the trust trap. It's when electeds and management put
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a lot of trust in their finance folks and others,
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sometimes because there's only one person to do those positions.
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And so rather than having a lot of folks that
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you can separate these duties amongst, so, you know, person
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A can check person B's work when it's one person,
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they tend to put all of their financial trust in
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those folks. And unfortunately that doesn't always work out the best,
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which I think is what happened in Springdale.
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In a minute, maybe we can talk about some of
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the other smaller government entities, the types of situations you've
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come across. But at times, state agencies are also the
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victims of fraud. So there was a pretty large theft
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or fraud investigation at the Office of Administrative Hearings here
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in Olympia where the audit report said that one employee
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with access to an agency credit card steered upwards of $ 800, 000
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to companies that that person owned over the course of
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a few years. When you hear, you know, that's a
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lot of money. So for taxpayers that may be wondering,
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how could that possibly slide that long? Why wasn't this
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reported sooner? What would you say to those folks?
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Again, a great question. It's very similar to what we
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talked about in Springdale. It's when that trust is put
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in that person. In this case, somebody unfortunately had the
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ability to manipulate some things on the back end. So
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specifically with this case, we're talking about a purchase card.
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This person was the purchase card custodian. He was able
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to initiate these purchases. And when it was time to
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present the purchase card, documentation to his supervisor for review,
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he unfortunately was able to manipulate that a bit. So
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rather than presenting the whole statement of all of the activity,
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he was able to kind of cherry pick just the
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things that he wanted his supervisor to see. I know
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the agency has since made recommendations, but it's one thing
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I think that's interesting about internal controls and setting up
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processes is sometimes what might seem like just a seemingly
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small thing is a all the window that somebody might
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need to take advantage, and that's what happened in this case,
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was just that one little ability to manipulate those statements
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was all he needed to be able to hide what
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he was doing.
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So concentrating power, authority, is that one risk? What are
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some of the basic, you know, sorts of safeguards that
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you're looking for? in a government operation with taxpayer money? Sure.
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I think right off the bat, segregation of duties is
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how we describe it. So exactly like you're saying, not
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having one person do everything. Or in the case of
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small government, sometimes maybe that's all there is, is one person,
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and that's okay. But where you can't separate out key duties,
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you have to replace that with effective monitoring. So let's
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go back to Springdale. If they have one clerk treasurer
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doing that, the mayor, the council, somebody else needs to
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be looking very, very closely at everything that they're doing
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so that we can check things. So segregation of duties
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right at the top. The other thing that our office
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talks about a lot is, it seems simple, but reviewing statements.
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So reviewing bank statements and credit card statements. Our office
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actually has found a large number of these cases. Office
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of Administrative Hearings, our office found that during one of
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our audits. And the way we found that is by
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reviewing the statements. We have Pierce County Housing Authority. That's
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the largest government misappropriation in Washington's history. Our audits found
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that by simply looking at a bank statement and it
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just popped out. So we've been doing whole campaigns, really,
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for our governments to really try to encourage, if you
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don't do anything else, review the statements because it's amazing
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the story that those statements can tell. So I would
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say those are probably our top two. Separating out key duties,
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having somebody reviewing the bank statements would catch a lot
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of these.
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And, you know, there could be any number of things
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going on in someone's life, you know, who's in one
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of these positions. But, I mean, one of the cases
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that your office reported involved a person who allegedly continued
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misusing public money after resigning during the audit. I mean,
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is that unusually brazen, or does it speak to sort
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of the mentality that happens? I mean, is that a one-off?
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Maybe not, maybe a two-off. Maybe not quite a one-off.
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It does happen occasionally. More often than not, and in fact,
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there's actually studies on this.
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It's an 80-20 rule.
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80% of folks that make this choice aren't what we
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would consider to be these terrible people. They have the
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dark triad personality that we talk about. There's narcissistic and
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psychopathic and Machiavellian. And there are these people, when we
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think of somebody that's a fraudster, that tends to be
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what we picture in our mind is these really horrible
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people that make these horrible choices. Studies show that that's
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the case maybe 20% of the time. The other 80%
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are usually people that have pressure in their life. So
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it kind of brings us back to what we call
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the fraud triangle. Some type of a financial pressure. They
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have an opportunity to make this choice because they have
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access to, and then they're able to rationalize. And one
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of the rationalizations that we hear a lot is that
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they don't really think that what they're doing is stealing.
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They say it's temporary. I just needed to borrow some
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money to get me through a hard time and I'll.
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Pay it back.
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So to your question, people that tend to do this
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after we've gone there, I think that's a lower number
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of people. That would be more in the 20%. Most
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times it really is what we would classify as an
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otherwise decent person who had some pressure. They're able to
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rationalize because they have the opportunity and unfortunately they make
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this choice.
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And let's talk about the scale of the number of
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just government entities out there that get audited, that your
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agency is responsible for auditing. Just give me some examples.
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We talked about small town, one state agency. What else
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is there?
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So we do a lot of auditing. We audit about 2,400
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governments across Washington and And again, I mentioned that our
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office finds a lot of these cases. And so we're
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finding them all across from the biggest of the big
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to the smallest of the small. But I would say
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the same thing holds true with our fraud investigations. We
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do have a higher concentration at cities and towns. That's
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where we're finding most of the losses. But school districts,
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public utility districts, water, irrigation, all the way up to
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our state agencies. So we've definitely seen that huge swath of,
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nobody is safe from it. The scope of how big
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some of these could grow might be dependent on how
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big the agency is and how developed their internal controls are,
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but we really have seen it at all levels of government.
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Let's talk specifically about your new role. So the Special
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Investigations Division and the whistleblower connection here. How important are
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whistleblowers in uncovering fraud that either routine auditing or has
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either missed or hasn't gotten to yet?
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So incredibly important. And I don't think that could be overstated. Very,
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very important. In fact, the Association of Certified Fraud Examiners,
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they come out with a study every couple of years
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where they did the survey across the whole globe. And
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all this information is coming together and it helps us
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understand fraud. And continually, year after year, the number one
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way that things are detected on the fraud side is
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through tips. And tips come in usually through whistleblowers. We
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attend a lot of conferences from that same agency, and
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they usually bring in whistleblowers from a lot of cases
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that we've all heard of. And it's admirable and inspiring
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to hear these folks talk about what they go through
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to be a whistleblower, but the effect of the things
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that they're bringing up is so incredibly important. So we
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take our work in this area incredibly seriously, their confidentiality,
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we take that seriously, and we're really happy to be
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a part of that program that allows this opportunity for
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state agency employees to speak up.
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What can turn a vague suspicion that's reported or what
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kind of details make a tip more of a valid
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peg to begin an investigation? Details.
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That's exactly what it is. I mean, you know, sometimes
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we might get something coming to us that says we
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think something's being run poorly. That would be a very
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difficult thing to follow up on.
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It's vague.
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We wouldn't know where to start. Who do we talk to?
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What do you mean by poorly? That's really subjective. So
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the ones that tend to get more traction are, you know,
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here's the person that I think is involved. Here's my
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specific allegation, potentially the law that we feel like has
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been broken, a time frame. So the more specifics that
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they can give us gives us the trail that we
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need to be able to go in there and be
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really effective. Otherwise, it's You're just kind of going in
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without any context to really know what's step one when
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we walk in the door.
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And then, so what are some of the red flags
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that tell you, okay, this is not just sloppy bookkeeping.
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This is something more sinister or more serious.
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Yeah, yeah. I think sometimes, I mean, it kind of
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depends on the case, but one of them that would
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just jump into mind immediately would be if we feel
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like there's some type of a concealment. So, for example,
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if say we see a disbursement that looks like it
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could be a potential personal payment and all you can
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imagine there's vendors that say Amazon, say Walmart, that could
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be a valid government purchase, could be personal, kind of
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hard to tell just on its surface. But if we
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start to partner that with. well, the person also didn't
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record it appropriately in their accounting system, or also the
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receipt is missing for this one. That is usually what
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kind of gets our red flags up of, like, there
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might be something more going on here.
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And do you find that a lot of times people
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just don't know the rules in these, you know, an
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irrigation district or a fire district, or is it just
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that there's really nobody watching in the near term? What's
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more common?
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I feel like more often than not it's, I would
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peg it as they're doing the best they can. So
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a lot of folks, especially in these smaller agencies, these
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aren't finance professionals that have decided to take a role as,
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you know, whether it's an elected or an appointed at
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a small district, they're people working in the community who
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wanted to volunteer to be a part of public service.
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So when they walk in, I really feel like they're
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just doing the best that they can and they might
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not realize what all the rules and laws are, or
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they're just, um, again, kind of doing the best they can.
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I think in the Springdale case, one thing that's interesting
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there was the main focus started out with the clerk treasurer.
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But in our report, we actually also talk about some
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questionable activity with the mayor. And that was kind of
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what the mayor has described to us as, you know,
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all of a sudden she's the one who detected this
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issue with the clerk treasurer. So now she's short a
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clerk treasurer while she's also the mayor. She does their
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code enforcement. She does other duties as assigned. Now she's
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taken over this clerk treasurer role, excuse me, clerk treasurer role. She's,
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I think, trying to do the best that she can,
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but in the meantime, wasn't paying herself really appropriately. We
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have some questions about the way that that was set up,
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but it's hard to know how much was intentional or
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how much was her just really doing the best she
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could in the situation she was given.
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And what did these cases reveal about just the cost
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of weak controls to society in general, to these towns
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that probably don't have all that much of a tax
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base to begin with?
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It's been pretty remarkable in the last several years. We've
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had some cases that have wiped out some of our
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small governments. I would think of town of Cusick, for example.
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That one came with a small town, again, only like
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200 some people in population. They have an average bank
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balance of between $ 200, 000 to $ 300, 000, and all of a
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sudden they go to the bank and they have $ 294
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to their name. So the gentleman there, their clerk treasurer,
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completely wiped them out. Town of Medellin was another recent
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one where they got wiped out pretty hard. So it's
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been pretty significant. But setting aside even the financial losses
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that these folks are dealing with, there's the loss of
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public trust, which I think sometimes can be even the
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bigger issue is how do you now– build that relationship,
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build that trust back with the citizens that have given
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you their trust. You've become the steward of their public funds,
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and then unfortunately somebody betrays that trust. How do you
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gain that back?
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Well, if you could give one piece of advice to
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every newly elected official out there, what would it be?
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I would say lean in to the financial statement side
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of things. We've heard when we've talked to elected officials,
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I'm not really here on the finance side. I'm here
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because I have a passion for whatever the public service is.
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that they're performing. And I appreciate that. And of course,
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that's a great reason to get into public service. But
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once you've made that choice to be there, you also
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have an obligation on the financial side. So I would
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say come to trainings, participate in your audit. We invite
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all elected officials to our entrance and exit conferences. Engage
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in that process. Hear what we have to say. Take
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our recommendations seriously. Don't be afraid to ask for more
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from your finance folks. If you don't understand what you're
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being given to review, ask questions and don't settle with
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anything short of being fully satisfied in what those answers are.
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Now, you guys also audit law enforcement organizations too, periodically, right?
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Financial via municipal audits, that sort of thing.
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Sure, yes.
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Does that get tricky with the, if you did find
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something that went above the, you know, bad bookkeeping to
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something possibly criminal. How do you keep the integrity of
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the investigation when you're dealing with local prosecutors? How does
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that work? Or are you dealing with local prosecutors?
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So as far as prosecutors go, they get our work
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at the very end of it. So we don't work
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for the prosecutors. We don't partner with them. Our role
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in fraud investigations is strictly civil. So our goal, again,
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is to answer the questions, who did it, how much.
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We help the government seek civil restitution. At the end,
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we hand our work off to a prosecutor, and then
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they independently make the decision if they're going to prosecute
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or not. Sometimes they ask us to come be expert witnesses.
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So we come if called. But as far as our investigations,
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we really haven't had that issue. We have investigated some
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law enforcement divisions, usually at either the town or the
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county level. And it hasn't been a problem. Whenever we've
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needed assistance, sometimes we would reach out to maybe somebody
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from a different jurisdiction. But we're pretty self-contained. We have
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subpoena authority. So in the process of performing those investigations,
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we don't often need to call for law enforcement. And
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I mean, we respect all of our clients and try
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to treat them with respect, but we also wouldn't not
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do something we need to do just because it's a
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law enforcement agency.
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So going back to the whistleblowers and the importance of tips,
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if someone out there maybe suspects or has good reason
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to believe there's something untoward happening, but they're worried that
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it would fracture their community. Maybe it's one of these
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smaller communities, or just there could be blowback that they
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are not prepared to deal with or don't want to risk.
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What's your advice to them? What should they know?
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Yeah, I would say think about the pro-con of what
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you're going through. That's the classic story of a whistleblower, right?
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It can be hard to be a whistleblower. But what's
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great for citizens and what I would offer them is
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we do have our citizen hotline program and they don't
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have to tell us their name. So they can go
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just right onto our website, tell us what's going on.
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Don't fill out the name field and nobody would ever,
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we would have no way to know it was them,
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nor would anybody else. But when we think about the
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last effects of some of these things, so, you know,
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take some of our fraud investigation cases that start with
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maybe somebody doing something that's $ 100 here or there, and
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next thing you know, we're millions of dollars into this investigation.
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I would encourage them to consider where could this be going,
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how could it expand beyond And just a quick side
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note there, that is one thing that we know about
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people who make this choice to misappropriate funds is it
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starts small and it grows. And so if they see
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something small, please consider saying something now before it has
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a chance to get larger.
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So for people that are worried about this, I mean,
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are there protections in law for whistleblowers as far as retaliation?
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So maybe this investigation doesn't pan out or something like that.
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What then?
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So we do have protections in law specific for the
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program that we run for state employees. So if you
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are a current state employee and you're filing something to
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us through our whistleblower program, there absolutely are provisions under
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RCW Chapter 4240 that protect them. So we, again, take
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that incredibly seriously. We protect their identity and there are
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recourses for them in law should they feel like they
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were retaliated against. There's also a chapter specific to the
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local government side. Our office doesn't run that program like
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we do with the state side, but they also have
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protections as well.
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And, you know, for people that may be thinking, well,
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you know, you know, a few thousand dollars here, a
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few thousand dollars there in the middle of nowhere, you know,
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or some middle of the state, someplace they're not going to.
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Why should people care about small scale fraud?
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I think we should care about any fraud when it
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comes to government. And maybe this is just my. My
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entire service has been in government, so maybe this is
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where my heart lies a little bit. But again, when
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we think about what could that $ 1, 000 be used for,
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if you compare this to a business, like, I don't
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know what it could be used for, probably a lot
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of things. But in government, it's going to go to
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serving the public. And that's always an admirable cause. So
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whether it's $ 5, $ 1, 000, or $ 1 million, those are funds
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out of the pockets of your taxpayers, and it's being
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funds taken away from the public services that those governments
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are set up to provide, and I feel like that's
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always important.
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And then just lastly, in this new role, what will
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this bring to the agency, and how will this help
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make these cases, you know, crack more of these cases?
409
00:22:10.849 --> 00:22:13.849
Yeah, we're really excited about this change because it's just
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adding more attention to it. We've been doing a lot
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of great work, in my opinion, over the years. One
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of the things we've been trying to do is move
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from the reactive side. So somebody calls us or we
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find a case and we investigate it. And that's great
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and that's an important part of what we do. But gosh,
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wouldn't it be nice if we could help prevent more
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of it? So we have a big focus on external trainings. Honestly,
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we've done it all across the nation, but specifically in
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Washington to so many associations As you can imagine, we've
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been spending a lot of time with small towns. We've
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been going on the road, having these small get-togethers with AWC.
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They do these.
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They're called small city connectors with mayors from these small
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towns so that they can hear directly from us. Here's,
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you know, review your bank statements. Look at the credit
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card statements. So doing what we can to try to
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be more on the preventative side. And having this change
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just gives us a little bit more time and capacity
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to do that.
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Just lastly, who audits the auditor's office? Who's watching the
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auditor's office? Yes, good question. We do get audited as well.
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We have a peer review every few years, and so
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there's this organization, the National State Auditor's Association, and they
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all put folks together. So we do get audited every
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few years, and those reports are on our website.
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Okay, we'll have to leave it there. Thank you very much,
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Brandi Pritchard. We do appreciate your perspective. Thank you so much.
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Still ahead on The Impact, another spike in health insurance rates.
439
00:23:33.829 --> 00:23:37.269
And new pushback to a federal plan to save endangered
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owls by killing other owls. Details after the break. For
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00:23:52.609 --> 00:23:55.049
the second year in a row, there will be double
442
00:23:55.269 --> 00:23:59.589
digit increases for health care plans sold on Washington's exchange.
443
00:24:00.079 --> 00:24:04.359
The state insurance commissioner has approved an average 22.2% rate
444
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increase for the 13 insurers offering plans through Washington's individual marketplace.
445
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According to the insurance commissioner's office, the rate increase is
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due to more substantial health care needs for people covered
447
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by individual health plans and an increase in the basic
448
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costs of healthcare overall. Last year, insurers requested a 21%
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rate increase. State law requires the insurance commissioner to approve
450
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rate increases when companies can prove they are actuarially justified.
451
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Animal rights groups are launching a PR campaign in Seattle
452
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and other West Coast cities aimed at turning the public
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against a plan to save endangered owls by shooting invasive owls.
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The Hoot Don't Shoot campaign is a project of the
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Center for a Humane Economy and Animal Wellness Action, and
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it targets a plan by federal wildlife officials to kill
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hundreds of thousands of barred owls over the next few decades.
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Though native to the eastern United States, barred owls are
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now in the west and are considered invasive. The Fish
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and Wildlife Service argues they pose a major threat to
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the survival of struggling northern spotted owl populations. The U.S.
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Fish and Wildlife Service announced plans to shoot barred owls
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found encroaching on northern spotted owl territory. Proponents of the
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plan argue barred owls are larger, more aggressive, and more adaptable,
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out-competing the endangered spotted owls, sometimes killing them outright. Critics
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of the plan claim that it's cruel, costly, and unlikely
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to work. That's a wrap for this week. Thank you
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for joining us. We'll see you next Wednesday for more
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in-depth interviews you won't find anywhere else. Take care.
