Auditors find fault with Puget Sound Partnership

The first state audit of the Puget Sound Partnership has uncovered financial management problems within the agency, according to a report released yesterday (PDF 312 kb) by the Washington State Auditor’s Office. The report covers the period from July 1, 2007 through June 30, 2009.

This first audit covered personal service contracts, general disbursements, and steps to create the Foundation for Puget Sound. Future audits will look into other areas. The audit report summarized the findings:

— The Puget Sound Partnership circumvented state contracting laws, exceeded its purchasing authority and made unallowable purchases with public funds.

— The Puget Sound Partnership failed to enforce the terms of its agreements with a foundation it created, incurring costs without clear public benefit.

Frank Mendizabal, spokesman for the partnership, told Seattle Times reporter Craig Welch that the problems were largely a result of moving quickly to get the new agency up and running. The problems have since been corrected.

“Every state agency gets audited and this was a good process for us to have to go through,” Mendizabal said. “We’ve learned from it.”

In a report by John Ryan of KUOW radio, auditor Emily Johnson does not let the new agency off the hook.

“From their inception up until the date that we had finished the audit, there was just really no indication that they had ever made following state rules and regulations a priority…. It is alarming and surprising. And as an auditor, in a way, you’re used to finding things like this, you’re just not used to finding this many things.”

I might add that these are the kinds of issues more frequently seen in audits of small local agencies, such as port and fire districts. It is a disappointing to see them in a cabinet-level agency such as Puget Sound Partnership — particularly when the staff knows that some people are gunning for them and will take glee in pointing out any failures. On the other hand, it appears these are procedural errors and not much more.

Specifically, the agency was found at fault for issuing sole-source contracts without going through the process of advertising, required when a contract exceeds $20,000.

One contract was awarded to a law firm for setting up the Foundation for Puget Sound. The contract went through change orders and ultimately reached $51,000, according to the audit. Mendizabal told Welch that the law firm was chosen because the attorneys had helped write the legislation that created the Puget Sound Partnership and was familiar with procedures for the foundation.

The audit looked at contracts with vendors and concluded: “The Partnership could not provide sufficient documentation to show notices of work were distributed to all vendors. Therefore, the opportunity to perform work was not fairly and equitably provided to all vendors on the roster in accordance with state procurement requirements.”

The auditors pointed out that the Partnership acquired Macintosh computers and equipment for $42,000 instead of buying cheaper Hewlitt Packard or Dell products, which would have cost $25,000 to $28,000. Macintosh is not compatible with some state accounting software, the auditors noted.

The agency also purchased and gave away $12,000 worth of monogrammed jackets and vests, which did not go through purchasing procedures and violates a law against giving away public property.

The auditors criticized the Partnership for a $10,000 membership to Cascade Land Conservancy to increase its visibility, $2,474 for catering a private reception, $687 for gift boxes, $5,109 for printing costs without going through the state Department of Printing, and $8,600 for camera equipment.

A statement added to the audit from the Puget Sound Partnership says it has brought its purchasing practices into compliance with state financial procedures.

As for funding to the Foundation for Puget Sound, an initial grant agreement required a match from private fund-raisers. Following a number of developments outlined in the audit, the partnership eventually cut back on the amount of the grant but failed to enforce the match requirement. The partnership apparently ended up paying the foundation $89,960 without the matching grant.

“The agency is convinced that public benefits resulted from the expenditure of these
monies by the Foundation for Puget Sound,” states the partnership’s formal response in the audit report.

17 thoughts on “Auditors find fault with Puget Sound Partnership

  1. ““The agency is convinced that public benefits resulted from the expenditure of these
    monies by the Foundation for Puget Sound,” states the partnership’s formal response in the audit report.”

    Wonderful! Name the ‘public benefits’ please.

    What public benefits benefited by the Foundation for Puget Sound illegally spending public funds?
    If the board members were simply ignorant of the laws, wouldn’t the agency benefit from getting rid of them?

    Shame on the Foundation for Puget Sound!
    The illegal spending of public funds needs to be taken out of their own pocket.
    Sharon O’Hara

  2. Have they accomplished anything beyond plans and studies? I’m willing to forgive the occasional gift box if the Sound is getting better.

  3. “As for funding to the Foundation for Puget Sound, an initial grant agreement required a match from private fund-raisers. Following a number of developments outlined in the audit, the partnership eventually cut back on the amount of the grant but failed to enforce the match requirement. The partnership apparently ended up paying the foundation $89,960 without the matching grant.”

    $89,960 is a bit more than one would expect the occasional gift box to cost.
    If the Foundation for Puget Sound is incapable or uninterested in enforcing the match requirement, how effective can it possibly be beyond collecting huge amounts of tax dollars?

    “It is a disappointing to see them in a cabinet-level agency such as Puget Sound Partnership — particularly when the staff knows that some people are gunning for them and will take glee in pointing out any failures….”

    Chris you are to be commended for reporting on this and clearly you regret the need as much as myself and others regret it happened.

    I didn’t learn of it feeling anything resembling ‘glee’…sickened and disappointed, yes. I expected more.
    Sharon O’Hara

  4. “issuing sole-source contracts without going through the process of advertising, required when a contract exceeds $20,000”

    I’m curious… how is it such actions may be deemed “procedural errors and not much more” when failing to ensure competition can have serious “bottom line” consequences?

    While the agency may be convinced that “public benefits resulted from the expenditure of these monies by the Foundation for Puget Sound,” I would think it makes it challenging to convince a citizenry if / when proper procedures are not followed and competition is not ensured, as a rule.

    Tristan Benz
    Maiden America

  5. Just to be clear, the Foundation for Puget Sound might be considered an educational arm of the Puget Sound Partnership. The goal, as I understood it, was to raise private funds to help with the overall educational effort.

    For example, the foundation spent $77,381 for start-up costs, $7,535 for consulting fees and $5,178 in legal fees, along with $19,960 to help produce a documentary about Puget Sound for public television and $70,000 to underwrite a program to bring in 16 journalists from around the country. (I was not involved.) Some of those funds were eventually matched, so the numbers don’t equal the unmatched amount.

    As for my comment about procedural errors, I was trying to find a way to say that the auditors found no fraud and did not conclude that money could have been saved by doing things the right way.

  6. “Disappointing” is not the word I’d use to describe illegal and unethical activity at a cabinet level state agency. Particularly one run by a lawyer! Personally, I think “unconscionable” is more fitting. And to describe $1.4 million no-bid contracts to consulting firms whose former employees now work at the Partnership as “procedural errors”? Please. Mark my words: this is the tip of a much bigger iceberg of corruption. Shame on the Puget Sound Partnership, and shame on anyone who dismisses this as anything less than what it is: criminal.

  7. It’s refreshing to see political correctness rightly being shown the door in this country. I have to agree with Justine. Whatever word choices there are at our disposal, we cannot tip toe around facts – spades are spades and facts speak for themselves.

  8. Researchers at Oregon State University have determined the NUMBER ONE THREAT to PNW salmon is immigration into the region, the vast majority of which comes from outside the U.S. and Canada (their words, not mine). In fact, they say, if nothing is done to control immigration NOTHING ELSE will restore salmon populations in the PNW. Obviously, immigration reform is a hot topic. But, curiously, absent from the discussion is the environmental community. I – personally – do not believe they should be allowed the luxury of sitting on the sidelines of this debate. Considering the money we have given the Puget Sound Partnership – and the “authority” we have bestowed upon them – they should be forced to weigh in on the effects immigration has – and is likely to have – on PNW salmon and their habitats. Considering the head of the Partnership has a Daddy in high places, a voicing of the impacts of immigration might add an important – but heretofore unmentioned – aspect to the immigration debate. Remaining silent; however, is a dereliction of duty and should motivate the people funding the Partnership to wonder – really – what they are paying for and what they are getting in return.

    How about it, Chris? Can you get us a statement from the Puget Sound Partnership on the effects, and likely effects, of immigration on the ecosystems of Puget Sound?

  9. BlueLight,

    The issue you raise is all about population growth and changing demographics, including a significant number of people moving here from other parts of the United States and other parts of the world. Illegal immigration is part of that equation.

    The question is whether the Puget Sound ecosystem can support a million new people in the next 20 years — roughly 25 percent more than we have now if you can believe numbers from the Puget Sound Regional Council. And then what happens for the next 50 to 100 years after that?

    The Kitsap Sun Editorial Board, which includes three citizen members along with Sun staff, is scheduled to meet with folks from the Puget Sound Partnership next week. If board members don’t raise this question, I’ll make an effort to bring it up, either at this meeting or later.

    Kathryn,

    Yes, David Dicks is still executive director of the Puget Sound Partnership.

  10. Chris…Will this meeting be open via online video to the rest of us?

    “The question is whether the Puget Sound ecosystem can support a million new people in the next 20 years — roughly 25 percent more than we have now if you can believe numbers from the Puget Sound Regional Council. And then what happens for the next 50 to 100 years?”

    If the Puget Sound ecosystem can’t support the new people expected here during the next 20 years – what IS THE POINT of throwing all these tax dollars – abused or not – into Puget Sound Partnership? If we get a handle on the next 20 years, no doubt a solution will evolve during that period to project 50 to 100 years further out.

    If David Dicks and the rest of the board can’t answer BlueLight’s question … how can their answers to other questions really matter?

  11. If British Petroleum was planning to drill for oil in Puget Sound, we would expect the Puget Sound Partnership to weigh in on the potential ramifications. That is not the threat that has been identified. What has been identified as the threat (by people with arguably more credible credentials than the staff of the PSP) is immigration. The PSP – in my opinion – is, therefore, obligated to weigh in on this. If they feel they can stand on the sidelines, we should wonder – exactly – what we are paying them to do.

  12. Sharon,

    I just talked to Editor David Nelson and Editorial Page Editor Jim Campbell. They tell me that they plan to live-stream the discussion Tuesday, June 1, if technical details can be worked out.

  13. Was the $10k to the Cascade Land Conservancy returned? I wonder what was the justification in joining that organization, rather than other organizations more directly related to the Sound, such as People For Puget Sound, PugetSoundKeepers Alliance, etc, or not joining any at all, which seems the right thing to do for a government agency? It’s just an odd thing to do…

    Looking at the CLC board of directors, it includes such political heavyweights as the former mayor of Seattle Greg Nichols, the head of Home Street Bank, Quandrant Homes, Tacoma Public Utilities, etc. Heavy hitters in the political powerstructure of the Sound. I suppose the PSP wants to be well acquainted with those folks, but to give government funds to them? Is there any precident in that? While I applaud their efforts to raise awareness, it all looks like a case of poor judgement, not criminal intent.

    It also seems like poor judgement, in going out and buying Mac computers, when the State has a clear buying policy, and infrastructure for supporting Windows machines, which ultimately saves money for the State by allowing competition among Dell, HP and others. While Macs may be fine computers, I own two myself, the State spends many millions buying specific software to support Windows. That’s about efficiency. Again, the State has very clearly stated policies, unless I’ve missed something here…

  14. “researchers at Oregon State University have determined the NUMBER ONE THREAT to PNW salmon and their habitats is immigration into the region, the vast majority of which comes from outside the U.S. and Canada (their words, not mine).”
    — BlueLight

    I did a google search for what you call “their words,” and I found many instances of this same comment of yours on many blogs/articles, but I didn’t find the OSU researchers’ words, so I was unable to find out what they really said or who “they” were.

    Simply saying “researchers at … have determined…” by itself doesn’t really raise the report to the level of credibility (despite that phrase being so common in the media). After all, it was reported over and over that researchers at the University of Utah determined how to make cold fusion work.

    But the main point I’d like to make is that even if the above paraphrase of OSU researchers were accurate, your interpretation of the import of that statement isn’t very useful. If someone builds a very poorly designed house with multiple structural flaws, it would be easy to get a bunch of physicists to agree that the number one threat to the house is gravity. That doesn’t mean that the solution is to try to build an anti-gravity machine.

    Similarly, we and our predecessors in the Puget Sound watershed have created a lot of development that has been poorly designed with regard to our environment and is unsustainable. We can approach this problem 2 ways: we can dramatically reduce the area’s population (just limiting immigration won’t be nearly enough), or we can change our style of development so that it is beneficial to our environment rather than detrimental to it.

    Neither is a slam-dunk. Both would be exceedingly difficult. But the latter approach is the only one with a real future, barring cataclysmic population reductions.

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