Pasco's TRAC faulted in state audit

Kristi Pihl, Tri-City HeraldMarch 14, 2014 

TRAC ATM Audit

An ATM cash machine at the TRAC facility in Pasco is one of the items of concern listed in a report that the state auditor issued to Franklin County.

BOB BRAWDY — Tri-City Herald Buy Photo

Some Franklin County departments appear to have the same problems handling the public's cash that helped former employee Dennis Huston commit the largest public embezzlement in state history.

There are no allegations that more money is missing. But a recently released state audit faults TRAC for a lack of oversight of its three ATMs and petty cash.

The audit, conducted by the Washington State Auditor's Office, found that the same county employee requests and receives cash for the ATMs, fills the ATMs and reconciles the cash to bank statements and the accounting system.

Auditors also issued management letters in February to the Franklin County Sheriff's Office and Benton Franklin Juvenile Court expressing similar concerns about a lack of separation of money-handling duties.

With TRAC, "the county's lack of policies, internal controls and documentation retention creates a potential for county resources to be misappropriated without being detected," the audit said.

The state's critique of TRAC has some Franklin County commissioners revisiting the idea of hiring a private company to manage the event center, which the county operates on behalf of the county and the city of Pasco.

And it has Franklin County Auditor Matt Beaton urging an independent review of TRAC's books and policies to find fixes, along with finding a private company to operate the ATMs.

Segregation of duties is important in accounting, Beaton said. The person who is making the deposit should not be the same person who is reconciling the accounts.

The county's elected officials are particularly sensitive to TRAC's issues, because it's only been two years since a vendor check by the county auditor's office uncovered an embezzlement that spanned 22 years.

Huston used his position in the county's public works department to defraud the county out of about $2.8 million. He created invoices and submitted them for payment without oversight. The payments were sent to public works, where he was able to retrieve them. He's serving a 16-year prison sentence and has been ordered to pay restitution on the full amount.

The county auditor's office now oversees public works accounting as part of the changes elected officials have made since the Huston embezzlement was discovered.

County auditor's office employees are putting in place updated financial software in all county departments that will help support a division of duties. Beaton said the software is a tool that can help, but it doesn't take away from the need for management to create an accountable environment.

Two years ago, less than a month after Huston was arrested for fraud, TRAC general manager Troy Woody told Beaton that TRAC had issues with the ATMs and with petty cash banks, according to emails obtained by the Herald.

Woody declined to comment to the Herald.

Beaton forwarded the information to Commissioner Brad Peck, then the chairman, who expressed concern that the practices, especially cash handling for the ATMs, did not appear "adequate or acceptable." Commissioners oversee TRAC through County Administrator Fred Bowen.

The state audit also noted withdrawals that should have been made from TRAC's petty cash fund of $25,000 were actually made from the account that holds event ticket sales.

Customers withdrew about $240,700 from TRAC's three ATMs during 2012, the audit said. TRAC's petty cash expenses were about $57,300 that year. The overall expenses were about $2.2 million.

Pasco City Manager Gary Crutchfield told the Herald the lack of controls came as a surprise to him.

Cash management is a fundamental element of TRAC's operation, Crutchfield said. He anticipates TRAC's advisory committee of three county representatives and three city representatives will want to talk about it at their next meeting, which is not scheduled yet.

"I'm confident that those concerns can be addressed through the commissioners' office and the county auditor watching that in the future," he said.

Peck said he had been given reason to believe the issues had been resolved, but state auditors don't agree.

Franklin County elected officials -- including the commissioners -- have provided guidance, resources and time for TRAC's staff to resolve the issues, Peck said. He also noted the staff identified the concerns in the first place.

TRAC has a highly qualified and highly compensated manager, Peck said. Woody will be paid a salary of about $107,800 this year. In addition, the county's former treasurer, Tiffany Coffland, is TRAC's finance manager.

It may be time for the commissioners to get more directly involved in TRAC's operations, Peck said. As policy setters, they have tried not to micromanage departments.

Peck has recommended contracting out the TRAC's management as a potential way to reduce annual losses of as much as $400,000, he said. That would also mean the risks and liabilities involved in managing the facility would fall on the private contractor.

Commissioner Rick Miller also told the Herald that hiring a private contractor should be considered, but he would want to make sure that TRAC continue to offer the Western-themed and sporting events the community enjoys, he said.

Miller was also surprised by the TRAC audit findings, and that the county needs to scrutinize everything it does, he said.

"Whatever it takes, we are going to have to fix this," he said.

TRAC has already made some changes.

Woody told Bowen via an email that the finance manager was removed as a signer on all checking accounts and will no longer handle cash except for the change fund and extra event change bank, allowing her to reconcile the accounts and audit events.

Woody also plans to ask commissioners to approve a resolution that would allow TRAC to use both its petty cash checking account and event ticket sales account for extra change needed during events, he wrote.

TRAC has already issued a request for qualifications for an ATM operator and has put a policy in place that separates duties, Woody wrote to Bowen.

TRAC management suggested new policies to be approved by commissioners a few weeks ago. The policies would not have as many eyes on the cash handling process as the county auditor's office recommends and would allow TRAC management to increase cash on hand for events without setting any limits.

Beaton told Bowen in an email that he couldn't support the proposed policies because they would essentially rubber-stamp the current cash-handling practices.

"The Franklin Auditor's office doesn't support county ownership of ATMs," Beaton wrote. "We will assist in the transition but do not believe the county is well suited to own, operate and account for ATMs."

Miller told the Herald he is uncomfortable with having county employees operate the ATMs. "It's too risky," he said.

Woody told Bowen in an email last week that more staff time would be needed to segregate cash-handling duties. He suggested moving a part-time box office supervisor to full time, at a cost of about $29,000 a year.

The emails between Woody and Beaton show some tension between the two county officials. In one exchange earlier this month, Woody appeared to second-guess reporting the ATM issue two years ago.

"Ahh the 'benefits' of doing the right thing," Woody wrote. "Guess another good lesson in county government to keep your mouth shut and make them figure it out."

-- Kristi Pihl: 582-1512;kpihl@tricityherald.com

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