'Wiped us out completely': Trusted small-town clerk emptied Metaline's bank account, cratered nonprofit

May 1-A former city employee admitted to "misappropriating" nearly a quarter-million dollars over six years from the small, remote town of Metaline - a staggering sum for a municipality with an annual operating budget of roughly $100,000 and population of less than 175 - according to a recently released state auditor's report.

By the time former Clerk Treasurer Kelly Flanagan was fired last June, there were 10 cents left in the town's bank account.

"That wiped us out completely," Metaline Mayor Peter Daggett said in an interview. "It's been almost a year, and we have finally fought our way back."

But records indicate that the damage caused by Flanagan went well beyond the coffers of the town that trusted her - and started years before she arrived in Metaline.

Flanagan had a hand in at least a half-dozen of Metaline's local boards, commissions and nonprofits, including the local pickleball club and the American Legion outpost. She led the Pend Oreille Regional Tourism Alliance, an organization that has for years hosted the community's largest annual event, the Bigfoot Festival. Roughly $30,000 was reported missing from alliance's account by the time Metaline's missing cash was discovered, some of which appears to have been stolen to cover Flanagan's alleged theft elsewhere.

Making matters worse, the damage may have been avoided if those who hired Flanagan or entrusted her to lead community organizations had looked into her background, as she was convicted 13 years ago of doing nearly the same thing.

"We got her on very high recommendation, and we didn't do a background check," Daggett said. "And that was, in retrospect, unforgivable."

Today, Flanagan remains free. She was arrested initially in June on charges of misappropriation by a treasurer, a felony, and appeared in Pend Oreille District Court for a first hearing on July 1. She was released on her own recognizance after the hearing and initially ordered to appear July 3 for arraignment.

But Pend Oreille County Sheriff Glenn Blakeslee forwarded the case to the FBI, and it remains on hold pending a federal investigation. Nearly a year later, the residents of Metaline, including its mayor, have heard effectively nothing about the case.

Misappropriating Metaline

Flanagan already raised alarms for state auditors before Metaline's coffers were found empty.

She had failed to submit the town's annual financial reports in 2024. That fall, auditors began a scheduled assessment of the town's finances, requesting documentation, which Flanagan reportedly ignored. The same month, the town's insurance company notified state auditors that Metaline's coverage was being terminated due to nonpayment.

But it was a bill from the county that brought things to a head.

Last June, the Pend Oreille County Road Department reached out to Daggett about a $12,500 bill for work completed in October 2024 that had never been paid. A county employee had joked in earshot of a county commissioner that the check was "lost in the mail," Daggett recalls. The commissioner had previously served on the Metaline City Council and knew Flanagan.

"And he got mad and said, 'No, she wouldn't do that,' " Daggett said.

The bill was finally paid on June 4. But Daggett and other officials, concerned by the delay, peered at the town's bank account.

There was nothing left. Daggett recalls that one council member started to cry.

State auditors determined Flanagan transferred $10,000 from the tourism alliance's bank accounts into the town's coffers on June 3. By the end of the next day, after the $12,500 bill was paid, there was only 10 cents left in the town's bank account, officials with the state auditor's office told The Spokesman-Review.

City officials contacted law enforcement on June 10 and placed Flanagan on administrative leave the next day, then fired her two weeks later.

Auditors found that over the course of six years, Flanagan had misappropriated at least $225,000 through purchases on the town's credit and debit cards by giving herself payroll advances that were not docked from subsequent paychecks, and through cash withdrawals. There was an additional $30,000 of "questionable" expenditures, meaning there was insufficient documentation to prove whether the money was spent appropriately.

Records show Flanagan spent the money on mulch, alcohol, groceries, pet supplies, medications, children's items, personal travel, restaurants, online shopping and payments to friends and family. She also spent it on subscriptions for her phone, TV services, a food delivery service and a clothing membership.

Confronted by the county sheriff, Flanagan reportedly admitted to the theft but also claimed to use city resources to support nonprofits she was involved with.

It was at least the second time in her life that she admitted to law enforcement to misusing her powers as a treasurer to steal from an organization that trusted her.

Same crime, different time

Thirteen years prior and 65 miles away, Flanagan was the treasurer of the Chewelah Cougar Boosters, a fundraising group that supported youth athletic teams from the local school district.

The group found many ways to raise money to support local kids, including a calendar that local companies would advertise in for $300 a pop. But Stickit Productions, the company that printed the calendar, hadn't been paid the $1,000 it was owed by the club.

The check was in the mail, Flanagan told club president Mike McMillan. Then, she said, the check was lost in the mail, accidentally sent to Alaska, according to court records.

There was no check, and only $2 left in the club's bank account. Later, McMillan told police he thought Flanagan had been stalling until her tax return arrived, so she would have the cash to cover her tracks.

Confronted by an officer, Flanagan admitted to stealing $5,200 from the club bank account by getting the bank to issue her a debit card in her name. A police investigation found fraudulent charges for liquor, movies, fuel, cash withdrawals, clothes, online shopping, insurance, groceries and more. At least one young athlete did benefit from the theft; she used $350 in club cash to send her son to a baseball camp.

Flanagan, who had paid most of the money back after being confronted, claimed to have fallen on hard times after losing her job the prior year, according to a police report.

She had been fired from the Mt. Spirits Liquor Store in Chewelah more than a year prior for suspected theft, according to court documents.

The owners of the store had become ill and entrusted Flanagan with the store's inventory and sole access to its computer systems. Eventually, a state audit detected that $5,800 of inventory was unaccounted for.

Store owners suspected Flanagan was selling liquor, pocketing the money and clearing the inventory from the computer system to make the books appear balanced. They attempted to catch Flanagan in the act.

"On the night that they prepared the store and video in order to catch Kelly the next day, they accidentally left the cash register settings out of order and Kelly suspected she was being watched more closely," wrote the officer preparing a report about Flanagan's theft from the fundraising club.

The store's owners, watching live surveillance of the store, saw as a now-suspicious Flanagan reviewed earlier tapes and discovered that the owners had set up an informal sting.

Lacking the smoking gun they were looking for, and already preparing to retire, the store's owners declined to press charges. They later told law enforcement that Flanagan's wages were being garnished by the state to pay back $8,000 in unemployment she had continued to collect long after she was hired by the liquor store.

These details were included a year later in a police report about the fundraising club theft to demonstrate "... a pattern of financial deception and theft by Kelly Flanagan over an approximate time period of two and a half to three years," law enforcement wrote in 2013.

Flanagan was charged with first-degree theft and first-degree identity theft, though she was only convicted for the latter.

Bigfoot, baby steps

For the few who already knew what happened, it was a shock to see Flanagan at last summer's Bigfoot Festival, which kicked off the same day she was fired from Metaline. Those who knew kept it quiet for the weekend, hoping to avoid causing a scene. And they were successful; for the vast majority of the Bigfoot Festival's thousands of visitors, nothing was wrong.

The Pend Oreille Regional Tourism Alliance would dissolve almost immediately after, unable to pay its debts, said Melanie Kiss, who suddenly found herself as the sole remaining board member when the music stopped. Some board members already planned to leave the board; other listed members may never have actually been on the board, Kiss said in an interview.

"(Flanagan) had gotten some friends to be on the board, but they never were present at meetings, and that was part of the issue," Kiss said. "She was saying they were voting to approve things but weren't necessarily there at the meetings ... some of those friends later said they didn't even know they were board members."

"I was the only one left standing," she added.

The tourism alliance still owes at least $10,000 to creditors, primarily for unpaid advertising from KXLY for the festival. The organization still gets sent collection letters, as does Kiss.

"We had received funding from the county to pay that," she said. "We got a check, and she took it for herself."

Given the timing, this suggests Flanagan took a $10,000 check from the county and moved the funds to Metaline's coffers to pay a bill from the county. All told, Kiss said roughly $30,000 went missing from the tourism alliance's bank account.

"I was very disappointed in her, because I had enjoyed working with her," Kiss said. "She was good at getting things done. I was disappointed she was taking funds from a volunteer organization."

Metaline's strained trust has left its mark, Daggett said. The city has started background checking its employees, but the town also got rid of all of its debit and credit cards - any purchases that require one, the mayor puts on his card and waits to be reimbursed. The new clerk treasurer refuses to handle cash.

"Everything's checked over twice ... everything needs two signatures," he said. "Especially anything to do with money or contracts or agreements, it gets reviewed and talked to death now on the town council meetings."

But the same tight-knit and trusting nature of the community that Flanagan is accused of exploiting helped get both Metaline and the Bigfoot Festival back on their feet. The neighboring town of Ione helped bail Metaline out in those early days when cash was tight, Daggett said. The Bigfoot Festival still will be held in June, taken up by a new volunteer organization from neighboring Metaline Falls unwilling to let it die.

"These three little towns, Ione, Metaline, Metaline Falls, you'd have to live up here to understand," Daggett said. "I moved up here from Los Angeles. I've lived in a small town before, but the way people stick together around here is different."

State auditors recommended locals attempt to make Flanagan pay them back .

Asked if he thinks that will happen, Daggett laughed.

"You can wish in one hand ..." he started, before cutting himself off.

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