PORT ANGELES — City staff says a preliminary audit of 2014 Port Angeles Downtown Association finances has revealed a lack of invoices, no reasons for expenditures and unexplained spending on bottled water, teacups and latex gloves.
“A number of serious issues and concerns were identified by the city regarding the financial activity and/or financial reporting of the PADA,” City Manager Dan McKeen said Sept. 26 in a two-page audit cover-letter to the association’s board of directors.
The audit examined $93,412 in revenues and $67,611 in expenses between Jan. 1 and July 31, Byron Olson, the city’s chief financial officer, said Thursday.
(EDITOR’S NOTE — A cover letter and the Port Angeles Downtown Association audit report, written by two of city CFO Byron Olson’s staff members, is available at http://tinyurl.com/pdn-paaudit.)
The audit says that money was paid for items without stated business purposes.
Such expenditures included $15 to the Port Angeles Red Lion Hotel, $15.15 to Joshua’s Restaurant & Lounge, $52.97 to Westside Pizza and $850 in eggs.
“They very well could be legitimate expenses, but absent notations or receipts on what it was for, then questions can be asked,” Olson said.
Neither Bob Lumens, downtown association board president, nor Barb Frederick, executive director, returned repeated calls Thursday for comment on the audit.
The review was based on a funding agreement between the city and the organization, which is made up of 180 to 200 businesses.
“It is important that as board members you be aware that many of the same audit-related findings were identified in 2011, and at the time the city was assured these issues would be rectified,” McKeen said in the letter.
Olson said Thursday that he and McKeen will discuss the audit results at a meeting this morning with Lumens.
The organization must respond in writing to the preliminary audit by Oct. 13, and the city will issue a final audit report Oct. 17.
The cover letter and audit report, written by two of Olson’s staff members, is available at http://tinyurl.com/pdn-paaudit.
They wrote that 46 percent of the 2014 payments they examined did not have adequate documentation to verify the purpose and justification for the amount paid.
“It is not possible to verify that the financial statements are an accurate assessment of activity,” they said.
Frederick said in an interview for the audit report that documentation was limited for expenditures.
“In 2014, multiple items were paid without invoices and [the] validity of expenses could not be verified,” she said in the report.
The review was based on an examination of 142 random PADA payments made in 2014.
At least $900 in payments were made to Frederick, PADA’s only employee, “without an invoice, receipt, justification or statement of business purpose,” the audit stated.
“Barb Frederick paid for $10.48 for latex gloves and bottled water — business purpose not on receipt,” the audit stated.
“Hobby Lobby $104.56 — business purpose?” the audit said, referring to the arts and crafts chain store.
Sometimes, when invoices were attached to statements, the two did not match.
“Paid Olympic Stationers off a statement [of] $135.86 and invoices attached equaled $111.16.
“Sundance window cleaners — paid $250, but the attached invoice was only for $214.
“Ross Dress for Less — paid $36.97 for teacups and saucers with no business purpose on invoice.”
Olson said the payments to Red Lion and Joshua’s could be for regular business association meetings held at those locations.
There is no indication of malfeasance, he said.
Some expenditures, such as for teacups and bottled water, also could be for special events and programs, he added.
PADA’s own policies also were not followed, according to the audit.
Frederick was paid $469.96 as reimbursement for two hotel rooms, but there was only one receipt for $232.72.
According to PADA policy, room charges of more than $90 require a second approval, and there was none.
Also, contrary to PADA policy, about 50 percent of PADA checks that were for more than $1,000 did not have more than two signatures.
Transfers and use of funds of more than $1,000 also did not have any approval other than Frederick’s.
In addition, one payroll check to Frederick was $1,796.26 when all others were $1,319.60.
“No explanation was stated for the different amount,” the audit stated.
“Also, signed timecards were not presented for any time period.”
The audit includes the recommendation that checks made out to Frederick have a second signature or be signed by a PADA board member and include an invoice or timecard.
The audit reviewed funding that passes through the city in parking fees that are assessed on businesses for monthly downtown parking passes and monthly parking space fees generated by the Parking and Business Improvement Area (PBIA), a junior taxing district.
The city paid the group $62,000 in 2013 in PBIA money from the mandatory parking assessments, Olson said, adding that he expects PBIA revenue to be similar in 2014.
The city suspended PBIA funding to the group July 24, alleging the PADA breached its funding agreement with the city, after paying $30,400 to the PADA in parking assessment fees for 2014.
The group has hired Silverdale attorney Richard Shattuck for representation in its fight with the city, paying him with general funds that include PBIA money.
Revenue also includes event proceeds, membership fees and B&O — business and occupation — taxes for the Main Street Program for 2014.
B&O taxes do not pass to PADA through the city and were not focused on in the audit, Olson said.
PADA is a state-approved Main Street entity that allows businesses to elect to have a portion of the B&O taxes go to PADA.
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Senior Staff Writer Paul Gottlieb can be reached at 360-452-2345, ext. 5060, or at pgottlieb@peninsuladailynews.com.
