After significant fraud, follow-up audit of Pierce County Housing Authority finds improvement, but issues remain

FOR IMMEDIATE RELEASE

Dec. 1, 2022

OLYMPIA – The Pierce County Housing Authority has taken steps to improve its financial safeguards since a $7 million misappropriation two years ago, but more needs to be done, according to an accountability audit released today by the Office of the Washington State Auditor.

“Although I am disappointed that more progress has not been made at the Housing Authority, they are moving in the right direction,” said State Auditor Pat McCarthy. “We understand that making big changes takes time. And we can see that such changes are still needed.”

The audit examined the two-year period immediately after the fraud – 2019 and 2020. Auditors determined that during that time, the Housing Authority began correcting the deficiencies that allowed a former finance director to steal millions in public funds. However, internal weaknesses persist:

• Finance staff still had full access to the Housing Authority's finance system. The agency had not yet fully implemented a new accounting system that would allow restrictions on user access.
• The Housing Authority had not reconciled bank statements from July through November of this year.
• The Housing Authority is in the process of designing an improved reporting process from staff to the Board of Commissioners regarding financial issues.

“The public expects and deserves robust protections against the misuse of tax dollars,” McCarthy said. “Since we discovered the major fraud, the Housing Authority's leadership has shown a commitment to understanding the issues that made it possible. I encourage them to act with urgency in correcting those issues.”

In 2019, auditors questioned wire transfers of large sums of money during a routine audit of the Housing Authority. The audit ultimately revealed the former finance director used a variety of schemes to misappropriate $6,948,277 in funds since 2016. In August 2021, the former finance director was sentenced to more than four years in prison for the theft.

Since the revelation of the misappropriation, the Housing Authority:

• Hired a new Executive Director in January 2021
• Contracted for assistance to assess its controls over financial activities
• Started the process of implementing a new financial system and establishing new controls
• Created a Finance Committee that meets monthly to review financial reports with executive leadership and staff

The audit published today includes recommendations for continued improvement. State auditors will begin the next regular audit of the Housing Authority in 2023, which will analyze its operations during 2021 and 2022. Copies of today's report and the Housing Authority's previous audits can be found on SAO's website: www.sao.wa.gov. The accountability audit report is here.

Media inquiries: Kathleen Cooper, Director of Communications – Kathleen.Cooper@sao.wa.gov | 360-890-0751