No major findings in draft audit report

Recommendation to clarify conditions for severance agreements
By Brandon Gustafson | Jan 30, 2019

The long-awaited audit of the city of Mukilteo’s 2017 finances and accountability was released in draft form Monday, Jan. 28, as representatives from the Washington State Auditor’s Office met with Mukilteo’s leaders for an exit interview and announced that there were no major findings in their report.

Auditors have been reviewing city finances and accountability for the 2017 fiscal year. The report took longer than normal to complete due to City Council allegations against Mayor Jennifer Gregerson, the office said

Last August, Councilmember Scott Whelpley revealed multiple instances of what he felt were misappropriation of city funds in severance and separation agreements Gregerson signed off on for former city employees.

Whelpley and a majority of the Council felt contracts were part of their legal authority, and that Gregerson should have brought those agreements before the Council since some differentiated from city policy, and since some were new contracts altogether.

In a few instances, ex-employees received an extra month of severance pay than they were entitled to, per the city’s policy. One of those former employees was state Sen. Marko Liias, the city’s former policy analyst.

In Liias’ case, he’d received three months of severance rather than the two months specified by the city’s policy.

Councilmembers passed a motion where all severance agreements, separation agreements, collective bargaining agreements, and memorandums of understanding had to be brought before the council prior to the mayor approving them. The council also approved a motion to allocate city money towards outside legal counsel to review the alleged misspending by Gregerson.

Some councilmembers said they wished to see the auditor’s report prior to spending money on legal services.

The report, which is not yet official, did not have any major findings in regards to the city’s finances. It also did not have any findings in city accountability in complying with city policy, state laws, state regulations, and providing adequate control over the safeguarding of public resources.

The issue with the severance packages was under the accountability portion of the report. Based on discussions with City Councilmembers and through tips from their citizen hotline, the auditors examined the delegation of authority for separation agreements, restricted funds, employee reimbursements, procurement, tracking theft sensitive assets, cost allocation plans, conflict of interest, budget compliance, city sales and use tax increase, self insurance, overtime pay, fiscal sustainability, and open public meetings minutes.

Although there were no findings, the auditors made some recommendations regarding the separation agreements going forward.


@Auditor recommendations@

According to the draft report, since 2012 there have been 12 separation agreements for a total payment of $252,936 to the former Mukilteo employees. Gregerson signed off on all of them.

The auditors found that the city hadn’t established a clear delegation of authority for what payments require City Council approval and what items the mayor can approve on her own.

Additionally, the auditors found that there was nothing in the city’s code or other adopted procedures regarding severance agreements until the Council passed its motion last August. That motion, however, wasn’t supported by an approved written resolution or ordinance clarifying those conditions, which the auditors recommended they create.

They also recommended that all approved separation payments are supported by written agreements.

Kristina Baylor, a program manager for the Washington State Auditor’s Office, said when reviewing the matter, they had to look at state regulations  regarding contracting power by the mayor and City Councilmembers. She said that in talking to their office’s legal team, as well as an attorney at the Washington State Attorney General’s Office, it was tough to make a distinction because nothing similar to this was in any case law the attorneys had reviewed.

Baylor said she can understand both sides of the argument regarding whether the law was broken, but that their office likely isn’t the right agency to determine it one way or the other, due to there being no case law similar to this.

Councilmember Anna Rohrbough felt that contracting was in the Council’s authority based on state RCWs, and that former Mayor Joe Marine, who Gregerson succeeded, didn’t do agreements like Gregerson has.

“The law was broken 12 times,” she said. “These were new contracts. Other attorneys have said there are issues here.”

She also felt like there being a lack of case laws shouldn’t cause there to be no findings, and that what happened with the contracts was black and white, and there were no shades of grey.

“Sometimes it takes someone doing something to create a case law,” Rohrbough said.

Baylor and other representatives from her office said the Council has already taken steps to pursue this situation going forward by obtaining legal counsel, and that they should continue to pursue that since they feel so strongly about it.

Councilmember Steve Schmalz agreed with Rohrbough regarding a lack of case law.

“The law itself shouldn’t be determined by case law,” he said.

Whelpley said he researched and found no severance agreements during Marine’s first term as mayor, and there was only one his second term of mayor, at the tail end, which ended up being signed off by Gregerson when she entered office in 2014.

“It started with one person,” he said. “It should have come before the Council.”

Whelpley said he and other councilmembers had talked with multiple attorneys who all thought there were issues with the agreements not being approved by the Council.

“Three to four attorneys are telling us to ratify these contracts or face litigation from the public,” Whelpley said.

“This legal solution is beyond our duty,” one of the auditors said.

Baylor said that, typically, they publish the final report on their website one to two weeks after their exit meeting with the city. That likely will be pushed back, as Schmalz said he wanted to discuss the situation with the auditors’ director of legal services.

Whelpley and Rohrbough also felt some portions of the report need to be reworded.

The Council is still reviewing the matter with its attorney.

On Tuesday, Gregerson told The Beacon she was happy with the draft report, and was looking forward to working with the Council on making clear policy for contract agreements.

“I’m proud that we have received a clean financial audit. It speaks to our responsible stewardship of public funds and our excellent finance staff,” she said. “I also am glad to move forward in helping the City Council establish a clear procedure and policy for the departure of employees. Their August motion provided good guidance, and now we can implement the auditor’s recommendation to affirm that through a resolution or ordinance.”

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