Spokane Valley’s refusal to pay part of its bill for Sheriff’s Office services since 2006 is based on a severely flawed assumption by city officials, the state auditor’s office said Monday.
The city’s claim to have been billed twice for administrative costs – once through its contract for police services and again through its contract for jail services – is a classic apples-and-oranges comparison, according to Guy Cavendar, an assistant audit manager in the state auditor’s Spokane office.
Cavendar said city officials and Portland accounting firm Financial Forensics improperly assumed the county used the same formula to assign indirect administrative costs to the jail contract as it used for the police contract. Actually, he said, the county used several “cost plans” to allocate indirect administrative costs differently to various programs.
Such costs represent services provided by Sheriff’s Office supervisors in the general course of their duties. Assigning a share of supervisory costs to various programs is “perfectly fine,” Cavendar said.
The city and its accounting consultant assumed incorrectly that the city paid 42 percent of the administrative costs assigned to the jail because the city paid 42 percent of the costs assigned to police services, Cavendar said. In fact, he said, the city paid only $18,154 of the administrative costs assigned to the jail – about 3 percent.
Financial Forensics concluded the city was overbilled $609,634, but Cavendar said it “doesn’t make sense” to claim a refund that’s twice as large as the $302,755 the city paid for jail services.
Based on the alleged overcharge in 2006, city officials continued to withhold a corresponding portion of their bill in subsequent years. County Commissioner Todd Mielke said Monday that the unpaid portion, including interest, will be $2.2 million to $2.3 million by the end of the year.
Deputy City Manager Mike Jackson said after Monday’s meeting that the city has set aside the money and can pay it quickly. He said City Manager Dave Mercier would make that decision in consultation with the City Council.
First, Jackson said, city officials want Financial Forensics to review the auditor’s analysis. The auditor’s office reviewed the issue at county commissioners’ request as part of a regular audit that’s still in progress.
The state auditor’s office released only a three-page “management letter” Monday, summarizing its findings in a review requested by county officials. Marshall Farnell, the county’s chief executive officer, asked Cavendar’s supervisor, audit manager Cody Zimbelman, to release details as soon as possible to expedite the city review.
Sheriff Ozzie Knezovich said the dispute needs to be resolved quickly because about 20 deputies’ jobs are at stake in the face of looming budget cuts.