For the second year in a row, Spokane administrators committed several violations of rules for handling federal money, a state audit has found.
In response, some Spokane City Council members are questioning if safeguards enacted earlier this year are being ignored.
The errors were made primarily with grant money from 2013 going to the city’s Community, Housing and Human Services Department, much like last year. A state auditor also found errors involving no-bid contracts from the Fire Department, and in the oversight of financial statements prepared by the city’s finance department.
At a news conference Tuesday, Mayor David Condon said his administration “takes the findings very seriously and in all cases have a plan to correct them … by the end of this year.”
Among other things, investigators discovered that some monitoring files “could not be located or were not retained” and a report was “five months late,” according to a preliminary draft of the audit report.
Auditors also faulted the city for delays in the investigation, saying city employees at times didn’t show up to scheduled meetings with state auditors or provide timely information.
The findings could impact the city’s ability to secure federal grants in the future, according to the audit report. Many of the city’s official responses to the findings in the draft report say Spokane “has made significant efforts to improve its internal controls,” including the adoption of “comprehensive Grants Management Policy and Procedures” in March of this year. The new rules created a city grants management and financial assistance department and a grant director to oversee all of the city’s grants.
But at a city finance meeting Tuesday, City Council President Ben Stuckart said these rules, approved by the council, had largely been ignored.
He took aim at Jonathan Mallahan, director of the city’s Community and Neighborhood Services Division, whose group made the most errors. He said the council had to withhold housing grants before Mallahan’s department began to follow the new grant rules.
“I’m still very worried about this moving forward and not confident that we’re all playing by the same rules,” Stuckart said.
When Mallahan tried to apologize that he “hadn’t communicated effectively,” Stuckart cut him off, saying he didn’t “want to have this conversation right now.”
Emails between Stuckart and Mallahan earlier this month show the enmity between the two.
In one exchange, after the council withheld the housing grants, Mallahan called the new grant rules “troublesome” because they took accountability away from department heads.
In his reply, Stuckart said Mallahan should have voiced his objections to the rules when they were being adopted, and that his “objective is for your department to follow adopted policies and procedures. Until City Council adopts new policies and procedures I expect them to be followed for every grant that is brought forward.”
Mallahan wrote back that he wanted to “collaborate” with Stuckart in “tweaking” the grant management rules.
Still, it was unclear if the new rules would prevent more audit findings next year. Both Condon and Mallahan said there was a chance the city would be dinged for a large number of findings a third year in a row. There were seven findings this year. Last year there were six. The year before that there two, and just one the previous year.
When last year’s findings were revealed, Chief Financial Officer Gavin Cooley said the mistakes were minor and called them “technical fouls,” blaming them on the “prior staffing.”
Stuckart laid blame with current leadership.
“These started in 2012, and before then we had minimal problems. Look to management. Look to what they’re not doing. That’s why we created grants management,” he said. “Nobody wants to take responsibility. You downplay it. You say you’re working on it and you have solutions. But you’ve never really bought into the solution.”
Last year, Stuckart called the findings “rather nitpicky,” but he didn’t characterize them that way again.
“Last year, (the audit findings) were eye-opening. This year, it’s just shocking,” Stuckart said. “I don’t want to be in this position again next fall.”
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