Washington state auditor’s reports find fraud, lack of financial controls at small towns in Franklin and Adams counties

Employees of a pair of small towns in central Washington misappropriated tens of thousands of dollars from taxpayers, according to reports by the Washington State Auditor’s Office.

Auditors identified misappropriations totaling $79,252 from Hatton in Adams County and $12,659 from Mesa in Franklin County. Both towns, less than 20 miles apart, have populations under 400.

The reports did not name the officials accused of being responsible for the lost money. They indicate a lack of safeguards for small town and local governments where employees have access to funds without oversight.

“Establishing proper financial controls can be challenging, but it’s not nearly as hard as explaining to your neighbors how their hard-earned tax dollars were lost,” State Auditor Pat McCarthy said in a statement. “No matter how small your government is, there are ways to protect your finances.”

The towns of Hatton and Mesa did not immediately respond to requests for comment Wednesday.

The unidentified former clerk-treasurer of Hatton misappropriated $72,119 between 2022 and 2024, according to the fraud report, and another $144,604 of “questionable payments” occurred over the same period, according to the auditor’s office report. Hatton’s annual budget is about $187,000.

Of the misappropriated funds, nearly $36,000 were from payroll disbursements for work hours beyond the clerk-treasurer’s approved schedule and cash advances the clerk-treasurer did not repay.

The town’s credit card statements showed $15,000 in questionable purchases because the town did not have adequate documentation to show the transactions were legitimate. The bank closed the town’s credit card in early 2024 because of nonpayment and wrote off the outstanding balance of $4,477, including $834 in fees.

Among $1.3 million worth of firefighting equipment loaned to Hatton from the U.S. Forest Service, auditors found a fire vehicle and a defibrillator valued at $32,000 stored at the clerk-treasurer’s home outside town limits. The clerk-treasurer later returned the vehicle, but the defibrillator was never accounted for.

The clerk-treasurer stopped working for the town in October, but he continued to have access to the town’s accounts until April 7, when auditors accompanied the mayor to the bank to have the clerk removed from the account, according to the fraud report.

Auditors found an additional $3,612 of personal payments made from the town’s bank account to an online bill processing vendor after the clerk was no longer employed.

It wouldn’t be the first time Hatton has had financial problems with an employee. A previous clerk-treasurer, Barabara Pence, pleaded to a third-degree theft misdemeanor in 2020 after a state auditor’s fraud investigation determined that she had misappropriated $6,289 and made $15,783 of questionable expenditures between January 2016 and July 2018. Pence is a member of the Hatton Town Council.

A separate fraud report released Tuesday found $7,133 in misappropriations attributed to the former mayor. In January 2023, a month before she resigned, the town council approved paying her $4,000 salary in advance, which is not allowed under state law. She only repaid two months of her salary after she resigned, the report said.

In nearby Mesa, the Franklin County Sheriff’s Office investigated and confirmed $9,200 of misappropriations by that city’s clerk-treasurer from November 2022 to November 2023. The auditor’s office agreed with the sheriff’s conclusions and found an additional $3,400 of misappropriations from its own investigation. The misappropriations were from unauthorized purchases on the city’s debit card, including for groceries, decorations, vehicle loan payments, personal utility payments, storage unit fees, tires and clothing.

Of these purchases, $323 occurred after the clerk-treasurer was fired in October 2023 for not working consistent hours, which resulted in the town hall closing for several weeks, according to the fraud report.

The fraud investigations will be forwarded to the Adams and Franklin county prosecutors.

The reports recommended establishing procedures for independent monitoring, verification and better documentation of accounts, timesheets and public property.

Similar gaps in checks and balances were behind other recent small-town misappropriation cases, including Cusick in Pend Oreille County, where the former clerk pleaded guilty last year to embezzling more than $195,000.

McCarthy said in an interview Wednesday that her office is partnering with the Association of Washington Cities to educate officials at smaller local governments about keeping better oversight of their money.

“Sometimes if their internal controls get lax or if they’ve had a lot of turnover and the opportunity presents itself, fraudsters will take advantage of it,” McCarthy said.

“It’s been a little disheartening that we’ve seen so much fraud in these small entities.”

Government editor Jonathan Brunt contributed to this report.