by Matt Rosenberg November 9th, 2011
The troubled Seattle Indian Services Commission, already in the process of being stripped of ownership of its adjoining properties on 12th Ave. S. by the city in King County Superior Court, is now under fire in a newly-released state audit because former staffers reportedly diverted $73,943 for questionable purposes. This comes after previous state and city audits criticized the commission for awarding contracts to immediate family members of top staff, and for allowing a board member’s husband and son-in-law to also be appointed to the board.
The commission is one of the City of Seattle’s Public Development Authorities, or PDAs, and is supposed to serve as an umbrella agency to help deliver social and health services to Seattle Native Americans. Its work has also included running a community computer center, providing youth with computer skills training, and running a Native arts and crafts shop. However a series of city and state audits in recent years have detailed managerial and oversight lapses at the commission, which has also had trouble managing its properties. In September, the City Council gave the green light to City Attorney Pete Holmes to petition county court to put the commission into trusteeship, because it has been unable to cover $6 million in remaining bond debt for its two buildings at 606 and 611 12th Ave. S. and unable to repair $2.5 million in water damage to one of the structures.
The disrepair led its sole tenant and main source of income, the non-profit Seattle Indian Health Board, to announce it will move out unless it can assume the debt and management of the two facilities and make the repairs. The trusteeship would convey control of the properties to the SIHB.
Now, though, the new report from the office of Washington State Auditor Brian Sonntag details more problems at the commission as it spiraled downward. It finds that from July 1, 2008 through June 30, 2010, the commission’s board also failed to oversee financial operations, resulting in a series of questioned expenditures totaling $73,943 by former Executive Director J. Michael Marshall, who is now deceased, and former Assistant Director Carol Peloza. In each instance, auditors say, no documentation could be produced which showed the payments to the top staffers, made while they still worked for the commission, were for work-related purposes.
According to the audit, Peloza made 23 payments to herself from the commission to pay off a personal debt of $8,070 and signed, endorsed and cashed a $1,200 check from the commission made out to “cash.” She wrote 46 additional checks from the commission to herself totaling another $29,787. Some of these were supported by handwritten notes that they were reimbursement for purchases of art for the commission or for payments to commission vendors for grounds maintenance, but no inventory or vendor records could be found to verify these claims.
In addition, Marshall was reimbursed $18,386 for personal credit card charges including $11,732 worth of building supplies, tools and materials Peloza bought using his card. No documentation could be produced describing the connection between the purchases and the commission’s work. Marshall’s domestic partner got $6,319 for purposes unknown and undocumented, and Marshall’s private firm got $1,310 for hosting the commission’s Web site in 2009 although the board wasn’t notified of the potential conflict. Another $8,957 in commission expenditures, supposedly for art, wasn’t supported with related inventory records.
These sub-standard practices were made easier, the audit says, because the commission’s board delegated all major financial tasks to Marshall who in turn delegated them to Peloza – giving her power to sign checks, keep accounting records, receive bank statements, maintain inventory, and oversee all other business responsibilities. “These duties are not compatible and should not be performed by one individual,” the audit states.
Our report in late September of this year as the city council considered court action to put the commission into trusteeship, noted that Marshall’s and Peloza’s combined salaries and benefits were $189,605 in 2008 and were budgeted to be $195,722 in 2009. Annual reports and audited financial statements ceased after 2008, and the new audit notes that 2009 and 2010 financial audits weren’t performed though Marshall and Peloza were employed into 2010, when both departed. Managerial problems had surfaced previously. A series of city and state audits from 2007 to 2009 found the commission failed to hold a number of required meetings, keep transparent meeting minutes, follow laws on competitive bidding, and establish reserve, and maintenance and operations funds.
The prior audits also raised specific concerns about failure to pay prevailing wage rates to contractors, and conflict of interest. A 2004 state audit cited the unauthorized awarding of two contracts totaling $30,000 to the Executive Director’s son for computer training and maintenance services, and a 2008 city audit criticized six years of contracting, on a sole source basis, with an immediate relative of the Executive Director, to run the Options enrichment, tutoring and counseling program for Native American/Alaskan Native youth. The 2008 city audit also waved a red flag at the appointment of a board member’s husband and son-in-law to the board, stating it created questions about whether they were serving the interests of the commission, or the agency she represented on the board.
In the new audit the city details several corrective steps it is taking. These include transferring check-signing authority from commission staff to the chairman and treasurer, and making payments subject to approval of the board with recommendations from the new finance committee. The city also said the trusteeship bid to transfer control of the two properties to the SIHB will help ensure the commission’s work continues.