State auditors have blasted the Downtown Pasco Development Authority for sweeping financial mismanagement that led to dwindling coffers, failing to comply with state law, and more.

Auditors issued two findings in a 16-page report released this month. In audit reports, a “finding” means auditors reviewed an agency’s records and have significant concerns.

The audit covers 2020-22. 

Auditors said the Downtown Pasco Development Authority, or DPDA, “did not provide adequate controls over safeguarding of public resources in most of the areas we examined” during that time, including accounts payable, cash receipting, compliance with private foundation grant contract terms and more. It also dropped the ball on keeping meeting minutes, complying with rules for holding closed-door sessions during public meetings, and filing annual reports, auditors said.

Auditors reached out to DPDA leaders, but they declined to respond to the findings, the report said.

The city of Pasco has now taken over many of DPDA’s duties, including managing the downtown farmers market and Pasco Specialty Kitchen, plus running the Cinco de Mayo and Fiery Foods festivals.

City officials “highly regard” the audit findings, City Manager Adam Lincoln said in a statement.

The city is “dedicated to transparency, accountability and the prudent use of public resources. To that end, (we) will continue to work with the state auditor’s office and any other relevant authority for a full accounting of the DPDA’s finances,” Lincoln said in the statement.

The Pasco City Council discussed the future of the DPDA on Feb. 12, with city staff recommending the group be dissolved. The council didn’t make a final decision during the workshop session but is expected to pick the topic up again sometime in March. 

It’s likely that part of the discussion will happen with the city attorney in a closed session.

During the Feb. 12 workshop, council members asked questions of city staff, including about the benefits and drawbacks of ending the DPDA and the city’s responsibilities. 

Councilman Charles Grimm said he wants to see criminal prosecution pursued to recover public funds and safeguard the public’s resources and trust.  

Councilman Leo Perales called the audit report "damning," "horrible" and "beyond words, really," and said he wanted to see DPDA leaders held accountable.

The DPDA was formed years ago to strengthen and enhance downtown, and its leadership structure includes an appointed seven-member board of directors and an executive director. 

The executive director position turned over three times during the audit period.

DPDA’s finances declined sharply during the audit period, going from $791,849 in total operating revenue in 2020, to $246,477 as of Aug. 31, 2023, and from $170,284 to $13,393 ending cash balance.

Auditors found a pattern of purchases that weren’t adequately backed up with documentation. 

That included nearly $300,000 in check payments, with more than $1,000 of those payments deemed “unallowable” because they didn’t appear to be for business purposes and more than $8,800 in asset purchases that were unaccounted for, the audit report said.

An executive director — the report doesn’t say which one — also made more than $285,000 in electronic funds transactions and debit purchases that weren’t adequately supported, including $79,517 in payments to people out of the state or country using money transfer services, auditors said.

“The authority’s debit card was also used to withdraw $2,740 in cash from an ATM. We also found over-the-counter cash withdrawals totaling $30,404 that lacked supporting documentation,” the report said.

When it came to cash receipting and grant funding, the agency’s controls also were lacking, the audit said. It noted, for example, that the agency received about $630,000 in private grant funding for Covid-19 relief, and it dedicated a portion to a program aimed at helping local businesses. 

But it couldn’t demonstrate that the money went to eligible recipients and that it was used for purposes that fulfilled the grant’s objectives, the audit report said.

In addition, DPDA didn’t ensure it followed the state’s Open Public Meetings Act, the audit said. 

It didn’t post meeting agendas online; its meeting minutes didn’t adequately show what business took place during sessions, if they were posted at all; it held closed-door sessions 11 times without giving an allowable reason; and it once took action outside a public meeting, among other issues, the report said.

The agency also didn’t file annual financial reports in a timely manner, the report said.