Damning WA audit reveals missing money, illegal meetings by Pasco downtown group

The Downtown Pasco Development Authority exists in name only after a new audit paints a damning picture of mismanagement at the agency charged with strengthening the city’s core.

The DPDA, which managed the Fiery Foods festival, Cinco de Mayo, Pasco Farmers Market and Pasco Specialty Kitchen, could not account for hundreds of thousands of dollars amid widespread management failures and illegal public meetings, according to a stunning report by the Washington State Auditor.

The state’s top auditor scrutinized spending between January 2020 and December 2022, according to a 16-page summary released Feb. 1.

The findings describe dubious cash withdrawals, unaccounted for equipment, unannounced meetings, illegal votes and more.

It covers a span when the agency’s financial condition was deteriorating.

Longstanding concerns

Recently-elected Pasco City Councilman Leo Perales told the Tri-City Herald the report validates longstanding concerns about the downtown association, which he described as essentially defunct.

The agency’s phone was answered by someone at the specialty kitchen, which is no longer in its control. Its website hasn’t been updated since last spring.

The city, he said, is in a position to ensure the festivals, farmers market and specialty kitchen will continue. It took a direct role in managing all of them in 2023.

“We have good internal controls,” he said.

The Downtown Pasco Development Authority office at 110 S. Fourth Ave. in Pasco.
The Downtown Pasco Development Authority office at 110 S. Fourth Ave. in Pasco.

The report does not identify individuals but notes DPDA had three executive directors during the three years covered by the audit.

The most recent, Jerry Martinez, left in 2023 after less than a year on the job. He was not responsible for the conditions he inherited, Perales said.

The Pasco City Council will discuss its relationship with DPDA at its Feb. 12 workshop, according to City Manager Adam Lincoln. Lincoln issued a lengthy statement saying it values auditor’s findings and the important work DPDA carried out to foster a vibrant downtown.

“The city council is deeply committed to ensuring the financial health and accountability of our partnerships and the entities we support,” he said.

Prior audit flagged problems

It isn’t the first scathing audit for DPDA, which has a checkered history that includes accusations of mismanagement and a prison sentence for a former director who embezzled funds.

Michael A. Goins agreed in 2016 to pay $262,000 to cover his embezzlement from the Downtown Pasco Development Authority, along with insurance costs and extra fees.
Michael A. Goins agreed in 2016 to pay $262,000 to cover his embezzlement from the Downtown Pasco Development Authority, along with insurance costs and extra fees.

Its 2017-19 audit was a preview of the 2020-22 one, saying DPDA’s financial condition put it at risk of not being able to meet financial obligations and that it lacked internal controls to ensure the proper use of public money.

DPDA responded to the 2020-22 report with a non-response. It informed the state it reached out to “former and current board members who all declined the opportunity to respond to the finding.”

The association was responsible for some of Pasco’s most popular public-facing events.

The city formally took over the Pasco Farmers Market and the Pasco Specialty Kitchen in 2023 following reports of mismanagement, financial chaos and even unsanitary conditions at the business incubator.

$300,000 unaccounted for

The state said it could not account for nearly $300,000 in expenditures by DPDA in the most recent review.

The time period includes the catastrophic bungling of the 2022 Cinco de Mayo festival, which saw DPDA spend $250,000 on an event for which it had budgeted $30,000. DPDA booked a five-figure loss blamed on a lack of clear financial and managerial oversight.

The Pasco Farmers Market in downtown Pasco.
The Pasco Farmers Market in downtown Pasco.

Among the missteps: DPDA spent $42,000 to re-book performers for the event after erroneously canceling their appearances.

The debacle led to the departure of the interim executive director. Pasco city leaders were optimistic his successor, Jerry Martinez, would turn things around.

Last December, the council voted 5-2 to raise its 2023 subsidy for DPDA to $240,000, more than twice the $100,000 it previously received, in a vote of support for Martinez. Despite the vote of confidence, Martinez resigned a few months later.

Widespread failures

The auditor’s office described broad failures in how DPDA managed the money it took in from the city, grants, events and other programs.

“In most of the areas we examined, (DPDA) operations did not comply, in all material respects, with applicable state laws, regulations, or its own policies.”

DPDA could not adequately account for check payments totaling nearly $300,000 the report said.

That included about $1,000 in “unallowable” payments with no clear business purpose and nearly $8,900 for assets that couldn’t be tracked.

It said an unnamed executive director used electronic funds transactions and a debit card to spend more than $285,000. That sum included $80,000 paid to 14 people outside of the United States and two people outside of the state of Washington.

DPDA’s debit card was used to withdraw $2,740 from an ATM. The auditor said it found undocumented over-the-counter cash withdrawals totaling $30,400.

The agency also failed to deposit cash it received in a timely fashion. The audit found the DPDA did not deposit $20,794 into its accounts. In a review of 26 deposits, 11 were not made within 24 hours and staff did not balance accounts in a timely fashion, if at all.

Peppers at the Pasco Fiery Foods festival hosted by the Downtown Pasco Development Authority in downtown Pasco.
Peppers at the Pasco Fiery Foods festival hosted by the Downtown Pasco Development Authority in downtown Pasco.

Questions about COVID

The audit also exposed weaknesses in how DPDA handled $630,000 in private grant funds it received to support people and families affected by the COVID-19 pandemic. Specifically, it used some of the money for its “Rapid Response Business Grant” program, which distributed money to local businesses harmed by the pandemic.

DPDA could not provide the auditor with completed grant applications that would have confirmed the money was used to fulfill the objectives of the grant, the auditor’s report said.

The auditor said DPDA’s board, a seven-member body appointed by the city, routinely violated the Washington Public Meetings Act.

Agendas were not posted and minutes were not available for nine meetings over audit’s three-year span. Additionally, the board held 11 executive sessions without citing why the conversation was exempt from the state Open Meetings Act.

The board even voted on DPDA business outside of an open meeting. Public agencies may discuss some issues, such as personnel matters and litigation, in executive session but may not vote on the public’s business behind closed doors.

DPDA had revenue of $791,848, $601,480 and $745,175 in 2020, 2021 and 2022 and expenditures of $649,300, $739,093 and $750,331 over the same period, said the report.

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