State auditors flag contract monitoring gaps, disclaim opinion on HAPO operations fund

The Washington State Auditor—s Office told the Franklin County Board of Commissioners on April 16 that its 2023 accountability and financial audits identified weaknesses in the county—s contract monitoring and financial reporting and issued a disclaimer of opinion for certain HAPO Center business-type activities.

Auditors said the accountability audit generally found compliance in most areas reviewed but identified deficiencies in the county—s oversight of third-party contracts. The auditors reported the county could not provide support for revenues and expenditures reported by the HAPO management company and found the county received $937,000 in commissary commissions only after the current commander inquired about outstanding balances. Audit staff also reported the county paid about $1.2 million more than contracted amounts for jail medical services between 2020 and 2024. "We recommend the county strengthen its oversight and monitoring of contracts," the auditors said during the exit conference.

The financial statement audit delivered an unmodified opinion on most county activities but said it could not express an opinion on business-type activities tied to the HAPO Center; the auditors issued a disclaimer for that portion because county staff could not provide adequate support for amounts reported. The auditors also described material deficiencies in financial reporting and recommended the county ensure financial activity is supported by documentation, re-evaluate internal controls and determine whether any amounts should be recouped.

Auditors separately issued a clean (unmodified) opinion on federal grant compliance, including review of the American Rescue Plan (Coronavirus State and Local Fiscal Recovery Fund), noting the county spent about $12 million of those funds in 2023 and that previously reported problems in the program had been corrected.

Commissioners pressed staff about next steps for recovering amounts and for legal remedies where the management company did not deliver records. Commissioner Baumann asked the county attorney to follow up on a previously issued 30-day certified letter to the HAPO contractor; county staff said legal counsel would review options. County Auditor Matt Beaton and Administrator Brian Danzl said they would join standing meetings with HAPO staff to address accounting practices.

The auditors said the findings and the county—s responses would appear in the published audit report in the coming weeks and that the next audit cycle will begin this summer. They also said the additional contract-monitoring work increased audit hours beyond the original estimate.

The exit conference included auditors who identified themselves as Ginny (audit manager, Team Tri-City) and Deborah O'Leary (audit supervisor/audit lead) and county staff including County Administrator Brian Danzl and County Auditor Matt Beaton.

The commissioners did not take a formal vote on the audit report during the meeting but directed counsel to pursue follow-up on the HAPO-related records and recommended recovery actions where appropriate.