The state Auditor’s Office has alleged that a former Camas mayor and executive director of the Camas-Washougal Economic Development Association misappropriated $19,311 by using the association’s funds for personal expenses.
The allegations — summarized in reports issued Thursday — come in findings that say Paul Dennis spent the money between Feb. 15, 2013, and Feb. 12, 2019, on an advanced home air system and vehicle costs. They also allege that he used an association debit card on a personal computer, hotel accommodations, fuel and meals.
Another $45,029 in expenses, spent between April 30, 2012, and March 1, 2019, remain in question; they may have been spent on business items, such as meals, fuel, reimbursements and car rentals, but weren’t adequately documented, according to the Office of the Washington State Auditor.
Dennis told The Columbian last month that the situation is unfortunate and stems from a civil dispute over pay. He said he’s still owed $10,000 by the association. Efforts to reach Dennis on Thursday afternoon were unsuccessful.
He resigned May 31, 2019, and the association’s board plans to dissolve the association next month. (Its decision to dissolve was unrelated to the audit and what the state auditor’s office described as a fraud investigation.)
The state auditor’s findings were forwarded to the Clark County Prosecuting Attorney’s Office for review. The Camas Police Department had already forwarded its findings to the prosecutor’s office for consideration, citing probable cause for a charge of first-degree theft.
Clark County Prosecutor Tony Golik said his office received the auditor’s report, and a deputy prosecutor is reviewing it along with the police report. Golik said there is no timeline for when a charging decision will be made.
In addition to its fraud investigation, the state auditor’s office issued a report declaring the association “unauditable,” saying it failed to respond to requests for an audit from the time it formed in 2011 to 2019. It was also unable to provide detailed financial records — expenditures of $1,260,583 over eight-plus years.
The association was founded by the Port of Camas-Washougal and the two cities, and it was headed by Dennis. The agency’s mission was to “help existing businesses succeed and bring new businesses and jobs to the area.”
According to the state auditor’s office, representatives of the cities’ school districts and the Columbia River Economic Development Council later joined the association’s board. The port entered into a one-year, professional services contract with Dennis’ company. He continued as the executive director without a contract and had sole control over the association’s bank accounts until 2019.
“Public funds need oversight and they need regular audits. Unfortunately, this is an example of the danger to tax dollars and public trust when accountability is shortchanged,” state Auditor Pat McCarthy said in a news release. “I hope it serves as a reminder of the importance of transparency and independent auditing, regardless of circumstance.”
The state auditor’s report said the association agreed with its findings.
The association also said that when it formed in 2011, the board believed the association was not a public agency or subject to audit, according to the state report. It said that when it became aware otherwise in 2018, the board adopted new bylaws, reincorporated as a public entity, appointed a chief financial officer and established financial procedures. Those practices have been in place since March 2019.
It was during preparation for an audit that the CFO discovered suspected losses of $15,000 to $20,000, as well as other questionable spending, and reported it to the state Auditor’s Office on April 10, 2019, according to the fraud report. The association also contacted the Camas and Washougal police departments.
Washougal Financial Director Jennifer Forsberg was assigned to complete a local audit to provide to the state, and she “had a difficult time receiving any documents from Paul, and had to go to the bank and get them herself,” according to Camas Police Department investigative documents.
Dennis was responsible for the association’s checkbook and was being paid $9,700 a month during his yearslong tenure as chief administrative officer, the police report says.
Forsberg told police she discovered Dennis had made many personal purchases with the association’s money, including a trip to San Francisco, parts for his Ford Mustang and “excessive amounts” of food and coffee, according to the police report.
Detectives stepped back from their investigation until January, so the state Auditor’s Office could finish its work.
In a February interview, Forsberg noted what she considered to be several other suspicious losses of money, such as a Gamestop purchase around Christmas, transactions at PetSmart and gas charges during Dad’s Weekend at Washington State University in Pullman.
“I asked Jen (Forsberg) if she ever saw Paul adjust his payment or make right any of the purchases. Jen said there were no additional deposits into the CWEDA account except from the three government entities. Further, there were no invoices for any of Paul’s paychecks,” the police report reads.
Forsberg said she believed there was clearly a misappropriation of funds, but a lack of controls over Dennis’ work made the issue more gray.
On Feb. 20, detectives interviewed Dennis, in the presence of his attorney Jacob Zahniser. Dennis told police the association had begun to interfere with his private business relationships; he was ordered by Camas’ city administrator in 2018 to remove his name from a business website, which cost him $90,000 worth of work. He further accused the association’s board of calling meetings it was not permitted to based on its bylaws.
Dennis said his salary was originally hourly, but “the board told him to get $9,700 a month regardless of if he was working one or 10 hours a day,” the police report says.
He said he used the association’s account whenever he met its clients. There were a few irregularities that went against his pay, he said, but he had settled them with the board, according to the police report.
When shown specific bank records, Dennis either said he did not remember certain purchases, that the financial discrepancies had already been reconciled, or the amount of money was a cumulative balance he was owed at that time, the police report says.
Lack of controls
The state auditor’s office also interviewed Dennis earlier this year. He allegedly acknowledged making personal purchases with association funds, the fraud investigation report says.
He told auditors the purchases should have been deducted from his regular monthly pay, but he could not identify which months that should have occurred. He later provided a list of transactions that confirmed certain personal purchases had been paid for with public funds. The list totaled $12,989, according to the fraud investigation report.
Among the oversight weaknesses identified in the report were:
• Dennis having sole control over the finances, with no secondary review of the association’s bank accounts.
• Debit card purchases without board approval.
• Payments that weren’t reviewed or provided to the governing body.
• Verbal presentations on the association’s expenditures at board meetings.
• A lack of a formal contract to define allowable expenses.
• A lack of supporting documents for disbursements of funds.
• A lack of insurance to cover potential losses.
The state auditor’s office found that more than $850,000 in checks written by Dennis to his company hadn’t been reviewed by the board. There was also no documentation, including board approval of Dennis’ monthly compensation, which forced investigators to rely on bank statements and interviews. He was initially paid $9,700 per month, but the board verbally approved a pay increase to $11,000 per month for April and May 2019, according to auditors.
“Additionally, we could not conclude whether $1.1 million of expenditures were allowable and served a public purpose due to the majority of the Association’s expenditures not having supporting documentation,” the report reads.
In concluding its findings, the state auditor’s office recommended that the association try to recover the misappropriated funds and $23,653 worth of investigative costs from Dennis.