The Washington State Auditor’s Office says staff inexperience and turnover in the city of Port Townsend’s finance department in 2022 and 2023 led to a $2.3 million reporting error, according to audit documents released Sept. 18.

“Our audit identified control deficiencies over accounting and financial reporting,” reads a letter sent to city staff. “The city experienced turnover within the finance department during the audit period which resulted in staff lacking the experience and training needed to prepare accurate and complete financial statements, notes and schedules before submitting them for audit.”

Specifically, the letter states, the city did not have a process for ensuring that balances were reported correctly on its schedule of liabilities. 

“We found the city did not ensure balances calculated using the State Actuary Tool were properly reported on the 2022 Schedule of Liabilities, resulting in both reductions being overstated and ending balance being understated $2,296,970,” according to the letter.

In the same letter, auditors noted the city corrected the error during the review and did not issue a formal finding. While no formal finding was issued, they urged the city to strengthen internal controls, improve review processes, and provide more training for finance staff.

“These matters are not included as findings in our public report, but we view them as important enough to warrant the attention of management and the governing body,” wrote Melinda Seibert, a state CPA and audit manager. “This letter is intended for the information and use of management and the governing body as recommendations to help strengthen the city’s internal controls.” 

The state auditor’s office issued the city’s financial audit on Sept. 25, 2025.

Jodi Adams, the city’s finance director, wrote in an email that it was made clear to city staff by state auditors that its financial reports were “‘fairly stated and correct.”

In response to a questions regarding staffing levels, Adams wrote, “We’re always learning and looking for ways to improve and are grateful the state audit process helps provide us an opportunity to do so. The finance department anticipates being fully staffed by the end of 2025 with the addition of our final accountant position, which will further strengthen the department’s capabilities.”

Adams added that while have a certified public accountant (CPA) would be a valuable asset, “it is not a requirement for most government finance roles. The addition of our Robert Half contracted senior accountant has proven invaluable, as we’ve been able to strengthen the knowledge and processes of our department and provide continuity during our staffing changes.”

Not included in the city’s most recent audit, however, are at least six citizen complaints submitted to the state auditor’s office regarding concerns about the city’s financial practices. Among those complaints are allegations of “sloppy contracting,” expenditures exceeding revenues, pay for city staff and allegations of “bid splitting,”a practice whereas a contract or large purchase is deliberately divided into smaller segments to avoid competitive bidding thresholds and more rigorous review and oversight. 

Staff with the state auditor’s public records office said that as of Aug. 21, there were six complaints pertaining to city financing, three of which remain open. Those three allegations were flagged for review during the next audit cycle.

In an email to The Leader, Adam Wilson with the state auditor’s office wrote, “The audits publishing look at fiscal years 2022-2023 and will not address the most recent concerns citizens brought forward. We were actively working with the city to wrap up this audit when those hotlines came in, and we were unable to include them in that audit work.”

Wilson wrote that the office understands that “the people who raised issues are very interested in having them addressed, and we do plan to return to the city soon. We expect to begin the city’s fiscal year 2024 audit this fall, and we will be considering the most recent citizen hotline submissions in that work.”