State officials have found troubling accounting practices and contracts in a small state agency set up to advance issues in the African American community, the Washington State Commission on African American Affairs. The agency’s mission is to conduct research and collect input from the community in order to advise the legislature, state agencies and the Office of the Governor on issues impacting the black community.
The agency is tiny. It consists of a team of two - a director and executive assistant. At the end of 2011, Gov. Gregoire appointed a new director and this fall a new executive assistant, Bailey Stober, was hired. This new administration came across a trail of documents left behind by their predecessors which they found unsettling.
“I found absolutely crazy expenses that I thought were kind of inappropriate,” said Stober, who has a background in investigations. “The more I kept digging, the more I realized I was onto something I thought was serious, so I was glad I was asked to investigate it.”
The first document which caught Stober’s attention regarded an agency credit line with Top Food and Drug. “I thought it was a little suspicious that a state agency had a corporate credit account with a private retailer,” said Stober.
Digging deeper Stober got his hands on dozens of receipts from Top Food and Drug. The former executive assistant, Pamela Morris, made nearly all of the purchases and many of them appeared to be for items not related to state business. They included miscellaneous groceries, tawny port, New York steaks, twice baked potatoes, dozens of bottles of wine, Jimmy Dean frozen omelets and greeting cards.
Records show it wasn’t the state, but the former assistant, Pamela Morris, who was making payments on the state’s credit line with the grocery store. She was often delinquent but eventually paid the bill off. Morris told KING she used the state account to buy items for a non-profit she helped to start – The Black Policy Foundation.
“We saw the foundation as an arm of the agency. They work on the same issues. I didn’t want the foundation to fall apart and I had invested so much personal time into it so if I could donate some meals here and there, then I was willing to do that,” said Morris.
Even though Morris paid with her own money, the director of the state’s Executive Ethics Board says state employees are not supposed to get special privileges, such as access to good credit.
"That's when the taxpayer says, ‘wait a minute, why do you get this special privilege? I'm part of that pool as well and it's only through your employment and position that this organization or this group is getting a leg up on me’, and that outrages the public and it should," said Melanie de Leon, Executive Director of the State Executive Ethics Board.
An accounting manager at the Department of Enterprise Services (DES) looked into the account as well and found the same concerns.
“It does not appear that the state has suffered a financial loss through purchases charged to this account, but concerns remain. Charges to the account for items for personal use, even if paid for with private funds, would be inappropriate use of the account. Other inappropriate purchases such as the wine are also troublesome, even if they were for Commission sponsored events and paid for with private funds. Regardless of the source of funds, charging these expenses to the Commission’s account would be prohibited. If the expenses were for Commission events supported by outside sources, then a separate account should have been set up to segregate agency purchases from other purchases,” wrote Jim Morgan, Accounting Manager, DES.
The new Commission leadership closed the Top Food and Drug account, but that wasn’t the end of it. "I ended up tearing apart our whole office, going through every file that I could possibly find and found several more pieces of documentation that alarmed me," said Stober.
Stober found letters of solicitation on state letterhead which asked private companies to donate to the agency. State law allows the Commission on African American Affairs to fund raise to further the agency’s mission. But how the donations were handled and what they were used for appeared problematic.
In four years the former agency director, Rosalund Jenkins, raised more than $300,000 in donations. Jenkins wanted to spend the donations in ways that are prohibited by the state such as transportation for community members to agency events, meals for members of the public at outreach meetings and wine for receptions. The state doesn’t allow spending money on alcohol or feeding the public.
To work around state spending laws, Jenkins set up an arrangement with a non-profit, the Northwest Institute for Leadership and Change. As outlined in a Memorandum of Understanding written by an assistant attorney general, the non-profit would be the state agency’s fiscal agent. All the donated money was deposited in one of the Institute's accounts. Under this arrangement state regulators would not see the purchases.
"I feel like if you have to put the money in a separate account where the state can't monitor it, there's something that you're hiding. I don't think that's transparent and open and I think the public would expect more of us," said Stober. “If I’m asking you for money for the state, it needs to go into a state account. We’re in a recession. The public is being nickel and dimed and they need to know they’re getting the best bang for their buck.”
The DES accounting manager found other issues with the set up which included a possible conflict of interest. The non-profit is run by a former board member of the Commission.
“Having an independent foundation raising money to further the purposes of the Commission would not be inappropriate. The problem is that the NILC was neither independent nor was it raising the money. It was merely managing the money that the director chose to deposit in NILC accounts rather than agency accounts. At least the appearance of a conflict of interest is raised due to the fact that NILC is operated by a past Chair of the Commission, Dr. Jackson. NILC’S only apparent role was to deposit and disburse funds on behalf of the Commission. NILC was paid a fee of 5% of the deposits for providing this service,” wrote Morgan.
KING 5 asked a representative from the Office of the Attorney General why one their attorneys wrote the Memorandum of Understanding that other state officials have found troublesome, but the reporters have not recieved an answer yet.
Jenkins told KING 5 she wasn’t hiding anything and that many other state officials knew about it the contract between the agency and the Northwest Institute for Leadership and Change.
"The fiscal agent relationship with NWILC (Northwest Institute for Leadership and Change) totally segregated private grants and donations from taxpayer dollars. This allowed the commission to benefit from private resources while respecting donors’ wishes and state law. An assistant attorney general drafted the memorandum of understanding with NWILC so it was properly drawn and legal. The Governor’s OFM (Office of Financial Management) Small Agency Accounting Division, the Office of the State Auditor, our board, and Governor’s office staff knew the Commission benefitted from private funds managed outside the state purse,” said Jenkins.
Records for the account with the Northwest Institute for Leadership and Change are incomplete and it’s not clear where most of the money was spent or for what purpose. But some itemized accounting was left behind in the office that showed the private donations paid for more than food and drinks. A list of expenses paid by the non-profit on behalf of the agency in 2008 show $300 for a limo ride to transport a community leader to a state function. Donations also paid a $3,537 bill for rain ponchos passed out to members of the public at a rally and $625 was spent on a professional photographer to take pictures of the rally.
Stober says many of the expenses such as the photography seemed wasteful, as the agency owns its own camera paid for with tax dollars.
“We have a state resource here to use that already cost us several hundred dollars. Why spend the money twice?" said Stober.
The current agency director said if they need items outside of state spending rules they reach out to the community for in-kind donations.
“There are plenty of people in the community that are friends of the Commission who we could say, ‘hey, we need you to donate some ponchos for us,’. They would do it and it wouldn’t have to be something where we were using state resources to purchase something like that,” said Ed Prince, Director, Washington State Commission on African American Affairs.
Other payments made by the Northwest Institute on Leadership and Change on behalf of the state show a potential conflict of interest. Available records show $4,254 was given to the Black Policy Foundation between 2008 and 2010. That’s the non-profit run by Pamela Morris, the executive assistant of the agency at the time the funds were dispersed.
“With the former Executive Director and Executive Assistant in leadership positions with this organization, a grant to the Black Policy Foundation from the Commission would be inappropriate,” wrote Morgan.
“The agency picked one non-profit to help and it happened to belong to a state employee who worked in the agency that was helping to oversee the pass through of this money and it’s wrong,” said Stober.
Both Jenkins and Morris, neither of whom works in state government now, stand behind the way they handled business.
“I believed then and I believe now that this was entirely transparent, legal, and ethical. In fact, any other handling of private funds would have compromised the interests of both taxpayers and donors. I’m proud of my work for the Commission, the decisions I made to expand our capacity, and especially the clean bill of health we received from the State Auditor in a 2010 review," said Jenkins.
“I have donated hundreds of hours of my personal time and some of my limited personal financial resources in a labor of love for my community, and for that I have no regrets or apologies,” said Morris.
Shortly after Prince took over as director, the Northwest Institute for Leadership and Change terminated its relationship with the Commission. Prince said they’re moving ahead doing the best work possible for the state.
“We’re doing great work, and we’ll continue to do great work. This is just a blip,” said Prince.