Wapato City Hall Bell

Wapato City Hall. (Yakima Herald-Republic)

WAPATO, Wash. — A fraud report by the state Auditor’s Office shows $308,199 was misappropriated by the city of Wapato over a six-year period.

The misappropriations occurred in business and occupation tax revenue and cemetery payments made to the city between October 2011 and October 2017, the audit found.

The matter has been turned over to the Yakima County Sheriff’s Office for investigation.

City Administrator Juan Orozco said he has been working with fraud investigators since learning of the matter not long after he took office as mayor in December 2017. He resigned as mayor in September and was subsequently appointed city administrator.

He accuses the former city administration of not keeping a close eye on Wapato finances.

“This is flat-out corruption,” he said during a phone interview Thursday afternoon. “This is hundreds of thousands of dollars that walked out the back door under their watch.”

The Yakima County Sheriff’s Office has known about the case since 2017, but waited for auditors to conclude their investigation, said Sgt. Judd Towell.

“We had to have their audit completed before we could do our investigation,” he said. “We will run with the investigation now and make some determinations.”

Former City Clerk-Treasurer Sue Pearson notified state auditors of possible misappropriations in October 2017, as required by state law. Later that month, the city’s deputy clerk-treasurer, Gloria Acosta, was placed on paid leave and was asked to resign in December 2017, the report said.

In January 2018, Pearson was placed on paid leave pending the investigation. Attempts to contact Acosta and Pearson were not successful Thursday. Neither has been charged with a crime in the incident.

Fraud investigators with the auditor’s office linked most of the misappropriations to Acosta.

“We compared bank records to underlying supporting records at the city, including accounting system records, and found a total misappropriation of $308,199. Of this amount, the former deputy clerk-treasurer was responsible for misappropriating at least $303,678,” the report said.

The remaining misappropriations couldn’t be tracked to any specific person, the report said.

The audit uncovered $290,780 in business and occupation taxes paid to the city but not recorded into the city’s system. That amount was used to replace other receipts already recorded into the system, which gave the appearance that bank deposits matched the city’s records, the report said.

The audit also found payments for burial plots and related services totalling $17,419 that were manipulated in city books the same way. The deputy clerk was responsible for at least $16,454 of those misappropriations, the report said.

The report doesn’t show how the misappropriated funds were used.

The city lacks segregation of duties and proper oversight of those funds, the report said.

In a response, the city said it has hired a new clerk-treasurer and instituted a double audit of finances with independent reviews.

The city’s insurance will cover the cost of the misappropriations and the state’s $42,443 investigation fee.

“The main thing is this — we identified the corruption,” Orozco said.