By Tom Hyde
The North Coast News, September 30, 1998
A special audit of some state flood control grants to local governments, including Ocean Shores, found a number of irregularities and will likely lead to a more intensive look at contracts given by local governments for coastal erosion work.
The Washington State Auditor's office found irregularities in how grants were given, a lack of documentation and grant applications, a lack of proper hiring procedures of contractors for the work, "back dating" of grants to cover work already completed, and that in some cases funds were spent on lobbying contrary to agency policy.
At the same time, the Washington State Auditor's office found that "the funds were expended in compliance with authorizations ... in all material aspects."
The special audit, with a completion date of September 2, was requested by the Washington Department of Ecology in May. Specifically, the audit looked at eight grants totaling nearly $800,000 awarded over a two-year period to local governments from the FCAAP program (Flood Control Assistance Account Program), a grant fund administered by Ecology.
Officially, Ecology requested the audit of its own program to check its processes and procedures and specifically to check coastal erosion grants because the agency knew it had treated them differently, according to Ecology Public Information Officer Sandy Howard Rudnick.
But Ecology also had concerns that one company had gained so many contracts in Southwest Washington apparently without a competitive award procedure, and that funds were being spent on lobbying.
People in the agency were "very uncomfortable with the fact that a single engineering firm is gathering a great deal of business in regards to flood control and coastal erosion issues out at the local government level," according to documents from the auditor's working file obtained under an open records request by The North Coast News.
Local governments contracted with Pacific International Engineering (PIE) in all eight grants reviewed.
Ecology officials also expressed concern about whether "the awards are actually being made properly, given the noncompetitive and regular nature of the awarding system they described for us. They are afraid about whether the local government payment to PIE is actually going for lobbying activities," according to auditors documents.
The audit determined that in four out of the eight grants local governments did not solicit for qualifications of engineering firms. Under state law, local governments are required to publish a "Request for Qualifications" to solicit firms. However, this does not apply if an emergency is declared.
The auditor's office found that the City of Ocean Shores did not produce any evidence of solicitation and no explanation.
City Manager Jack McKenzie said that with the coastal erosion the city was in an emergency situation. The city has three contracts with the engineering firm for coastal erosion, on two of which no solicitation was done. "We've had two emergencies and two contracts (without a competitive process)," he said.
Both Pacific County and Montesano did not solicit until a year after initial work, although Pacific County did declare an emergency. Centralia did not solicit qualifications either, although it used the same contractor the county was already using.
Under many of the grants, lobbying was done, which is not allowed by Ecology's guidelines. However, lobbying using state funds is allowed under a wide range of circumstances. And some of the grants approved by Ecology included lobbying tasks.
Pacific International Engineering often "packages" contracts with work seeking federal or state financing, which some city council members in Ocean Shores said was a deciding factor in awarding the EIS project to PIE instead of CH2MHILL.
But PIE principal Harry Hosey disagrees with the characterization of lobbying.
"It is not lobbying, what it is, is getting the information to the decision makers at their request," he said. "The cities make the presentations, we just supply the information."
" This company does not provide lobbying ... to make sure we do not run into a question, we have registered as lobbyists."
Hosey and Pharos Corporation principal Judith Shaman are both registered at the federal level as lobbyists, said Hosey, but not at the state level, he confirmed. Chuck Gayle of PIE, a former Ecology official who worked on coastal erosion here for the agency and suggested PIE to the city, is registered with the state as a lobbyist.
"The audit was clean," Hosey said. The money was only spent on items authorized by the Department of Ecology."
The audit also found that, with the one exception of Centralia, there were no application materials on hand for the FCAAP grants and in some cases contractors wrote the grant scope of work statements for Ecology's signature. Not all of the grants, however, were intended to go through the regular competitive award process since some were the result of Governor's request or actions by the Legislature.
The auditor noted that "there seems to be a great deal of political activity surrounding the grants .." The audit also found that in many cases grants were "back dated" more than a year in one case, to cover work already well under way or nearly completed.
Because the audit was a special audit requested by Ecology to check its own procedures, no "findings" have been issued by the auditor's office as a result. However, the Auditor's Office will likely take a closer look at contracts on coastal erosion as it does specific audits of local governments and the Department of Ecology, according to Mindy Chambers of the State Auditor's office. The Erosion Grants
| Westport | $250,000 |
| Lewis County | $80,000 |
| Grays Harbor County | $25,000 |
| Montesano | $86,554 |
| Pacific County | $100,000 |
| Ocean Shores | $175,000 |
| Port of Skamania | $249693 |
| Centralia | $50,000 |