Fraud risks loom large for small governments in 2025

Misappropriation of public funds can be financially devastating to local governments, especially in smaller, rural areas where community members depend on taxpayer money to supply critical services and resources.

This troubling trend has continued in 2025, as our Office has seen an increase in the number of fraud investigations focused on local governments in areas with smaller populations where employees have access to public funds without appropriate reviews. 

“Establishing proper financial controls can be challenging, but it’s not nearly as hard as explaining to your neighbors how their hard-earned tax dollars were lost. No matter how small your government is, there are ways to protect your finances,” said State Auditor Pat McCarthy.  

Fraud Awareness Week seems like the appropriate time to shine a light on a few of these cases that not only speak to the importance of government accountability and transparency, but also to the value of the resources we offer that can help governments prevent fraud. We’ve highlighted a few of these guides at the end of this article. 

The Town of Hatton (published May 2025)

Auditors identified misappropriations totaling more than $79,000 in the tiny town of Hatton, which has a population of less than 100 people (2020 census) and formal boundaries encompassing less than a square mile. The former town clerk-treasurer, who also identified himself as the town fire chief, used a variety of misappropriation schemes including paying himself for hours more than his approved work schedule. Additionally, auditors identified $7,133 in misappropriations related to Hatton’s former mayor, including paying her annual salary in advance – which is not allowed by law – and failing to repay the advance when she resigned later the same year.

Discover more details in our blog post, which includes links to our published reports.

Adams County Public Hospital District 2 (published September 2025)

A lot of the misappropriation we investigate centers on digital funds, but this particular case included an ‘old school’ scheme: check alteration.

In September 2023 a bank notified the Hospital District that one of its customers, the district’s accounting clerk, had altered four district checks and used mobile deposit to deposit the funds into her personal bank account. Funds from a fifth check were also deposited—after the Clerk had been terminated.

In total, our investigation revealed more than $30,000 in misappropriation. Learn more in our published audit report (PDF).

White Pass School District 303 (published April 2025)

Serving the communities of Packwood, Glenoma and Randle along US Highway 12, the White Pass School District came under scrutiny in January 2024 when the district notified our Office regarding a potential loss of public funds related to Associated Student Body (ASB) receipts that were collected but never deposited with the county treasurer.

The secretary responsible for depositing these ASB funds acknowledged misappropriating more than $20,000 and signed an agreement to repay the district. Our published report (PDF) includes more details.

The City of Mesa (published May 2025)

While gathering documentation for a regularly scheduled audit by our Office, Mesa officials discovered several unallowable debit card transactions made by its former clerk-treasurer. City officials notified our Office of a potential loss of public funds, as required by state law (RCW 43.09.185) and filed a police report with the Franklin County Sheriff's Office, which investigated.

The investigation revealed that the former employee used her city-issued debit card to make $12,659 in personal purchases for groceries, decorations, car payments and other items. 

Mesa has a population of less than 400 people (census, 2020) and is in Franklin County.

Learn more and find a link to our published report in our blog post.

City of Mabton (published May 2025)

Alerted to a potential loss of public funds by a newspaper article detailing a robbery in Mabton’s City Hall parking lot, our Office contacted city officials to follow up. We found that the city’s police department investigated the incident, in which the city’s deputy clerk said a stranger robbed her of more than $20,000 in city funds while she was on her way to deposit the money at the bank.

The police investigation determined the thief was the deputy clerk’s boyfriend’s brother, and concluded they believed the deputy clerk, her boyfriend and her boyfriend’s brother all played a part in taking the money from the city.

As our published report (PDF) describes in more detail, our investigation revealed how internal controls at the city were not adequate to safeguard public resources, and included recommendations for improvement.  

Key resources to help your government prevent fraud 

In addition to investigating misappropriations, the State Auditor’s Office offers dozens of resources to help governments safeguard public resources and meet accounting requirements. Among them: 

• A key guide, Trust, But Verify (PDF), shows elected officials and other employees responsible for oversight how to establish effective controls and prevent fraud. 

• One of our newest guides, Follow The Money (PDF), includes the basics of banking and bank statements, including warnings from case studies SAO investigated; what to do if you spot a red flag; and a 30-minute bank statement review checklist.

• Another resource, Segregation of Duties (PDF), explains how accounting departments of all sizes can implement appropriate reviews and controls. 

• The Open Public Meetings Act (OPMA) was enacted to make the conduct of government more accessible and open to the public, which plays a key role in fraud prevention. Our OPMA guides, best practices and checklists are designed to help governments comply this legislation.