Fraud

Since 2016, Washington’s governments have reported more than $37 million of lost public funds as a result of cyberfraud, sometimes referred to as phishing, spearfishing or business email compromise schemes. In these schemes, an external threat actor contacts the government, appearing to be a known source such as an employee, upper-level manager, vendor or other business associate. Government staff are convinced to redirect valid payments to the external threat actor, or to purchase gift cards and provide them with the card numbers.  

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. 

A pair of small towns in Eastern Washington lost tens of thousands of tax dollars to employees who spent the money shopping online and on other unallowable purposes, the Office of the Washington State Auditor has found. 

As technology evolves, so does fraud… right? The last five years have revealed new schemes and new ways to make those schemes a bit easier with the widespread use of artificial intelligence (AI), deepfake technology and even generative AI sites with chatbots ready to help would-be fraudsters with their schemes.  

With all this technology at hand, anti-fraud professionals have been surprised at the dramatic rise in a less-sophisticated scheme: external check fraud.

Every year, the Special Investigations Team at the Office of the Washington State Auditor investigates misappropriation in all types of governments, from large state agencies to small towns and special purpose districts. So far in 2024, our Office has issued 17 fraud investigation reports representing more than $2.2 million in misappropriated or questionable uses of public resources. 

No matter the type or size of your government, fraud could happen to you and, if left undetected, it could have significant financial implications. 

Since 2019, the Office of the Washington State Auditor has reported more than $2 million in public funds that were misappropriated through purchase card schemes. Purchase cards are convenient for local governments because they can significantly reduce the volume of purchase orders, invoices, petty-cash transactions and checks that governments need to process. But they also carry a high risk of fraud, waste and abuse. 

The clerk-treasurer of a small city in the Cascades misappropriated more than $900,000 in public funds over nearly a decade, despite warning signs that improper activity was occurring, the Office of the Washington State Auditor found in a fraud report issued today.

A Washington state employee misappropriated nearly $900,000 through fraudulent credit card purchases, the Office of the Washington State Auditor found in a fraud report released today. It is the largest internal misappropriation in a state agency in at least the last 15 years.

The report identifies $878,115 in misappropriations between 2019 and 2023 at the Office of Administrative Hearings (OAH).

Misappropriation of public funds and fraud cases have surged in just the past year due to remote work, artificial intelligence and other factors. ProPublica recently spoke with SAO's Brandi Pritchard to find out more and she shared her expertise gleaned from many years of experience to answer questions including:

Five years ago, the Office of the Washington State Auditor advised the town of Cusick that it had inadequate controls over its payroll and credit cards. Had the small government followed its audit recommendations then, it likely could have avoided more recent, and much larger, losses.