Published Friday, May 12, 2006

Audits may kill jobless help
Federal review questions $600,000
meant to assist unemployed

© 2006, The Daily Herald Co.

By John Wolcott
SCBJ Editor

The future of the Snohomish County Workforce Development Council, through which millions of dollars is provided annually for local employment and job training, is in doubt because of two failed federal audits that demand the agency repay $600,000 in misspent funds.

If not resolved quickly, the audits and other accusations threaten the flow of nearly $8 million in federal funds to Snohomish County jobs programs.

In addition to the audit demands, the agency is facing:

• A whistleblower lawsuit by a former employee who alleges she was fired for pointing out improprieties.
• The withdrawal of labor leaders from the board because of alleged poor communication.
• Charges that top management routinely withheld vital information from the agency's board of directors.

A two-week investigation of the charges against the nonprofit organization by the Snohomish County Business Journal, including interviews with a dozen sources close to the situation, show that most of the directors on the agency's board had not been informed about the audits, lawsuits or other issues.

Agency director and chief executive officer Lorinda Causey downplayed the severity of the audits Wednesday.

"What you're telling me about what you're hearing in the community sounds much more severe to me than where we're actually at," she said.

She said the monitoring audits are not final because there is still "a review period, so the decision on whether the questioned expenditures will be disallowed isn't final. ... And our conversations with labor are still occurring."

The agency, formed in 1999 under the federal Workforce Investment Act of 1998 to consolidate 70 different employment and training programs, is a governing group with a board representing Snohomish County government, chambers of commerce, education, labor and economic development sectors.

If the agency is not recertified for the 2006-07 fiscal year by June 30, it will be closed, state officials said. A closure would cut off nearly $8 million in federal funds earmarked for the county.

Problems began surfacing in the summer of 2005, including two audits that disallowed the use of more than $600,000 in federal funds that will need to be repaid if the expenses cannot be justified by the agency. Since the agency has no money to cover repayment, Snohomish County government could wind up with the bill.

Last July, a monitoring audit by the state Employment Security Department questioned the use of $183,000 in federal funds for three business conferences, including one at which nationally known management consultant Tom Peters was paid $50,000 for his presentation.

The money was intended to help jobless people find work.

In September 2005, the agency's former finance director, Deborah Anderson, filed a civil lawsuit in U.S. District Court against the agency and its chief executive officer, Causey. Anderson alleges she was fired after she raised issues "about WDC budgetary improprieties" with outside auditors.

Anderson alleges that after the board of directors approved a balanced budget, she was asked by Causey to create "a second, inflated budget" that would be used for operating the agency.

In March, the agency received a report from the U.S. Department of Labor questioning the use of more than $430,000 in federal job funds for expenses not allowed under federal guidelines.

On April 17, the Snohomish County Labor Council voted to withdraw from the agency, citing the audits, the ongoing lawsuit by the former finance director and the withholding of "vital decision-making information" by Causey and board chairwoman Liz Marks.

On April 26, Snohomish County Deputy Executive Mark Soine wrote to each agency board member, noting the audits and the failure of the Workforce Development Council to apply for recertification for the coming fiscal year.

He asked them to "review the management and oversight of the operation" and to provide the county executive with a plan to address those problems by May 10. Soine said Marks did provide a report to him on that date, but he wished "it had more meat on it."

The Everett Area Chamber of Commerce board, another significant member of the agency, sent a letter to Soine on Thursday agreeing to remain on the board to work to resolve the issues. But it said it would do so only if "steps are taken" to:

• Replace Causey and Marks;
• Recertify the agency by the June 30 deadline; and
• Get Snohomish County to commit to helping rebuild the council, said Louise Stanton-Masten, chamber chief executive.

"I really want to emphasize the willingness of the Everett chamber to continue to being engaged in ongoing conversations with the county and business, education and labor organizations ... to resolve the current management and leadership issues," she said.

Jean Hales, president and chief executive of the South Snohomish County Chamber of Commerce, said that her board, too, had voted to remain a member of the agency and to work for the restructuring of the organization.

Without a labor representative on the agency's board, federal regulations will not allow recertification. Also, Ellen O'Brien Saunders, executive director of the state Workforce Training and Education Coordinating Board, said the agency is already late in submitting its certification applications, which were due March 30.

"The 90 days to the end of June just provides time for the state's review and approval," she said. "It's not time available to county WDCs."

Saunders said the Snohomish County workforce council "is the first of the 12 councils statewide to ever miss filing for recertification."

Saunders said the audits and the board's recertification will be "topics on our May 23 board meeting agenda," adding that "the question of certification is continuing to be addressed and will move forward."