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Originally published October 31, 2012 at 7:16 PM | Page modified November 1, 2012 at 12:07 PM

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Seattle lax in tracking federal grants, state auditor concludes

State Auditor Brian Sonntag's report on Seattle's administration of federal grants in 2011 faults the city for lacking internal controls and any centralized approach to ensure the money was adequately tracked.

Seattle Times staff reporter

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In a scathing report released Wednesday, the state auditor found significant deficiencies in how the city of Seattle monitored and administered millions of dollars in federal grants in 2011.

The report from State Auditor Brian Sonntag repeatedly faults the city for lacking internal controls and any centralized approach to ensure that federal money was adequately tracked and going toward the intended purpose.

It said city staff lacked training on complicated federal grant requirements, that competitive bid processes sometimes weren't followed and that staff didn't always check that subcontractors were performing the work for which they were reimbursed.

The lack of internal controls over financial transactions has been a theme of auditor reports for the city of Seattle over the past several years. The current report notes that the city is taking steps to improve its monitoring and reporting responsibilities.

But the auditor repeated his recommendation from a year ago that the city establish centralized oversight of financial management and grant compliance.

Finance director Glen Lee said the proposed 2013 city budget includes a new position responsible for citywide accounting and financial controls. The City Council currently is finalizing the budget.

Lee said the audit did not find that federal money was misappropriated, but he acknowledged that in four instances, in three different departments, the city had "less than ideal monitoring and not as tight a review of expenses" as it should have had.

Councilmember Tim Burgess, chair of the Government Performance and Finance committee, said the city is developing a new centralized computing system with enhanced financial monitoring.

But after a decade of decentralization, he cautioned, "It's a massive change for the city, and it's going to take another year or two before it's fully implemented."

The audit found problems with four federal grants that it reviewed. About $1 million went to the Office of Economic Development (OED) for a new Healthy Foods Here program in partnership with Public Health — Seattle and King County.

Grants were awarded to grocery stores in neighborhoods where fresh fruits and vegetables were scarce. The city purchased equipment, including refrigerators, but didn't track that the equipment was used for the program, the audit report said.

The city also did not use competitive bids before purchasing up to $125,000 of grocery-store supplies and equipment, in violation of city and federal procurement rules.

The Human Services Department also was faulted for its handling of two other federal grants, one for transition housing for homeless people and another of Community Development Block Grants for housing and economic development.

The audit report said the department paid $3.3 million to housing service providers without receiving adequate documentation. It also said department staff members relied on information from service providers about how the money was spent rather than verifying it themselves.

The audit questioned $266,500 spent by one grant recipient. The report said the federal government could request a refund of any expenditures that weren't adequately documented.

Lynn Thompson: 206-464-8305 or lthompson@seattletimes.com. On Twitter @lthompsontimes.

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