State Audit Finds Multimillion-Dollar Errors in Mason County Fund Reporting

Mason County understated cash in its external investment pool fund by nearly $14 million and overstated cash in its custodial fund by the same amount after failing to fully report investment transactions, according to a Washington State Auditor’s Office report.

The errors did not change the combined ending cash and investment balance in the county’s fiduciary funds, and the county subsequently corrected them, auditors said.

The audit covers the 2025 calendar year. It found that the county’s procedures for preparing and reviewing financial statements failed to catch misstatements involving investment purchases and sales.

Auditors attributed the problem to insufficient staff time and resources devoted to ensuring that the statements included all fiduciary activity for the year.

County employees used incomplete financial information to determine the amounts reported for external investment activity, the finding says.

The state classified the control failure as a “significant deficiency,” a problem less severe than a material weakness but important enough to require the attention of those responsible for county oversight. Auditors identified no material weaknesses in financial reporting.

The affected funds account for money the county holds or invests on behalf of others. The county’s financial notes describe custodial accounts that include collections and distributions for school districts, fire districts, ports and other governments. Reporting rules require external investment activity to be accounted for separately from cash held in custodial funds.

In the statements submitted for audit, the county underreported additions to the external investment pool fund by $52,478,157 and deductions by $38,536,271. That left the fund’s reported cash balance $13,941,886 too low.

The custodial fund had the reverse problem: additions were understated by $38,536,271 and deductions by $52,478,157, leaving its ending cash balance $13,941,886 too high.

Auditors recommended that the county devote adequate staff time and resources to comprehensive reconciliations before submitting its financial statements for audit.

In its written response, the county said it would revise financial statement procedures and supporting workpapers and consult an external certified public accountant for assistance and review. It said it believes those changes will prevent the problem from recurring.

The county listed May 30, 2027, as its anticipated completion date for the corrective work. The State Auditor’s Office said it would review the county’s progress during the next audit.

Auditors issued an unmodified opinion on the financial statements under the state-prescribed cash-basis accounting framework. A separate adverse opinion under generally accepted accounting principles reflected the county’s use of a different accounting framework. Auditors reported no noncompliance material to the financial statements.

The federal portion of the audit also resulted in an unmodified compliance opinion for the Highway Planning and Construction program, the sole major federal program examined. No federal award findings or questioned costs were reported.

In a separate update included in the report, the county described a 2024 finding involving checks on contractors’ eligibility to receive federal funds as fully corrected. The county said it had updated its purchasing policy, added a certification to vendor forms and begun checking federal exclusion records before purchases using federal money.