Mason County officials underreported cash balances in its external investment pool by approximately $14 million while simultaneously overstating the custodial fund by the same margin, according to a recent assessment by the Washington State Auditor’s Office. The discrepancies stemmed from the county’s failure to fully document specific investment transactions. These errors, which impacted the 2025 calendar year, did not alter the total combined balance of the county’s fiduciary funds, and the county has since rectified the figures.
The auditors determined that the county’s internal processes for preparing and reviewing financial statements were insufficient to detect misstatements related to the purchase and sale of investments. The report attributed this oversight to a lack of adequate staff time and resources dedicated to verifying that all fiduciary activities for the year were included in the statements. Consequently, county personnel relied on incomplete financial data when calculating reported external investment activity.
State auditors labeled this control failure as a "significant deficiency." This classification indicates an issue less severe than a material weakness but significant enough to warrant the attention of county oversight bodies. No material weaknesses were identified in the broader financial reporting.
The funds involved hold money managed by the county on behalf of third parties. Financial notes indicate that the custodial accounts manage collections and distributions for various entities, including school districts, fire districts, and port authorities. Reporting standards mandate that external investment activity be recorded separately from cash held in these custodial accounts.
Specifically, the county’s submitted statements showed an underreporting of $52,478,157 in additions to the external investment pool fund and $38,536,271 in deductions. This resulted in the fund’s reported cash balance being $13,941,886 lower than the actual amount. Conversely, the custodial fund exhibited the opposite error, with additions understated by $38,536,271 and deductions understated by $52,478,157, causing its ending cash balance to be overstated by $13,941,886.
To address the issue, auditors recommended that the county allocate sufficient staff time and resources to perform comprehensive reconciliations prior to submitting financial statements for audit. In its written response, the county stated it would revise its financial statement procedures and supporting documentation and would engage an external certified public accountant for assistance and review. The county expressed confidence that these measures will prevent a recurrence of the error and set May 30, 2027, as the target date for completing corrective actions. The State Auditor’s Office plans to monitor the county’s progress during the next audit cycle.
The auditors issued an unmodified opinion on the financial statements based on the state-prescribed cash-basis accounting framework. However, a separate adverse opinion was issued under generally accepted accounting principles due to the county’s use of a different accounting framework. No material noncompliance with financial statement regulations was reported.
The federal portion of the audit also yielded an unmodified compliance opinion for the Highway Planning and Construction program, the only major federal program examined. No federal award findings or questioned costs were noted. Additionally, the report included a separate update regarding a 2024 finding related to verifying contractor eligibility for federal funds. The county reported that this issue has been fully resolved by updating its purchasing policy, adding a certification to vendor forms, and initiating checks of federal exclusion records before making purchases with federal funds.
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