Treasury issued demands for repayment to the county and the state of Washington in two separate “notice of recoupment” letters dated Aug. 14. The letters detailed 36 confirmed cases of payments to ineligible recipients, which Thurston County had initially flagged to the agency in August 2023.
This story is a part of Cascade PBS’s WA Recovery Watch, an investigative project tracking federal dollars in Washington state.
While Thurston is thus far the only county in the country that the federal government has demanded return program funds due to fraud, a Treasury spokesperson wrote in an email that the agency has received more than 10,000 complaints of misuse of funds. Most of those complaints correspond to individual payments.
Thurston County has already repaid about $250,000 from the program's first round, according to housing program manager Tom Webster. County officials asked Treasury for leniency on improper payments stemming from the program’s second round, but in a Nov. 13 memo the agency’s internal watchdog recommended recouping the entirety of the fraudulent payments.
Congress gave over $45 billion to local jurisdictions to bail out renters and landlords as part of multiple economic stimulus packages passed in response to the COVID-19 pandemic. Some 10 million renters received aid, in some cases covering more than one year’s worth of rent.
In an effort to get money out quickly, Treasury eased rules to allow for self-attestation of eligibility. In a June 4 letter, Thurston County Manager Leonard Hernandez wrote that the self-attestation guidance as well as Treasury directives to distribute the funds promptly made fraud prevention difficult.
“The balance between expediency and thoroughness in verifying applications has been a challenging one,” Hernandez wrote. “We respectfully request that Treasury consider the broader context within which these suspected fraud cases occurred.”
The recouped funds account for about 1.2% of the roughly $53 million Thurston County distributed in emergency rent assistance between 2020 and 2022.
Slides from an Oct. 9 budget meeting suggest the money will come out of Thurston County’s general fund. Hernandez did not respond to follow-up questions posed by Cascade PBS.
When the ineligible payments occurred, the program was managed by Community Action Council of Lewis, Mason and Thurston Counties, an area nonprofit social service provider. Cascade PBS previously reported that the county terminated its contract with the nonprofit during a closed-door meeting, and shut down its rent assistance program for over two months in early 2022 after a routine audit found six examples of alarming payments.
Community Action Council initially disputed that any fraud occurred on its watch, and the county cited its “insufficient response” to the audit findings to justify terminating the nonprofit’s contract. Community Action Council was reached by email Thursday but declined to comment.
Hernandez told Thurston County Commissioners at the Oct. 9 budget meeting that Community Action Council was in talks with its insurance carrier regarding the funds.
Treasury officials have also issued letters demanding repayment or questioning costs to the state of Missouri for $24,600 and the state of Michigan for $11,400, according to reports on the Treasury’s website.
Many jurisdictions across the country forfeited millions back to the feds because they failed to spend it fast enough, in some cases due in part to strict fraud controls. Yakima and Spokane counties lost a combined $3 million in 2022 after they missed spending deadlines.
The extent of fraud that affected emergency rental assistance programs can be difficult to pin down, but existing data suggests fraud is rare. A King County internal audit in 2022 found 130 examples of potentially improper payments, totaling less than 1% of total funds distributed.
Find tools and resources in Cascade PBS’s Follow the Funds guide to track down federal recovery spending in your community.
Washington’s Department of Commerce oversaw the distribution of more than $800 million in rent assistance to counties. A Commerce spokesperson told Cascade PBS that the agency is monitoring 118 instances of fraud reported to them – including two related to a property management company that operates in the state and is currently under federal investigation.
Adam Wilson, a spokesperson for the State Auditor’s Office, wrote in an email that it is uncommon for the federal government to recover money like this, and the office was not aware of any recent comparable examples. He added that the Auditor’s office “formally commended” Thurston County for identifying the issue themselves and notifying them.
“We did not issue an audit finding,” he wrote, “because they were appropriately monitoring their subrecipients and identifying issues.”
Correction: This story has been updated to clarify that the state Department of Commerce receives fraud reports from counties and nonprofits, not just counties.
