An examination into the operations of the Fort Worden Public Development Authority has uncovered “two very serious financial irregularities,” the co-chairs of the agency’s board said in a recent letter to the Port Townsend City Council.

Officials with the Fort Worden PDA announced last month the public entity was in a financial crisis, with millions of dollars of debt due after funding for construction projects had been been diverted to day-to-day operations.

The meltdown prompted a reorganization earlier this month by the  PDA in a bid to stay afloat.

But while leaders of the agency have shared little publicly on the intricate details of the PDA’s fiscal dilemma — focusing instead on maintaining public support for the embattled agency while pinning much of its monetary woes on impacts from the COVID pandemic — the board offered city officials a more unvarnished assessment of the agency’s situation in a Nov. 16 letter to Port Townsend’s mayor and city council.

A copy of the letter was released to The Leader last week by the city and the PDA in response to a public records request by the newspaper. The contents of the letter were previously published on the online blog, Port Townsend Free Press.

In the letter, Norm Tonina and Todd Hutton, co-chairs of the PDA board, noted the “financial irregularities” that had been made public.

“We are acutely aware of the criticisms that have been expressed about the state of the PDA,” the pair wrote to the mayor. “We have heard from you and the city manager that there has been a lack of accountability at the PDA.”

Tonina and Hutton, however, said they had not been trying to dodge responsibility for what’s happened with the agency. They added a fundraising campaign was being conducted to raise money to keep the fort running. 

“We both have the commitment to continue in our roles and believe that we have the experience and knowledge to lead the PDA out of this crisis,” they wrote. “We have devoted ourselves nearly full-time to the PDA, and have acted with due deliberation in responding to net revenue shortfalls and audit findings, rethinking the future business model required for a long-term sustainable operation, confronting personnel problems, addressing financial irregularities that were uncovered, working in the face of impossible odds to find solutions to the collapse of revenue due to COVID shutdowns and restrictions, and collaborating with our Fort Worden partners to re-imagine business and governance models.”

The pair also noted in the letter the financial irregularities that had been found, adding that the Port Townsend Police Department and the Washington State Auditor’s Office had been notified of the “alleged fraud.”

The suspected fraud involved two cases that totaled just more than $10,000, according to the letter.

Tonina and Hutton wrote the “potential malfeasance” was being addressed by the hiring of financial experts to review the agency’s books.

They said the PDA had “engaged the services of a forensics accountant, who is also a certified fraud investigator, to verify the PDA’s preliminary findings, and we sought the counsel of a retired assistant district attorney who headed up a white collar crime unit.”

Board members said they were shocked when they were told of the PDA’s financial crisis in late October by David Timmons, who was then serving as acting associate executive director but has since been made interim director.

In the letter, Tonina and Hutton cast blame on Dave Robison, the PDA’s former executive director who retired in November.

“We are well aware that we have been criticized for not taking more decisive action regarding the now retired executive director’s apparent lack of oversight of key staff,” Tonina and Hutton wrote in the letter to the city, which is the charter holder for the agency. 

“Actually, we did take decisive action about which you are aware. As a result of our investigation and performance review, the former executive director was relieved of personnel and financial management responsibilities,” the pair noted. “We did not, however, show our executive director the door, which is what some in the community wanted and expected.”

Tonina and Hutton said Robison was not terminated because they “wanted to respect an individual’s intention to retire within a few months after a more than 30-year career serving Port Townsend in various capacities.”

They also said they needed Robison’s expertise on ongoing PDA projects and issues during the transition.

“And it should be noted that we have discovered zero evidence that the former executive director had knowledge of or participated in the alleged fraud incidents. In retrospect, we would make the same humanitarian and business logic decision, even though we have experienced scorn for that decision,” Tonina and Hutton said in the letter.

The pair also noted in the letter that they had been transparent in their financial reporting to the PDA’s board, but details of the alleged fraud had not been made public because of the ongoing investigation and the potential for a lawsuit.

“We had been asked by the Port Townsend Police Department and the State Auditor’s Office not to reveal publicly that we had reported information that suggested alleged fraud due to possible negative impact on an active ongoing investigation and potential future litigation,” they said in the letter.

The board co-chairs closed the letter to the city by noting the financial impact that the COVID-19 pandemic has had on the agency, and complained that the city had not offered any assistance to the PDA.

“We feel it is important to stress, contrary to some people’s beliefs, the reason the PDA is in this financial situation is due to COVID and our adherence to the necessary state restrictions that are still ongoing. As a result of the closure of Fort Worden State Parks in March and the ongoing restrictions, the PDA has lost upwards of 90 percent of its 2020 revenue.

“The financial irregularities that we uncovered have exacerbated the situation, to be sure. As co-chairs, our regret — our mea culpa — is that we have not advocated with the city more forcefully for the PDA during this crisis,” they wrote.