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UPDATE: City says no wrongdoing in finance director's firing

2018 audit showed problems with finances; Scott James becomes the fourth director to leave Edmonds within a year


Last updated 6/4/2020 at 1:45pm

Scott James

Scott James, Edmonds' finance director since March 2014, has abruptly left the City after being fired by Mayor Mike Nelson.

According to a separation agreement obtained by the Beacon, which James signed May 18 and Nelson May 27, James has agreed to a gag order in exchange for severance pay equal to six months salary and payment for any unused leave.

James's salary was $164,000 a year. His official last day with the City was Monday, June 1.

In accordance with federal law, James is eligible for six months of COBRA insurance coverage effective July 1. Both the salary and insurance are being paid in one lump sum.

The gag order means James agreed not to speak with the media or make disparaging statements about the City regarding his separation. He also agreed not to seek re-employment with the City of Edmonds.

Nelson confirmed James' departure on Wednesday, May 27, but would not provide details.

"Scott James is no longer working for the City," he wrote in an email. "I have made Dave Turley the acting finance director. I appreciate Scott's service to our City and wish him the very best in his future endeavors."

The City's directors are at-will employees, meaning they can be fired or can quit for no reason. Nelson has not explained the reasoning for James' departure. The agreement, however, stated that James agreed that his separation was not an admission by the City that he violated any law or failed to fulfill any of his doing.

The City specifically denies any wrongdoing in the agreement.

Audit report

According to the State Auditor's Office audit of City finances from Jan. 1 to Dec. 31, 2018 – issued Sept. 16, 2019, when Dave Earling was mayor – the City's internal controls were not adequate to ensure financial reporting.

The audit spelled out several deficiencies, including:

– The City did not have adequate controls to ensure accounting pronouncements related to post-employment benefits and pensions were implemented correctly; and

– Although the City has taken significant steps to make improvements in its controls over the capital asset accounting system, the report noted that the "current process does not ensure its accounting records align with its operational (public works and utility) records for tracking, monitoring and maintaining city-owned assets. Additionally, the City could not demonstrate that an annual inventory of capital assets was completed of all departments as required by its Capital Asset Policy."

In its response to the SAO report, the City acknowledged that "it did not have sufficient controls in place to ensure that our financial statements were free from error. We concur that the deficiencies identified, when taken together as a whole, represent a material weakness in our financial processes."

The City agreed to take corrective action to fix its accounting issues, with a deadline date of May 30, which was this past Saturday.

At the City Council meeting on May 26, council president Adrienne Fraley-Monillas and councilmembers Luke Distelhorst, Susan Paine, and Laura Johnson, voted in favor of the separation agreement. Councilmembers Diane Buckshnis, Vivian Olson and Kristiana Johnson voted against it. The agreement was approved with the 4-3 vote.

Director since 2014

James came to the City with an extensive background, most recently as finance director of the City of Mukilteo. Before that, he was financial director for the City of Sunnyside, Washington.

He was a staff accountant for the City of Edmonds from 1998 to 2005.

In Edmonds, James was instrumental in Standard & Poor's Global Ratings' assigning its coveted "AAA" long-term rating to the City of Edmonds, a first in the city's history.

The bond rating represents the highest level of creditworthiness a municipality can achieve and allows the City to borrow money at the lowest commercial interest rates possible.

Fourth director in a year to leave

James joins three other City directors – Police Chief Al Compaan, Carrie Hite from Parks and Recreation and Mary Ann Hardie from HR – as directors who have left the City in the past year. Compaan retired shortly before Nelson entered office for his first term in January. He was replaced by Jim Lawless, who is now acting police chief.

Hardie left for the same position in Lacey, in Thurston County, and had been the target of several acrimonious council discussions between City staff and councilmembers on then-Mayor Dave Earling's proposal to give raises of 8% (which included a 3% cost-of-living bump) to seven City directors and two assistant police chiefs.

At a council meeting in May 2019, Earling said that, " ... one of our councilmembers disparaged the City's director of Human Resources by claiming she had failed to fulfill her job duties, had provided false information, and had acted out of her own self-interest by recommending salary levels per City directors to the council."

Hite resigned last June to take a Parks and Rec director position in Redmond.

"There seems to be a lot of uncertainty and instability in Edmonds," she said at the time. "I know this often happens with the ebb and flow of politics, and I certainly understand and am prepared for that in my role as a municipal leader.

"This particular time in the political environment in Edmonds seems different to me. The relationship the council has with the administration has been impactful to staff, City processes and policies. It is difficult to navigate this and feel a sense of teamwork and security."


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