State Auditor confirms overpayment in PUD case

by Mark St.J. Couhig
Sequim Gazette

A Fraud Investigation Report issued in early November by the Washington State Auditor's Office (SAO) says a former Public Utility District No. 1 of Clallam County (PUD) employee "was paid $24,726 for which he was not eligible."


The employee, Timm Kelly, is the husband of Cindy Kelly, who was recently defeated in her bid for a seat on the PUD board.


The report says that in February 2012 the PUD advised the SAO that a possible loss of public funds had occurred. The PUD also told the SAO it had researched the case, including paying for an investigation by an outside investigator.


Following the investigation, the PUD said Timm Kelly, then a line foreman in the district's Forks service area, had violated the district's residence policy.


The PUD requires certain employees, including "first responders" who work in a designated service area, to reside within the boundaries of the service area. To make the deal more palatable, they provide an "outpost" stipend.


In addition to his $42.50 per hour PUD pay as a line crew chief, Kelly was receiving $550 per month to live in Forks.


PUD spokesman Michael Howe said the PUD provides the stipend to those who are required to live on the West End to encourage local residents "to train for the family wage linemen jobs." He added that for those who reside on the east side of Clallam County, living in the West End can be a hardship.


After taking the job in 2007, Kelly moved a mobile home onto a friend’s property outside Forks.


In 2010 he became president of the IBEW Local 997 — Port Angeles, a job that required him to spend more time in Port Angeles, he said.


According to the hearing documents, PUD employees approached Kelly’s PUD superintendent, Dennis Shaw, in 2011 to question Kelly’s ability to be the Forks line foreman while living in Port Angeles. The hearing report states, “…these employees expressed concern and disillusionment with what they perceive as claimant’s ability to ‘bend the rule’ with regard to the residency requirement.”


Following the PUD's investigation, Kelly was suspended and later discharged from the PUD. Kelly's application for unemployment compensation was later denied.


Following his suspension and discharge, Kelly filed a grievance against the PUD with the state Public Employment Relations Commission.


The grievance claims he lost his job as line crew chief in Forks as a reprisal for his union activities. A complaint also has been filed by the International Brotherhood of Electrical Workers against the PUD, with a hearing set for December.

Seeking compensation

Kelly appealed the denial of unemployment compensation payments and appeared before the state Employment Security Board in June to argue his case.


During the hearing Kelly claimed he was able to handle emergencies in Forks while out of the region. Additional information filed indicated that the resolution of some outages was delayed due to his being away from Forks.


During his testimony, Kelly said he lived about 50 percent of the time in the Forks service area prior to 2010, when he became president of the IBEW.


Since then, he said, he had lived about 20 percent of the time in Forks and 80 percent at the residence he and his wife maintain in Port Angeles. His union duties required him to spend more time away from Forks, he said.


Information provided in publicly disclosed testimony from the unemployment hearing shows he also was compensated for his service as the local IBEW president.


The SAO recommended the PUD seek from Kelly or its insurance bonding company the overpaid stipend. They also suggested seeking compensation for the SAO-related investigation costs of $1,588.40 and any investigation costs the PUD incurred.


The PUD is currently looking into the possibility.


The SAO report also recommended that the PUD strengthen internal controls to ensure adequate oversight and monitoring of stipend pay. Howe said the PUD recognizes the importance of adequate internal controls and agrees with recommendations in the report. "The district advised the SAO that it has implemented an annual residency verification process," Howe said.


The SAO is referring the case to the Clallam County Prosecutor’s Office for any action deemed necessary.


Reach Mark Couhig at


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