Whidbey General Hospital officials failed to file complete financial reports with the Washington State Auditor’s Office for three years in a row, a violation of state law.

As part of a special report on local government transparency, the auditor’s office released a list last week of local government agencies that have been late in filing the required reports, have filed incomplete reports or failed to file at all in the years 2011, 2012 and 2013.

“I hope this report highlights the importance of transparency and accountability for all local governments, not only in meeting their legal requirements,” Auditor Troy Kelley said in a statement, “but in meeting the expectations of the people they serve.”

A total of 11 local government bodies in Island County were on the list, but they are all small bodies — water, sewer, cemetery and drainage districts — except for the hospital and the Island County Emergency Services Communications Center.

Hospital officials did not file financial reports in 2013 or 2012; they filed an incomplete report in 2011.

The hospital has $112 million in operating expenses for 2015 and a projected loss of $4.9 million, which will be covered by reserves.

Whidbey General Hospital Chief Financial Officer Frank Hemeon, who started in the position last year, provided comments on the auditor’s report in an emailed statement.

“Whidbey General Hospital is committed to transparency in finances and to meeting all regulatory requirements,” he wrote.

Hemeon explained that Whidbey General Hospital, as required by law, has two audits each year. One is conducted by state auditors and the others is an independent audit conducted by Moss Adams.

Both audits are public records and are presented to hospital commissioners.

“In the case of Whidbey General Hospital, the appropriate audits have been conducted in a timely manner but not uploaded to the state website,” Hemeon wrote. “At no time was this identified in a state audit as an area of significant concern.”

But Thomas Shapley, a spokesman for the auditor’s office, said that the audits and the financial reports are two separate issues that shouldn’t be confused. The law requires governmental agencies to file financial reports with the auditor’s office within 150 days after the end of the fiscal year.

He explained that it normally takes longer than 150 days after the end of a fiscal year for audit reports to be released; as a result, lawmakers require the timely reporting of financial reports so that more current information is available. He said the reports are public and are used by state lawmakers, lending agencies and citizens.

“If you live in a district, it’s pretty tough to hold leadership of the district accountable if you don’t know what the numbers are,” he said.

Also, Shapley explained that some of the smaller districts don’t have regular, in-person audits, so the financial reports are the only way for the state to look at the books. This doesn’t apply to the hospital, however.

Tom Shaughnessy, director of Island County Emergency Services Communications Center, said the agency had trouble filing in the past because of a software glitch that has since been fixed.

Whidbey General, ICOM and the smaller districts aren’t alone in noncompliance. Almost 300 of nearly 2,000 local government entities have missed the deadline or failed to file for three consecutive years. Among those are 22 of the state’s 58 hospital districts.

Shapley said audits could have issued official “findings” in auditor reports to all the noncompliance entities, but he said it seemed like too stern an approach and would have upset many local government officials. Instead, Kelley issued the report as a more gentle way to coax compliance.

Shapley said there isn’t any penalty for noncompliance. The auditor’s office is a reporting agency, not an enforcement agency, he said.

“It’s up to the constituents to hold local government accountable,” he said.

According to Hemeon, complying with the law isn’t a simple matter.

“A substantial amount of financial data must be manually reformatted and uploaded to the state website,” he wrote. “Attempted uploads are sometimes unsuccessful, adding to the amount of time and resources required to comply with regulations.”

“Despite these obstacles, we will continue to work with the state to fulfill our regulatory requirements at all times,” he added.

Shapley said that his office provides free, in-person, annual classes to local governments with the goal of helping them file their annual reports. Trainers traveled to all 39 counties in early 2014 to train employees and managers representing more than 600 local governments.

In addition, he pointed out that most of the much smaller districts, with very limited resources, manage to meet the requirement.

Shapley also said the reports can be simply mailed in, though he said the auditor’s office would greatly prefer the information be entered online.

The Auditor’s Office issued a formal finding against the hospital in 2014.

Auditors found that the hospital made more than $180,000 in overpayments to employees and employees accrued nearly 23 hours of unearned time off in 2012 and 2013. Auditors found that the hospital had inadequate controls over the payroll system.

The overpayments were repaid before the audit report was issued.