A Washington state audit criticizes a small Eastern Washington irrigation district for borrowing $40,000 at 6% interest from three of its commissioners to replace a pipe.

The loan to the Palisades Irrigation District in Douglas County violated the prohibition against public officials having a financial interest in government contracts they've participated in awarding, according to an auditor's office report released Thursday.

In a letter to the auditor's office, the irrigation district said it would adopt procedures to avoid conflicts of interest.

"We accept full responsibility for our actions," the letter states. "We apologize for our ignorance of the law in this case and we are willing to take immediate steps to prevent any further infractions."

The district serves about 600 acres. In spring of 2015, the mainline could no longer deliver water across the 8-mile-long district and needed to be replaced, the district's secretary, Sarah Hale, said Friday in an interview.

The project was expected to cost $44,000, more than double the district's annual budget of about $20,000, according to Hale and the auditor's office.

The district sought loans from three banks, but were rebuffed, she said.

"The only options were no water or self-funding," Hale said.

According to auditor's records, one commissioner loaned $20,000, while the other two loaned $10,000 apiece. At the beginning of this year, the district owed the three commissioners $10,373. The loan is due to be repaid in mid-November.

Hale said the district is paying the same interest rate as was being offered by the banks.

The auditor's office also faulted the irrigation district for not following formal bid procedures.

"The district could not show it adequately safeguarded public resources by ensuring it received the best price for goods and services and contracted with the lowest responsible or most highly qualified bidder," according to the auditor.

Hale said the district obtained three quotes and hired an excavator that submitted the lowest one.

The district in its letter to the auditor's office promised to also adopt polices on hiring contractors. "It is our desire to operate our irrigation district with professional integrity and in compliance of all laws," the letter states.

The district has two part-time employees.

The auditor's office said it expects the district to undergo training and to tighten its policies and record keeping, but did not indicate that it would take further action. 

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