KINGSTON — Kingston Chamber of Commerce President Donna Etchey is calling the gaffe a “procedural oversight.” But an internal audit’s discovery that the chamber didn’t pay payroll taxes in 2010 and 2011 prompted the resignation of the chamber’s board treasurer in January, the renewed use of accounting software, and development of new accounting procedures.

Etchey said the chamber is working on a payment plan with the state Department of Revenue and the U.S. Internal Revenue Service; she said the chamber could owe between $8,000 and $15,000. The chamber is asking members to help with “a special one-time contribution” so the chamber can pay the money back without its budget taking too big of a hit.

Etchey said the chamber’s annual budget is about $60,000.

Etchey, who was acting president in 2011 and is president this year, is publisher of the North Kitsap Herald and Kingston Community News. She said an audit committee — consisting of her, a board member and two chamber members — conducted the audit because one hadn’t been done in accordance with the chamber’s bylaws.

“In October or November, we reviewed the books,” she said. There were no records on Quickbooks, the chamber’s business accounting software system, and the audit committee had to “rebuild the records,” Etchey said.

“By December, we found it,” she said of the error. “We initiated contact with the state and the IRS. We have all of 2011’s records, we’re working on 2010, and we’re still piecing 2009 together.”

Etchey characterized the negotiations with Department of Revenue and the IRS as “very positive.”  Day to day accounting, formerly handled by the treasurer, is now handled by the executive director with oversight by the board treasurer. The treasurer is responsible for payroll deductions.

The former treasurer, Christine Conners, said she was never fully trained in Quickbooks. “I pretty much self taught,” she said. She said she produced a monthly profit-and-loss statement for the board.

Conners credited the payroll-deduction snafu to “a complete lack of knowledge of the Quickbooks program. It’s a good thing we had that audit.”

Quickbooks produces a report that shows how much an employer should deduct from an employee’s check for Social Security, Medicare, unemployment and L&I, Etchey said. The chamber has one employee.

Etchey said Conners paid the Department of Revenue, usually after the chamber received a bill. But the audit committee could find no evidence that the IRS was paid, even though deductions were made from the executive director’s paycheck.

During her three years as treasurer, Conners worked for Kitsap Credit Union and later joined SoundRunner as assistant business manager. She said she resigned as treasurer because she was “so busy” and “It was hard to keep up with everything. There is a new board, and I thought it best to have a new treasurer take over.”

But Etchey said she asked Conners to resign. The new board treasurer is Eva Monlux of Stanley Steemer in Kingston.

Despite the financial gaffe, Etchey said the chamber is in good shape. “In 2012, we got seven new board members and they bring a lot of strengths to the table,” she said.

“The Kingston chamber got an additional $2,000 in hotel-motel tax revenue because of its location. It’s a very vital part of the community — not just Kingston but the North Kitsap area. In 2011, 2,850 people walked through our door for information.”

In 2010, the chamber office had 1,986 visitors. In 2007, the year it opened its office, it had 742 visitors. Prior to 2007, the chamber had a desk at the Community Center. In July 2009, the chamber executive director position went from contract employee to payroll employee.

“We’re kind of growing up,” Etchey said.