PORT ANGELES — The state Auditor’s Office has given the city a clean bill of health on vacation and sick-leave cash-out policies in its audit of 2011 finances.

Looser policies that had been in place led the agency to criticize the city for lax cash-out practices in its audit of 2010 finances and led to the March 15 firing of Finance Director Yvonne Ziomkowski.

But the office has found that cash-out controls have improved, Finance Director Byron Olson said in a memo to the City Council.

In the most recent audit, “there were no significant findings, which is a very nice thing,” City Manager Dan McKeen told council members at their regular meeting Tuesday.

He said last week that a City Council subcommittee consisting of Deputy Mayor Brad Collins, former Mayor Dan Di Guilio and Councilwoman Brooke Nelson is revising city cash-out policies and will meet later this month.

Tighter procedures were put in place by former City Manager Kent Myers after he fired Ziomkowski.

“There is a form, and signatures are required on the form,” McKeen said. “It requires an approval process that involves the human resources department and finance department.”

The state Auditor’s Office had criticized the city for cash-outs taken by Ziomkowski and other employees, blaming the city for “unclear policies and inadequate controls” but saying there was no intentional wrongdoing.

Ziomkowski transferred cash-outs into her deferred compensation account for retirement without seeking approval from Myers, her supervisor, denying culpability and saying in an earlier interview that she “acted based on past practices.”

Ziomkowski, a 24-year city employee, was terminated after overdrawing $28,862 in vacation and sick-leave cash-outs from 2009 through 2011.

The annual limit was between 80 and 120 hours.

Ziomkowski’s cash-outs for the three years totaled 896 hours. She was allowed to keep $32,867 in overpayments and repaid $28,862.

Since 2003, the city has spent $1.4 million compensating employees for unused leave, a Peninsula Daily News investigation discovered.

Senior Staff Writer Paul Gottlieb can be reached at 360-452-2345, ext. 5060, or at paul.gottlieb@peninsuladailynews.com.