CA: Former justice grant agency rife with accounting problems

Bakersfield Californian ^ | 2/2/05 | Brian Melley - AP

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SACRAMENTO (AP) - A defunct state agency that distributed federal crime grants was so plagued with accounting problems that it was impossible to audit and tens of millions of dollars in future funds could be in jeopardy, state auditors said Wednesday.

Auditors looking into the Office of Criminal Justice Planning found incomplete and inaccurate paperwork a year after the agency was abolished because of leadership problems and poor business practices.

"In my 30 years experience, this is the worst thing I've ever seen," said Samuel Hull, chief of state audits. "When we got into there and started looking at things ... the problems just kept ballooning."

Without proper records, auditors could not do their job and forensic accountants had to reconstruct the agency's books. It took 46 employees 16,000 hours to complete the review and cost over $1 million.

The report was forwarded to the attorney general's office, which was evaluating the case, a spokesman said. A lawmaker said state prosecutors would investigate fraud.

In an unrelated case, the agency's former executive, N. Allen Sawyer, is expected to be sent to prison after pleading guilty last month in a federal corruption probe of officials who tried to help an energy company beat a rival to build a Stockton power plant.

Auditors said their task was recreate a paper trail and not assess blame, but they said the unusual nature of the case had prompted them to contact the attorney general's office in March.

"This doesn't happen easily. Someone has to make a decision not to set up the accounting," said James Tilton, a budget manager for the Department of Finance.

While some former employees cooperated with auditors, others refused, some didn't return calls for assistance and some couldn't remember details about the books.

From July 1999 to December 2003, the federal government gave the office $425 million in grant money to be distributed to local governments for crime prevention and to community organizations that aid victims of rape, domestic violence, child abuse and homicide.

How much of the money from the federal Justice and Health and Human Services departments was spent at the local level is uncertain because of the sloppy accounting.

While about $10 million in federal funds have been frozen pending the report, there has been no effect on grant recipients such as shelters for battered women, gang suppression programs or rural crime prevention, said Eric Lamoureux, spokesman for emergency services, which took over most of the office's functions.

Now that the state has reconstructed the books, however, tens of millions of dollars in federal funds could be lost because of bad bookkeeping, Tilton said.

The state would not provide a more accurate figure because it is about to enter negotiations with federal agencies, which could penalize the state, seek reimbursement or cut off future funding.

The final report delivered to lawmakers Wednesday found the office violated all the basic checks and balances, Tilton said.

Auditors found incomplete and inaccurate records, lack of supporting documents and differences between records kept by the office and similar records kept by other state and federal agencies.

Cash receipts and payments were not recorded, some accounts receivable figures weren't kept dating back five years, Hull said. And funds intended for some programs were spent on other programs.

Sen. Wesley Chesbro, D-Arcata, chair of the Budget Committee, was appalled by the report, but said it confirms lawmakers' decision to abolish the office and transfer victim service programs to emergency services and juvenile justice programs to the Board of Corrections.

He said lawmakers were frustrated when they couldn't get information from the office two years ago to prepare the state budget. The office had also mishandled grants for domestic violence services, he said.

Chesbro said the AG's office would investigate whether fraud was committed.

"It's far worse even than we thought at the time," Chesbro said. "I'm glad we acted when we did with the limited information we had. Now the solution is on the way two years later."

Sawyer, 36, pleaded guilty in Sacramento federal court to mail fraud, admitting he used his position as acting executive director of the office to promote Sunlaw Energy Corp.'s bid without disclosing his financial interest.

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