California Agency Misplaced Hundreds of Millions of Dollars

Published April 1, 2005

Hundreds of millions of dollars flowing through California’s now-disbanded Office of Criminal Justice Planning (OCJP) were never properly documented, in what officials are describing as one of the worst accounting nightmares in recent state history.

“In my 30 years of experience, this is the worst thing I have ever seen,” said Samuel E. Hull, chief of the California Department of Finance’s Office of State Audits and Evaluations, on February 2.

The assessment of five years’ worth of grant handling by the OCJP, released on February 2, was so grim that Department of Finance officials declined even to call it an audit. Instead, they characterized their efforts to make sense of the agency’s accounting as a “reconstruction” of financial events.

When they were finished, the 46-person audit team, which spent 16,000 hours on the project, called into question $425 million in federal grants that were administered through the OCJP over the five-year period ending in the fiscal year 2003-04.

Report Sent to AG

Finance officials stopped short of characterizing the accounting shortcomings at the OCJP as criminal. But they did forward their 46-page report to the state attorney general’s office for review.

“This kind of accounting, or lack thereof, does not happen on the natural,” Department of Finance spokesman H.D. Palmer said.

State Department of Justice spokesman Nathan Barankin declined to comment on the referral except to say, “We have received the report and other information from the Department of Finance, and we are evaluating it.”

Millions of Dollars Frozen

As a result of the accounting problems, federal officials last year froze millions of dollars in funding that had already been approved for a variety of criminal justice programs to vendors operating in good faith all over state.

Although the state’s OCJP cleanup efforts prompted the federal government to provide interim funding last year for the programs, tens of millions of dollars in additional grants are still in danger of being disallowed as a result of the agency’s accounting problems, according to the state Department of Finance.

Auditors found extensive evidence of commingled funds, with federal funding earmarked for one program winding up in the coffers of another.

“They violated all the basic principles [by] not using money as it was authorized, both at the federal and state level,” said Jim Tilton, the Department of Finance’s program budget manager.

In its 30-year history, the OCJP has acted as a state clearinghouse within the Governor’s Office to disburse federal crime-fighting grants to hundreds of California agencies, directing the money to a plethora of projects targeting domestic violence, street gangs, and sex crimes, and providing assistance to victims groups and other organizations.

History of Trouble Noted

The OCJP had long been a target for political critics who disagreed with any sitting governor’s criminal justice agenda, but the agency came in for some of its most intense scrutiny during Gov. Gray Davis’ tenure.

Under the Democratic former governor, one OCJP chief was blasted for withdrawing funding for battered women’s shelters, while another came under fire and was forced to resign when he was implicated in a federal investigation into political corruption in San Joaquin County.

The latter appointee, N. Allen Sawyer, has since pleaded guilty to mail fraud and is awaiting sentencing. He could not be reached for comment.

State Sen. Sheila Kuehl (D-Santa Monica) said she had many run-ins with the OCJP during the years before her election, when she worked to obtain funding for battered women’s shelters.

“We always found them to be inept and inadequately supervised,” Kuehl said in an interview. “I’d say the line people always tried their best, but the leadership was always really lame.”

Slew of Problems Identified

The OCJP met its demise through the state budget approved in 2003, which turned its grant-administering functions over to the state Office of Emergency Services. It was then scheduled for a closure audit in December 2003, which at a cost of more than $1.1 million ultimately resulted in the “reconstruction” document.

The reconstruction of the OCJP’s accounting found numerous instances of “incomplete” and “inaccurate” accounting records. Finance auditors said in their report they discovered “significant differences” between the OCJP’s records and those of other state and federal agencies, as well as massive disorganization and the “apparent intentional manipulation” of additional records by the OCJP’s former staff.

Travel advances were not supported by documentation, the reconstruction found. Millions of dollars in cash disbursements, receipts, and accounts receivable were never recorded or are still outstanding.

The most expensive problem the reconstruction effort found was $322 million in grants and awards administered through the OCJP’s Public Safety and Victims Services programs. Officials in the Office of Emergency Services who inherited the programs’ administration were “unable to certify the accuracy of the financial data … because of the recordkeeping weaknesses of OCJP,” the report stated.

Andy Furillo ([email protected]) is a staff reporter for the Sacramento Bee. This article originally appeared in the newspaper’s February 3, 2005 edition. Reprinted by permission.