With Audits Like These…

With great fanfare last July, Governor Jerry Brown launched an “investigation” into “the circumstances surrounding significant budgetary irregularities at the California Department of Parks and Recreation dating back to at least 2000.”

Governor Brown also directed the state Department of Finance to conduct “a comprehensive audit of Parks’ fiscal controls.”

The governor directed California Natural Resources Agency Secretary John Laird to conduct “a sweeping review of Parks’ management.”

Readers will recall that the investigation and audit were prompted by a “preliminary investigation into Parks’ finances” that revealed that “for at least 12 years the department under-reported tens of millions of dollars to the state Department of Finance.”

Back in the fall of 2011 the State Parks Department had ordered the closure of 70 state parks, eight of which were in Mendocino County, the majority in northern California. These closures were declared necessary because the Parks Department said they had to slice $22 million ($11 million per year for two years) for their share of state budget balancing. But in June, thanks to some dogged reporters at the Sacramento Bee, they admitted that they had lost track of over $55 million, the equivalent of five years of the savings they expected by closing the 70 parks.

The Governor had to do something to cool the outrage from the public and all those alarmed people who'd volunteered time and money to keep the parks going. Parks officials had made the closure announcements without explaining how they'd come up with the list of which parks to close (Mendo County took a big hit) later claiming that their notes had been “destroyed.”

It now appears that there were no notes, no record of decision-making. They just pulled the closure list outtatheirass.

To this day the Parks department has not officially rescinded their closure announcements. We don’t know how that suddenly re-discovered $55 million is going to be allocated, and local groups and volunteers continue to limp along doing what they can to make sure their particular park doesn't suddenly go dark. The state, natch, has not returned any of the money raised on false pretenses.

Just last month, the California Parks Association issued their 2013 forecast: “The forecast for this year is unclear but there are some good signs. After a slow beginning, there seems to be some forward motion on the agreements to match donor funds that were raised for the 70 state parks on the closure list last year. It would be great to see all those agreements completed soon.”

That from an organization that is supposed to be a parks advocacy group. Not a mention of the $55 million, the audit, or the grotesque mismanagement that produced it and the consequent panic of impending closures.

When Governor Brown made his audit announcement last July he said that “the Department of Finance was not aware that the State Parks and Recreation Fund and the Off Highway Vehicle Fund held $20,378,000 and $33,492,000 above their reported balances. The under-reporting occurred over the course of two prior gubernatorial administrations.”

“We will get to the bottom of this situation,” declared Resources Secretary John Laird, “and work with the Attorney General, the Legislature and the Department of Finance to make sure nothing like this ever happens again. We will also work with the Legislature to see how this money can be used to mitigate park closures.”

So far, nada. The Attorney General hasn’t done anything (although there’s the usual empty rhetoric about “exploring criminal prosecutions” which won’t go anywhere), the Department of Finance was and is still part of the problem, and the Legislature has still not even demanded that the $55 million be used to keep parks open or that the fraudulently raised donations be returned.

Governor Brown did fire (“accepted the resignation of”) Parks Director Ruth Coleman; and the department’s acting chief deputy Michael Harris was also “removed from his position.”

Brown then appointed Resources Agency Undersecretary Janelle Beland to be acting interim director of the Parks Department, directing her to “promptly report to him and Secretary Laird on further actions that should be taken to ensure that the Department is being managed with honesty, accountability and transparency.”

Ms. Beland’s “report” is nowhere to be found, some eight months later.

Then a retired Marine General named Anthony Jackson was appointed as Parks director. He looks like he means business, but he has no experience with state bureaucracy or parks operations and so far has been invisible and inaudible.

The $55 million in hidden assets were brought to light when new Parks fiscal staff began an internal review of accounts, following a separate investigation by the Attorney General over unauthorized vacation buy-outs which was initially triggered by the Sacramento Bee. (The huge vacation buyouts for top Parks officials were a separate scandal of their own which have also not been acted on.)

Fast forward to last week when the long-awaited audit was finally released. Titled, “Weak Procedures Have Led to Inconsistent Budgetary Reporting and Difficulties in Measuring the Impact of Efforts to Keep Parks Open.”

Weak procedures?

Not incompetence, not political appointees, not high turnover, not self-serving bureaucrats, not do-nothing auditing and monitoring agencies, not bad management and supervision.

“Weak procedures.”

The Department of Finance duly announced, “Our audit … highlighted the following:

“• For years the department has continually reported different fund balance amounts-usually lesser amounts-to the Department of Finance (Finance) than it reported to the State Controller's Office for both the State Parks and Recreation Fund and the Off-Highway Vehicle Trust Fund (off-highway vehicle fund).

“• Finance notified the department of those differences as early as April 1999, yet the issue was not resolved until the fall of 2012.

“• Although various budget officers — including the current one — raised concerns about the differences in reporting, the budget office continued to report the different amounts.

“• The former deputy director of administration and the former acting chief deputy director directed the current budget officer to continue reporting the information as in the past out of fear of a budget reduction.

“• In 2011 Finance significantly reduced the transfer amounts the department reported to the off-highway vehicle fund. This contributed to a $33.5 million understatement of the fund balance leading the public to believe that the department was hiding these funds.

“• The department lacks written analyses regarding how it selected 70 specific parks for closure and thus, may not be able to justify the reasonableness of the selections to the public.

“• The department does not budget or track expenditures at the park level and used outdated information to develop estimated operating costs for its parks.”

In explaining how the “differences in reporting” came about, the Auditor goes out of his anonymous way to avoid naming names, simply regurgitating the gibberish of a few anonymous source-bureaucrats.

“Correspondence we reviewed in the department's accounting and budget files show that Finance informed the department that differences existed between the amounts reported in the governor's budget and those provided in the State Controller's budgetary report as early as April 1999, yet neither current staff nor documentation we reviewed in the accounting and budget files at the department supplied an explanation regarding what originally caused the differences or why the issue was not resolved until the fall of 2012. The department's former acting chief deputy director told us that when he started at the department in 2003 as the deputy director of administration he was informed by the budget officer at the time that the difference in reporting for the parks fund was the result of an error made several years earlier [by whom? why?] that understated the amount reported to Finance. Over the years, various individuals at the department became aware of the differences in the amounts being reported. According to the current accounting administrator, approximately one year after she became aware of reporting differences in 2002, she was directed by the accounting administrator at the time to begin preparing fund condition statements — which show revenues, expenditures, prior-year adjustments, transfers, and fund balances — and providing them to the department's budget office. However, she stated that the department's budget office continued to report its own amounts and that over the next six years three different budget officers, including the current one, came to her with concerns about the differences in reporting. According to the department's current budget officer, she noticed the reporting differences when she started working at the department in February 2011. She stated that she discussed the issue with the former deputy director of administration and the former acting chief deputy director, and both told her not to change anything in the way the budget office was reporting, as they were concerned that, if the department reported the fund balances accurately, as shown in the State Controller's records, the department's General Fund appropriation could be reduced. Because amounts in the governor's budget were inconsistent with amounts reported in the State Controller's budgetary report, the difference created confusion among the public and decision makers regarding the actual balance in each fund. Additionally, such inconsistencies may have resulted in the Legislature and the governor using inaccurate financial information when making budgetary decisions concerning the department.”

Take that, Parks Department — whoever you are!

The audit goes on like that for page after page, explaining the obvious, repeating itself time and again, providing some basic financial mathematics, describing this report from that year from the other office or bureaucrat…

Pretty weak, indeed.

The Finance Department, which conducted the audit, is part of the problem. They let this mess grow for over 12 years right under their anonymous noses without fixing it, so, of course, they can’t implicate themselves. In fact, it’s a clear conflict of interest that the Department of Finance — run by the same kinds of fools and hacks as the Parks department — even did the audit.

Then we get this gem: “The principal analyst agreed [sic] that the way the transfer was presented could be perceived as misleading if viewed in isolation.”

We can imagine that conversation:

Auditor: Don’t you agree that hiding $55 million might make the public think that the Parks Department is making this whole closure problem up out of whole cloth?

Principle Analyst: It might look that way, but if you read through our mountains of incompetent paperwork you’d see that we’re just morons, we’re not capable of misleading anyone.

What is to be done?

“According to the Chief of Finance's fiscal systems and consulting unit, Finance will consider implementing a policy to ensure that, in the future, when a decision is made to reflect the effect of pending legislation in a prior-year fund condition statement, any related adjustments will be made explicit and obvious.”

That’s the solution? “Consider” implementing a policy that will… um, er, uh, clarify something, maybe?

“According to the department's budget officer, she discussed this issue with the former deputy director of administration and they were comfortable with Finance adjusting the transfer amount, since it was supported by proposed legislation to move the unintended additional funds out of the off-highway vehicle fund. However, the budget officer acknowledged that she did not document the discussion. At a minimum we would have expected to see such a significant change escalated within the department to ensure that the department's highest levels of management were informed of the change and its effect on the fund balance.”

What is the parks budget?

“The deputy director of administration stated that the department has not determined the amount needed to fully operate the 278 parks at the 2010 level. As a result, the department *may have been premature* [our emphasis] in announcing that it would have to close up to 70 specific parks to achieve the General Fund reduction.”

Just a little premature? Maybe? Perhaps?

The implication being that if they had waited until they “determined the amount needed to fully operate the 278 parks at the 2010 level” — which is their job — they could have announced the unnecessary parks closure at a better time.

So, do all the private organizations and donors who ponied up millions of dollars and thousands of volunteer hours for no reason at all get their money back, and their regular Parks staff back, now that there’s $55 million available?

“Because of concerns with the department's outdated and incomplete cost estimates, we found it difficult to measure the impact of the department's operating, concession, and donation agreements, collectively known as partnership agreements. To determine the effect of a partnership agreement on a park, the district would need to know the cost of operating that park; however, according to the deputy director of administration, the department does not budget or track expenditures at the park level. The methodology that the department developed to estimate operating costs for its parks, including those that it identified for closure, uses the proportion of a district's costs that are attributed to each park in the district-proportions that were last determined in 2002-and applies these proportions to the actual district expenditures for fiscal year 2007-08 to divide up the costs among the parks. As a result, the department's estimated park operating costs were outdated.”

In other words, they will keep the donations because their own estimates were not serious.

“Further, the estimated costs included only the direct costs of the parks, not indirect costs such as a park's share of statewide costs for accounting, payroll processing, and procurement. More recently the department asked the districts to develop new estimated operating costs for parks on the closure list. However, these estimates were difficult to compare to the department's earlier estimates because the district estimates were not consistent in terms of the time periods they covered or their completeness. Nevertheless, the department's estimates based on the older information were higher than the districts' estimates for six of the seven parks we reviewed, and some were significantly higher. Without updated and complete estimates of the costs to operate each park, it is difficult to accurately estimate the amount the department would save by closing a given park, and to measure the impact of partnership agreements that provide funding to help pay parks' operating costs and offset the effects of budget reductions.”

They have to keep the money because they have no idea what it costs to operate a park and they might need it.

According to a pathetic note at the end of the audit we are told that the Parks Department agrees with the audit’s conclusions.