The state Department of Parks and Recreation routinely searched for ways to spend extra money each June despite facing the threat of park closures and forgoing upkeep at its 278 properties, based on newly released transcripts from an internal investigation.
Testimony from 30 interviews with state employees portrays parks administrators who appeared to have the opposite problem from one long described by Gov. Jerry Brown excess cash left over and not enough ways to spend it.
That was the case in June 2011, when the investigation found former parks administrator Manuel Thomas Lopez tapped some of the funds for a cash buyout of accumulated leave without authorization. The state Resources Agency made transcripts available late Friday from the completed report by Deputy Attorney General Corinne Murphy on Lopez's actions.
Brown's administration revealed last month that the parks department had long hidden $54 million without reporting it to the Department of Finance and state lawmakers, who have constitutional authority over spending in California. In the past year, private donors and other government agencies have contributed under the impression the parks department did not have a dime to spare. Longtime state parks director Ruth Coleman and other top officials resigned last month.
The documents depict a department that wanted to keep secret a reserve of its own special funds to hedge against future financial problems while securing and spending as much state general fund money each year as it could.
Department of Finance spokesman H.D. Palmer said his office was unaware that parks officials had hidden funds until July. Finance and the state Department of Justice are investigating further.
"I'm not going to get into what (our audit) is going to conclude, other than there was something very much awry in the way parks was working their budget operations," Palmer said.
In the documents, Cheryl Taylor, a former state parks budget director, described a cat-and-mouse game that parks officials played with finance officials to protect their department's share of general fund money.
The parks department is funded by fee revenues and taxpayer dollars. Taylor suggested parks officials kept a hidden surplus in the fee-based State Parks and Recreation Fund because they feared the Finance Department and lawmakers would cut the share of department funds that comes from taxpayers.
"If you exceed what you project you're going to collect (in fees), DOF would like to reduce that amount in your general fund to take the strain off the general fund," she said. "The department doesn't want to do that. So what they do I'm going to tell you when I was there. There was probably $25 million or more sitting in the SPRF account. And we reported, I don't know, $5 million?"
Some employees described a springtime rush each year to spend money authorized by the Legislature to avoid having the funds return to the general fund budget for other purposes. They said the parks budget was so volatile that it was difficult to make accurate projections each year.
In one instance, Lopez allegedly tried to circumvent the Department of Finance by using "dummy" documents that made it look as though the parks department had entered contracts to purchase equipment, according to a transcript of an interview with Dorothy Kroll, a parks accountant. Kroll said she and other accountants struggled with the procedure because they knew "we have to face the auditor." In one case, she said, Lopez had more than $1 million allocated for a computer contract before any contract existed.
Kroll said that in "the last three fiscal years, we had a lot of money that was left on the table. And when you get to that point and it's June, it's really too late to to really do much with it. Manuel authorized what's called what he called programmatic encumbrances where he would have us encumber like a dummy document to reserve the funds."
She added that she refused to sign documents: "If you want anything more, Manuel, you have to sign it because I'm not putting my name on this stuff."
Lopez did not return a call Saturday for comment.
At least two officials testified that the practice of quickly burning down budgeted funds each June right before the fiscal year ends was widespread in California government.
"Well, I've been around the fiscal world long enough to know that you don't leave unexpended authority if you can avoid it," testified Michael Harris, who has since been fired as acting parks chief deputy director.
Harris said the problem in this instance was that Lopez "fell into the trap of thinking of it as as his own money. that money is the department's and it needs to be spent on the department's priorities."
Kroll said that "we're closing parks, our budget's taking a hit, you know, and there was what (Lopez) and (another parks budget official) call a checkbook."
The appropriate practice is for such money to go back to the state general fund, said Natural Resources Agency spokesman Richard Stapler.
Coleman, who was not interviewed in the investigation, has repeatedly stated she did not know about the surplus. Yet testimony released Friday indicated she knew of the money. She could not be reached for comment.
In June 2011, the final month of the fiscal year, Lopez fast-tracked a vacation buyout program for himself and more than 50 other employees, suggesting that massive leave balances were too big a liability for the department. According to an investigation spreadsheet, he had 1,109 total leave hours, equal to more than 138 days. Another employee, Tina Williams, had 1,604 leave hours.
Lopez, whose Granite Bay home is underwater, made the case that buyouts were necessary because some workers were at risk of losing their homes in the face of state-ordered furloughs.
Helen Carriker, an administrator with the Department of Fish and Game, told investigators that she had told Lopez in an informal conversation that his buyout plan couldn't be done and that any such plan would have to go through the Department of Finance. Carriker observed that "the state is short cash. So um no. That's not going to be something that they're going to let you do right now."
But Lopez persisted. He ultimately received $28,647 last year from the buyout plan, more than any other department employee. All told, the department paid out $269,413.
The state has had limited leave buyout plans in the past, but generally limited to 40 hours or 80 hours. The Department of Personnel Administration stopped that practice in 2008 due to state budget troubles.
Lopez resigned from the agency in May, a week before he faced termination over the unauthorized leave buyout. In July, he and his wife filed for bankruptcy protection, indicating that they owed $230,000 more on their Granite Bay home than it is worth and had $86,000 in credit card debt.
He also allegedly redirected visitor revenues from parks showers and automated fee stations into accounts that bypassed oversight from the Department of Finance and state lawmakers, according to Kroll's testimony.
"What he was doing was shortchanging the revenues of this new program and putting the money in the reimbursement which allows us to use that reimbursement cash any time we need to," Kroll said.