California state parks had hidden surplus for 20 years, auditor's probe finds

Published: Friday, Feb. 15, 2013 - 12:00 am | Page 1A
Last Modified: Tuesday, Aug. 6, 2013 - 9:55 am

A new probe of financial scandals at the California Department of Parks and Recreation found that officials maintained a hidden cash surplus for as long as 20 years – far longer than previously known.

The investigation by the California state auditor, released Thursday, tracked a surplus going back to 1993 in the State Parks and Recreation Fund, the primary fund that collects and disburses revenue generated by the 278 state parks.

The Bee first reported in July that department officials maintained a secret surplus in this fund which at the time amounted to $20 million. Although the surplus amount varied over time, no evidence has emerged that the money was spent illegally.

High-ranking officials at state parks headquarters stayed quiet about the surplus even as the department moved to close 70 parks, for the first time in history, to achieve state budget savings. The surplus would have been enough to avoid these cuts.

In the months since the scandal, the leadership staff at park headquarters has been replaced, and the Legislature and governor have approved a plan to spend the $20 million surplus on park operations.

The surplus existed because department officials routinely reported different fund totals to the State Controller's Office and the Department of Finance in violation of state accounting rules.

But like other recent investigations – completed by the Department of Finance, the Controller's Office and the attorney general's office – the state auditor was unable to explain how the surplus accumulated in the first place.

"Neither current staff nor documentation we reviewed in the department's accounting and budget files had an explanation for what originally caused the differences or why the issue was never resolved," investigators wrote.

This unresolved question continues to frustrate lawmakers and park lovers.

"I'm appalled that a department in the state of California can operate with such a loose accounting system," said Assemblywoman Beth Gaines, R-Rocklin, a member of the Assembly's Water, Parks and Wildlife Committee.

The Department of Finance on numerous occasions between 1999 and 2003 warned parks officials that they were reporting improper fund balances, according to the latest audit. Those warnings were ignored, and then mysteriously stopped coming from finance officials in subsequent years.

Last year, after the hidden funds were revealed, the Finance Department imposed a new rule stating that department heads are now required to certify – under penalty of perjury – that the accounting information they report is accurate.

"We had relied on departments and agencies to accurately report fund balances to Finance as we prepared budgets in the fall," said Finance Department spokesman H.D. Palmer. "In the case of Parks, not only was that not the case – there was deliberate under-reporting."

The audit also shed light on a criticism that emerged in 2011, when Parks and Recreation was courting nonprofits and local governments to take over some of the 70 parks slated for closure. Many of those groups complained that the department could not tell them how much it cost to operate any single park, because its accounting system tracks expenses only at the district level.

This greatly complicated those groups' efforts to figure out how much money they had to raise from donors to take over operations and keep a park from closing.

Nearly all the parks avoided closure nonetheless, because enough local groups took a leap of faith and agreed to operate parks without knowing how much it would actually cost.

"It was like pulling teeth to try and get any exact numbers out of anyone," said Wes Nelson, a board member of the Malakoff Diggins Park Association, the nonprofit now running that Sierra park under an agreement with the state.

The problematic budgeting didn't stop there. The audit also found that the parks agency is unable to state with certainty how much it costs to operate all 278 parks.

As a result of these findings, the auditor concluded that the department was "premature" in deciding which 70 parks to close – given it could not demonstrate that the closures would actually save the required money. In addition, it found that the cost estimates officials did rely on were as much as a decade old.

"As a result, any factors involving these cost estimates that the department considered in selecting parks for closure were not accurate," the audit states.

The audit recommends that the Parks Department begin accounting for expenses at each park. It also urges the department to develop a reliable estimate of operating costs for the 278 parks as a whole.

In a written response, the department agreed with the recommendations. It is preparing procedures to carry them out in partnership with the Department of Finance, said Aaron Robertson, new chief deputy director of state parks.

"We need to be transparent about what our costs are," Robertson said. "The money is the people's money that we have the obligation to steward."

A lingering mystery concerning a different park fund seems to have been resolved in the latest audit.

When the scandal came to light, state officials said the total hidden surplus amounted to $54 million. The majority – $33.5 million – was parked in the Off Highway Vehicle Fund.

Subsequent investigations revealed that the $33.5 million was not, in fact, hidden. Instead, it simply appeared to be a surplus because of long-running complications in the way that fund was managed and because of transfers by the Legislature.

The auditor traced the problem to a misrepresentation in the governor's January 2012 budget plan. The Department of Finance misstated the amount of off-highway vehicle funds because it suspected the account had been receiving too much money in error.

Finance officials said Thursday they should have been more transparent in the budget plan by explaining that the off-highway balance was not the actual amount in the account. They said they estimated an off-highway vehicle balance based on what would have been the amount after corrective action, which lawmakers did not take until months later.

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