Audit: Parks Officials Hid Budget Surplus Due to Fear of Cuts; 'Useless Reserve' Went Unspent

Released today: The Attorney General’s “Report of Investigation into Discrepancies in Financial Reports Submitted by the California Department of Parks and Recreation.”

The audit of the California state parks department sheds light on why senior officials covered up an unreported funding surplus of as much as $29 million for a decade or more. The report says department managers hid the surplus first because they were concerned about future budget cuts, then out of fear of "embarrassment" if the cover-up were to be disclosed. The report's executive summary concludes the extra money seems "to have represented an essentially useless reserve that could not be spent by the Parks Department as there was no legislative appropriation to do so."

Former State Parks Director Ruth Coleman resigned when the surplus was reported last July. She denied any knowledge of the hidden funds, and the audit found that reports that she was aware of the extra funds are "unreliable."

The report says charges that the department also hid more than $34 million in the parks Off-Highway Vehicle fund were unfounded.

The revelation of the surplus engendered outrage this summer in light of the scheduled closure of dozens of 70 state parks because of what was thought to be a $22 million budget gap over two fiscal years. But, as The California Report's Rachael Myrow wrote in July, "Most of those closures did not happen because of near-heroic fundraising from non-profits across the state. (T)he money, [however], could also have prevented cutbacks in hours, staffing and services systemwide."

Friday's report says the disparity between reported funds and actual funds "grew unintentionally during a challenging financial budgeting and tracking period from 1995 to 2003."

But it goes on to implicate a number of department personnel in a deliberate cover-up:

It is clear, however, that by no later than 2003, and perhaps as early as 1999, the failure to accurately report all [State Parks Recreation Fund] monies to the [Dept of Finance] became conscious and deliberate. The facts show that former budget officer Becky Brown noticed the growing disparity as early as 1998.

By late 2002, when the discrepancy in SPRF balance reports had reached $26.8 million, the budget and accounting officers and their supervisor, Tom Domich, then-manager of fiscal
services, were all aware of the discrepancy. Thereafter, from 2002 to 2012, numerous individuals failed to take appropriate action to ensure the monies were revealed to the DOF. The primary reason consistently given for not doing so was fear that the Department would see its already-reduced general funding cut further if the extra monies in the SPRF were revealed. The embarrassment expected to result from revealing the funds was another motivating factor...

Throughout this period of intentional non-disclosure, some Parks employees consistently requested, without success, that their superiors address the issue.

Ultimately, Aaron Robertson arrived as head of the Department’s administrative services division and recognized his duty to report the matter up the chain of command, both within and outside the Department. Until then, no one had been willing to report the matter beyond their supervisors. Instead, people have consistently followed the directions of those above them that the fund balance disparity would not be disclosed to the DOF.

Conclusively identifying everyone who knew of the funds and gave orders that they not be reported to the DOF is difficult. Reports that former director Ruth Coleman knew of the
funds are unreliable.

The report cites other officials, including Michael Harris, Coleman's chief deputy who was subsequently fired from the department, as having known about the extra funds as well.

Read the report's executive summary below. The entire report is online here.

Investigation Into Parks Financial Reporting