O.C. Fund Missing More Than $2 Million

More than $2 million has disappeared from a county planning department fund used to pay for building inspections, prompting officials to place two employees on administrative leave while they investigate.

Planning and Development Services Director Thomas B. Mathews said there is no evidence that the money was stolen, though theft hasn’t been ruled out.

“An outside auditor is going through the books,” Mathews said. “We’ll have a lot more to report in a month.”

Auditor-Controller David E. Sundstrom’s office discovered that the fund was empty during a close-out of the planning department’s books for the fiscal year that ended June 30. There should have been about $2.5 million.

The Board of Supervisors this week authorized up to $8 million to cover inspection costs until the fund can be replenished. The account is usually funded from fees paid by developers for building and safety inspections of new and remodeled homes.

Also, Mathews ordered immediate cost cuts in his department, eliminating unfilled vacancies and ending the use of outside help, including contractors to check grading permits. Layoffs are possible, he said.

The investigation will review how much money went into the fund during the last year and what expenses were paid. Auditors in the last two weeks uncovered one obvious problem: Planners had estimated that 8,000 permits would be pulled last year; only 4,500 were.

The size of Orange County’s inspection fund was challenged in 1999 in a lawsuit filed by Barratt American Inc. The national homebuilder argued that the county was improperly stockpiling a high reserve in the fund, which at one point reached $18 million.

A court master was appointed to analyze the county’s use of the money.

Shortly before the lawsuit was filed, supervisors agreed to reduce inspection fees by nearly a third to reduce the reserve. As of June 30, 2001, the fund was at about $7 million. The lawsuit is still pending.