Probe of Agency Is Urged

A state agency failed to account for as much as $425 million in “pork barrel” grants to law enforcement and anti-crime groups over a five-year period, and apparently misspent much of it, the Department of Finance said Tuesday.

In a sharply critical report, Finance Department officials called for a California Department of Justice investigation of the agency, whose records were in such disarray that veteran auditors found that they could not conduct an actual audit.

“In my 30 years of experience, this is the worst thing I’ve ever seen,” said Sam Hull, the Department of Finance’s chief auditor.

The team spent 1,600 hours, at a cost of $1 million, struggling to reconstruct what happened in the agency, the now-disbanded Office of Criminal Justice Planning.

The agency was responsible for handing out money to shelters for battered women, drug prevention programs including D.A.R.E., anti-gang projects and other crime-prevention efforts.

Its directors reported to the governor, and the office could be used by the state’s chief executives to burnish their tough-on-crime images by dispensing money to police and nonprofit groups.

The office was disbanded at the end of Gov. Gray Davis’ tenure in 2003. At the time, lawmakers requested a final audit.

Sen. Jackie Speier (D-Hillsborough), who led the effort to abolish the agency, said the report appeared to suggest “criminal conduct,” although finance officials stopped short of making such a charge.

An aide to Atty. Gen. Bill Lockyer would not comment, except to say that the justice department would evaluate the report.

Auditors said the problems were so significant that the state risked having to refund tens of millions of dollars in federal law enforcement grants that the office had given to local agencies.

Finance Department officials said they did not analyze how the agency awarded its grants. But they recommended that Lockyer’s office make at least an initial inquiry into the process.

The report comes as authorities investigate tens of millions of dollars in grants given to nonprofits in 1999, 2000 and 2001 for projects related to parks and recreation. “This kind of accounting or lack thereof doesn’t occur” naturally, said Finance Department spokesman H.D. Palmer.

The Legislature closed the department by shifting its money -- $250 million -- to the Office of Emergency Services and the Board of Corrections. The finance report recommends that those successors continue piecing together how the money was spent.

Criticism of the office dates to at least the tenure of Gov. Pete Wilson, a Republican. The Schwarzenegger administration generally limited its inquiry to 1999-2003, Democrat Davis’ tenure.

Among the problems cited in the 45-page report, auditors cited “apparent manipulation of records” by the Office of Criminal Justice Planning staff, “incomplete and inaccurate” accounting records, and “significant differences” between records kept by the office and those kept by the federal government and state controller.

“It is unknown how many files are missing which might include errors involving the understatement or overstatement of expenditures,” the report said.

In several instances, employees received advances for travel, expenses and salaries, but no receipts or other justification of the expenditures could be found, auditors said.

More than $5 million in expenditures was never entered into the accounting system, and at least $2.8 million in receipts dating to 1995 was never entered.

The office tracked its receipts and spending manually until April 2003, when it began using a computerized system. Auditors called former staffers in the office to help sort out the voluminous records; they found some willing and others not. The report also found that the office:

* Commingled funds, spending money earmarked for specific purposes on unrelated programs.

* Left pending $1.023 million in accounts receivable for more than seven years, and provided insufficient support for an additional $1.3 million in accounts receivable.

* Failed to reconcile its monthly bank statements dating to July 2002.

The findings did not shock Capitol veterans. For years, legislators have tried to dismantle the agency. A Bureau of State Audits report in 2002 cited an array of similar problems.

“It was always a mess,” said Sen. Sheila Kuehl (D-Santa Monica). “They deserved to have all the funding taken away from them.”

The agency’s first director under Davis was Frank Grimes, a 32-year veteran of the Los Angeles Police Department, who had been Davis’ link to police groups that were a key part of Davis’ political coalition.

Grimes resigned in early 2002, after Davis scolded the agency for denying grants to battered women’s shelters for little or no cause, and days before he was supposed to testify before a legislative oversight committee.

Davis forced out Grimes’ successor, acting director N. Allen Sawyer, days before the November 2002 election after Sawyer was named in a federal public corruption investigation in his hometown of Stockton.

Sawyer since has pleaded guilty to one count of mail fraud in connection with an effort to help then-San Joaquin County Sheriff Baxter Dunn and lobbyist Monte McFall solicit payoffs from companies seeking to do business in the Stockton area.