by David M. Greenwald
Monies that were supposed to be used for environmental and worker safety funds by the California District Attorneys Association, a statewide organization that serves as an advocacy group for the state’s prosecutors, appear to have been used instead for general operating expenses during times when the CDAA experienced “cash flow shortfalls,” an audit performed by San Francisco accounting firm Hemming Morse found in December, detailed in a report just released this week and first reported by the San Francisco Chronicle.
According to the audit, in May of 2020, Mark Zahner, the current CEO of CDAA, “raised a concern to CDAA’s BOD regarding the management of funds related to environmental and worker safety programs.”
He noted that, in practice, the CDAA had considered funds received to be “unrestricted and available for general use”—in other words, “general funds.”
In June, Zahner informed the CDAA’s Board of Directors “that CDAA had used contributions received associated with environmental and worker safety settlements for general fund expenditures during periods when CDAA experienced cash flow shortfalls.”
These expenditures were not related to either environmental or worker safety purposes.
“CDAA has reportedly used environmental and worker safety funds in this way since approximately 2007,” the audit notes, and the total amount owed is nearly $3 million. Furthermore, the audit finds, “CDAA’s expenses began to exceed revenues in fiscal year 2009.”
The result is that the practice depleted these funds, which were established in order to train prosecutors as well as retain outside attorneys hired to help handle complex cases involving environmental violations. For smaller and more rural counties, which lack the resources and specialization to take on large corporations, this means that they will not have resources potentially to take on these types of cases.
The Chronicle cited an email from Riverside County District Attorney Mike Hestrin, co-chair of CDAA’s Environmental Subcommitte, to group members from last week.
“Unfortunately, at this time … CDAA has no current funding sources and no other personnel available to assist your offices in these types of prosecutions,” Hestrin wrote. “At this time, the timetable for any future funding is also up in the air.”
He told the Chronicle, “Part of what happened was there just weren’t enough controls over the money that you know how it was being spent.”
Eventually the CDAA will reimburse the $2.88 million to the fund, but that will occur over several years.
The audit found that “it appears that CDAA had a long-standing practice of borrowing funds received from environmental and worker safety settlements.”
The audit cites a member from the April 20, 2004, Board of Director’s Meeting from then-CFO Deanna Lord, who noted, “To keep afloat, environmental settlements are being borrowed and will be repaid when OBS reimburses CDAA. This inter-fund transfer mechanism has been employed in the past for similar situations in which reimbursements are delayed and cash flow problems result.”
The audit noted, “Because CDAA’s environmental and circuit prosecutor programs had significant unexpended net assets, CDAA’s borrowing practices put restricted funds at-risk if funding challenges arose.”
The problem arose with strains caused by the Great Recession, when “certain CDAA programs also experienced acute losses during this period.”
While the CDAA later “implemented measures to cause its programs to become self-funding … subsequent presentations to the BOD indicate that CDAA continued to fund programs with monies originated by other programs.”
The audit found, “Ultimately, the resources provided to CDAA by the programs subject to our analysis have been instrumental to CDAA’s financial viability from 2004 to present. The data we have reviewed and the interviews we have conducted indicate that CDAA recognized that the resources of these programs were restricted by donors.
“Despite those restrictions, CDAA has had a long-standing practice whereby otherwise restricted funds could be used on an interim basis for other CDAA programs. Thus, CDAA considered those funds ‘borrowed’ and expected to repay borrowed funds to the originating program so that the organization could ultimately fulfill donor-imposed restrictions.”
Despite these problems, the auditors did not find evidence of illegal activity, though the results have been sent to the Attorney General’s office for review.
“While the audit revealed no evidence of intentional malfeasance, it did identify a pattern that violated best practices and accepted accounting standards for restricted-purpose funds,” CDAA officials said in a statement.
A critic of the CDAA, San Francisco DA Chesa Boudin, said this week that he was “shocked and disappointed” to learn of the accounting practices.
“As elected DAs, we understand how to avoid co-mingling restricted funds and general-purpose funds — we have to do it every day managing our budgets,” he said. “The millions of restricted dollars CDAA improperly dedicated to lobbying and general fund expenditures, deprives Californians of much needed environmental and workplace safety protections.”
In addition, San Joaquin County DA Tori Verber Salazer, a reformer who resigned last year due to the association’s continued and long-standing opposition to criminal justice reform, also blasted the report.
In a letter last summer to Yolo County DA Jeff Reisig, the Vice President of CDAA, she said, “It is pretty clear that having members of CDAA’s board (past and present) lead the investigation — including selection of the auditors, monitoring and releasing the documentation — raises legitimate issues of conflict.”
She has gone further, calling on the board of directors to immediately resign, stating, “They had a duty and a responsibility to oversee this, and they failed to do so.”
—David M. Greenwald reporting
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