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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CDAA has reportedly used environmental and worker safety funds in this way since approximately 2007
I believe the funds have been used since 2004 not 2007 but I’m sure that just a typo.
who initiated the forensic audit?
Who discovered the problem?
The CEO discovered the problem.
Then why not a pic of the CEO instead of Reisig?
Reisig is the Vice President of the org and the local interest in the story.
I think Mr greenwald would like to be his campaign manager as far as the picture goes it’s probably the only one he has hanging in the bedroom so it’s easy to gain access to that picture
“The millions of restricted dollars CDAA improperly dedicated to lobbying and general fund expenditures, deprives Californians of much needed environmental and workplace safety protections.”
Are there examples?
“deprives Californians of much needed environmental and workplace safety protections.”
Are there examples?”
Excellent question especially during this time of COVID-19. If these funds could have been used to improve workplace safety for essential workers, this could be a very big impact. I have no knowledge of this but would find it a critical question for our time.
I know that every so often there is a press release about environmental prosecutions and settlements with big companies. I imagine counties like Yolo wouldn’t have the resources to take on big businesses without some sort of resources. Examples would require a lot more knowledge than I have.
Environmental Circuit Prosecutor Project
In 1998, the California Environmental Protection Agency (CalEPA), the California District Attorneys Association (CDAA), the Department of Fish & Game, and the United States Environmental Protection Agency established the Environmental Circuit Prosecutor Project (ECPP) to fill a gap in the enforcement of water, air, and other environmental laws in rural counties in California. The ECPP provides environmental prosecutors to counties that lack the expertise and resources to prosecute environmental crimes. Penal Code section 14300 codified the Environmental Circuit Prosecutor Project as a cooperative effort of the CDAA and CalEPA.
Circuit prosecutors are employed by CDAA but are deputized by the elected District Attorney in each county where they work. Funding is provided by various sources including CalEPA and the Penal Code 14300 account.
Project Benefits to California
Rural areas become less attractive to environmentally relatedcriminal activity.
Citizens of rural counties enjoy the protection from environmentalcrimes as do urbanized counties.
Local prosecution efforts encourage fair and uniform enforcement ofenvironmental laws throughout the state.
Businesses and other regulated entities gain a level playing fieldin both rural and urbanized counties.
So, an attorney, under the State Bar Rules of Professional Conduct (Rule 1.15 I believe) has an absolute obligation to protect his/her client’s funds. While the Rule doesn’t really apply to CDAA, one would think that the board – attorneys all, when advised by staff that the Association was “borrowing” from a restricted account, might have shown some concern? I recall in 1986 CDAA used its non-profit status to oppose the confirmation of California Supreme Court Justices Bird, Reynoso, and Grodin. A result of this was a loss of their non-profit status and some tax liability and penalties the individual board members were obligated to pay. Times and people change, behavior, apparently, doesn’t. Nice reporting David.