LITTLE ROCK — The U.S. Forest Service plans to look into the unauthorized use of federal funds by the Arkansas Forestry Commission after the commission reported that it spent grant money to make payroll and owes $1.18 million to one of its grant programs.
The commission routinely borrowed from federal grants to pay salaries with the intention of paying the money back by the end of the fiscal year, though the money was not designated for that purpose.
The state Department of Finance and Administration told the commission to stop the practice last month, resulting in 36 people being told they would lose their jobs to make up for a $4 million budget shortfall.
John Shannon, the state forester, told the U.S. Forest Service in a Dec. 9 letter that the commission had overdrawn from its federal grants to pay salaries and other administrative costs that should have been paid for with state money. He said the commission owes $1.18 million to its Southern Pine Beetle Prevention and Restoration grant.
In response to questions from the Arkansas Democrat-Gazette, Stephanie Neal Johnson, public affairs director for the Forest Service’s southern region, said that the “administrative error” relating to the use of federal grants is “critically important” to the Forest Service.
“The Forest Service will be contacting the Arkansas Forestry Commission after January 1, 2012, to better understand their financial management system and the administrative error,” she wrote in an e-mailed response.
“The Forest Service will work with the Arkansas Forestry Commission to initiate plans to address full compliance with Office of Management and Budget Circulars and Federal Cost Principles.”
E-mails between Shannon and the commission’s former fiscal chief, Robert Araiza, show that the commission borrowed money from its federal grants as recently as October.
In an Oct. 19 e-mail, Araiza told Shannon, “The only option you have is to borrow from [the pine beetle grant] another $320,000, making our debt now $1,782,100.”
Shannon responded: “Sarge: Borrow the amount we need. No other option.”
Kathy Holt, the governor’s liaison to the commission, was included in the e-mail.
Shannon has said that the commission will operate within its budget going forward.
In his letter to the Forest Service, he said Gov. Mike Beebe will request a supplemental funding and appropriation request during the Legislature’s coming fiscal session so the commission can repay its debt to the grant program.
Araiza told lawmakers earlier this week that he believed borrowing that money was appropriate as long as it was paid back.
Working under that assumption, the commission certified to the state finance department that it had $5.6 million available for operating expenses. But without thefederal grant money, it actually only had about $2 million, state budget office administrator Brandon Sharp said.
Sharp said that because many of its grants do include money that can be used for operations, the commission has the authority to move funds between federal grants and its own operating income.
Richard Weiss, director of the state finance department, told a legislative committee earlier this week that the department was not aware of how the commission was using its federal grant money until recently.
Weiss told lawmakers that the department was tasked with taking a closer look at the commission’s finances after Shannon asked the governor for additional funds.
In a Nov. 14 letter to Beebe, Shannon asked for a supplemental appropriation that would include $1.87 million to “retire payroll debt and make the payroll for approximately 300 employees” in fiscal 2012.
Front Section, Pages 1 on 12/24/2011