Governor’s Office Says Misuse of Federal Funds To Blame For Forestry Shortfall

Beebe administration officials offered a new argument today that financial mismanagement of federal grant money had more to do with budget woes and layoffs than previously thought at the embattled Arkansas Forestry Commission.

For several weeks after layoffs of 36 Forestry Commission field workers were announced, legislators have been quizzing administration and agency officials on the reason for a $3.5 million funding shortfall that appears to have surfaced around June 2010, but was not made widely known until October 2011.

Officials from the Department of Finance and Administration (DF&A) have been combing the commission’s books for weeks trying to unravel the mysterious deficit, director Richard Weiss said today.

In October 2011, Forestry Commission Director John Shannon and officials with the Beebe administration initially chalked up the agency’s revenue decline to fewer taxes collected from the severance tax on the timber industry. They denied former agency financial chief Robert Araiza’s claims that he was sounding warning bells on troubled forestry finances for years, although e-mails suggest he clued in his superiors to the troubles in June 2010.

On Tuesday, Gov. Mike Beebe (D) spokesman Matt DeCample and DF&A Director Richard Weiss met with reporters and laid out a paper trail that suggested Araiza “inaccurately certified federal funds” for operations for years.

They claimed that money from federal forest service grants were being counted as agency income twice in some instances, and that the oversight was not fully brought to the attention of the Governor’s office until October of this year when the 36 Forestry Commission workers were told they would be let go in January. DeCample and Weiss also said that in some circumstances the grant money appears to have been used for improper purposes, but an expected federal audit by the U.S. Department of Agriculture would provide further insight.

“That’s the paperwork we have,” DeCample said.

As described by DF&A, the certification of federal funds to state agencies is a routine paperwork task that is not regularly double-checked by state finance officials, state lawmakers or legislative auditors.

“It’s why DF&A didn’t catch it. It’s why Joint Budget didn’t catch it. It’s why Legislative Audit didn’t catch it,” DeCample said.

The forms require the chief financial officer and agency director to sign off on on their accuracy or face civil penalties of $100 to $1,000 per violation.  Former Forestry Commission fiscal officer Robert Araiza appears on many of the forms as does agency director John Shannon and Richard Bell, director of the state Agriculture Department, which oversees Forestry.

More than 50 certification of federal funds documents were provided to the press ranging from June 2007 to December 2011.

Araiza was not available for immediate comment.

A legislative panel will meet Wednesday to discuss funding solutions to the agency’s budget woes.

DeCample said the Governor had no plans to support a tax increase, but was open to other legislative solutions.

He also said Beebe intended to ask for a supplemental appropriation in the upcoming fiscal session of $2.7 million from last year’s budget surplus. That money would be used to pay back potentially misused federal funds and shore up agency finances through the current fiscal year. It would not restore the layoffs of the 36 workers planned for later this month.