Press Releases

SACRAMENTO—State Controller Betty T. Yee today announced the results of her team’s review of the Association of Bay Area Governments (ABAG), finding that a lack of internal controls in administration of an affiliated financing authority provided opportunities for potential misuse of funds.

Initiated in February, the Controller’s review followed up on allegations that the director of the ABAG Finance Authority for Nonprofit Corporations (Authority), a joint powers agency charged with issuing debt for projects in member jurisdictions, had embezzled about $1.3 million in an elaborate scheme.

“Crucial internal control standards were not adequately followed at ABAG in its oversight of the Authority,” said Controller Yee, the state’s chief fiscal officer. “Local governments must protect public money by ensuring that those who authorize spending are not the same people who write the checks.”

The Controller’s auditors assessed 79 internal control elements based on guidance from the federal General Accounting Office, and found that 49 of the elements were inadequate.

They found, for instance, that the Authority’s director was authorized to release funds earmarked for developers, record the transactions, receive bank statements, and perform reconciliations. This is inconsistent with principles of internal control that call for a segregation of duties so that any one person cannot both authorize spending and process the related paperwork.

In more findings, the Controller’s staff revealed ABAG lacked separation of duties in accounts payable, where a clerk was assigned the incompatible tasks of processing invoices, making entries to the general ledger, and printing checks for disbursement. Further findings included many missing or late staff performance evaluations; no comprehensive travel policy and accounting procedures for travel advances; and no efficient way to identify the number of contracts currently in effect and the funds associated with those contracts.

The complete report of the Controller’s staff review is available here.

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