TCEDA Board meets at 3 p.m. Tuesday in the Tuolumne County Board of Supervisors chambers on the fourth floor of the County Administration Building, 2 S. Green St., Sonora.

Read the audits:

Management audit: https://docs.google.com/document/d/1OomaQ0mDdhr9YydixP_6chFev-RwnjSfE01jq2k8jn4/edit?usp=sharing

Financial audit: https://docs.google.com/document/d/1NE0XSJ_MeqB8xMemBCnvB7sGjRGsG6GY_39NQYqSNQ4/edit?usp=sharing

The now-defunct Tuolumne County Economic Development Authority operated in a realm of its own without the proper policies in place to provide effective oversight of its chief executive officer, Larry Cope, financial and management audits that were released on Monday confirmed.

Much of what is contained in the long-awaited audits confirm what The Union Democrat reported in February about the TCEDA’s spending for travel and business expenses, as well as some of the findings from a report by the Tuolumne County Civil Grand Jury released in June.

Macias, Gini and O’Connell LLP, or MGO, a California-based public accounting firm that has audited many of the largest cities in the state, was paid $41,250 by the TCEDA Governing Board to conduct the audits at the recommendation of the jury.

The TCEDA was formed in late 2008 as a joint powers authority through an agreement between the county and City of Sonora to help foster economic growth and assist businesses.

However, the county Board of Supervisors and Sonora City Council unanimously decided to withdraw from the agreement on Feb. 19 due to a loss of public trust that made it difficult for the TCEDA to continue.

All of the recommendations made in the audits were addressed to the county because it’s in the process of recruiting an interim economic development director who would pick up where the TCEDA left off.

Weaknesses in the TCEDA’s travel and business expense policy left the door open for possible fraud, waste, abuse and mismanagement, according to the firm’s final report on the management audit.

The policy allowed Cope to approve his own travel and business-related expenses, provided him with certain exemptions to the rules and listed him as the person who approves such exemptions.

“This allowed the Director to approve his own expenses that exceed the policy limitations,” the audit report stated.

The Union Democrat published a report on Feb. 19 after an extensive review of the TCEDA’s travel and business expense records for 2017 and 2018 that found Cope had spent more than $100,000 on the agency’s credit card in those two years combined.

Cope’s expenses in the years reviewed by the newspaper included multi-day trips to trade shows in places such as Las Vegas and Boston, where some of the hotels Cope stayed at cost more than $400 a night.

The next director should be required to submit travel plans for approval ahead of time, someone else should review and approve his or her expenses, and the county’s auditor-controller should regularly monitor the expenses, according to the recommendations from the audits.

The auditors also recommended requiring the next director to disclose more information for meal expenses, including a description of the purpose, identifying the participants by name, business, or — if confidential — business types, and include itemized receipts.

Only a few of the receipts submitted by Cope in 2017 and 2018 were itemized. His calendar identified county officials whom he met with over a meal in 2017, but not 2018. He also only listed businesses as either “existing clients” or “prospects,” but did not identify them by name or type of business.

According to the auditors, the TCEDA’s policy also did not comply with Internal Revenue Service rules requiring employees to provide a business-related reason for expenses and pay the agency back “in a timely manner” for any expenses or reimbursements that were not covered by its policy.

The auditors also suggested that the board “may consider budgeting and accounting for local meal expenses separately from travel expenses and monitor the reasonableness” of the director’s local meal expenses on a monthly basis.

The TCEDA board approved the original version of the policy on July 10, 2009, after Cope presented them with a draft. Minutes from the meeting stated he met with County Auditor-Controller Debi Bautista for direction on the policy.

Some minor updates to the policy were approved by the board in 2015.

Bautista said on Monday she probably should have sat down with the TCEDA board and explained how they passed a policy that allows the director to overrule it at anytime, but she didn’t because she was told they were completely separate entities and needed separate policies.

“I will never do that again,” she said. “I don’t care if they pass their own policies, I would scrutinize them at the same level as any other county department. We’ve learned a lot from this.”

County Counsel Sarah Carillo said she was not involved with the formation of the TCEDA, nor was anyone currently in her office, but they can only provide legal advice to their clients and can’t make the decision on what to do for them.

The management audit stated that requests for information concerning the TCEDA went through the County Counsel’s Office and were decided on a case-by-case basis.

Outside attorneys were hired to defend the TCEDA against a lawsuit filed by county resident Ken Perkins last year for information concerning the businesses that had benefited from the agency’s assistance, which ultimately resulted in the release of redacted information and $7,000 awarded to Perkins for his attorney fees.

Auditors acknowledged there might be legal reasons to withhold information concerning some clients of the TCEDA, but stated “the tracking and reporting of business contacts are important for both performance metric reporting and transparency.”

According to the audit, the TCEDA’s tracking of performance metrics fell short of those reported by similar economic development agencies in Madera and Siskiyou counties.

The other agencies collected metrics such as the number of site requests made by business, industrial vacancy rate, amount of funds invested into the economy, and return on investment, while the TCEDA did not.

Additionally, the audit found that Cope should not have claimed “comp time” while in England for a month in 2017 because he was a salaried employee who does not receive comp time. The audit noted that he agreed to return the hours to the county from his accrued vacation time when his contract was terminated last month.

Cope received a lump-sum payment of more than $120,000 as part of his separation agreement with the TCEDA.

County Supervisor John Gray, who serves as TCEDA chairman, said he could not weigh an opinion on the audits Monday because he was out of town most of the day and had yet to read through them.

Sonora Mayor Jim Garaventa, who serves on the TCEDA board, also said he hadn’t gotten a chance to read the audits Monday afternoon because he received them that morning while he was at work.

Bautista is scheduled to give a presentation about the audits to the TCEDA board at a special meeting Tuesday afternoon.

The board is also scheduled to consider a number of items related to the process of dissolving the TCEDA and its nonprofit arm, the Economic Prosperity Council of Tuolumne County, including the recent resignation of longtime TCEDA board member Barry Hillman.

Hillman, who joined the board in 2012, took aim at critics in his resignation letter dated March 19.

“I deeply regret the demise of the TCEDA as I continue to believe it has provided an excellent pathway for true economic development in Tuolumne County now lost due to shortsighted influence and misrepresentations of a minority of individuals who have never taken time to understand the importance and value of this organization,” he wrote.

Hillman said he had not read the audits when contacted via telephone Monday afternoon and declined to answer any other questions before abruptly ending the call.

Contact Alex MacLean at amaclean@uniondemocrat.com or (209) 588-4530.

23049454