XAVIER BECERRA State of California

Attorney General DEPARTMENT OF JUSTICE

600 West Broadway, Suite 1800
San Diego, CA 92101
P.O. Box 85266
San Diego, CA 92186-5266

Public: (916) 445-9555

Telephone: (619) 738-9323
Facsimile: (619) 645-2271
E-Mail: Ed.Ochoa@doj.ca.gov

March 4, 2021

VIA EMAIL & U.S. MAIL

Gregory D. Totten
Chief Executive Officer
California District Attorneys Association
2495 Natomas Park Drive, Suite 575
Sacramento, CA 95833
Email: gtotten@cdaa.org

RE: Hemming Morse, LLP ’s Report of Findings (December 11, 2020)

Dear Mr. Totten:

Thank you for taking the time to speak with me and other members of the Attorney
General’s office on February 17, 2021. As we advised you, Yolo County District Attorney Jeff
Reisig and the California District Attorneys Association’s (CDAA) Legislative Director Larry
Morse, our office remains deeply concerned about the findings made by Hemming Morse, LLP
in its “Report of Findings” dated December 1 1, 2020 (“Report of Findings” or “ROF”) regarding
the CDAA’s misuse of funds.1 When we learned last summer from CDAA that restricted funds
from the Environmental Training Project and Environmental Circuit Prosecutor Project had been
inappropriately used to support CDAA’s other programs and general operating expenses, our
office promptly made the decision to stop funding from court-ordered settlements to CDAA’s
programs pending further review of CDAA’s investigation.

The Report of Findings documents numerous instances in which CD AA understood that

settlement proceeds were restricted funds to be used only for the designated purposes as
expressly stated in court judgments (e.g., use for environmental training and/or the
Environmental Circuit Prosecutor Project)2, yet notwithstanding that clear information, for

1 We note th, Rep,rt ,f Fi„ding, i, d„ig„ated „confidential,„ but CDAA has made it
publicly available through its website and other means.
2 ROF,
Il 20, 40, 42 (“Pursuant to your instructions, the monies will be deposited into the
CDAA Environmental Project Fund to provide needed training to prosecutors and enforcement
Gregory D. Totten, CEO
March 4, 2021
Page 2

thirteen years, CDAA improperly used restricted funds for other purposes.3 Equally troubling, in
light of this knowledge, is the finding that CDAA’s audited financial statements over several
years inaccurately reported all revenues and net assets as tIny estrictedf During that time, CDAA
also provided financial statements (in the form of “budgets”) to the CDAA Environmental
Protection Committee (including members of our office), which reflected funds were available in
each of the environmental and worker safety sub-accounts, when in fact those funds were
“borrowed,” used for other purposes, and eventually depleted.5 These actions by CDAA, an
organization composed of prosecutors, and which has served a critical role in providing training
to the law enforcement community, only serve to undermine the public’s trust in our
governmental officials and institutions.

During our meeting, we inquired whether CDAA had adopted the “recommendations for
improvements” set forth in paragraphs 137 through 144 of the Report of Findings. We were
concerned to learn that, notwithstanding the gravity of these findings, CDAA’s Board of
Directors still had not formally taken action to address all of these recommendations. Based on
our discussion, it is our understanding that CDAA’s management team has at least stopped the
practice of borrowing funds and that CDAA’s board will be considering adopting additional
measures by the summer of 2021. This is too late. We strongly urge CDAA’s governing board
to act swiftly to implement all necessary measures and internal controls and to ensure full
compliance with applicable accounting and reporting requirements, including the proper use and
management of restricted funds. At a minimum, those measures should include an audit
committee comprised of members who are not employees of the CDAA organization and
committee members should be knowledgeable about financial matters and have no conflicts of
interest with the organization. The audit committee should: (1) be familiar with the
organization’s financial statements; (2) be prepared to provide meaningful support to the auditors
when judgment calls are necessary; (3) review executive compensation arrangements and any
transactions between directors and the CDAA organization that may pose a potential conflict of
interest to ensure that the financial statements properly report such arrangements; (4) review the
organization’s internal controls to determine whether they are adequate and make
recommendations to CDAA’s board for improvements; and (5) present the auditor’s

personnel handling environmental cases.” (fn. 67), 44-62, 68-71, 80-84, 108-109 (“To keep
afloat, environmental settlements are being borrowed and will be repaid when OES reimburses
CDAA. This inter-fund mechanism has been employed in the past for similar situations in which
reimbursement are delayed and cash flow problems result”), 112-118 (“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”).
3 ROF, q 27.

4 As Hemming Morse indicates in its report, “CDAA’s financial statements are the
responsibility of management.” ROF, IT 76-77.
5 For example, as of
March 31, 2020, CDAA’s budget report indicated that $3.1 million
was available in those sub-accounts, but in fact those funds were entirely depleted.
Gregory D. Totten, CEO
March 4, 2021
Page 3

management letter, which typically highlights concerns with the organization’s internal controls,
to the board and make recommendations for improvements. CDAA should also hire competent
external auditors who will be committed to performing sufficient tests and other audit procedures
to ensure that restricted settlements funds are properly accounted for, reported, and protected.
This entails interviewing and reviewing the qualifications of the auditor engagement partner and
audit team members to ensure they have experience auditing nonprofits, reviewing resumes and
office literature and publications, as well as checking references and possible conflicts of
interest

We also discussed the disturbing finding by Hemming Morse that CDAA still owes $2.88
million to the depleted environmental and worker safety funds.7 CD AA’s proposal to set aside
ten percent ofunencumbered general funds (approx. $100,000/yr.) to restore the restricted funds
is simply not acceptable, as we all agreed. Consequently, we strongly urge and expect CDAA’s
board to implement a robust repayment plan to ensure that those funds are fully repaid with
interest within a more reasonable period of time (i.e., within 3-4 years). The board should
consider options to increase unrestricted revenue streams or be prepared to make difficult, but
necessary budget adjustments to reduce operating expenses.

Lastly, CDAA’s board should review CDAA’s Bylaws to evaluate whether there are
opportunities to promote board oversight. It was not clear from the Report of Findings whether
CDAA had an active Finance Committee, which should have been involved in reviewing
CDAA’s annual budget, as well as regular reports on management’s performance in meeting its
budget goals. The Finance Committee generally presents budget reports and shortfalls to the full
board for its deliberation. The CDAA board should consider adopting new committees or
revitalizing its committees to assist the board as permitted by Corporations Code section 7212.

We hope that CDAA’s management team will take the recommendations presented above
and in the Report of Findings seriously and implement additional controls subject to the board’s
approval. However, in light of the disturbing and significant problems uncovered in the Report
of Findings, our office will not direct further funding from settlement proceeds to CDAA until
we see concrete actions by the Board and the organization that give us confidence the CDAA has
implemented measures and controls to appropriately manage restricted funds and taken the
necessary steps for timely repayment of the $2.88 million with interest.

We look forward to CDAA’s response that it will promptly implement these measures.

6 CDAA limited the Hemming Morse audit to those funds related to settlement, judgment
and grant funds received by CDAA. We strongly encourage the CDAA board to retain an
external auditor to conduct a full-scope audit of all of CDAA’s accounting funds and transactions
to ensure its financial statements are fairly presented in accordance with generally accepted
accounting principles and auditing standards.
7 ROF, qI 27, 46-47.
Gregory D. Totten, CEO
March 4, 2021
Page 4

Acting Chief Assistant Attorney General

For XAVIER BECERRA

Attorney General

cc: Jeff Reisig, Yolo County District Attorney

Larry Morse, Legislative Director