Findings of audit peculiar

Friday, Oct. 24, 1997 | 10:41 a.m.

High court justices assured the Legislative Commission Audit Subcommittee on Thursday that steps have been taken to prevent the problem from recurring.

The audit of the Administrative Office of the Courts was requested by Chief Justice Miriam Shearing following the resignation of Don Mello as AOC director in February. Mello resigned under pressure but before revelations about the checks.

The audit found that the office sent about $250,000 to lower courts for automation improvements without written agreements covering the terms and conditions of the payments.

The review also uncovered six checks totaling $379,280 written to lower courts for automation improvements that were never sent. Months later, the checks were canceled.

The audit, which reviewed records from July 1994 through last January, resulted in 12 recommendations, all of which were accepted by the Supreme Court.

Shearing and Justice Bob Rose, who attended the meeting of the subcommittee which reviewed the report, said they were stunned at what was uncovered.

Shearing said Mello apparently decided on his own to send money to the state's different district court systems for automation improvements. There were no written agreements and the court wasn't notified of the various disbursements, she said.

But even more strange was Mello's decision to write checks to several district courts but to never send them, Shearing said. Two checks totaling $125,000 made out to the Washoe County District Court were found in Mello's desk after he left, she said.

The checks to the Washoe court were processed on Aug. 15, 1996. A call to Washoe court officials found no one who expected to receive the money and the checks were canceled in January and March of this year after Mello left, Shearing said.

Rose called the practice bizarre and said the only possible explanation was to artificially inflate the amount of money actually sent to the lower courts for improvements.

Mello, in a written response, said auditors were misinformed about the distribution of funds to the lower courts.

"Every grant was made only after receiving a letter request detailing what the recipient court was to do with the funds," he said.

Mello said the explanation for checks that were written but never sent is simple: They were drawn up after discussions with district court officials about their automation needs. Mello said he was waiting for written verification before sending the checks. When a written request was not received, the checks were canceled, he said.

The audit found no evidence that any of the court money was stolen or used improperly, only that controls were lacking to properly track the funds.