Arkansas State Forester John Shannon resigns after legislative audit finds forestry commission improperly borrowed more than US$6.4M from federal grants

Wendy Lisney

LITTLE ROCK, Arkansas , February 10, 2012 (The Associated Press) – Arkansas state Forester John Shannon announced his resignation Friday after a legislative audit questioned financial practices at the Arkansas Forestry Commission that led to the layoff of 34 employees.

Shannon announced his resignation to the Legislative Joint Auditing Committee. He said he submitted his resignation Thursday and it will be effective at the end of business Friday.

A legislative audit released earlier in the day found the commission improperly borrowed more than $6.4 million from federal grants to prop up its strained budget. The Division of Legislative Audit found 59 instances since September 2007 in which money was transferred from federal grants to pay for the commission's operations.

"I've appeared before I don't know how many legislative committees over the last few months and every time I've told you folks that at the forestry commission the buck stops with me," Shannon said. "And I'm not going to go wobbly on you now, so yesterday I resigned as state forester. My resignation becomes effective at the close of business today. When I say the buck stops with me, I mean the buck stops with me."

The audit said the commission's former chief fiscal officer Robert Araiza filed inaccurate federal and state financial documents, drew down federal grants prematurely and improperly used the federal money for operations. The report also said Shannon did not fully question the commission's ability to borrow from the grants and did not properly review the grant documents.

Auditors also said the commission may owe more than the $1.5 million that officials originally said remained unpaid to the federal government. The report said a lack of documentation for other transfers could possibly increase the amount owed to more than $1.9 million.

In the report, auditors called Araiza's actions inappropriate and possibly in violation of state law. Auditors also said Shannon did not exercise due diligence in his oversight of the commission's financial activities. Araiza declined to comment to The Associated Press on the audit.

Auditors said they would forward the report to prosecutors to determine whether criminal charges should be filed. Auditors recommended that the forestry commission re-examine its oversight procedures to make sure all federal grants are properly documented and spent.

The report said Shannon allowed the borrowing from federal funds to continue even after he was notified in June 2010 that the practice was improper.

But in a letter responding to the report, Shannon said he wasn't notified until November 17, 2011.

"Had I known earlier I would have halted the practice immediately," Shannon said.

Auditors also said Shannon did not implement significant cost-savings steps during the commission's financial troubles until this past fiscal year.

The commission announced the layoffs last year and initially blamed the shortfall on a drop in timber severance tax revenue. Gov. Mike Beebe announced Wednesday that money would be shifted in the budget to rehire 15 laid-off firefighters.

On Friday Beebe said Shannon helped to develop the commission into a widely respected and reliable agency.

"However, after Legislative Audit's review of the financial troubles at Forestry, I agree that a change in management is needed," Beebe said. "I thank John for his years of dedicated service to Arkansas."

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