The Sheriff's Department took $1.6 million -- most of belonging to released inmates -- instead of directing it to the appropriate county agency, according to a report released Thursday by the county Auditor-Controller.
A spokesman for Sheriff Lee Baca, Steve Whitmore tried to downplay the problem, saying it was "more about accounting than anything else."
He vowed, however, that the department would correct the problem.
In her report, Auditor-Controller Wendy Watanabe said, "We noted that the Sheriff's inappropriately transferred approximately $1.6 million in unclaimed funds into their operating revenue over a two-year period."
"The funds should have been transferred to the Treasurer and Tax Collector as required by the County Fiscal Manual," she added.
Whitmore estimated more than $1 million belonged to inmates who had deposited money into accounts that could be used during their stint in jail to buy goods from jail consignment stores and to make phone calls.
When the inmates were released, they didn't withdraw what was left in the accounts.
The County Fiscal Manual requires that such "unclaimed funds" be transferred to the Treasurer and Tax Collector within a year if they had been "abandoned" by inmates; three years if they had been used as evidence; and three months if they had been found in the course of business.
Money that still remains unclaimed was supposed to go into the county's General Fund, but the department kept it instead.
"Transferring unclaimed funds to a department's revenue may result in the use of funds that were not authorized by the Board of Supervisors as part of a publicly accessible appropriations process," Watanabe said.
"Sheriff's management indicated they were not aware of the unclaimed funds requirements, and adopted a practice of periodically transferring unclaimed funds for over three years to the department's operating revenues."
Whitmore said the department would adopt all of the report's recommendations.
"We're going to work it out with the Treasurer -- the accounting and the bookkeeping will be done the way they want it done. Everything will be to their satisfaction," he said.
"We appreciate this audit, because an audit such as this had not been done before on these particular funds," he added. "It's more about accounting than anything else, however, we're going to implement all the recommendations suggested -- we think it's the right thing to do."
Whitmore acknowledged, however, that returning the money to inmates might be difficult.
"Some of the inmates don't have their names listed but that's irrelevant," he said. "We're going to be working with the county on what to do with that money but I don't quite know how that's going to play out."
The audit uncovered an additional $1.5 million that the department should have transferred to the Treasurer, but didn't.
The department was also faulted for leaving $160 million in excess "Special Revenue Funds" and having no detailed plans for how to spend it.
The audit said the department had $370 million in special fund revenues available over three fiscal years, but spent only $210 million of it and didn't determine appropriate spending plans for the remainder.