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Audit finds unauthorized fees, spending in Alabama court system

Court administrators enacted an illegal fee on foreign language interpreters and put the money in a nonprofit account for judicial conferences. Separately, the court system withheld more than 60 contracts from legislative oversight.

(CN) — In an unusually long list of irregularities, Alabama’s Administrative Office of the Courts was cited for 17 instances of financial or statutory noncompliance during an audit period between October 2017 and last September, according to a report released Friday.

According to the Alabama Department of Examiners of Public Accounts, inconsistencies with state law included a nonprofit fund used in part to purchase alcohol, entertainment, swag and commemorative materials for judicial conferences, an undisclosed amount of credit card purchases without accompanying documentation, a lack of financial controls over several salary transactions and more than 60 contracts worth more than $4 million that were not scrutinized by a legislative contract review committee. 

Alabama has a unified state judicial system where the Administrative Office of the Courts, or AOC, is responsible for the financial oversight and administration of 41 judicial circuits covering all 67 counties, as well as hundreds of municipal courts. Friday’s audit also noted AOC failed in its duty to collect, compile and distribute data on the operations of municipal courts in the state.

The office is supervised by a director who is appointed by the chief justice of the Alabama Supreme Court. Chief Justice Tom Parker was elected in 2018 and appointed Rich Hobson as the director of AOC in 2019. 

The judicial college fund’s mission is listed as providing “training and education programs for court officials and employees of the Alabama Judicial System.” Yet the audit determined money in the fund, whether it was public or private, was also used to purchase “alcoholic beverages, excursions and other entertainment such as DJs, social events, party supplies and rentals, gift cards, door prizes, shirts, tumblers, totes, flowers, trophies and plaques,” among other things.

AOC spokesman Scott Hoyem emphasized via email Friday those expenses were “reimbursed from associations or the activity fees of participants,” adding “the practice of paying for alcohol prior to reimbursement has ceased.”  

According to its 2018 IRS Form 990, the Alabama Judicial College Education Fund collected program revenue totaling $664,537 and recorded expenses of $584,892 that year. The vast majority of revenue, $662,726, was listed as “conference fees.” Another $1,358 was listed as “meal reimbursements” and only $453 was characterized as “all other program service revenue.” Any public support from an interpreter program is not specifically noted, nor is the compensation of the fund’s director, Wally Lowery, who listed a 40-hour work week on the form.

The audit report also noted the AOC allowed its own employees to perform work on behalf of the judicial college, employees claimed per diem even when their expenses were provided, and “numerous payments” were made on a debit card without supporting documentation. One former employee who had been awarded $8,684.59 for sick leave upon their resignation reimbursed the money after the overpayment was discovered by auditors. 

“The [AOC] should ensure all monies collected are paid into the state treasury or deposited in an approved state depository to the credit of the general fund of the state of Alabama or to the credit of a special fund if the latter is allowed by law,” the report recommended. “The [AOC] should only charge fees that have been statutorily authorized.”   

Hoyem noted the AOC has been audited by the examiner’s office approximately 13 times since the fund was established in 1978 — a period which included 10 chief justices and 12 court directors — and the agency has not previously flagged the judicial college arrangement. 

Alabama Chief Examiner Rachel Riddle said by phone Friday AOC cooperated with the audit, but called the judicial college fund - which covers conference registration and exam fees for judges' continuing education - “a strange situation” because even though it is a 501(c)(3) nonprofit, it was partially funded with fees from the state’s Foreign Language Interpreter Program. Those fees were never statutorily authorized, Riddle said. Rather, the arrangement was imposed through a court order.

Hoyem explained that less than $15,000 has been collected from the interpreter fees program since 2009, and the judicial college fund was established 45 years ago as a nonprofit organization “because there has never been a state appropriation for judicial education.”

Fees collected from the registration of interpreters, while they were in the same account, were “specifically used to pay the rating service, from the National Center for State Courts’ approved list, to grade the oral exams,” Hoyem explained. “All other funds in the account are registration fees.”

The state’s Contract Review Permanent Legislative Oversight Committee was established for reviewing all personal and professional contracts paid from appropriated funds. During the review period, the AOC reportedly withheld 65 contracts from the oversight committee totaling $4,270,144.84.

“The Administrative Office of Courts should submit all professional service contracts to the Contract Review Permanent Legislative Oversight Committee,” the report recommended.

Hoyem said the 65 contracts withheld from the committee were all court referral contracts for a single year, 2018.

“These contracts have been submitted to contract review for approval each year since at least 1991 and 2018 is the only known exception,” he wrote without providing an explanation. “These contracts have been submitted for approval each year of the current administration that began in 2019.”

The AOC was also cited for inadequate policies on employee verification and a lack of controls ensuring that nonconsumable personal property was accounted for properly.

State Senator Greg Albritton, a member of the contract review committee, said by phone Friday he was aware of the report and the issues “need to be corrected.” 

“I can assure you the Legislature will be looking at [the report] and finding ways that we can exercise our appropriate authority where needed,” he said. “There are several things in there that have me concerned and I am unsure whether there is an intent or a misunderstanding. But we’re going to find out.”

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