Conflicts of interest, mismanagement and weak federal oversight have tainted the Mississippi Department of Marine Resources' mission to preserve coastal resources, a draft of a federal audit concludes.
The Inspector General's Office of the U.S. Interior Department questions $30 million of the $39 million in Coastal Impact Assistance Program spending from 2009 through 2012 that was sampled as part of the audit. The state received a total of $99.8 million in CIAP grants from the Interior Department during that time, with most of the money administered by the DMR.
The draft audit, sent to state and local officials in February and obtained last week by the Sun Herald, says the Interior Department's U.S. Fish and Wildlife Service relied on inadequate grant oversight by its predecessor, the Bureau of Ocean Energy Management, to monitor CIAP spending by the DMR and Harrison and Hancock counties. Few issues arose in Jackson County, the third coastal county eligible for CIAP funding.
"These conditions allowed grant recipients to operate in an envi
ronment rife with conflicts of interest, with no assurance that many of the grants issued in Mississippi were used for intended purposes or benefitted the public in general."
The audit focused mostly on the DMR. It describes grant awards to friends, family and associates of Bill Walker, who headed the agency, and Tina Shumate, its CIAP director. The DMR's governing board fired Walker on Jan. 15. Shumate resigned and left her office Jan. 31. Federal and state investigations of the DMR, first reported in October by the Sun Herald, continue.
The audit describes "widespread conflicts of interest" involving land purchases the DMR oversaw, deficient land appraisals, splitting of contracts that circumvented state bid laws, grant awards that failed to meet CIAP criteria and improper charges to CIAP grants.
The audit recommends specific policies and procedures Fish and Wildlife and the DMR should adopt to correct the problems. The final version of the audit is expected by fall and should include the DMR's responses to the findings and intended actions. Fish and Wildlife requested the audit in 2012 when it assumed responsibility for CIAP.
The inspector general's audit concludes, "Failure to act on these recommendations, we believe, would further undermine CIAP and open the door to fraud, waste and mismanagement of millions of dollars in federal funds meant to conserve, protect and restore American coastal areas, wildlife and natural resources."
Walker's replacement, Jamie Miller, said the agency is working to correct problems the audit details.
"The office that was responsible for that program has been working closely with U.S. Fish and Wildlife to respond to some of those, I guess, findings," said Miller, who started work in April. "We don't know what the final outcome of our responses will be. There are some similarities in what OIG has pointed out and what we have discovered in our evaluation of the agency.
"It has been a partnership in responding with the federal government to the OIG. What could be misunderstood is the OIG's report isn't simply about the department. Really, it is as critical of the U.S. Fish and Wildlife Service as it is us."
He also said the DMR disagrees with some of the findings, but he did not want to get into specifics.
Officials at Fish and Wildlife said in November they would not discuss the audit until it is completed.
Walker would not talk about the audit. "I haven't seen it and I don't know what's in it," he said. "I'm not privileged to that information."
Shumate has previously referred questions to her attorney, Tim Holleman of Gulfport. He said he disagrees with the draft audit's conclusions.
"In my opinion, she didn't have a conflict," Holleman said. "We're a small community. If you wanted to take it to the nth degree, you would create some serious problems. I just don't know how far you carry a conflict."
Family, friends benefit
The audit details almost $16 million in CIAP land buys and projects that benefited family, friends and associates of Walker and Shumate.
"A potential conflict of interest existed between the DMR executive director and his wife, who has been employed by two different major DMR subgrantees -- the University of Southern Mississippi (USM) and the Institute for Marine Mammal Studies (IMMS)."
Walker's wife, Sharon Walker, worked at USM until she took a job in March 2010 with IMMS. The news release announcing her new job at IMMS said she would "bring millions in grant funding and many marine programs to IMMS," the audit says.
The next day, the DMR submitted what the audit says was an "unusual request" to move a $7.8 million CIAP grant, the state's largest, to IMMS from USM. DMR explained USM was "hesitant" to spend the money on reconstruction of a Biloxi aquarium Hurricane Katrina destroyed.
A USM official denied this when interviewed for the audit. "He also stated that USM gave up the almost $7.8 million grant after splitting up grants managed by the DMR executive director's wife into those that were 'the university's' and those that were 'hers,'" the audit says.
Within months, the audit says, IMMS received an additional $3.3 million grant initially rejected in the state's CIAP plan.
"I have never seen the DMR request to transfer my CIAP grant from USM to IMMS," Sharon Walker said, "however, USM/GCRL (Gulf Coast Research Lab) wished to change the goals, objectives, and scope of work of my grant -- to which I did not agree. This grant was competitively reviewed on the scope of work originally submitted."
Bill Walker's son, Scott Walker, served on the board of The Nature Conservancy when that organization received CIAP grants Bill Walker authorized.
Waterfront property Scott Walker owned in Jackson County was included on a CIAP-eligible property list. Shumate, the DMR's CIAP administrator, served on the board of the Land Trust for the Mississippi Coastal Plain and suggested the purchase, other Land Trust associates have told the Sun Herald. But the Land Trust wound up buying the land with other money, which the DMR supplied.
A friend of Bill Walker's, David Harris, also benefited from the CIAP program, a potential conflict of interest, the audit says. The DMR spent $3.7 million -- almost $2.4 million per acre -- to buy Harbor Landing in the Ocean Springs harbor from Harris. The DMR had agreed to remove the yacht club and boat storage building and restore the property as green space.
Harris was allowed to 'wind down' operations for 1½ years, although he was not supposed to earn a profit. However, the audit says, nobody from the DMR followed up with a request for financial records on the businesses.
To fulfill the grant's purpose, the DMR must demolish the yacht club and building, the audit says. But CIAP money can't be spent on demolition.
The audit concludes, "Such high-priced property that could require an extra investment of state funds to be able to even call it 'green space' is, at the very least, difficult to justify."
Harris and his wife, Melba, said the property appraised for about $4 million, but they agreed to take less because they were ready to sell after the BP oil spill. However, the audit points out, the CIAP appraiser's value was 207 percent higher than the county-appraised value of about $1.3 million.
The Harrises said the "wind down" period was offered so boat owners would have a chance to move.
"We didn't make any money," Melba Harris said in an interview Thursday. " We weren't making ends meet before."
The DMR also designated $195,000 in CIAP money for property, including a renovated house, owned by Shumate's parents in Pascagoula. Bill Walker told auditors he knew about the relationship, but Shumate had assured him the purchase would be handled like all other CIAP transactions. The DMR could not provide documents showing how the Pascagoula property was selected or how it ranked in comparison with other properties the public suggested.
Holleman said Shumate recused herself from the land transaction.
The state's CIAP plan included purchase of Coast properties as one overall project totalling $10.8 million.
The audit says, "Structuring this land acquisition project in the state plan as one overall acquisition project instead of identifying individual parcels up front did not allow the public a chance to comment on the properties DMR selected for purchase.
"This created an environment that allowed questionable land purchases to occur ."
Projects fail to meet goals
The audit finds seven grants totaling more than $8.7 million should have been rejected for having "little or no relevance to the preservation of coastal areas." The audit deems $5.9 million already spent as "ineligible costs."
The audit says federal authorities found 90 percent of the DMR-controlled Mississippi Gulf Coast National Heritage Area's comprehensive plan for marine and coastal conservation was focused on cultural heritage, with only a 10 percent emphasis on conservation.
n One grant for $500,000 went to the Ohr-O'Keefe Museum of Art in Biloxi, but only 4 percent will be spent on landscaping that could be considered coastal preservation, the audit says. The audit says most of the money went to install skylights and flooring in the museum welcome center.
Shumate directed the Heritage Area's work, according to the audit. Holly Zinner, the museum's former deputy director, said she was asked by Shumate to become a commissioner. Zinner had joined Ohr-O'Keefe in 2008 but is now working only part time. Zinner said she never attended any Heritage Area meetings and had forgotten she was even appointed to its commission. Zinner did not believe her appointment had any connection to Ohr-O'Keefe's grant. The application process, she said, began in 2006.
n A grant totaling about $1 million, including $788,300 added through an amendment, has been designated for the Old Wire Road Trail Project in Stone County, a 20-mile asphalt trail along an old telegraph line. Stone County, the audit says, "is a land-locked county not designated as an eligible recipient for CIAP grants."
Stone County's grant consultant, Nell Murray, also serves as a commissioner for the Heritage Area, as did six others who either managed or potentially benefited from CIAP money, the audit says. Murray could not be reached to comment.
n The audit also questioned $500,000 in CIAP spending on the Infinity Science Center associated with the Stennis Space Center in Hancock County for a classroom to educate people about space, marine and environmental science. The audit describes it as "a general-purpose classroom" with questionable benefit for coastal preservation.
Appraisals of CIAP properties, handled by Barber & Mann Inc. of Ridgeland, are criticized in the audit for a number of reasons.
To begin with, the audit says, the DMR parceled out CIAP work to Barber & Mann through five contracts and contract amendments that increased the amounts, plus 55 purchase orders. The DMR paid Barber & Munn a total of $718,347 to assist in writing the state CIAP plan, administer grants and manage land purchases.
The audit says the DMR's actions suggest the agency was attempting to avoid competitive bids. Barber & Mann is owned by Madison County Tax Assessor Gerald Barber and his wife, Elizabeth Rooks-Barber, who managed CIAP work, including property appraisals.
Property appraisals, the audit says, contained an average of more than five deficiencies.
The audit found in 15 of 16 cases, county appraisals were far lower than amounts paid for properties. The difference between county appraisals and purchase prices ranged from 132 percent to 7,282 percent on the 15 purchases. The only exception was the property bought from Shumate's parents, where the CIAP appraisal was only 11 percent more than the county-appraised value.
"These issues," the audit says, "can diminish CIAP's overall impact on coastal communities by resulting in overpayment for property and reducing the amount of funds available for other projects."
Rooks-Barber said all her contracts were approved by the state's Personal Services Contract Review Board. She referred all other questions to the DMR.
"DMR addressed all of the questions in the draft audit report and submitted them to the U.S. Fish and Wildlife Service," she said.
In conclusion, the audit says:
"CIAP grants have been approved that failed to support an authorized use under the law. Conflicts of interest within the Mississippi DMR have marred the program and the public's perception of CIAP. Improper land appraisals have undermined CIAP's intended impact of protecting environmentally fragile coastal areas and communities.
"In the areas of procurement and accounting, sole-source regulations were circumvented; unallowable, unallocable, and unreasonable charges were allowed to be made on certain grants, and equipment purchases and other financial issues were mishandled."