Bureau of Consumer Protection criticized in audit

Auditors say the Bureau of Consumer Protection spends more on consultants each year than all but 10 states in the nation.

The recommendation to rely more on staff instead of consultants was one of a series in a confidential draft audit report, which also recommended taking fraud investigations away from the bureau.

The audit was requested by Attorney General Brian Sandoval, who reportedly had some run-ins with Consumer Advocate Tim Hay, who was appointed by Sandoval's predecessor, Frankie Sue Del Papa, and whose term expires in 2005. Hay can only be removed from the office for malfeasance, inefficiency or neglect of duty.

Hay declined comment on the report, saying he hasn't completed his response. The audit report was removed from the Audit Committee's agenda Wednesday because Hay had not been given enough time to respond.

The draft audit also reported numerous incidents in which sources of funding in the bureau's $3.6 million annual budget were mishandled and improperly accounted for.

The issue of Hay's reliance on consultants was raised during a Board of Examiners meeting by Secretary of State Dean Heller. Several consulting contracts were put off until the next board meeting, where Hay explained that his policy has been to keep the permanent staff small, using consultants for their specialized expertise, instead of hiring experts full time.

But auditors pointed out that Nevada's consumer protection consulting budget is one of the 10 highest in the nation, with contracts totaling $539,000 in fiscal 2003. They argued the state could save significant amounts of money by using staff attorneys and experts more.

In addition, auditors recommended the bureau send its attorneys to more workshops and rule-making hearings. They had a lawyer present in only five of 19 hearings sampled, while other states use attorneys in nearly all workshops to protect the public interest.

Auditors said the bureau's expertise is in utility matters and that investigations of deceptive trade often rely on the criminal justice division, which handles the bulk of fraud cases for the Attorney General's Office. Auditors recommended the deceptive-trade staff be transferred to that unit, and that it be charged with investigating and prosecuting mortgage fraud as well.

They said that would leave the Bureau of Consumer Protection to focus on utility cases and issues.

Auditors said moving the bureau's offices back to the central offices would save a total of about $60,000 a year. Hay has tried to keep the offices next door to the Public Utilities Commission, saying that is more efficient for his staff. Auditors agreed with Sandoval that the savings outweigh any benefits of staying in privately leased space, and that being in the central office results in other efficiencies.

The audit lists several examples of funds being used or accounted for incorrectly. The bureau's funding comes from a variety of sources including the general fund, an assessment on utilities and a special account for enforcement of unfair trade practices which is generated by damages and civil penalties.

All those funding sources are restricted in where they can be spent and, according to auditors, the bureau often violated those restrictions by moving money from one category to another in violation of state regulations and law. For example, one lawyer's salary was paid by utility funds, although he worked exclusively on deceptive trade practices.

The audit is expected to be formally released after Hay's comments are included.