COUNTY AUDITORS EYE SUBPOENA POWER : EMBEZZLEMENT CASE PROMPTS CONSIDERATION.

Byline: David Bloom Daily News Staff Writer

Los Angeles County auditors are considering seeking subpoena power to guard against abuses of county-associated private foundations such as one that led to a county museum official's plea of no contest to embezzling $2 million.

A scathing 1993 audit that led to the resignation of the county Natural History Museum director never uncovered the embezzlement because auditors had no legal right to review the private museum foundation's books, said Auditor-Controller Alan T. Sasaki.

``We could only go so far,'' Sasaki said. ``We couldn't get any records on the foundation side.''

The museum's former chief deputy director, Marcus Rodriguez, pleaded no contest last year to embezzling $2 million from the foundation between 1988 and 1994.

The theft was discovered only after James Powell took over in 1994 as head of the museum and foundation, saw discrepancies in the foundation's books and turned them over to the District Attorney's Office, which conducted an investigation leading to Rodriguez's conviction.

The Daily News reported July 25 that the District Attorney's Office now is investigating allegations that former county Supervisor Peter F. Schabarum, with the help of Rodriguez, funneled charitable money through a sham museum foundation account to use it for personal travel.

Schabarum could not be reached for comment, and his attorney has declined comment.

The museum foundation provides about half the museum's $19 million budget through donations, grants, admission fees and revenues from museum gift shops and restaurants.

Though it is intimately entwined with the museum, even paying part of the salary of top officials, it is a separate organization with a separate board of trustees.

Sasaki said he is examining the potential for subpoena or similar powers that would allow his auditors to examine the books of the dozens of independent foundations and nonprofit groups that are connected with many county departments.

``We are looking at alternatives that may provide us access to those kinds of records,'' Sasaki said. ``We need to get some interpretation as to what the Government Code allows.''

Auditors, who are the county's internal fiscal watchdogs, already have the power to demand any records they need from departments to ensure funds are being handled properly, Sasaki said.

But they have no power over the private foundations connected with those departments, even if, as with the museum, they are an essential part of a department's existence, county officials said.

``Some of them raise money for us,'' said Supervisor Yvonne Brathwaite Burke, whose district includes two of the Natural History Museum's four facilities. ``Sometimes things we can't do as a county, they can do on our behalf. But we need to put it in all our contracts (with the foundations) that we have a right to review their books.''

The need to watch foundations will only increase in coming months, Sasaki and Assistant Auditor-Controller Tyler McCauley said, as budget-battered departments turn increasingly to private fund-raising sources to make up for county cuts.

A 1992 auditor's review found that 19 county departments had set up 180 foundations and nonprofit groups which brought in $52 million in donations, grants and services.

In turn, the county provided more than $2 million in free office space and other support for the foundations.

The foundations vary in size and duties from the multimillion-dollar organizations that provide half the budget of the natural-history and art museums to tiny, almost ad hoc groups that help individual libraries with volunteers and book sales.

The sheer number of foundations, their many roles and their independent structures have made fiscal watchdogs' work difficult, officials said.

The museum's Rodriguez scandal has been only the most egregious of a series of problems in recent years in connection with county-connected foundations.

For instance, in the early 1990s, the Department of Health Services set up a foundation to raise money for the department, but spent hundreds of thousands of dollars more on salaries, equipment and office space than it ever received in donations. The foundation was shut down after a Daily News investigation.

More recently, the Board of Supervisors blistered health officials for contracting practices with some nonprofit public-health foundations.

The contracts legally shortcut purchasing and hiring rules, allowing the county to meet short deadlines using federal grant money for immunizations and similar programs.

But auditors are examining whether those shortcuts were abused by some organizations and whether too many contracts went to foundations controlled by current or former county employees, McCauley said.

``I have been very concerned about that,'' Burke said. ``We need to audit them.''

Burke said she wants to see arrangements made with all organizations connected with the county to allow a review of accounts on demand, and in the case of large foundations, an annual audit.