An investigation has found that the California Department of Forestry and Fire Protection hid $3.6 million in collected legal settlements rather than depositing the money into the state's general fund as required.

For seven years, the agency paid the California District Attorneys Association to hold the money and used the cash for equipment purchases and training, the Los Angeles Times reported Saturday.

Documents reviewed by the Times show that top agency officials were aware of potential problems with the fund as early as 2008, when an internal audit was launched. The practice didn't end until last year, however, amid questions about whether the fund was legal.

Cal Fire's own regulations stipulate that proceeds of legal settlements go to the state's general fund.

In early drafts, auditors said Cal Fire needed approval from the state Department of Finance for the separate fund. They added that Cal Fire's chief counsel expressed concern that if the Finance Department learned about the fund, it would demand that the money be placed in the state treasury.

"I am concerned about the possible perception and allegation that we are using this fund to bypass state contracting, purchasing, and travel rules and guidelines," Anthony Favro, head of Cal Fire's auditing team, wrote in a September 2009 email message to Del Walters, the agency's director at the time.

Despite the audit, Cal Fire continued to send money into the fund. The agency's current director, Ken Pimlott, froze the fund in 2011 after the prosecutors association's new accounting firm raised questions about it.

After questions from the Times last week, Pimlott notified the state Natural Resources Agency and the Finance Department about the fund. The Department of Finance is planning an investigation.

Janet Upton, a Cal Fire spokeswoman, said Pimlott was not aware of the auditor's comments about the fund in the drafts.

The Times said some of the most critical comments about the fund were cut from the final version of the audit.

Last summer, investigators found that the California Department of Parks and Recreation hid $20 million in two special funds as parks were threatened with closures because of budget cuts. In the wake of the parks scandal, the Department of Finance looked for secret funds in other areas but did not find Cal Fire's account with the prosecutors association.