This report needs no comment. From top to bottom, California government is mismanaged, corrupt, inefficient—meant for the special interests, the unions and corporations—not the people of the former Golden State.
As Dan Walters says, this report is fodder for the Recall—not much too like or honest about California government.
State High-Risk Audit Program
The California State Auditor’s Updated Assessment of Issues and Selected Agencies That Pose a High Risk to the State
State Auditor, 8/19/21
The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
State Capitol
Sacramento, California 95814
Dear Governor and Legislative Leaders:
As required by Government Code section 8546.5, my office presents this report about statewide issues and state agencies that represent a high risk to the State or its residents. Our work to systematically identify and address such high-risk statewide issues and agencies aims to enhance efficiency and effectiveness by focusing the State’s resources on improving the delivery of services related to important programs or functions.
We describe in this report seven high-risk statewide issues that include aspects of water infrastructure, information security, and state management of COVID‑19 federal funds. We also conclude that five state agencies meet our criteria for posing a high risk: the California Department of Corrections and Rehabilitation, the California Department of Technology, the California Department of Health Care Services, the California Department of Public Health, and the California State Teachers’ Retirement System. Finally, we have removed state oversight of K-12 education funding from our state high-risk list because the State has made sufficient progress toward controlling risk factors.
We will continue to monitor the risks we have identified in this report and the actions the State takes to address them. When the State’s actions result in significant progress toward resolving or mitigating such risks, we will remove the high-risk designation based on our professional judgment.
Respectfully submitted,
ELAINE M. HOWLE, CPA
California State Auditor
Selected Abbreviations Used in This Report
| CA-MMIS | California Medicaid Management Information System |
| CalSTRS | California State Teachers’ Retirement System |
| CDCR | California Department of Corrections and Rehabilitation |
| CDT | California Department of Technology |
| CRF | Coronavirus Relief Fund |
| CSU | California State University |
| EDD | Employment Development Department |
| Emergency Services | California Governor’s Office of Emergency Services |
| Finance | Department of Finance |
| FI$Cal | Financial Information System for California |
| Health Care Services | Department of Health Care Services |
| IT | information technology |
| LAO | Legislative Analyst’s Office |
| LCAP | Local Control Accountability Plan |
| LCFF | local control funding formula |
| MHSA | Mental Health Services Act |
| OIG | Office of the Inspector General |
| OPEB | other postemployment benefits |
| PAL | Project Approval Lifecycle |
| Public Health | California Department of Public Health |
| Repair Act | Road Repair and Accountability Act of 2017 |
| State Controller | State Controller’s Office |
| Transportation Commission | California Transportation Commission |
| UC | University of California |
| Water Resources | Department of Water Resources |
Contents
| Issue or Agency | Responsible Agency | Report Section | On List Since |
| Introduction | |||
| Retained on High-Risk List | |||
| State Management of COVID‑19 Federal Funds | Various Agencies | The State’s Management of COVID‑19 Federal Funds Has Led to Inefficiency and May Have Resulted in Substantial Fraud | 2020 |
| State Financial Reporting and Accountability | Department of FI$Cal and Various Agencies | The Transition to FI$Cal Continues to Pose a Risk to the State’s Financial Reporting and Accountability | 2020 |
| Higher Education—Affordability | California State University and University of California | Students’ Ability to Afford Higher Education in California Remains a Concern | 2013 |
| Information Security | California Department of Technology and Various Agencies | Weaknesses Persist in the State’s Information Security | 2013 |
| Water Infrastructure—Dam Safety and Water Reliability | Department of Water Resources and the Governor’s Office of Emergency Services | Aging Water Infrastructure Continues to Threaten Public Safety and Water Availability | 2013 |
| California State Teachers’ Retirement System—Fully Funding Retirement Benefits | California State Teachers’ Retirement System | CalSTRS Continues to Risk Being Unable to Fully Fund Retirement Benefits for Teachers | 2011 |
| California Department of Corrections and Rehabilitation—Providing Constitutionally Required Medical Care to Inmates | California Department of Corrections and Rehabilitation | CDCR Has Not Yet Demonstrated That It Can Provide Constitutionally Required Medical Care to Inmates | 2007 |
| Department of Health Care Services—Medi‑Cal Eligibility and Oversight of Mental Health Services Act Funds | Department of Health Care Services | Health Care Services Has Not Adequately Addressed Issues With Medi‑Cal Eligibility or Its Oversight of MHSA Funding and Programs | 2007 |
| California Department of Public Health—Safety of Residents in Long‑Term Health Care Facilities | California Department of Public Health | Public Health Has Not Addressed Certain Concerns That Could Affect the Health and Safety of Patients and the Public | 2007 |
| California Department of Technology—Information Technology Oversight | California Department of Technology | CDT Has Not Yet Demonstrated That It Has Improved Its Oversight of State IT Projects | 2007 |
| Other Postemployment Benefits—Fully Funding Retiree Health Care Benefits | Department of Finance, California Department of Human Resources, and California Public Employees’ Retirement System | The State Continues to Have a Significant Unfunded Retiree Health Care Liability | 2007 |
| Transportation Infrastructure—Road Conditions and Funding | California Department of Transportation and California Transportation Commission | Caltrans Must Sustain Progress in Improving Transportation Infrastructure Amid Limited Funding | 2007 |
| Removed From High-Risk List | |||
| K-12 Education—Oversight Related to Education Funding | State Board of Education and California Department of Education | The State Has Implemented Changes to Improve Oversight of Education Funding | 2013 |
Introduction
Background
State law authorizes the California State Auditor (State Auditor) to develop a state high‑risk government agency audit program (high‑risk program). Our office implemented this program to improve the operation of state government by identifying, auditing, and recommending improvements to state agencies and statewide issues at high risk for waste, fraud, abuse, or mismanagement or for having major challenges associated with their economy, efficiency, or effectiveness. In accordance with this statutory authority, the State Auditor adopted regulations in 2016 that further describe the high-risk program. As we outline below, these regulations provide the criteria we used in determining the list of state high‑risk agencies and statewide issues we present in this report.
Criteria for Determining Whether a State Agency or Statewide Issue Merits a High-Risk Designation
State regulations outline the conditions under which an agency or issue may be included on the State Auditor’s high-risk list. All four of the following conditions must be present for us to assign the high-risk designation:
- The potential waste; fraud; abuse; mismanagement; or impaired economy, efficiency, or effectiveness may result in serious detriment to the State or its residents.
- The likelihood of waste; fraud; abuse; mismanagement; or impaired economy, efficiency, or effectiveness causing such harm is so great that it constitutes a substantial risk of detriment to the State or its residents.
- The state agencies that are affected by or responsible for resolving the waste; fraud; abuse; mismanagement; or impaired economy, efficiency, or effectiveness are not taking adequate corrective actions to prevent the risk or its effects.
- An audit and the agencies’ implementation of the resulting recommendations will significantly reduce the substantial risk of serious detriment to the State or its residents.
For both state agencies and statewide issues, we consider a number of factors in determining whether there is substantial risk to the State or its residents. We consider whether the risks are already causing detriment, whether those risks are increasing, and whether changes in circumstances are likely to cause detriment. We also consider various factors to determine whether the risks will have serious effects, such as loss of life, injury, or a reduction in residents’ overall health or safety; impairment of the delivery of government services; significant reduction in the overall effectiveness or efficiency of state government programs; and impingement of citizens’ rights. Finally, in evaluating whether agencies have taken adequate measures to correct previously identified deficiencies or whether the State has taken measures to reduce the risks posed by the issues, we consider factors such as whether the agencies have demonstrated a strong commitment to controlling or eliminating the risk and whether they have made significant progress through action already taken to control or eliminate the risk to the State. In all cases, our professional staff make the final determination of risk level based on their independent and objective judgment.
Removal of High-Risk Designation
We must remove the high-risk designation under either of the following circumstances:
- A change in circumstances has resulted in the risk no longer presenting the potential for serious detriment to the State or its residents.
- The agencies have taken sufficient corrective action to prevent or mitigate the risk of harm.
For example, we evaluate whether the agencies have defined the root causes of the risk and identified and implemented effective measures for eliminating those causes. We also analyze whether the agencies have processes for monitoring and validating the effectiveness and sustainability of corrective actions. When we determine that these actions have resulted in significant progress toward resolving or mitigating the high‑risk issue, we remove the high-risk designation. However, we must continue to monitor the issue. If the risk reoccurs, we will consider reinstating the high-risk designation using the factors described above. State law requires us to base the final determination of whether to remove a high-risk designation on our professional judgment.
State High-Risk Reports
Government Code section 8546.5 authorizes the State Auditor to audit and to publish audit reports on any state agency it identifies as high risk. In May 2007, we issued a report that provided an initial list of high‑risk state agencies and statewide issues, and we have since issued several reports updating the status of those agencies and issues. We published our most recent update to the state high-risk list in January 2020, but later designated the State’s management of federal funds related to COVID‑19 as a high-risk statewide issue in August 2020. Further, we include a list on our website of any audits of high‑risk state agencies and statewide issues that we are performing.
To update our assessment of high‑risk state agencies and statewide issues, we interviewed knowledgeable staff at the responsible state agencies to gain perspective on the extent of the risks the State faces. We also reviewed efforts that the staff at the agencies said were underway and intended to mitigate the identified risks. In addition, we reviewed reports and other documentation relevant to the issues and consulted other state agencies when appropriate.
Updated Assessment of High-Risk Issues and Agencies
The State’s Management of COVID‑19 Federal Funds Has Led to Inefficiency and May Have Resulted in Substantial Fraud
Background
We first designated the State’s management of federal funds related to COVID‑19 (federal COVID‑19 funds) as a high-risk statewide issue in August 2020 (2020-602) based on the significant amount of funding granted to the State, the urgent need for the funding, and the rapid nature of the allocation of this funding to state departments, among other factors. We previously identified 18 state departments that had received or were expected to receive a total of more than $71 billion in federal COVID‑19 funding to operate more than 35 federal programs. Several of these programs will receive or have received an amount of federal funding that exceeds their recent annual expenditures. Other departments expected to receive federal COVID‑19 funding for new programs, which increases the risks for the State, as new programs require departments to quickly establish new management controls. Because a significant amount of the federal COVID‑19 funding was directed at federal programs that provide assistance to individuals who are not working or have low incomes, failure by the departments that implement these programs to engage in adequate outreach efforts could have left Californians without medical care or money to pay for housing and food for themselves and their families. Furthermore, departments have faced significant hurdles in managing federal COVID‑19 funds, such as monitoring subrecipients or vendors, creating a high risk for inefficiencies and waste.
See this issue previously reported at http://auditor.ca.gov/reports/2020-602/index.html.
