CSA
Summary
Read the report at California State Auditor ↗
Department of
Fish and Game:
The Preservation Fund Comprises a
Greater Share of Department Spending
Due to Reduction of Other Revenues
June 2005
2004-122R
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June 14, 2005 2004-122
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 requested by the Joint Legislative Audit Committee, the Bureau of State Audits presents its audit report
concerning the Department of Fish and Game’s (Fish and Game) administration of the Fish and Game Preservation
Fund (preservation fund).
This report concludes that although fees from fishing and hunting licenses have increased, the preservation fund
reserves have decreased significantly between fiscal years 2001–02 and 2003–04. This occurred while Fish and
Game had its General Fund appropriation reduced, which together with the preservation fund has been used to fund
Fish and Game’s programs. However, while funding for some programs has dramatically increased or decreased,
others, such as hatcheries, have changed little. A long-range spending plan could serve as a useful tool to guide
Fish and Game decisions, especially in times of fluctuating funding, but Fish and Game lacks such a tool.
Between fiscal years 2001–02 and 2003–04, Fish and Game spent into its reserves, that is, the balance that had
accumulated in the preservation fund. During this time, Fish and Game spent more from its accounts with revenues
dedicated by statute for specific purposes (dedicated accounts) than it collected. Furthermore, Fish and Game has
not demonstrated that it used allowable dedicated resources to cover deficit spending in certain accounts of the
preservation fund. Fish and Game was able to cover the deficit spending in these accounts by borrowing from
those dedicated accounts with sufficient balances, a practice that may not be allowed.
Fish and Game adequately assessed and collected fees and allocated revenue to the appropriate accounts of the
preservation fund. It did not do as well, however, in accounting for indirect costs because it failed to follow
its own policy and update the percentages used each year to allocate indirect costs. As a result, Fish and Game
overcharged or undercharged indirect costs to certain preservation fund programs.
Respectfully submitted,
ELAINE M. HOWLE
State Auditor
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CONTENTS
Summary 1
Introduction 5
Audit Results
Hatchery Expenditures Have Declined, but
Not as Steeply as Department of Fish and Game
Expenditures Overall 13
Total Funding for Hatcheries Decreased Less
Than 3 Percent Between Fiscal Years 2001–02
and 2003–04 20
Trout Production by Fish and Game Hatcheries
Has Also Declined 21
Other Factors Contribute to Hatchery Production 23
Fish and Game Spending Declined Overall 25
Fish and Game Has Not Established Written Spending
Priorities, Nor Has It Identified Sufficient Funding
Levels for Preservation Fund Programs 27
Fish and Game Spent More for Both Dedicated and
Nondedicated Programs Than It Collected in Revenue 29
Fish and Game Has Not Demonstrated That It Uses
Allowable Resources to Cover Certain Deficit Spending 31
Fish and Game Advanced $1.4 Million From the
Preservation Fund to the Native Species Conservation
and Enhancement Account That May Not Be Paid Back 33
Fish and Game Failed to Allocate Indirect Costs in
Accordance With Its Cost Allocation Plan 34
Fish and Game Appears to Be Performing
Other Accounting Tasks in Accordance With
State Requirements 35
Recommendations 38
Response to the Audit
California Resources Agency,
Department of Fish and Game 41
California State Auditor Report 2004-122 11
SUMMARY
RESULTS IN BRIEF
This audit focused on administration of the Fish and Game
Preservation Fund (preservation fund) by the Department
of Fish and Game (Fish and Game). The preservation fund
Audit Highlights . . . accounts for about a third of the department’s revenue and was
established for the protection and preservation of birds, mammals,
Our review of the Department fish, reptiles, and amphibia. The preservation fund’s major source
of Fish and Game’s (Fish and of revenue is the sale of fishing and hunting licenses. Of the money
Game) administration of its
deposited into this fund, 15 percent goes into dedicated accounts
preservation fund disclosed
and can only be spent for specific programs according to statutes.
the following:
Fish and Game may use the remaining money at its discretion to
þ The preservation fund
support any preservation fund program.
together with the General
Fund pays for many of Fish
and Game’s programs. Although fees from fishing and hunting licenses increased, the
preservation fund reserves decreased significantly during the past
þ Although revenues to
three years. At the same time, Fish and Game had its general fund
the preservation fund
have increased due to fee appropriation reduced, which, together with the preservation
increases that took effect fund supports Fish and Game’s programs. Consequently, the
in fiscal year 2003–04 for
preservation fund now covers a larger share of program costs.
sport fishing licenses, Fish
However, not all programs have been affected equally by the
and Game has had its
general fund appropriation reduction in General Fund appropriations. While funding for
reduced by over $20 million some programs has dramatically increased or decreased, others,
between fiscal years
such as hatcheries, a focus of this report, have changed little. A
2001–02 and 2003–04.
long-range spending plan could serve as a useful tool to guide Fish
þ Also, between fiscal years and Game decisions, especially in times of fluctuating funding,
2001–02 and 2003–04,
but the department lacks such a tool. In addition, other factors
Fish and Game spent
have affected the amount of funding available for the department’s
down its preservation
fund reserves significantly. programs, including inappropriate indirect cost charges and a loan
to another fund that may never be paid back.
þ The amount Fish and
Game spent on its
hatcheries declined less Between fiscal years 2001–02 and 2003–04, annual revenue
than 3 percent from fiscal collected on behalf of programs supported by the preservation
years 2001–02 to 2003–04
fund increased 8 percent, from $81.9 million to $88.5 million.
while the spending of other
However, spending in some of these same programs decreased
programs declined more
significantly. during this period, with some programs suffering a larger decrease
than others. For example, the amount Fish and Game spent on its
continued on next page . . .
hatcheries declined less than 3 percent during those three years,
but the biodiversity (wildlife habitat) protection and restoration
program experienced a 22 percent cut. During this time, Fish
and Game made spending cuts to certain of its programs due
to decreased funding, especially reductions in its general fund
California State Auditor Report 2004-122 11
þ Although, a long-range appropriation. Considering all sources of funding, Fish and
spending plan could serve Game’s total spending decreased by 13 percent between fiscal
as a useful tool to guide
years 2001–02 and 2003–04. However, we found no clear evidence
department decisions,
indicating how it made decisions regarding spending cuts. Fish
especially in times of
fluctuating funding, the and Game did not prepare annual operational plans outlining
department lacks such its spending priorities for those years and has not updated its
a tool.
strategic plan since 1995. In spite of efforts to prioritize the many
þ Finally, Fish and Game programs that it operates, Fish and Game has not yet adopted a
failed to follow its own formal set of priorities to guide its spending.
procedures for properly
allocating its indirect costs,
During the same three fiscal years, Fish and Game spent much of
resulting in overcharges
to some programs and its reserve, that is, the accumulated balance in the preservation
undercharges to others. fund. From fiscal years 2001–02 through 2003–04, Fish and
Game expended more from its accounts with revenues dedicated
by statute for specific program purposes (dedicated accounts)
than it collected for those purposes. Total annual expenditures
for dedicated programs ranged from $388,000 to $2.8 million
more than the revenue collected for these accounts. During
fiscal years 2001–02 and 2002–03, expenditures from the
nondedicated account also exceeded the corresponding years’
nondedicated revenue, although in fiscal year 2003–04 Fish
and Game reduced those expenditures from the nondedicated
account to less than the revenue collected. Fish and Game
projects that the ending balance in fiscal year 2005–06 for the
preservation fund as a whole will be $665,000, down from
nearly $24.5 million in fiscal year 2001–02.
Furthermore, Fish and Game has not demonstrated that it
used allowable resources to cover its deficit spending in certain
accounts of the preservation fund. The preservation fund’s
nondedicated account and some of its dedicated accounts had
deficit balances as of June 30, 2004. Fish and Game was able to
cover the deficit spending in these accounts by borrowing from
those dedicated accounts with sufficient balances. Although
the statutes establishing some dedicated accounts may allow
for a broader interpretation of the types of expenditures they
may cover, Fish and Game was not able to explain to us which
resources it used to cover the accounts with deficits or why the
uses of these funds were allowable. Deficit balances of these
accounts totaled $14.7 million at June 30, 2004.
Fish and Game adequately assessed and collected fees and
allocated revenue to the appropriate accounts of the preservation
fund. Similarly, it properly followed the State’s general
administrative procedures for a sampling of expenditures from
the preservation fund.
22 California State Auditor Report 2004-122 California State Auditor Report 2004-122 33
It did not do as well, however, in its accounting for indirect costs;
it failed to follow its own policy and update the percentages used
each year to allocate indirect costs. Using updated percentages, we
determined the department overcharged or undercharged indirect
costs to certain preservation fund programs. Because Fish and
Game bases its distribution of the cost of shared services, such as
legal services and air services, on the total expenditures of each
program, the effect of the incorrect indirect cost allocations was
magnified in each affected program.
Finally, Fish and Game did not properly account for a $1.4 million
loan from the preservation fund to the native species conservation
and enhancement account. Though Fish and Game made small
transfers to the preservation fund to repay the advanced funds, it
could not provide us an adequate repayment schedule. Because
interest accrues more rapidly than Fish and Game is repaying
the advance, the loan may remain unpaid unless the department
changes its practices. When the advance is not collected, the
resources are not available for preservation fund programs.
RECOMMENDATIONS
To mitigate the effects of budget reductions and fluctuations in
program revenue, Fish and Game should take a more strategic
approach to evaluating its financial needs. It should update its
strategic plan and develop annual operational plans with specific
measurable goals and objectives, then determine the funding
necessary to meet those goals, allowing it to better measure the
sufficiency of funding for its programs.
To reduce the reliance on fund reserves and borrowing of dedicated
resources, Fish and Game should take measures to ensure that
revenue streams are sufficient to fund each of its programs. This
may require legislation to adjust fee revenues used for specific
dedicated programs within the preservation fund or General Fund
budget augmentations to sustain dedicated and nondedicated
program operations.
To ensure that the resources of dedicated accounts are used for
their intended purposes, Fish and Game should avoid borrowing
from these accounts to fund expenditures of other accounts. If
this is temporarily unavoidable, the department should identify
the specific dedicated account that is the source of the borrowed
resources and ensure that the law establishing that account allows
for an interpretation that would make the expenditures allowable.
22 California State Auditor Report 2004-122 California State Auditor Report 2004-122 33
Finally, Fish and Game should identify those dedicated accounts
that have been used to pay for expenditures of other accounts and
pay back these lending accounts.
To make the resources available for preservation fund programs
and to properly account for its fund balance and liabilities, Fish
and Game should seek resolution for the advance from the fund
to the native species conservation and enhancement account
through administrative or legislative means. It should prepare
an amortization schedule that is an accurate and realistic
schedule for repayment and take steps to repay the advance. If
full reimbursement cannot be accommodated, Fish and Game
should take action to have the advance written off.
To prevent inequitable distributions of indirect costs and
administrative expenses, Fish and Game should review and update
the percentages used in its allocation method annually.
AGENCY COMMENTS
The Resources Agency, which oversees Fish and Game, agrees
with our conclusions and has begun to implement our
recommendations. n
44 California State Auditor Report 2004-122 California State Auditor Report 2004-122 55
INTRODUCTION
BACKGROUND
The Department of Fish and Game (Fish and Game)
maintains native fish, wildlife, plant species, and natural
communities for their ecological value and benefits to
people. In addition, Fish and Game is responsible for using
fish and wildlife for a variety of purposes, including recreation,
business, science, and education. The department collects fees
and issues a variety of licenses, tags, and permits for activities
such as fishing and hunting. Through its land and facilities
branch, Fish and Game currently operates 12 trout hatcheries,
eight salmon hatcheries, and two fish planting bases.
The request for a performance audit arose from the Legislature’s
concern regarding the department’s administration of the Fish
and Game Preservation Fund (preservation fund). In particular,
funding for the State’s hatcheries has decreased, leading some to
surmise that a sufficient share of fishing license revenue is not
being used to fully meet the needs of the hatcheries.
THE FISH AND GAME PRESERVATION FUND
According to the Manual of State Funds published by the
Department of Finance (Finance), all money collected under
the Fish and Game Code or under any other law relating to the
protection and preservation of birds, mammals, fish, reptiles,
or amphibia are credited to the preservation fund. The fund
is to be used to pay Fish and Game’s expenses in carrying out
the provisions of the Fish and Game Code. Certain revenues or
receipts are restricted to use for specific purposes.
Fish and Game Code, Section 711, specifically provides that
the costs of hunting and sport fishing programs are to be
financed out of hunting and sport fishing revenues. The costs
of commercial fishing programs are to be paid solely out of
revenues from commercial fishing taxes, license fees, and
receipts from other sources for such purposes. This section also
provides that Finance shall include in the governor’s budget
sufficient money from the General Fund to pay for the cost of
Fish and Game’s other programs necessary for the protection
and enhancement of California’s nongame fish and wildlife, and
their habitats.
44 California State Auditor Report 2004-122 California State Auditor Report 2004-122 55
The preservation fund provides money for many of Fish and
Game’s programs as a necessary supplement to its budget
allocations from the General Fund, special funds, federal funds,
and bonds. At a summary level, the programs supported by the
preservation fund are described as follows:
• Biodiversity Conservation Program—Activities in this
program encourage the preservation, conservation, and
maintenance of the State’s wildlife resources. These include
the protection and management of fish, wildlife, and native
plants, as well as the habitats necessary to support them.
• Hunting, Fishing, and Public Use Program—This program
allows for diverse and sustainable hunting, trapping,
recreational and commercial fishing, and public use of the
State’s wildlife and their habitats. Activities include evaluating
game fish and wildlife populations to effectively regulate
public interaction with them.
• Management of Department Lands and Facilities Program—
This program provides for the management of the land and
facilities Fish and Game owns or leases to conduct its work in
conserving, protecting, and managing fish and wildlife.
• Conservation Education and Enforcement Program—
Through this program, Fish and Game provides hunter and
conservation education programs, and promotes compliance
with fish and wildlife laws and regulations to protect
resources, habitats, and public safety.
• Spill Prevention and Response Program—This program
supports efforts to prevent damage, minimize environmental
impact, and restore California’s fish and wildlife populations
and habitats from the effects of oil and other hazardous
material spills.
As illustrated in Figure 1, the largest share of the preservation
fund supports the Conservation Education and Enforcement
Program, which provides the law enforcement, public safety,
and conservation education component of Fish and Game’s
core services.
66 California State Auditor Report 2004-122 California State Auditor Report 2004-122 77
FIGURE 1
Department of Fish and Game Preservation Fund
Actual Expenditures for Programs
Fiscal Year 2003–04
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Source: Fiscal year 2003–04 actual expenditures from Governor’s Budget Fact Book,
fiscal year 2005–06 budget.
In fiscal year 2003–04, 22 percent of the preservation fund
was expended for the Management of Department Lands
and Facilities Program, which includes the operation of
hatcheries and fish planting facilities. The hatcheries are used
to raise fish to be planted in rivers, lakes, and streams as a
part of Fish and Game’s efforts in the management of fisheries
statewide. According to Fish and Game’s Strategic Plan for Trout
Management, dated November 2003, trout fishery management
in California is presently accomplished using one of the three
following techniques:
• Self-Sustaining Fisheries—This management technique
applies to most of the trout streams and many lakes in the
State. Self-sustaining fisheries generally require a viable
aquatic ecosystem where trout reproduction, growth, and
survival are adequate to perpetuate the population, and only
habitat protection management strategies are required, in
addition to angling regulations. According to Fish and Game
senior biologists, this technique is the preferred type of trout
fishery management and is the most widely used.
66 California State Auditor Report 2004-122 California State Auditor Report 2004-122 77
• Put-and-Grow Fisheries—These fisheries are supported by
hatchery-produced trout stocked at about three inches to
six inches in length. This technique is used in waters where
the spawning habitat is limited and unable to support a
satisfactory sport fishery, but the fish habitat otherwise
supports suitable trout growth and survival. Many of these
fish are expected to increase substantially in size and survive
for more than one season, thereby providing catchable fish in
subsequent years.
• Put-and-Take Fisheries—This management technique
is employed to create trout fisheries where they would
not naturally exist or to maintain fisheries where natural
production is inadequate to support fishing demand. It is
supported chiefly by hatchery-produced trout weighing
about one-half pound each and measuring 10 inches to
12 inches in length. These trout are placed in waters that
are easily accessible to the general public and where angling
demand is high. Catchable-sized trout are stocked in
about 780 (4 percent) of the 18,000 stream miles and about
300 (8 percent) of the 3,581 cold-water lakes and reservoirs
suitable for resident trout in California. According to Fish
and Game Commission policy, catchable-sized trout are to
be stocked in waters where at least 50 percent by number or
weight will be caught by anglers.
Fish and Game’s hatcheries and fish planting facilities program
provides fish of varying sizes to support put-and-grow as well as
put-and-take fisheries. However, the Biodiversity Conservation
Program is also an important part of overall fishery management
and represented 15 percent of the preservation fund’s expenditures
in fiscal year 2003–04, as depicted in Figure 1 on the previous page.
The preservation fund principally comprises revenues collected
from the sale of fishing and hunting licenses and tags, though
a small portion is provided by fines, permits, and others fees
related to the preservation of the State’s fish and game and
their habitats. In October 2003 legislation amended the Fish
and Game Code to adjust the fees related to nine of the 10 base
licenses that account for more than 99 percent of the sport
fishing license revenue. In fiscal year 2003–04, the preservation
fund collected a total of $88.5 million in revenue.
88 California State Auditor Report 2004-122 California State Auditor Report 2004-122 99
SCOPE AND METHODOLOGY
The Joint Legislative Audit Committee (audit committee)
approved a performance audit of Fish and Game operations.
To assist us in conducting this audit, we engaged the services
of KPMG LLP (audit team), a professional services firm that
provides advisory services for public and private sector clients.
The audit team was composed of personnel from KPMG and the
Bureau of State Audits. The audit team’s examination focused on
Fish and Game’s handling of the preservation fund as well as the
funding of the State’s fish hatcheries from fiscal years 2001–02
through 2003–04.
The audit examined the following key areas as they relate to the
preservation fund:
• The setting, collecting, and spending of and accounting for
revenue generated by the sale of sport fishing licenses.
• The allocation of this revenue to program activities.
• Fish and Game’s assessment of the sufficiency of funding levels.
• Fish and Game’s allocation of indirect costs.
• Trends in funding of the hatcheries.
The audit team interviewed selected department managers and
staff members; identified key documents; and reviewed relevant
laws, regulations, and rules, as well as historical and current
financial information, to obtain a general understanding of
Fish and Game operations and the internal and external forces
that influence its activities. From this overview, the audit team
identified the Fish and Game activities relevant to the audit’s
objectives and selected the key processes for analysis.
To determine whether Fish and Game followed applicable
requirements in setting and collecting fees for fishing licenses
and related revenue sources, as well as accounting for this
revenue in the preservation fund, the audit team interviewed
knowledgeable staff and identified the applicable laws, rules,
and regulations related to fishing license fees and other revenue
sources. In addition, the auditors interviewed staff members
who were knowledgeable of the procedures used in collecting
and accounting for the revenue. The audit team examined
88 California State Auditor Report 2004-122 California State Auditor Report 2004-122 99
documentation provided by Fish and Game related to these
processes, as well as applicable laws, rules, and regulations
identified in the course of review.
Due to the large number of relatively immaterial revenue sources
and minor programs provided for in the Fish and Game Code,
the audit was limited to an examination of the top 10 sport
fishing revenue sources, which comprised 99 percent of the
preservation fund’s sport fishing revenues in 2004.
To examine the disbursement of funds from dedicated and
nondedicated revenue accounts in the preservation fund, the
audit team verified that proper approvals had been obtained and
disbursements were made in accordance with state guidelines
in a sample of claim schedules containing disbursement records
for expenditures from the preservation fund related to the
hatcheries and fish planting facilities program.
To examine the charging of payroll costs to dedicated and
nondedicated revenue accounts in the preservation fund, the
audit team determined if time sheets had been approved, if
employees had charged time to activity codes appropriate for
the program, and if hours noted matched those entered into
the California Statewide Accounting and Reporting System for
a sample of time sheets on which personnel charged time to
the hatcheries and fish planting facilities program. Based on
the duty statements for three department employees who had
charged time to dedicated accounts, the audit team verified the
reasonableness of the activities charged.
To identify the programs supported by the preservation fund,
determine other funding sources for these programs, and
ascertain how Fish and Game allocates funds to them, the audit
team interviewed knowledgeable staff regarding the procedures
in use and identified the applicable laws, rules, and regulations
related to allocating funds to the preservation fund programs.
The auditors sought to identify policies and procedures in place
related to the prioritization of funding allocations, though
Fish and Game could not provide formal documentation
demonstrating such priorities. In addition, the team prepared a
schedule that illustrated the levels of program funding from the
preservation fund and other funds during fiscal years 2001–02,
2002–03, and 2003–04.
1100 California State Auditor Report 2004-122 California State Auditor Report 2004-122 1111
To determine whether the department measured the sufficiency
of funding levels for programs within the preservation fund, the
auditors interviewed knowledgeable staff regarding the policies
and procedures in use and identified the applicable laws, rules,
and regulations related to funding level sufficiency.
To ascertain whether the department allocated its indirect
costs in an appropriate manner, the audit team interviewed
knowledgeable staff regarding the policies and procedures
in use; identified the applicable laws, rules, and regulations;
and reviewed the cost allocation base for fiscal years 2001–02
through 2003–04.
The audit team also interviewed knowledgeable department
staff and identified the applicable laws, rules, and regulations to
define Fish and Game’s role in funding fish hatcheries. The audit
team prepared an analytical review that illustrated changes in
revenue by fund and program, and noted the significant changes
from fiscal years 2001–02 through 2003–04. The team also
identified general trends in overall revenue and in the allocation
of funds to various programs and asked department officials for
explanations of these trends.
Our report of Fish and Game’s hatcheries emphasizes the State’s
nonmitigation hatcheries. Nonmitigation hatcheries are not
fully funded from other sources. Mitigation hatcheries are
designed to mitigate the effects of approved dams on the State’s
waterways. Though the department operates these hatcheries,
their operating costs are provided for by federal funds and
reimbursements from responsible agencies. There are currently
six such hatcheries, including the Feather River Hatchery,
Nimbus Hatchery, and Mokelumne River Hatchery. n
1100 California State Auditor Report 2004-122 California State Auditor Report 2004-122 1111
Blank page inserted for reproduction purposes only.
1122 California State Auditor Report 2004-122 California State Auditor Report 2004-122 1133
AUDIT RESULTS
HATCHERY EXPENDITURES HAVE DECLINED, BUT NOT
AS STEEPLY AS DEPARTMENT OF FISH AND GAME
EXPENDITURES OVERALL
The Department of Fish and Game (Fish and Game), like
most departments, had to reduce its operating budget
in fiscal years 2001–02 through 2003–04 in response to
shrinking state revenue. Unlike some departments, however,
Fish and Game continued to collect revenue at a relatively
steady rate during that period. Its revenue is based largely on
the fees related to fishing and hunting licenses and the wide
variety of enhancements and tags associated with those licenses.
In fiscal year 2003–04, licenses and permits generated nearly
$80.3 million, representing 91 percent of the $88.5 million total
revenue of the Fish and Game Preservation Fund (preservation
fund). The revenue generated from sport fishing licenses and
fees accounts for the largest share of the preservation fund.
In fiscal year 2003–04, sport fishing-related sales totaled
$53.4 million, or 60 percent, of the preservation fund revenue.
The Legislature approved fee increases for several existing sport
fishing licenses and enhancements, as well as the addition of a
Bay-Delta sport fishing enhancement stamp. These fee increases
resulted in additional sport fishing revenue collected in fiscal
year 2003–04. Despite the additional license revenue, however,
Fish and Game’s overall spending authority decreased, due in
part to General Fund reductions. As a result, the preservation
fund accounted for a larger share of the department’s total
operating budget in recent years, as depicted in Figure 2 on the
following page. Some of the programs that are supported by
the preservation fund have been reduced significantly as Fish
and Game could not offset General Fund reductions, although
total spending for hatcheries and fish planting facilities remained
relatively constant over the audit period.
1122 California State Auditor Report 2004-122 California State Auditor Report 2004-122 1133
FIGURE 2
Proportion of Fish and Game Preservation Fund
Expenditures to All Fish and Game Expenditures
Fiscal Years 2001–02 Through 2003–04
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Sources: Governor’s Budget Fact Books, fiscal years 2003–04 through 2005–06.
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As depicted above, the preservation fund spent $87.2 million
in fiscal year 2001–02, accounting for a 33 percent share of
Fish and Game’s total expenditures. In fiscal year 2003–04,
the preservation fund expenditures were $87.4 million, which
accounted for a 38 percent share of the department’s total
spending. Because the dollar amounts of the preservation fund
expenditures were nearly identical in fiscal years 2001–02 and
2003–04, the change in the fund’s relative share of Fish and
Game’s spending can be attributed to the reductions in the
department’s other funding categories.
Even though Fish and Game has some discretion in how
the majority of preservation fund money is used to support
its initiatives, decreased spending affected some programs
1144 California State Auditor Report 2004-122 California State Auditor Report 2004-122 1155
more significantly than others. The proportionate shares of
the preservation fund expended for each program fluctuated
from year to year. Table 1 identifies the preservation fund
expenditures for each program and subprogram during the three
fiscal years we reviewed. The table also identifies the change in
preservation fund expenditures between fiscal years.
TABLE 1
Fish and Game Preservation Fund Expenditures by Program
Fiscal Years 2001–02 Through 2003–04
(Dollars in Thousands)
Percentage Percentage
Change Change
Fiscal Year Fiscal Year Fiscal Years Fiscal Year Fiscal Years Percentage
2001–02 2002–03 2001–02 to 2003–04 2002–03 to Change
Program Name Actual Actual 2002–03 Actual 2003–04 Overall
Biodiversity Conservation Program
Multi-Species and Habitat Conservation Planning $ 4,100 $ 4,652 13.5% $ 8,989 93.2% 119.2%
Biodiversity (Wildlife Habitat) Protection and Restoration 5,855 4,129 (29.5) 3,832 (7.2) (34.6)
Subtotals 9,955 8,781 (11.8) 12,821 46.0 28.8
Hunting, Fishing, and Public Use Program
Hunting, Sport Fishing, and Public Use Regulations 12,420 11,513 (7.3) 11,282 (2.0) (9.2)
Commercial Fisheries Management (Marine and Inland) 5,649 12,333 118.3 10,698 (13.3) 89.4
Providing Hunting and Fishing Opportunities—
Nondepartmental Lands and Waters 3,704 4,212 13.7 3,717 (11.8) 0.4
Subtotals 21,773 28,058 28.9 25,697 (8.4) 18.0
Management of Department Lands and Facilities Program
Lands 7,132 6,146 (13.8) 5,557 (9.6) (22.1)
Hatcheries and Fish Planting Facilities 15,738 15,295 (2.8) 13,077 (14.5) (16.9)
Wildlife Laboratories 1,721 657 (61.8) 604 (8.1) (64.9)
Subtotals 24,591 22,098 (10.1) 19,238 (12.9) (21.8)
Conservation Education and Enforcement Program
Conservation Education 705 275 (61.0) 125 (54.5) (82.3)
Enforcement and Public Safety 30,210 32,795 8.6 29,549 (9.9) (2.2)
Subtotals 30,915 33,070 7.0 29,674 (10.3) (4.0)
Spill Prevention and Response Program — 147 0.0 — (100.0)
Subtotals — 147 0.0 — (100.0)
Total state operations $87,234 $92,154 5.6% $87,430 (5.1%) 0.2%
Sources: Governor’s Budget Fact Books, fiscal years 2003–04 through 2005–06.
1144 California State Auditor Report 2004-122 California State Auditor Report 2004-122 1155
As illustrated on the previous page in Table 1, expenditures
for some programs increased substantially between fiscal years
2001–02 and 2003–04, while spending on other programs
decreased. For example, expenditures increased more than
119 percent for multi-species and habitat conservation planning.
However, Management of Department Lands and Facilities
Program expenditures decreased by 22 percent during that same
period. As a component of this program, preservation fund
expenditures for hatcheries and fish planting facilities decreased
17 percent during that time period.
However, examining the preservation fund expenditure budget
by itself does not provide a complete understanding of the
programs’ respective funding conditions. Table 2 tabulates
the program and subprogram expenditure budgets from all
funding sources for those programs that receive any amount of
money from the preservation fund. By considering all sources
of funding, it is evident that although Fish and Game’s total
expenditures decreased by 13 percent over the period of the
audit, overall expenditures for hatcheries and fish planting
facilities were reduced by less than 3 percent.
The total spending for hatcheries and fish planting facilities
remained relatively consistent over the audit period, but Fish
and Game reduced other programs more dramatically as the
preservation fund could not offset General Fund reductions.
For example, Fish and Game reduced spending for biodiversity
(wildlife habitat) protection and restoration by 22 percent, from
nearly $53.3 million in fiscal year 2001–02 to $41.4 million
in fiscal year 2003–04. It reduced spending for hunting, sport
fishing, and public use regulations by 30 percent during
the same two fiscal years, from $24.6 million to almost
$17.2 million. Wildlife laboratories experienced the most
dramatic reduction; this is an expenditure category within the
same program as the hatcheries. Although wildlife laboratories
spent only $1.8 million in fiscal year 2001–02, Fish and Game
reduced its spending by 59 percent in fiscal year 2003–04 to
$735,000. These fluctuations are an indication of Fish and
Game’s lack of an established plan for its program spending, as
discussed beginning on page 27 of this report.
1166 California State Auditor Report 2004-122 California State Auditor Report 2004-122 1177
TABLE 2
Expenditures From All Fish and Game Funding Sources by Program
Fiscal Years 2001–02 Through 2003–04
(Dollars in Thousands)
Percentage Percentage
Change Change
Fiscal Year Fiscal Year Fiscal Years Fiscal Year Fiscal Years Percentage
2001–02 2002–03 2001–02 to 2003–04 2002–03 to Change
Program Name Actual Actual 2002–03 Actual 2003–04 Overall
Biodiversity Conservation Program
Multi-Species and Habitat Conservation Planning $ 50,399 $ 46,757 (7.2%) $ 44,981 (3.8%) (10.8%)
Biodiversity (Wildlife Habitat) Protection and
Restoration 53,287 52,318 (1.8) 41,407 (20.9) (22.3)
Program totals 103,686 99,075 (4.4) 86,388 (12.8) (16.7)
Hunting, Fishing, and Public Use Program
Hunting, Sport Fishing, and Public Use Regulations 24,609 19,324 (21.5) 17,190 (11.0) (30.1)
Commercial Fisheries Management (Marine and
Inland) 8,742 12,975 48.4 12,012 (7.4) 37.4
Providing Hunting and Fishing Opportunities—
Nondepartmental Lands and Waters 7,632 7,853 2.9 6,868 (12.5) (10.0)
Program totals 40,983 40,152 (2.0) 36,070 (10.2) (12.0)
Management of Department Lands and
Facilities Program
Lands 20,721 19,302 (6.8) 16,949 (12.2) (18.2)
Hatcheries and Fish Planting Facilities 20,245 20,612 1.8 19,704 (4.4) (2.7)
Wildlife Laboratories 1,796 758 (57.8) 735 (3.0) (59.1)
Program totals 42,762 40,672 (4.9) 37,388 (8.1) (12.6)
Conservation Education and Enforcement Program
Conservation Education 4,498 3,723 (17.2) 3,290 (11.6) (26.9)
Enforcement and Public Safety 44,512 45,669 2.6 39,853 (12.7) (10.5)
Program totals 49,010 49,392 0.8 43,178 (12.6) (11.9)
Spill Prevention and Response Program
Prevention 3,620 2,437 (32.7) 2,861 17.4 (21.0)
Readiness 13,944 14,650 5.1 16,579 13.2 18.9
Response 3,575 1,853 (48.2) 885 (52.2) (75.2)
Restoration and Remediation 33 668 1,924.2 605 (9.4) 1,733.3
Administrative Support 6,148 5,403 (12.1) 5,935 9.8 (3.5)
Program totals 27,320 25,011 (8.5) 26,865 7.4 (1.7)
Total state operations $263,761 $254,302 (3.6%) $229,854 (9.6%) (12.9%)
Sources: Governor’s Budget Fact Books, fiscal years 2003–04 through 2005–06.
From fiscal years 2001–02 to 2003–04, revenue in the preservation
fund increased 8 percent, from $81.9 million to $88.5 million.
The majority of the revenue Fish and Game collects each year is
generated through sales of fishing and hunting licenses and tags.
1166 California State Auditor Report 2004-122 California State Auditor Report 2004-122 1177
In fiscal year 2003–04, other revenue sources included permitting
fees, fines, penalties, and various fish and game taxes, though when
combined, all of the other sources account for only 10 percent
of Fish and Game’s revenue. Figure 3 below clearly illustrates the
majority revenue share that license and tag sales provide.
FIGURE 3
Fish and Game Preservation Fund Revenue Sources
Fiscal Years 2001–02 Through 2003–04
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Sources: Department of Fish and Game Fund Condition Statements, Preservation Fund,
fiscal years 2001–02 through 2003–04.
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Within the category of fishing and hunting license revenues,
sport fishing licenses and associated license enhancement sales
account for the largest share of the preservation fund. Based on
preliminary sales figures reported by Fish and Game’s license
revenue branch in fiscal year 2003–04, sport fishing-related
sales totaled $57.2 million, or 68 percent of all preservation
fund revenue. Figure 4 on the following page illustrates the
respective proportions of the principal license revenue sources
in the preservation fund based on revenue branch figures over
the three fiscal years.
1188 California State Auditor Report 2004-122 California State Auditor Report 2004-122 1199
FIGURE 4
Fish and Game Principal License Revenue Sources
Fiscal Years 2001–02 Through 2003–04
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Sources: License revenue branch year-to-year license sales, fiscal years 2001–02
through 2003–04.
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Although the chart indicates that sport fishing license revenue
rose overall during the years in review, these figures do not
disclose that the number of fishing licenses sold declined during
the same period. In fiscal year 2001–02, Fish and Game reported
sales totaling 3.2 million sport fishing licenses, including the
associated enhancements required for fishing in specified waters
or for particular species. The following year, the sales volume
declined to three million sport fishing licenses. However, sales
increased again in fiscal year 2003–04 to reach 3.3 million sport
fishing licenses and enhancements sold. Part of this recovery
was a result of the Legislature’s approval of the addition of a
Bay-Delta sport fishing enhancement stamp, which created an
additional required enhancement purchase for many anglers.
For fiscal year 2003–04, the Legislature also approved increases
to the unit costs of several existing sport fishing licenses and
enhancements. All of this served to increase sport fishing license
revenue to bolster Fish and Game’s diminishing funding from
1188 California State Auditor Report 2004-122 California State Auditor Report 2004-122 1199
other sources. As depicted in Figure 5, Fish and Game collected
$9.2 million more in sport fishing license and enhancement
revenues in fiscal year 2003–04 than it did the prior fiscal year.
FIGURE 5
Fish and Game Sport Fishing License Revenue
Fiscal Years 2001–02 Through 2003–04
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Sources: License and revenue branch year-to-year license sales, fiscal years 2001–02
through 2003–04.
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TOTAL FUNDING FOR HATCHERIES DECREASED LESS
THAN 3 PERCENT BETWEEN FISCAL YEARS 2001–02
AND 2003–04
A major component of the Management of Department Lands
and Facilities Program is the operation of hatcheries and fish
planting facilities. During fiscal years 2001–02 through 2003–04,
funding for these operations decreased by less than 3 percent
overall, losing just $541,000 of the $20.2 million allocated from
all sources in fiscal year 2001–02. However, the representative
2200 California State Auditor Report 2004-122 California State Auditor Report 2004-122 2211
share of the operating expenses funded by the preservation fund
for hatcheries and fish planting facilities decreased 17 percent,
from $15.7 million in fiscal year 2001–02 to $13.1 million in
fiscal year 2003–04. Figure 6 illustrates the shares of hatchery
funding provided by each source over the years studied.
FIGURE 6
Source of Operational Expenditures for Fish and Game
Hatcheries and Fish Planting Facilities
Fiscal Years 2001–02 Through 2003–04
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Sources: Governor’s Budget Fact Books, fiscal years 2003–04 through 2005–06.
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TROUT PRODUCTION BY FISH AND GAME HATCHERIES
HAS ALSO DECLINED
Along with the decrease in hatchery program funding noted above,
the statewide production volume of Fish and Game’s hatcheries
declined slightly from 2002 to 2004 (due to the timing of optimal
production and release cycle, fish counts are based on calendar
years rather than fiscal years). The hatcheries currently produce
6.5 million to 7.5 million catchable trout per year (each 10 to
12 inches in length), one million smaller, or “subcatchable,” trout
2200 California State Auditor Report 2004-122 California State Auditor Report 2004-122 2211
for put-and-grow fisheries, and five million to six million fingerling
trout. During the 1990s, Fish and Game produced seven million to
10 million catchable trout per year, though at the time, a catchable
trout was defined as being 8 to 10 inches in length. The increased
size requirement for catchable trout has lengthened the amount of
time required to raise the fish, and in turn has increased the unit
cost per trout. However, although the number of fish produced
annually has decreased, the total gross weight of trout produced
each year is similar. Figure 7 illustrates the hatcheries’ output in
terms of the gross weight of catchable and subcatchable fish raised
from 1990 to the present time.
FIGURE 7
Fish and Game Hatchery Production Volume in Pounds
1990 Through 2004
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Sources: Lands and facilities branch, annual fish and eggs production allotments, calendar years 1990 through 2006.
Note: Years for which complete catchable and subcatchable production figures were not available have been excluded.
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2222 California State Auditor Report 2004-122 California State Auditor Report 2004-122 2233
It should be noted that the necessary length of time to produce
catchable trout is about 18 months. As a result, funding increases
made in one fiscal year may not have an immediately evident
impact on the number of fish produced and planted. Moreover, large
reductions in funding for hatcheries could have a detrimental impact
on the fish already partway through their development cycle if Fish
and Game were short the funding needed to finish growing the
fish to the size needed for them to survive outside the hatchery.
OTHER FACTORS CONTRIBUTE TO HATCHERY
PRODUCTION
According to the fisheries branch chief and a senior fishery
biologist, and in line with the trout management plan, the
hatchery operations committee determines the needs for fish
production in the various regions. The branch chief states that
history is the primary driver for the allotment of fish; production
and planting volumes are generally predicated on maintaining
traditional levels to the degree that hatchery production can
support it. However, funding for the hatcheries is not linked to a
current measure of customer demand. The last formal California
angler preference survey conducted on behalf of Fish and Game
was completed in 1988. Fish and Game has identified the need
for regular angler surveys and has developed a strategy to base
hatchery production levels on angler demand and effectiveness.
However, lacking specific angler preferences, we compared the
number of sport fishing base licenses sold with the statewide
hatchery production volumes year-to-year, which provides a
high-level indication of the angling demand versus supply.
Figure 8 on the following page illustrates this comparison.1
As illustrated in Figure 8, the total number of catchable
and subcatchable fish produced fell by only 500,000, or less
than 6 percent, from 2003 to 2004. The number of catchable
fish produced in 2004 declined by 1.1 million from the level
produced the prior year. However, the figure also illustrates
that the number of anglers dropped slightly between 2002 and
2003 but rose to nearly two million in 2004. Although Figure 8
does not take into account the existing population of trout in
California’s streams and lakes, if these recent changes in the
numbers of hatchery-produced fish and anglers develop into
longer-term trends, more anglers could be competing for a
smaller number of catchable fish.
1 Sport fishing base licenses are the resident and nonresident licenses and the one- and
two-day fishing licenses.
2222 California State Auditor Report 2004-122 California State Auditor Report 2004-122 2233
FIGURE 8
Sport Fishing License Sales and
Hatchery Production Volumes
2002 Through 2004
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Sources: Lands and facilities branch annual fish and eggs production allotments, 1990
to 2006, and license and revenue branch year-to-year license sales, fiscal years 2001–02
through 2003–04.
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Some of the existing hatcheries are not operating at their full
production capacities as designed. This is the result of multiple
factors including limitations on operating funds and insufficient
capital outlay funds for hatchery upgrades, improvements,
and maintenance. However, even if the required funds were
available to increase hatchery production, concerns regarding
environmental impacts from hatchery by-products and
consideration for fish health conditions would continue to limit
hatchery output volumes. In addition, Fish and Game’s existing
policies and its Strategic Plan for Trout Management raise concerns
regarding the effectiveness of put-and-take hatchery-produced
fish as a sustainable plan for managing the State’s fisheries. For
example, the trout policy adopted by the California Fish and
2244 California State Auditor Report 2004-122 California State Auditor Report 2004-122 2255
Game Commission (commission) states as its first premise,
“Natural reproduction and rearing of trout will be encouraged
to the greatest extent possible by protecting and improving
habitat and by affording protection from disease, predators and
competing fish species.” Other commission policies include the
following points specifically relevant to Fish and Game’s use of
put-and-take planting strategies:
Policy 4. Artificial propagation is a major department
program, but will be utilized only when necessary to
augment natural production.
Policy 6. Hatchery trout shall not be stocked in waters
where they may compete or hybridize with trout,
which are threatened, endangered, or species of special
concern. Exceptions may be made for stocking waters,
which are not part of a species recovery program.
Policy 8. Catchable-sized trout shall be stocked only
when it is reasonable to expect at least 50 percent by
number or weight will be taken by anglers.
Fish and Game’s Strategic Plan for Trout Management makes it
clear that balancing the demands of various types of fisheries
with the needs of individual fish populations is an important
consideration in making resource allocation decisions. Changes
in the ratio of catchable to subcatchable trout produced in
recent years support the commission’s emphasis for Fish and
Game to sustain natural fisheries rather than simply depend on
ever-larger releases of catchable, hatchery-raised fish.
FISH AND GAME SPENDING DECLINED OVERALL
From fiscal years 2001–02 through 2003–04, Fish and
Game’s total actual expenditures decreased 13 percent, from
$263.8 million to $229.8 million. This was in addition to a
5 percent reduction in total expenditures between fiscal years
2000–01 and 2001–02. As illustrated in Figure 9 on the following
page, Fish and Game made reductions in all of its major program
areas from fiscal years 2001–02 through 2003–04.
2244 California State Auditor Report 2004-122 California State Auditor Report 2004-122 2255
FIGURE 9
Total Fish and Game Expenditures by Program
Fiscal Years 2000–01 Through 2003–04
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Sources: Governor’s Budget Fact Books, fiscal years 2002–03 through 2005–06. In the
Governor’s Budget, hatcheries and fish planting facilities are a part of the Management of
Department Lands and Facilities Program.
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Fish and Game indicates its budget reductions were primarily
the result of directives from various Department of Finance
(Finance) budget letters issued between 2001 and 2003 in reaction
to statewide decreases in General Fund revenue. The efforts to
reduce expenditures began with a statewide hiring freeze in fiscal
year 2001–02. Later, as an additional budget reduction strategy,
Finance required most departments to abolish certain personnel
positions that were vacant as of June 30, 2002. Fish and Game
indicates it lost 137.5 vacant positions for a budget reduction of
$5.7 million in fiscal year 2002–03. During that same fiscal year,
state agencies were required to reduce their General Fund budgets
by 20 percent from the levels previously approved for the year.
2266 California State Auditor Report 2004-122 California State Auditor Report 2004-122 2277
For Fish and Game, this resulted in reductions of $2.5 million
in General Fund expenditures during fiscal year 2002–03 and
ongoing reductions of $11.4 million in fiscal year 2003–04.
Further staff reductions were required in fiscal year 2003–04 by
Finance, resulting in a loss of $7.2 million and the elimination of
an additional 174 vacant and filled positions at Fish and Game. In
total, Fish and Game determined that it lost 414 positions during
fiscal years 2002–03 and 2003–04.
Fish and Game indicates it also suffered a permanent loss of
$1.6 million beginning in fiscal year 2003–04 due to declining
revenues from the California Environmental License Plate Fund.
FISH AND GAME HAS NOT ESTABLISHED WRITTEN
SPENDING PRIORITIES, NOR HAS IT IDENTIFIED
SUFFICIENT FUNDING LEVELS FOR PRESERVATION
FUND PROGRAMS
Fish and Game has not prepared current operational plans that
outline sufficient funding for its programs. Although it adopted
a department-wide strategic plan in 1995, the plan may no
Although Fish and longer reflect the current objectives of Fish and Game’s programs.
Game has had to Without measuring the sufficiency of funding levels, Fish and
address frequent budget Game is at a disadvantage in accurately projecting the funding
reductions, it has done necessary to operate programs at their intended capacities.
so without the benefit of This affects the department’s ability to justify program funding
a written list of funding allocations as it is difficult to build a convincing case for a given
priorities for its activities. level of funding without having first defined a target service level
and the associated costs. Further, Fish and Game never adopted a
formal set of priorities to guide its spending.
Although Fish and Game has had to address frequent budget
reductions, it has done so without the benefit of a written list
of funding priorities for its activities. Its executive team began a
series of meetings in fiscal year 2000–01 to address anticipated
reductions in the General Fund budget. According to Fish and
Game, during that year, Finance proposed shifting $6 million
in expenditures from the Fish and Game General Fund
authorization to the preservation fund. In response, Fish and
Game explored ways to replace the lost funds with preservation
fund money to support ongoing activities.
As the State’s budget crisis continued, the Fish and Game executive
team met on several occasions throughout the period from fiscal
years 2001–02 to 2003–04 to address strategies for responding
2266 California State Auditor Report 2004-122 California State Auditor Report 2004-122 2277
to funding issues. At times, the executive team invited Fish
and Game’s regional managers and branch chiefs to join the
meetings. According to Fish and Game, in July 2003 and in 2004,
the expanded group conducted a priority-setting exercise in an
attempt to assign a priority to each of Fish and Game’s activities.
Unfortunately, the group was unable to complete the effort and
provide an established list of priorities to the Fish and Game
director. According to the deputy director for the wildlife and
inland fisheries division, the group felt that Fish and Game
was responsible for more top-priority programs than it had
funds to operate.
In the absence of a formal, written guiding document, Fish and
Game established its spending plans for fiscal years 2001–02
For some programs, the through 2003–04 in accordance with several influences, including
continuation of ongoing legislative direction, prior years’ spending, customer demands,
projects and level of and statutory requirements. For some programs, the continuation
spending provided in of ongoing projects and the maintenance of a level of spending
prior years were the provided in prior years were the determining factors for
determining factors for establishing the funding in subsequent fiscal years. For example,
establishing the funding Fish and Game indicates it has conducted a statewide waterfowl
in subsequent fiscal years. survey for several years to track trends in the affected species’
populations. According to the deputy director for the wildlife
and inland fisheries division, Fish and Game’s experience has
provided it an understanding of the resources required to perform
the survey. Discontinuing the survey would diminish the value of
multi-season trend data.
Fish and Game also considered its customers’ needs when
setting its spending priorities. For example, one important Fish
and Game activity is to review applications from individuals
who are proposing to substantially alter in any manner one
of California’s streambeds. In reviewing each application,
the law requires staff to determine whether the activity may
substantially adversely affect an existing fish or wildlife
resource. Unfortunately, Fish and Game did not charge and
collect adequate fees from applicants to cover the costs of its
reviews. For example, in 2003–04, it collected $1.6 million from
streambed alteration agreement applications but expended
more than $3.3 million in reviewing the applications and
conducting related activities. Fish and Game took steps in fiscal
year 2003–04 to adjust the program fee structure. However, due
to the lengthy public comment and hearing process required
for such changes, Fish and Game anticipates the new fee
schedule will not be instituted until October 2005. In spite of
2288 California State Auditor Report 2004-122 California State Auditor Report 2004-122 2299
the current shortfall in fee revenue, Fish and Game determined
that responding to permit applicants is a high enough priority to
justify overexpending the associated account.
Based on the documents we reviewed and interviews with
department officials, Fish and Game could not provide policies
dictating specific funding levels for the fish hatcheries. Fish and
Game Code, Section 711(c), dictates that the costs of hunting
and sport fishing programs are to be covered by hunting and
sport fishing revenues and reimbursements, federal funds
received for hunting and sport fishing programs, and other
funds specifically appropriated by the Legislature. We found no
statutes, administrative rules, or federal regulations that specify
target levels for hatchery funding.
Fish and Game Code, Section 711, provides that the State’s
budget act shall include sufficient money from the General Fund
and sources other than the preservation fund to pay for the
In fiscal year 2001–02 the cost of nongame fish and wildlife, and their habitats. However,
balance in the preservation because of the recent reductions of General Fund support, and
fund was $24.5 million; because Fish and Game did not reduce its expenditures to the
however, due to reductions same degree that revenues declined, the department spent down
in General Fund support, the existing reserves in the preservation fund. Fish and Game
Fish and Game projects projects that at the end of fiscal year 2005–06, it will have a
the balance to drop balance of only $665,000 in the preservation fund. This is in
to $665,000 by the end comparison to the $24.5 million fund balance at the beginning
of fiscal year 2005–06. of fiscal year 2001–02. Assuming Fish and Game’s share of
General Fund revenue is not restored and the amount of fee
revenue the department collects remains the same, it will be
forced to make additional program cuts.
FISH AND GAME SPENT MORE FOR BOTH DEDICATED
AND NONDEDICATED PROGRAMS THAN IT COLLECTED
IN REVENUE
As required by Section 13001 of the Fish and Game Code, all
revenue collected by the department and relating to the protection
and preservation of wildlife is deposited into the preservation
fund. All revenue collected and deposited into the preservation fund
can be spent only to support preservation fund programs. Within
the fund, certain revenues are restricted to specific purposes
established in statute; Fish and Game holds such dedicated money
in separate accounts of the preservation fund. For example, Fish
and Game Code, Section 7149.8, requires persons taking abalone
2288 California State Auditor Report 2004-122 California State Auditor Report 2004-122 2299
to purchase an abalone report card in addition to a standard
sport fishing license. Section 7149.9 requires that abalone report
card revenue be deposited into the abalone restoration and
preservation subaccount within the preservation fund. This section
further stipulates that the funds received by this subaccount are
to be expended for abalone research, habitat, and enforcement
activities. In fiscal year 2003–04, the preservation fund contained
26 of these dedicated accounts, representing 15 percent of the total
expenditures from the fund.
Although dedicated programs have revenue streams to support
them, from fiscal years 2001–02 through 2003–04, Fish and
Game expended more on dedicated programs in total than
these programs generated in revenue. During this period, Fish
and Game’s dedicated programs as a whole expended $388,000
to $2.8 million per year more than they received in revenue.
The Streambed Alteration If dedicated programs are not currently self-supporting, then
Agreement Program they are either using resources they have accumulated or
expended close to other resources in the preservation fund. For example, the
$3 million annually from streambed alteration agreement program carried forward a
fiscal years 2001–02 negative beginning balance ranging from $1.4 million to
through 2003–04, more than $4.4 million during these three fiscal years. The
although it only collected program annually expended close to $3 million, although it
between $1.3 million and only collected between $1.3 million and $1.6 million in annual
$1.6 million in these years. revenues. Fish and Game indicated that the streambed alteration
agreement program and similar dedicated programs used
existing account balances to make up for these overexpenditures
(see additional discussion on the borrowing of dedicated
resources on page 31). However, it will soon exhaust existing
dedicated fund balances if spending and revenue collecting
continue at the current rate.
For two of these years, the nondedicated portion of the
preservation fund incurred even more expenditures in excess of
revenues. Nondedicated expenditures exceeded nondedicated
revenues by $4.3 million in fiscal year 2001–02 and by
$11.6 million in fiscal year 2002–03. Table 3 tabulates the
dedicated and nondedicated revenues and expenditures for the
preservation fund for the years reviewed.
3300 California State Auditor Report 2004-122 California State Auditor Report 2004-122 3311
TABLE 3
Revenues, Expenditures, and Net Income for the Fish and Game
Preservation Fund by Dedicated and Nondedicated Money
Fiscal Years 2001–02 Through 2003–04
(in Thousands)
Actual
2001–02 2002–03 2003–04
Revenues
Dedicated $11,776 $10,631 $12,681
Nondedicated 70,088 67,181 75,881
Total Revenue 81,864 77,812 88,562
Expenditures
Dedicated 12,864 13,442 13,069
Nondedicated 74,387 78,729 74,372
Total Expenditures 87,251 92,171 87,441
Net Income
Dedicated (1,088) (2,811) (388)
Nondedicated (4,299) (11,548) 1,509
Net Income Total (5,387) (14,359) 1,121
Sources: Governor’s budgets and Department of Fish and Game’s fund condition
statement for fiscal years 2000–01 through 2004–05.
Undercollection of revenue from fees intended to cover the
costs of dedicated programs has added to the fiscal stress on the
preservation fund.
FISH AND GAME HAS NOT DEMONSTRATED THAT IT
USES ALLOWABLE RESOURCES TO COVER CERTAIN
DEFICIT SPENDING
It is not clear that Fish and Game always uses dedicated
resources in the preservation fund for their intended purposes.
Two of the preservation fund’s dedicated accounts, as well as
the nondedicated account, had negative overall balances as
of June 30, 2004, and some of these deficits have persisted
for several years. In essence, accounts with positive balances,
whose revenues have exceeded expenditures over the lives of
the accounts, are subsidizing the excess expenditures of the
accounts with deficits. No problem would exist if the nondedicated
account was covering these deficits because its resources can
3300 California State Auditor Report 2004-122 California State Auditor Report 2004-122 3311
be used for a broad range of preservation purposes, including
any of the purposes for which the dedicated accounts were
created. However, with the nondedicated account itself running
a deficit, the only resources available in the preservation fund
to cover the deficit spending are those dedicated accounts with
positive balances. In addition to the nondedicated account, the
bighorn sheep dedicated account and the lake and streambed
alteration dedicated account had negative overall balances
as of June 30, 2004. For the three accounts, the deficit was
$14.7 million in fiscal year 2003–04.
The statutes establishing some dedicated accounts may allow for
a broader interpretation of the types of expenditures they may
incur. However, when we asked Fish and Game to demonstrate
to us which resources it used to cover the expenditures of
accounts with negative overall balances and to explain why the
use of those resources was allowable, it did not directly address
either question. Fish and Game pointed out that the fund as a
whole had a positive balance and that only fund resources were
used to pay fund expenditures. Although we do not contest
these statements, they are not relevant to the question of the use
of the resources of individual accounts with dedicated purposes
established in law.
Fish and Game agrees that three of its dedicated accounts
have negative overall balances. As a response to these negative
funding issues, Fish and Game indicates it has revised its fiscal
year 2005–06 budget to reflect a reduction of $1,053,000 in an
effort to bring the preservation fund “into balance.” However,
it did not specify the impact of the proposed reduction on
individual dedicated accounts. Furthermore, Fish and Game has
submitted an increased fee package for the lake and streambed
alteration account to improve the fund condition. Fish and
Game indicates it is currently working with Finance and the
Legislature to find alternatives to improve the negative overall
balances of the accounts.
We are still concerned that Fish and Game’s responses to these
negative balance issues are insufficient. The revenues that flow
Using the resources of one into the dedicated accounts are restricted to the purpose for
dedicated account to pay which the program and the account were established. Therefore,
for the expenses of another using the resources of one account to pay for the expenses of
may not be appropriate. another account may not be appropriate. For example, the
enabling legislation for the Bay-Delta sport fishing enhancement
stamp dedicated account makes it clear that funds collected
from the sale of this stamp are for the long-term benefit of
3322 California State Auditor Report 2004-122 California State Auditor Report 2004-122 3333
Bay-Delta sport fisheries, not to pay for the expenses of another
program. We believe it is not sufficient for the department to
address these issues by simply going forward with reductions
in spending where necessary and increases in fees, although
this is a good first step. We believe that Fish and Game needs to
identify those accounts that have in past years been the lenders
to other dedicated accounts and the nondedicated account, and
that the lending accounts should be paid back.
FISH AND GAME ADVANCED $1.4 MILLION FROM
THE PRESERVATION FUND TO THE NATIVE SPECIES
CONSERVATION AND ENHANCEMENT ACCOUNT
THAT MAY NOT BE PAID BACK
As of June 30, 2004, Fish and Game’s preservation fund showed
a loan (as an “Advance to Other Funds”) of $1.4 million to the
native species conservation and enhancement account (native
species account). The loan was formalized in 1989. Currently,
the loaned amount is tracked in Fish and Game’s accounting
system as Fund 0213.
Fish and Game recorded payments from the native species
account to the preservation fund of $99,000 in fiscal year
2001–02, $45,000 in fiscal year 2002–03, and $40,000 in fiscal
year 2003–04. Fish and Game provided a repayment schedule for
the advance made to the native species account, but it did not
include an amortization schedule that would demonstrate when
the loan could be repaid. According to information provided
by the State Controller’s Office, although the principal balance
of the advance was nearly $1.4 million as of June 30, 2004,
the accrued interest had increased the outstanding amount to
almost $1.8 million.
The native species account’s revenue sources are donations
received for support of nongame and native plant species
conservation and enhancement programs, an appropriation in
the annual budget act from the General Fund equal to $2 for
each free annual wildlife area pass issued during the preceding
calendar year, and revenues from the sale of annual wildlife
area passes and native species stamps, as well as promotional
materials and nature study aids.
The State Administrative Manual (SAM) indicates that the
“Advances to Other Funds” classification is to be used to show
the amount of repayable advances between funds that are not
expected to be repaid within the current or ensuing fiscal year,
3322 California State Auditor Report 2004-122 California State Auditor Report 2004-122 3333
the “Reserve for Advances” classification is to be used to indicate
the noncurrent portion of a long-term repayable advance to
other funds, and interest earned as of June 30 on loans to other
funds should be recorded in accounts receivable and accrued as
of that date.
Fish and Game told us that it will continue to make annual
payments on this loan, but only to the extent of revenues
received into the native species account. Unfortunately, revenues
to the native species account have not been sufficient to pay
down the loan. In fact, the interest has accrued more rapidly
than Fish and Game has historically repaid the preservation
fund for the original advance. Therefore, unless revenues to the
native species account increase significantly, this loan may never
be paid back. When the advance is not collected, the resources
are not available for preservation fund programs.
FISH AND GAME FAILED TO ALLOCATE INDIRECT COSTS
IN ACCORDANCE WITH ITS COST ALLOCATION PLAN
Several of Fish and Game’s activities have been created for the
benefit of all the divisions of the department. These activities,
which it calls “shared services,” are the license revenue branch,
legal services, air services, and geographic information systems.
Fish and Game did not adjust the percentages used in allocating
the indirect costs associated with these shared services to
the divisions that benefited. It used the same percentages for
allocating these indirect costs for fiscal years 2001–02, 2002–03,
and 2003–04. As a result, some programs were overcharged,
while others were undercharged for these costs.
Costs associated with the license revenue branch and legal services
Although its own are to be allocated based on the governor’s budget information for
guidelines for allocating the prior year for each division receiving an allocation. Fish and
shared costs require Game has not updated the percentages it used since prior to fiscal
percentages to be year 2001–02, the first year examined by this audit.
adjusted annually, Fish
and Game failed to do so Costs related to air services and geographic information systems
for fiscal years 2001–02 are to be allocated based on actual activity logged during the
through 2003–04. prior year. The Fish and Game budget unit does not have copies
of the activity logs to update the percentages annually and has
not updated them since prior to fiscal year 2001–02.
According to Fish and Game’s own guidelines for allocating
shared costs, percentages are to be adjusted annually based on
either the governor’s budget for the prior year or the actual
3344 California State Auditor Report 2004-122 California State Auditor Report 2004-122 3355
services provided. Because annual adjustments were not made
to the allocation ratios from fiscal years 2001–02 through
2003–04, Fish and Game inaccurately charged these programs
for indirect costs. Our comparison showed that from fiscal
years 2001–02 through 2003–04, the department’s calculations
overcharged the hatcheries and fish planting facilities program
a total of $1,337,921 of the license revenue branch’s and legal
services’ indirect costs. Fish and Game’s calculations resulted
in overcharging the enforcement and public safety program for
the license revenue branch and legal services costs by a total of
$3,345,885 over the same period. Because the required activity
logs from the audited years were not made available, we were
unable to determine the correct amounts that should have
been allocated for costs related to air services and geographic
information systems.
During the same period that some programs were overcharged,
Fish and Game’s outdated allocation percentages undercharged
other programs for license revenue branch and legal service
costs. For example, the multi-species and habitat conservation
planning program was undercharged a total of $2,753,429, and
the biodiversity (wildlife habitat) protection and preservation
program was undercharged $2,915,920.
Each of the programs that was overcharged or undercharged for
the shared services discussed above was further affected by the
out-of-date allocation calculations when Fish and Game allocated
other administrative costs to them. The department allocated
the balance of administrative indirect costs—which ranged from
$42,837,851 in fiscal year 2001–02 to $36,944,474 in fiscal year
2003–04—based on the total direct and indirect expenditures of
each program. The errors in calculating indirect cost allocations
were further compounded when Fish and Game distributed
administrative costs based on the erroneous proportionate spending.
FISH AND GAME APPEARS TO BE PERFORMING
OTHER ACCOUNTING TASKS IN ACCORDANCE WITH
STATE REQUIREMENTS
Fish and Game adequately assessed and collected fees, allocated
revenue to the appropriate accounts in the preservation fund,
and followed the State’s general administrative practices for
expenditures we reviewed. However, it did not promptly
allocate revenues.
3344 California State Auditor Report 2004-122 California State Auditor Report 2004-122 3355
Based on our review of source documents and Fish and Game
calculations, the department adjusted sport fishing license fees
in accordance with Fish and Game Code, Section 713. For fiscal
years 2002–03 and 2003–04, Fish and Game’s calculation of the
index factors for annual fee increases matched the audit team’s
independent calculations. In each fee we tested, the index factor
was properly applied to the license base rate to determine the fee
increase, and then the increase amount was correctly rounded
to the nearest 25 cents. In each case, the increase amount was
correctly added to the base amount to arrive at the new license fee.
For fiscal year 2003–04, the basic methodology was the same as
in the prior fiscal years. However, Senate Bill 1049 set the rates for
nine of the 10 license fees that account for 99 percent of the sport
fishing revenue collected. The audit team validated Fish and Game’s
calculation for the only license that was indexed that year.
Based on our review, Fish and Game’s license revenue branch and
its fiscal and administrative services bureau (bureau) accurately
Fish and Game accurately collected sport fishing license revenue and posted it correctly
collected sport fishing to the proper accounts within the department’s accounting
license revenue and system. Licenses sold and reported on sport fishing report forms
posted it correctly to the were accurately recorded in the license information system.
proper accounts. Discrepancies between reported and remitted amounts for sport
fishing license sales were documented and adjusted or corrected.
The California Statewide Accounting and Reporting System
(CalSTARS) has several dedicated accounts to which Fish and
Game revenue is allocated. Initially, all revenue is deposited into
the nondedicated portion of the preservation fund. Each month,
bureau staff make accounting adjustments within CalSTARS to
allocate a portion of the total revenue from the nondedicated
account to individual dedicated accounts. The money is allocated
based on the revenue generated that month by the licenses
and stamps that statutes have authorized to fund each of the
dedicated accounts. Although dedicated accounts are established
to provide funding for all or part of particular programs, Fish
and Game is not specifically prohibited from also allocating
nondedicated revenue to these same programs as all of them are
elements of the preservation fund.
Monthly revenue adjustments to allocate funds to the dedicated
accounts were entered properly on posting tags and keyed
accurately into CalSTARS. However, Fish and Game did not
allocate dedicated revenue to the proper accounts within 30 days
of collection as required by the SAM. During the period reviewed,
3366 California State Auditor Report 2004-122 California State Auditor Report 2004-122 3377
the time required to make the allocation to the dedicated
accounts ranged from a low of 20 days in June 2004 to a high
of 162 days in August 2003, as illustrated in Figure 10. The
average time to make the allocation was 67 days.
FIGURE 10
Number of Days the Department of Fish and Game
Took to Allocate Dedicated Revenues
Fiscal Year 2003–04
�����������
��� ��� �� �� �� ��
�������� �������� ��������� �������� �������� ��������
����
�����������
�� �� �� �� �� �� ��
�������� �������� �������� �������� ������� ��������
��� �������
Sources: Calculation based on license revenue branch monthly revenue summaries and
CalSTARS posting tags retained by the fiscal and administrative services bureau.
The delays in posting were caused by a combination of factors.
In some months, substantial time elapsed between the month
end and the license revenue branch’s production of the monthly
summary report. The bureau also experienced delays in making
the accounting adjustments indicated by the summary report.
Regardless of the causes, however, the lack of timely posting of
appropriate funds to the dedicated accounts could have resulted
in funds being unavailable to support expenditures from those
accounts when they were needed.
The audit team obtained for testing a sample of 30 direct
disbursements from the preservation fund related to the hatcheries
and fish planting facilities program. Based on this sample, Fish and
Game paid and posted the invoices accurately, following general
state administrative practices and, on average, within 37 days of
the invoice date.
3366 California State Auditor Report 2004-122 California State Auditor Report 2004-122 3377
To examine the charging of payroll costs to dedicated and
nondedicated revenue accounts in the preservation fund, the
audit team obtained a sample of time sheets on which personnel
charged time to the preservation fund related to the hatcheries
and fish planting facilities program. All of the sampled time
sheets had been approved. The activity codes that Fish and
Game personnel noted on the time sheets were appropriate for
the hatcheries and fish planting facilities program. In addition,
the audit team confirmed that three department employees who
recorded time against activities related to dedicated accounts
had appropriate job duty statements to allow for activities in the
corresponding programs.
RECOMMENDATIONS
To mitigate the effects of budget reductions and fluctuations in
program revenue, Fish and Game should take a more strategic
approach to evaluating its financial needs. It should update its
strategic plan and develop annual operational plans with specific
measurable goals and objectives, then determine the funding
necessary to meet those goals. Once it determines goals and
their costs and establishes its written priorities, Fish and Game
will also be better able to measure the sufficiency of funding for
its programs.
To reduce the reliance on fund reserves, Fish and Game should
take measures to ensure that revenue streams are sufficient to
fund each of its programs. This may require legislation to adjust
fee revenues used for specific dedicated programs within the
preservation fund or General Fund budget augmentations to
sustain dedicated and nondedicated program operations.
To ensure that the resources of dedicated accounts are used for
their intended purposes, Fish and Game should avoid borrowing
from these accounts to fund expenditures of other accounts. If
this is temporarily unavoidable, the department should identify
the specific dedicated account that is the source of the borrowed
resources and ensure that the law establishing that account allows
an interpretation that would make the expenditures allowable.
Finally, Fish and Game should identify those dedicated accounts
that have been used to pay for expenditures of other accounts and
pay back the lending accounts.
To make the resources available for preservation fund programs and
to properly account for its fund balance and liabilities, Fish and
Game should seek resolution for the advance from the fund to the
3388 California State Auditor Report 2004-122 California State Auditor Report 2004-122 3399
native species conservation and enhancement account through
administrative or legislative means. It should investigate the initial
balance, accrue interest based on historical information, determine
payments, prepare an amortization schedule that is an accurate
and realistic schedule for repayment, and take steps to collect
repayment. If full reimbursement cannot be accommodated, Fish
and Game should take action to have the advance written off.
To prevent inequitable distributions of indirect costs and
administrative expenses, Fish and Game should review and
update the percentages used in its allocation method annually.
To ensure that fees collected are promptly available to support
expenditures from dedicated accounts, Fish and Game should
allocate the revenue to the appropriate accounts within 30 days
of collection, as required by the SAM.
We conducted this review under the authority vested in the California State Auditor by
Section 8543 et seq. of the California Government Code and according to generally accepted
government auditing standards. We limited our review to those areas specified in the audit
scope section of this report.
Respectfully submitted,
ELAINE M. HOWLE
State Auditor
Date: June 14, 2005
Staff: Steven M. Hendrickson, Chief Deputy State Auditor
Consultant: KPMG LLP
3388 California State Auditor Report 2004-122 California State Auditor Report 2004-122 3399
Blank page inserted for reproduction purposes only.
4400 California State Auditor Report 2004-122 California State Auditor Report 2004-122 4411
Agency’s comments provided as text only.
California Resources Agency
Department of Fish and Game
1416 Ninth Street, Suite 1311
Sacramento, CA 95814
MEMORANDUM
June 1, 2005
TO: Elaine M. Howle, State Auditor
Bureau of State Audits
555 Capitol Mall, Suite 300
Sacramento, California 95814
FROM: Mike Chrisman (Signed by: Karen Scarborough for)
Secretary for Resources
SUBJECT: Bureau of State Audits Report #2004-122
This memo is in response to the California State Auditor Performance Audit completed on the
Department of Fish & Game Preservation Fund.
The Resources Agency appreciates the opportunity to respond to the findings of the Bureau of
State Audits review of the Department of Fish and Game. The audit notes that the Department was
unable to demonstrate that all expenditures to dedicated accounts were allowable. However, the
audit states that “Fish and Game adequately assessed and collected fees and allocated revenue to
the appropriate accounts of the preservation fund.” The audit noted the fund as a whole is solvent.
The audit points out that the Department of Fish & Game (DFG) faces funding challenges in
meeting its statutory obligations, as well as the expectations of many constituencies and the public
it serves. DFG will be working closely with the Resources Agency and the Department of Finance
to identify solutions for improving the condition of the Fish and Game Preservation Fund (fund), and
still meet its statutory obligations. As DFG explores short and long-term solutions to bring the fund
accounts into balance, the Department will report periodically to the Resources Agency on actions
and progress to resolve the current funding issues.
DFG has already begun to address the fund condition through a combination of additional
revenue and expenditure reductions. A proposed fee increase has been submitted to the Office of
Administrative Law for the Streambed Alteration Account.
4400 California State Auditor Report 2004-122 California State Auditor Report 2004-122 4411
Elaine M. Howle, State Auditor
June 1, 2005
Page 2
That fee increase is expected to produce additional revenue of approximately $1,700,000 annually.
In addition, operating expenses will be reduced in the non-dedicated accounts by $1,053,000.
These actions were reported to the Legislature as a part of the May Revise of the Governor’s
Budget, and have been incorporated in the 2005-06 DFG expenditure plan. In addition, DFG will
begin to review and update the Strategic Plan to provide the basis for setting priorities in evaluating
programmatic and financial needs. DFG is confident that it will be successful in its efforts to align
its approved fund levels with the mandated activities and priorities.
DFG has been receiving payment of the outstanding loan of $1.4 million from the Fish and Game
Preservation Fund to the Native Species Conservation and Enhancement Account. Based on all
collected revenue, the Native Species Conservation and Enhancement Account continues to make
payments to the Fish and Game Preservation Fund. Because annual revenue ranges between
$40,000 to $100,000, it is uncertain whether DFG will be able to satisfy the full repayment of the
loan. Options will be explored to address this shortfall.
The Department has begun a review to update the indirect cost charge percentages used in the
annual allocation method, to ensure the correct charges against its various fund sources.
Over the past years, DFG has experienced declining revenues and various budget and staffing
reductions. Despite this, DFG continues to accomplish its ever-expanding mission. This requires
making difficult decisions to ensure the current priorities are met. This audit reflects the results
of compromises and tough programmatic decisions. Nonetheless, no impairments to dedicated
account programs were cited, and a plan is underway to fully repay the borrowed funds. The
Department of Fish and Game, in working with the Resources Agency and the Department of
Finance, will be able to institute solutions to the audit findings.
If you have any questions, contact Don Wallace, Assistant Secretary for Finance and Administration
at (916) 653-9709.
4422 California State Auditor Report 2004-122 California State Auditor Report 2004-122 4433
cc: Members of the Legislature
Office of the Lieutenant Governor
Milton Marks Commission on California State
Government Organization and Economy
Department of Finance
Attorney General
State Controller
State Treasurer
Legislative Analyst
Senate Office of Research
California Research Bureau
Capitol Press
4422 California State Auditor Report 2004-122 California State Auditor Report 2004-122 4433