Summary

Oil Spill Prevention and Administration Fund The Department of Fish and Game and the Office of Spill Prevention and Response Need to Improve Their Administration of the Spill Fund August 2012 Report 2011-123 Independent NONPARTISAN Accountability TRANSPARENT The first five copies of each California State Auditor report are free. Additional copies are $3 each, payable by check or money order. You can obtain reports by contacting the Bureau of State Audits at the following address: California State Auditor Bureau of State Audits 555 Capitol Mall, Suite 300 Sacramento, California 95814 916.445.0255 or TTY 916.445.0033 OR This report is also available on the World Wide Web http://www.auditor.ca.gov The California State Auditor is pleased to announce the availability of an on-line subscription service. For information on how to subscribe, please contact the Information Technology Unit at 916.445.0255, ext. 456, or visit our Web site at www.auditor.ca.gov. Alternate format reports available upon request. Permission is granted to reproduce reports. For questions regarding the contents of this report, please contact Margarita Fernández, Chief of Public Affairs, at 916.445.0255. CALIFORNIA STATE AUDITOR Elaine M. Howle State Auditor Doug Cordiner B u r e a u o f S t a t e A u d i t s Chief Deputy 555 Capitol Mall, Suite 300 Sacramento, CA 95814 916.445.0255 916.327.0019 fax www.bsa.ca.gov August 14, 2012 2011-123 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 California State Auditor presents this audit report concerning the Department of Fish and Game’s (Fish and Game) Office of Spill Prevention and Response’s (spill office) management of the Oil Spill Prevention and Administration Fund (spill fund). The spill office is responsible for preventing and responding to oil spills and the administrator of the spill office is responsible for administering the spill fund. The revenue for the spill fund is mostly derived from its per-barrel fees, which are charged to owners or operators of crude oil and petroleum products received in California, and the fees paid by certain vessels carrying cargo other than oil, known as nontank vessels. Combined, these fees fund the majority of the spill office’s oil spill prevention activities. This report concludes that Fish and Game misstated the financial condition of the spill fund appearing in the governor’s budget for four of the five fiscal years during our audit period from fiscal years 2006–07 through 2010–11. These misstatements were, in part, a result of Fish and Game’s budget branch not having written procedures directing staff to reconcile the spill fund’s financial condition to the State Controller’s Office records. Moreover, the analysts in Fish and Game’s budget branch lacked experience and training regarding the preparation of fund condition statements. State law requires the administrator to produce a three-year projection of the spill fund’s future revenues and expenses. Relying at least in part on financial information prepared by the spill office in June 2011, the Legislature recently approved a temporary increase to the per-barrel fee to cover projected deficits in the spill fund. However, the spill office’s three-year projection contained inaccuracies because the spill office did not take the steps necessary to verify the accuracy of the financial information included in the projection. A factor that may have affected the three-year projection is the method Fish and Game used to calculate the federal government’s share of its indirect administrative costs, such as those costs associated with accounting, personnel services, and general administration. Fish and Game’s method for calculating the federal government’s share led to an undercharge of $27.3 million to the Federal Trust Fund that was incurred by other funds administered by Fish and Game. The federal government has agreed to allow Fish and Game to recover this amount over the next three fiscal years. As a result, the spill office will need to consider the reduction in the spill fund’s indirect administrative costs when projecting its fund balance and, if necessary, adjust the fees accordingly moving forward. This report also follows up on recommendations issued in our August 2008 report titled Office of Spill Prevention and Response: It Has Met Many of Its Oversight and Response Duties, but Interaction With Local Government, the Media, and Volunteers Needs Improvement, Report 2008-102. In that report, we concluded that Fish and Game’s restructuring of certain spill office positions appeared to have caused friction between the spill office and Fish and Game management. To help reduce friction, we recommended that the spill office and other Fish and Game units discuss their respective authority and better define their roles. This report concludes that some of these issues still exist and that they may be resolved with the development of written policies and procedures. Our 2008 report also raised concerns regarding certain employees’ salaries being improperly charged to the spill fund; however, we found that Fish and Game has since resolved these issues by providing guidance to its employees and implementing a new time reporting system. Respectfully submitted, ELAINE M. HOWLE, CPA State Auditor California State Auditor Report 2011-123 vii August 2012 Contents Summary 1 Introduction 7 Audit Results Until Recently, the Department of Fish and Game Misstated the Financial Condition of the Oil Spill Prevention and Administration Fund 17 Certain Practices May Have Affected Decisions Regarding Recent Fee Increases 19 The Spill Office Could Improve Its Relationship With Fish and Game and State Lands Through Written Policies and Procedures 23 Employees Are Generally Charging the Spill Fund for Authorized Purposes 26 Recommendations 29 Appendix A Oil Spill Prevention and Administration Fund Revenues and Expenditures and Their Statutory Justification 31 Appendix B Status of Prior Recommendations 33 Responses to the Audit California Natural Resources Agency, California Department of Fish and Game and California State Lands Commission 41 viii California State Auditor Report 2011-123 August 2012 Blank page inserted for reproduction purposes only. California State Auditor Report 2011-123 1 August 2012 Summary Results in Brief Audit Highlights . . . The Office of Spill Prevention and Response (spill office) of the Our review of the management of the Oil Department of Fish and Game (Fish and Game) is responsible Spill Prevention and Administration Fund for preventing and responding to oil spills. Following the 2007 (spill fund) highlighted the following: Cosco Busan oil spill, the California State Auditor (state auditor) issued a report in August 2008 titled Office of Spill Prevention and » The Department of Fish and Game Response: It Has Met Many of Its Oversight and Response Duties, (Fish and Game) has yet to fully implement but Interaction With Local Government, the Media, and Volunteers two of the 15 recommendations we made Needs Improvement, Report 2008-102. As discussed in the report, four years ago regarding the assessment we concluded that Fish and Game and the spill office could improve of the spill fund’s fund balance and their administration of the Oil Spill Prevention and Administration the friction between the Office of Spill Fund (spill fund) and recommended several changes. One was that Prevention and Response (spill office) and the spill office annually assess the reasonableness of the spill fund’s Fish and Game. reserve balance and the per-barrel fee charged to owners of crude oil and petroleum products received in California. The per-barrel » The spill fund’s balance appearing in the fee, together with fees paid by certain vessels not designed to governor’s budget was misstated for carry oil as cargo, known as nontank vessels, generates most of the four of the five fiscal years during our spill fund’s revenues. These revenues fund the majority of the spill five‑year audit period. office’s oil spill prevention activities. » The Legislature recently approved an In the nearly four years since the issuance of our 2008 report, increase to the per‑barrel fee to cover Fish and Game and the spill office have implemented most projected deficits in the spill fund. of our recommendations, but they still have not completely However, the spill office developed these addressed others. Specifically, Fish and Game and the spill office projections using fund balances that were have implemented 13 of the recommendations and partially not as accurate as they could have been. implemented two. We determined that Fish and Game only partially implemented our recommendation about the assessment » At least as far back as fiscal year 2006–07, of the spill fund’s fund balance, in part, because it misstated the Fish and Game undercharged the federal balance appearing in the governor’s budget for four of the five fiscal government for its share of Fish and years during our five-year audit period, from fiscal years 2006–07 Game’s indirect administrative costs by through 2010–11.1 Generally, these misstatements resulted from using budgeted expenditures instead of a lack of written procedures in Fish and Game’s budget branch actual expenditures. directing staff to reconcile the spill fund’s financial condition to the State Controller’s Office’s (state controller) records. The state » The Oil Spill Technical Advisory controller’s records contain up-to-date accounting information Committee believes that Fish and Game’s provided by the departments that use the fund, primarily Fish and interpretation of state law has affected Game, the State Lands Commission (State Lands), and the Board of the administrator’s authority to effectively Equalization. The omission of these procedures and a clerical error perform certain statutory responsibilities. in one fiscal year caused the ending fund balance to be misstated in fiscal years 2006–07 through 2009–10. 1 A “fund balance” is the amount of money in a fund that is available for appropriation, and in the governor’s budget, three fund condition statements present the summary of the operations of a fund for the previous, current, and budget year. 2 California State Auditor Report 2011-123 August 2012 Although Fish and Game’s budget branch accurately reported the fund balance as of June 30, 2011, it did not update its procedures to include this reconciliation step until April 2012, after we brought this issue to the attention of a budget branch supervisor. Moreover, the analysts within Fish and Game’s budget branch lacked both experience in preparing fund condition statements and relevant training. The deputy director of the administration division acknowledged that staffing the budget branch with experienced staff has been difficult. As a result of these issues, the accuracy of the fund balances of other funds Fish and Game administers may be similarly affected. Relying at least in part on financial information provided by the spill office, prepared in June 2011, the Legislature recently approved an increase to the per-barrel fee to cover projected deficits in the spill fund. The spill office administrator is required each year to produce a three-year projection of the spill fund’s revenues and expenditures. However, the spill office developed its three-year projection using fund balances that were not as accurate as they could have been. The former acting administrator of the spill office (former administrator) explained that he used financial data that his office gathered independently, believing he could not rely solely on the financial information maintained by Fish and Game’s budget branch. Although his lack of confidence in the budget branch’s financial data may have been warranted, the spill office also lacked written procedures directing staff on how to prepare the three-year projection. Consequently, the three-year projection contained inaccurate financial information. Ultimately, however, due in part to clerical errors, this financial data closely reflected the spill fund’s actual condition based on the state controller’s records. We believe it is critical that the spill office take steps to ensure that financial information included in its three-year projection is accurate. Possibly affecting the former administrator’s ability to accurately project the revenues, expenditures, and resulting fund balance used as the basis for the three-year projection was the method Fish and Game used to calculate the federal government’s share of indirect administrative costs. Typically, indirect administrative costs include the expenditures that benefit multiple programs or units within a department, such as the costs associated with accounting, personnel services, general administration, and facilities maintenance. At least as far back as fiscal year 2006–07 and continuing through fiscal year 2010–11, Fish and Game undercharged the Federal Trust Fund (federal fund) for the federal government’s share of these costs because it used budgeted expenditures, as reported in the governor’s budget, instead of actual expenditures, as the basis for determining its fixed indirect cost rate. Because it used budgeted expenditures for estimating its costs during those years, other funds administered California State Auditor Report 2011-123 3 August 2012 by Fish and Game, including the spill fund, paid the indirect costs that should have been charged to the federal fund. Ultimately, this situation may have reduced the balance of those other funds. According to Fish and Game, the federal government has agreed to allow Fish and Game to increase its fixed indirect cost rates over three years beginning in fiscal year 2011–12 to compensate for the $27.3 million that was undercharged. Because the spill fund will benefit from the federal fund absorbing a greater share of the indirect administrative costs through fiscal year 2013–14, the spill office will need to consider the reduction in these costs when projecting its fund balance moving forward. In our 2008 report, we also concluded that Fish and Game’s restructuring of certain spill office positions appeared to have caused friction between the spill office and Fish and Game management. We recommended that the spill office and other Fish and Game units discuss their individual authority and better define their roles in managing spill prevention staff, consistent with the administrator’s statutory responsibilities and other needs of Fish and Game. However, the Oil Spill Technical Advisory Committee (committee), which, among other things, provides public input and independent judgment on the actions of the spill office’s administrator, asserted that issues still exist between Fish and Game and the spill office. Specifically, the committee believes that Fish and Game has interpreted certain changes made to state law in 2002 in such a way as to affect the legal authority of the administrator to effectively perform the statutory responsibilities granted under the Lempert-Keene-Seastrand Oil Spill Prevention and Response Act (act). This act emphasizes prevention of marine oil spills through improved safety measures and stronger inspection and enforcement efforts. As a result of this statutory interpretation, the committee asserts that the spill office has encountered issues with other Fish and Game divisions, such as the law enforcement division (enforcement). For example, the committee’s 2009–2010 Biennial Report by the Oil Spill Technical Advisory Committee to the Governor and the Legislature, published in June 2011, noted that it learned about decisions made by enforcement to remove or replace key staff during the response to oil spills without the advice or consent of the administrator. In particular, during our interviews, committee members explained that this situation occurred during the response to the October 2009 Dubai Star oil spill, which released 400 gallons of oil into the San Francisco Bay. Although the former administrator and the chief of enforcement had agreed to work together in the future to approve such decisions, written policies and procedures would be in the best interest of all entities, ensuring that such collaboration occurs consistently in the future. 4 California State Auditor Report 2011-123 August 2012 Our 2008 audit report also raised concerns about certain employee salaries being improperly charged to the spill fund. Specifically, the report described instances in which some Fish and Game employees inappropriately charged the spill fund for activities not related to spill prevention. The report raised further concerns that spill prevention wardens recorded insufficient details to justify their charges to the spill fund. Since our 2008 report, we found that Fish and Game has resolved these issues by providing guidance to its employees and implementing a new time-reporting system. However, during our review of selected labor distribution reports for State Lands’ employees, who perform various activities, including conducting inspections of marine facilities, we found that an employee charged an unallowed activity to the spill fund. In particular, this employee charged the spill fund for several hours of meetings related to holiday planning because State Lands lacks sufficient controls to ensure that only allowable spill-related activities are charged to the spill fund. Recommendations To prepare and report accurate fund condition statements for inclusion in the governor’s budget each year, Fish and Game should do the following: • Ensure that staff in its budget branch follow written procedures to develop fund condition statements. • Train both new and existing staff on how to prepare fund condition statements for inclusion in the governor’s budget. To ensure that three-year projections of the spill fund’s revenues, expenditures, and fund balances, all of which are used to determine fee rates, are based on accurate financial information, the spill office should, at a minimum, do the following: • Develop written procedures directing staff on how to prepare the three-year projection, including steps to verify the accuracy of the financial information in the projection. • Consider the reduction in the spill fund’s costs, as a result of the recovery of indirect administrative costs, when projecting its fund balance moving forward. To prevent under- or over-recovery of federal funds, Fish and Game should regularly reassess whether using budgeted expenditures or actual expenditures will produce the most accurate results. California State Auditor Report 2011-123 5 August 2012 To eliminate confusion about the authority of the spill office and its relationship with Fish and Game, the Legislature should consider amending state law to clarify its intent regarding the administrator’s authority. To ensure that the spill office continues to work consistently with enforcement to resolve issues on the use of staff, the spill office should develop written policies and procedures with Fish and Game enforcement. To comply with state law, State Lands should develop time sheet review procedures to ensure that its employees charge the spill fund only for oil spill prevention activities and that those charges are accurate. Agency Comments Fish and Game and State Lands agree with the audit report’s recommendations and outlined steps they have already taken, or plan to take, to implement them. 6 California State Auditor Report 2011-123 August 2012 Blank page inserted for reproduction purposes only. California State Auditor Report 2011-123 7 August 2012 Introduction Background Following two significant oil spills affecting California’s coast, the Legislature enacted the Lempert-Keene-Seastrand Oil Spill Prevention and Response Act (act) in 1990. In enacting the law, the Legislature declared among other things that emphasis should be put on preventing marine oil spills through improved safety measures and stronger inspection and enforcement efforts. The main source of funding for these spill-prevention activities is a per-barrel fee established by the act, which is charged to those who own crude oil and petroleum products at the time the products are received at California marine terminals. Additionally, the legislation declared the State’s need for enhanced response efforts through improved control and cleanup technology, improved response management, and coordination with federal agencies. The act also led to the creation of the Office of Spill Prevention and Response (spill office) in 1991 within the Department of Fish and Game (Fish and Game). As part of Fish and Game, the spill office is able to use the department’s resources to carry out the provisions of the act. For example, the spill office relies on wardens within Fish and Game’s law enforcement division to conduct spill investigations and enforce criminal statutes contained in the act. The spill office asserts that its mission is to “provide the best achievable protection of California’s natural resources by preventing, preparing for, and responding to spills of oil and other deleterious materials, and through restoring and enhancing affected resources.” The act specifies that the per-barrel fee must be used for a variety of preventive measures, including implementing oil spill prevention programs, researching prevention and control technology, carrying out studies that may lead to improved oil spill prevention and response, and financing environmental and economic studies relating to the effects of oil spills. The administrator of the spill office, who is appointed by the governor, is responsible for implementing the State’s oil spill prevention and response activities. When an oil spill occurs within California waters, the administrator represents the State in any coordinated response efforts with the federal government. The administrator is required by law to ensure that he or she has available for support, personnel who are fully trained to adequately respond to an oil spill. The act gives the administrator the authority, consistent with state civil service law, to hire and fire employees as necessary to fulfill the spill office’s responsibilities. The act also assigns certain oil spill prevention responsibilities to the State Lands Commission (State Lands), including inspecting and monitoring the State’s marine facilities. State Lands’ marine facilities 8 California State Auditor Report 2011-123 August 2012 division is responsible for carrying out these activities. According to information obtained from State Lands’ Web site, inspectors monitor activities and enforce regulations at marine oil terminals daily. These inspections include observing and assessing oil transfers to and from oil tankers and barges, with an emphasis on preventing pollution. Personnel from the marine facilities division also conduct comprehensive annual inspections at each marine oil terminal, making structural and marine oil pipeline assessments and reviewing operational procedures and training. To provide public input and independent judgment of the actions of the administrator and the State Interagency Oil Spill Committee, the act also formed an Oil Spill Technical Advisory Committee (committee). The committee consists of 10 members, six of whom are appointed by the governor, two by the speaker of the Assembly, and two by the Senate Rules Committee. Committee members include representatives of the public as well as people with knowledge of marine transportation, environmental protection and the study of ecosystems, and oil spill response and prevention programs. The committee is required to meet at least twice a year and to provide recommendations to the administrator, State Lands, and other governmental entities on certain provisions of the act, including the promulgation of all rules, regulations, guidelines, and policies. The Oil Spill Prevention and Administration Fund The main source of funding for the spill office’s operations is the Oil Spill Prevention and Administration Fund (spill fund), which is administered by the spill office’s administrator in accordance with state law. Appendix A presents the spill fund’s revenues, which come from primarily two sources: a per-barrel fee on crude oil and petroleum products received in California and a nontank vessel fee collected from certain vessels. This appendix also details the spill fund’s expenditures, authorized for readiness, prevention, and administrative support activities. The spill fund cannot be used to pay for response activities related to actual oil spills—the State’s Oil Spill Response Trust Fund (trust fund) is used for spill response costs the State incurs. We did not examine the trust fund because it was not within the scope of this audit request. Appendix A also shows that Fish and Game and State Lands accounted for nearly all the expenditures from the spill fund during our audit period, from fiscal years 2006–07 through 2010–11, with the remaining expenditures made by various state and local government entities, including the State Controller’s Office and the Office of Environmental Health Hazard Assessment. During this same period, the spill fund’s revenues ranged from a low of $26.8 million in fiscal year 2006–07 California State Auditor Report 2011-123 9 August 2012 to a high of $34.9 million in fiscal year 2007–08, while expenditures ranged from a low of $32 million in fiscal year 2006–07 to a high of $36.3 million in fiscal year 2007–08. Figure 1 on the following page displays how the spill fund’s revenues are collected and for what purposes various state and local government entities expend money from the spill fund. The Board of Equalization collects the per-barrel fee. The administrator determines the amount per barrel, up to a maximum amount permitted by the act, sufficient to carry out the oil spill prevention activities defined in the act while permitting a reasonable reserve. If the administrator determines that the per-barrel fee should be set above the statutory maximum, then state law must be amended. The spill office charged the maximum per-barrel fee of 5 cents from January 20, 2003, until January 1, 2012, at which time legislation approved by the Legislature and signed by the governor took effect and temporarily raised the statutory maximum. The former acting administrator of the spill office (former administrator) prepared a three-year projection in June 2011 indicating projected deficits in the spill fund’s ending fund balance of roughly $9 million for fiscal year 2012–13 and $17 million for fiscal year 2013–14. Relying at least in part on that financial information, the Legislature approved a temporary increase to the statutory maximum of no more than 6.5 cents per barrel. The fee increase is effective until January 1, 2015, when the fee will revert to 5 cents per barrel. At the same time that the per-barrel fee increased, the spill office increased the fee it charges for nontank vessels—vessels weighing 300 gross tons or more that carry oil, but not as cargo. Fish and Game collects this fee for each nontank vessel with each application for a certificate of financial responsibility. Certificates of financial responsibility signify that a vessel operator has adequate financial resources to pay for the cleanup and damage costs that would arise from an oil spill. The amount of the fee depends on the nontank vessel’s carrying capacity: larger carrying capacities result in larger fees. During fiscal years 2006–07 through 2010–11, the spill office charged nontank vessel fees ranging from $500 to $2,500, and it increased the fee effective January 1, 2012, to a range of $650 to $3,250 per vessel. Because the nontank vessel fee ranges are established in regulation, the spill office consults with the committee when requesting an increase to the nontank vessel fees. In signing the legislation that authorized the per-barrel fee increase in October 2011, the governor directed the spill office to increase the nontank vessel fee and reduce program expenditures to address the structural imbalance of the spill fund. In response and wanting to implement both the per-barrel and nontank vessel fees by January 1, 2012, the spill office requested an emergency rulemaking action to amend regulations pertaining to the nontank vessel fee. The Office of Administrative Law endorsed and approved this requested action in November 2011. 10 California State Auditor Report 2011-123 August 2012 Figure 1 Summary of Oil Spill Prevention and Administration Fund Revenue Collection and Usage, as of January 1, 2012 Nontank Owners of Vessel Owners Crude Oil or or Operators Petroleum Products $ The Department of Fish and Game (Fish and Game) collects a fee of between $650 and $3,250 from nontank vessel owners or operators with each application for a certificate of financial responsibility and deposits The Board of Equalization collects the fee revenue into the Oil Spill Board of revenues that come from a fee of Prevention and Administration Fund Equalization 6.5 cents per barrel imposed on (spill fund). Certificates of financial owners of crude oil or petroleum responsibility signify that a vessel products when received at owner or operator has adequate California marine terminals. financial resources to pay for the cleanup and damage costs that would arise from a marine oil spill. Per-barrel fee revenue is deposited into the spill fund. Department of Fish and Game Administration Division Office of Spill Prevention and Response Law Enforcement Division Provides various services, including The administrator of the spill office is identified by state Wardens have the authority to accounting, budgeting, and law as the administrator of the fund. The spill office's enforce the criminal statutes of the information technology services for mission is to provide the best achievable protection by Lempert-Keene-Seastrand Oil Spill the Office of Spill Prevention and preventing, preparing for, and responding to spills, and Prevention and Response Act. Response (spill office). through restoring and enhancing affected resources. Less than 1 percent of the spill fund’s The administrator awards grants to certain local government expenditures during our audit period were entities to, in part, provide oil spill response equipment. made by the state entities listed below. The State Lands Commission (State Lands) accounted for approximately 30 percent of the spill fund’s total expenditures during our audit period. Local Government Entities State Lands Commission Other State Entities Includes any local public agency State Controller’s Office or tribe in the State, including cities, (state controller) counties, tribal nations, fire departments, port districts, public Office of Environmental utility districts, and emergency Health Hazard Assessment management departments. Department of None of these individual entities Human Resources accounted for more than 1 percent of the spill fund's expenditures Board of Equalization during our audit period. Department of Finance REVENUES EXPENDITURES Administrative Services Provides accounting and budgeting services for Fish and Game. Marine Facilities Division Performs various activities, including conducting inspections of marine terminal operations. Mineral Resources Management Division Performs various activities, including conducting inspections of facilities and equipment to ensure safe and environmentally friendly operations. Sources: California Government Code, Section 8670; financial records obtained from the state controller; and various documents obtained from Fish and Game, the spill office, and State Lands. California State Auditor Report 2011-123 11 August 2012 Additional Responsibilities Were Assigned to the Spill Office After the Cosco Busan Oil Spill In November 2007 the Cosco Busan, an outbound container ship, struck a support on the San Francisco-Oakland Bay Bridge in heavy fog, breaching two fuel tanks and releasing about 53,600 gallons of oil into the bay. The Legislature subsequently passed and the governor signed legislation that, among other things, expanded the scope of responsibilities for the spill office. According to the former administrator, the legislation did not include additional funding sources or resources to cover these new responsibilities, summarized in Table 1. Although the spill office did not seek to increase the per-barrel fee to address the 2008 legislation, it did submit three budget change proposals requesting additional spending authority from the spill fund for local assistance grants and new positions. The spill office’s scientific branch chief asserted that the Department of Finance (Finance) approved the spill office’s request for local assistance grants; however, Finance denied the spill office’s budget change proposals requesting additional positions to implement the new responsibilities. Concerns About the Administration of the Spill Fund As state law required, Finance published a special review report in January 2005 titled Report on the Department of Fish and Game Office of Spill Prevention and Response, Review of Fiscal and Program Activities. The scope of work included reviewing the financial basis and programmatic effectiveness of the spill office’s prevention, response, and preparedness program. The report noted operational inefficiencies within both Fish and Game and the spill office, including a lack of clear delineation of the reporting structure and authority of the spill office administrator in relation to Fish and Game staff and operations. Finance also reported that the method Fish and Game used for distributing indirect costs was undocumented. Specifically, in its 1995 spill office program review, Finance reported perceived inequities in Fish and Game’s distributed administration funding, causing the spill office to pay a higher percentage of its revenues for distributed administrative costs than any other Fish and Game fund. Finance noted that even though the 1995 program review described Fish and Game’s plan to remedy the perceived inequities, as of 2004 Fish and Game had not initiated its plan. It further noted that Fish and Game had continued to charge unsupported distributed administrative costs to the spill fund. Although Fish and Game appears to have addressed some of the concerns raised by Finance regarding the spill office paying a higher percentage of its revenues for distributed administration costs than any other Fish and Game fund, as described in the Audit Results, we identified additional concerns about administrative costs during our audit period. 12 California State Auditor Report 2011-123 August 2012 Table 1 Significant Responsibilities Assigned to the Office of Spill Prevention and Response by 2008 Legislation CHAPTER AND STATUTE RESPONSIBILITY Chapter 566, Specifies an alternative procedure if the administrator, the United States Coast Guard, or any other qualified public agency, as Statutes of 2008 determined by the administrator of the Office of Spill Prevention and Response, is unable to attend a drill of the marine oil spill (Senate Bill 1739) contingency plan held outside the State. In particular, the law authorizes the administrator to require the owner or operator of the vessel or marine facility to provide for an independent drill monitor to evaluate the drill and to submit the evaluation to the administrator and the owner or operator. Based upon the evaluation, the administrator is required to determine whether the drill satisfies the requirements of the Lempert-Keene-Seastrand Oil Spill Prevention and Response Act. The law required the administrator to adopt regulations to implement the provisions of this chapter on or before January 1, 2010. Requires the administrator to require a rated oil spill response organization to demonstrate that it can deploy the response resources necessary to meet the applicable provisions of a marine oil spill contingency plan in which the organization is listed. Additionally, the law requires the administrator to require satisfactory completion of one unannounced drill for each rated organization before being granted a renewal or before reinstatement of a revoked or suspended rating. Chapter 563, Requires the administrator, as part of the training and certification program, to authorize a local spill response manager to Statutes of 2008 train and certify volunteers, and requires the local spill response managers to participate in all drills upon the administrator’s (Assembly Bill 2031) request. In the event of a marine oil spill, the local spill response manager is required to provide the State’s on-scene coordinator with timely information on activities and resources deployed by local government in response to the oil spill, cooperate with the administrator, and respond in a manner consistent with the area contingency plan, to the extent possible. Requires the administrator to offer grants to a local government with jurisdiction over or directly adjacent to marine waters to provide oil spill response equipment to be deployed by a local spill response manager. Chapter 565, Requires the administrator to submit to the governor and the Legislature an amended California oil spill contingency plan Statutes of 2008 by January 1, 2010, that consists of both a marine oil spill contingency planning section and an inland oil spill contingency (Assembly Bill 2911) planning section. Requires the administrator to ensure the State’s ability to prevent the contamination of wildlife and to identify, collect, rescue, and treat oiled wildlife according to specified requirements, including training of volunteers, stocking emergency equipment for rescue, and providing additional staffing. Provides the administrator with the primary authority to serve as a state incident commander and to direct removal, abatement, response, containment, and cleanup efforts with regard to all aspects of any placement of petroleum or a petroleum product in the waters of the State. Chapter 564, Requires the director of the Department of Fish and Game, in the event of a marine oil spill or discharge, to consult with the Statutes of 2008 administrator in determining where the spill or discharge is likely to spread, when determining a fishery’s closure. (Assembly Bill 2935) Requires the administrator to amend the California oil spill contingency plan to include the identification and prioritization of environmentally and ecologically sensitive areas, a plan for protection actions to be taken in the event of an oil spill in those areas, the location of available response equipment and personnel to deploy the equipment to protect priority environmentally and ecologically sensitive areas, and a program for testing protection strategies for each of the priority environmentally and ecologically sensitive areas. Additionally, the law requires that the California oil spill contingency plan include an element that would consider the utilization of specified private working craft and mariners in plans for containment and cleanup. Sources: California Government Code, sections 8574 and 8670, and Fish and Game Code, sections 5654 and 5655. Subsequently, in August 2008, we issued an audit report of the spill office titled Office of Spill Prevention and Response: It Has Met Many of Its Oversight and Response Duties, but Interaction With Local Government, the Media, and Volunteers Needs Improvement, Report 2008-102. We concluded that the amount of reserves in the spill fund had increased significantly over the past several years, leading to a $17.6 million reserve by June 30, 2007, and noted that a fee increase without corresponding expenditure increases California State Auditor Report 2011-123 13 August 2012 contributed to the high balance as did the failure of the spill office to assess the level of the reserve. However, we also reported that the spill office estimated that fund reserves could drop to $7.4 million by the end of fiscal year 2009–10. To ensure an appropriate reserve balance for the spill fund, we recommended that the spill office annually assess the reasonableness of the spill fund’s reserve balance and the per-barrel fee on crude oil and petroleum products. In addition, we noted several instances in which salaries of Fish and Game employees were charged to the fund for purposes not related to oil spill prevention. As a result, we made several recommendations, including that the spill office provide guidelines to its employees concerning when to charge activities to the spill fund and when to charge other funds. We present the status of Fish and Game’s and the spill office’s implementation of these recommendations in Appendix B. Additionally, in June 2011, the committee issued its 2009–2010 Biennial Report by the Oil Spill Technical Advisory Committee to the Governor and the Legislature, in which it noted a number of accomplishments as well as concerns and priority issues. Although the committee stated that it believes that oil spill preparedness, prevention, and response in California has improved, it voiced various concerns, including the need to better maintain the fiscal integrity of the spill fund through either an increase in revenue or reduction in expenditure within the confines of the spill office’s statutory requirements, or a combination of the two. The committee also commented that one of its continuing concerns is the programmatic, fiscal, and administrative relationship between the spill office and Fish and Game. In particular, the committee noted that under the existing framework, there is a marked lack of control by the spill office administrator over spill office employees and only limited control over its funds. Scope and Methodology We conducted this audit at the direction of the Joint Legislative Audit Committee, which approved the audit objectives listed in Table 2 on the following page. Our fieldwork generally included work at the spill office, Fish and Game, and State Lands. 14 California State Auditor Report 2011-123 August 2012 Table 2 Audit Objectives and the Methods Used to Address Them AUDIT OBJECTIVE METHOD 1 Review and evaluate the laws, • Reviewed relevant sections of the California Government Code, California Public Resources Code, and other laws rules, and regulations significant and regulations. to the audit objectives. • Interviewed legal counsel from the Department of Fish and Game (Fish and Game). 2 Determine which state and Reviewed and agreed the accounting records from the State Controller’s Office (state controller) with the financial local government entities statements of Fish and Game and the Board of Equalization (BOE) for fiscal years 2006–07 through 2010–11. receive funds from the Oil Spill Prevention and Administration Fund (spill fund). 3 For each fiscal year beginning • Interviewed relevant staff and officials from the Office of Spill Prevention and Response (spill office), Fish and in 2006–07, determine Game’s budget branch and accounting services branch, BOE, and the state controller. the spill fund’s revenues, • Reviewed Fish and Game’s budget branch’s written procedures regarding the preparation of fund condition expenditures, transfers, and statements reported in the governor’s budgets for fiscal years 2008–09 through 2012–13. fund balance. • Reviewed and agreed the accounting records from the state controller with the financial statements of Fish and Game and BOE for fiscal years 2006–07 through 2010–11. 4 For each fiscal year beginning Reviewed relevant sections of the California Government Code, California Public Resources Code, and the budget in 2006–07, determine the acts of 2006 through 2010 for each of the entities we identified as part of our audit work related to audit objective 2. justification or statutory authority used for appropriating or transferring funds from the spill fund to each entity that receives the funds. 5 Determine whether the spill • To address the first portion of this audit objective, we performed the following steps: office received additional • Reviewed relevant chapters and statutes from the 2008 legislation. resources following the 2008 • Interviewed relevant staff and officials from the spill office and reviewed relevant budget change legislation that increased the proposals, including those requesting additional positions that were ultimately denied. spill office’s responsibilities. • Reviewed and agreed the accounting records from the state controller with the financial statements of Fish Further, determine if the spill and Game and BOE for fiscal years 2006–07 through 2010–11. office has assessed its current • To address the second portion of this audit objective, we performed the following steps: resource needs and whether • Interviewed relevant staff and officials from the spill office, Fish and Game’s budget branch and accounting that assessment is reasonable. services branch, BOE, and the state controller. • Reviewed the method and support used by the former acting administrator of the spill office to prepare the required three-year projection of the spill fund’s future revenues and expenditures, which led to the January 1, 2012 increase in the per-barrel fee charged to owners of crude oil or petroleum products received in California. • Reviewed the governor’s budgets for fiscal years 2008–09 through 2012–13 and the spill office’s staffing levels as reported in the Salaries and Wages supplement to the governor’s budgets for fiscal years 2006–07 through 2010–11. 6 For those entities that receive • Reviewed relevant sections of the California Government Code and California Public Resources Code. significant amounts from • Reviewed Fish and Game’s new time-charging policies to ensure they issued guidance to staff on how to the spill fund, identify how appropriately charge their time. those funds are used and • Interviewed relevant staff and officials from the State Lands Commission (State Lands), Fish and Game, and evaluate whether those uses the spill office. are consistent with state law. In particular, determine • Reviewed the State Lands’ and Fish and Game’s cost-allocation plans to determine whether expenditures were whether each entity maintains allocated as described in their cost-allocation methodologies. adequate records of staff time • Observed staff from the accounting services branch distribute these costs to the various funds and determined that charged to the spill fund and the spill fund was receiving an equitable share of these costs compared to other funds. evaluate whether staff time • Tested a selection of 60 employee time sheets that charged the spill fund, including 36 from Fish and Game was appropriately charged. and 24 from State Lands, to determine whether time charged to the spill fund was for activities allowed by the Lempert-Keene-Seastrand Oil Spill Prevention and Response Act. California State Auditor Report 2011-123 15 August 2012 AUDIT OBJECTIVE METHOD 7 Evaluate whether the • Reviewed relevant sections of the California Government Code, California Public Resources Code, and the organizational relationship California Fish and Game Code. between the spill office and • Interviewed relevant officials and staff from the spill office and Fish and Game, as well as members of the Oil Fish and Game promotes the Spill Technical Advisory Committee (committee). spill office’s mission, goals, • Followed up on the concerns identified in our 2008 report regarding the spill office’s legal and communications and objectives. functions and determined that there were no reportable issues, as of June 2012. • Reviewed historical spill office and Fish and Game organizational charts. • Reviewed memorandums of understanding between the spill office and Fish and Game. • Reviewed Fish and Game’s budget change proposals that affected the spill fund. 8 Assess whether the spill • Reviewed documentation supporting the spill office’s and Fish and Game’s 60-day, six-month, and one-year office and Fish and Game responses on the status of implementing our prior report’s recommendations. Additionally, we reviewed our have fully implemented the February 2009 and February 2010 special reports to Assembly and Senate Standing/Policy Committees titled recommendations from Implementation of State Auditor’s Recommendations, reports 2009-406 and 2010-406, respectively. Additionally, we the California State Auditor’s reviewed assessments of the implementation of the report’s recommendations included in our January 2010, 2008 report (2008-102). January 2011, and January 2012 reports titled Recommendations Not Fully Implemented After One Year: The Omnibus Audit Accountability Act of 2006. • Interviewed relevant staff and officials from the spill office and Fish and Game and obtained and reviewed supporting documentation, as necessary, to determine whether the report’s recommendations were fully implemented. 9 Identify any potential areas • Interviewed relevant staff and officials from the spill office and Fish and Game, as well as members of for improving oversight of the the committee. spill fund to ensure the most • Reviewed the Department of Finance’s January 2005 report titled Report on the Department of Fish and Game Office efficient and effective use of of Spill Prevention and Response, Review of Fiscal and Program Activities, as well as the committee’s 2009–2010 Biennial the funds. Report by the committee to the governor and the Legislature, which it issued in June 2011. • Reviewed the spill office’s method and procedures for preparing its three-year projection that it uses to justify its fees. • Tested a selection of 60 time sheets from Fish and Game and State Lands to determine whether they were reviewed and approved by a supervisor 10 Review and assess any other • Interviewed relevant officials and staff from Fish and Game, the spill office, as well as members of the issues that are significant to committee to determine whether there were any other issues significant to the spill fund that warranted our the spill fund. review or analysis. • In conducting our fieldwork, we learned that the committee was concerned that State Lands did not always disclose to the spill office its budget change proposals that affected the spill fund. As a result, we performed the following steps: • Interviewed relevant officials and staff from the spill office and Fish and Game and State Lands, as well as members of the committee. • Reviewed State Lands’ budget change proposals and budget change concept proposals that affected the spill fund. Sources: The California State Auditor’s analysis of audit request 2011-123 and of information and documentation identified in the table column titled Method. 16 California State Auditor Report 2011-123 August 2012 Assessment of Data Reliability In performing this audit, we relied on various electronic data files obtained from the entities listed in Table 3. We adhere to the standards of the U.S. Government Accountability Office, which require us to assess the sufficiency and appropriateness of computer-processed information that is used to support findings, conclusions, or recommendations. Table 3 shows the results of this analysis. Table 3 Methods of Assessing Data Reliability INFORMATION SYSTEM PURPOSE METHOD AND RESULT CONCLUSION Department of Fish and To make a selection of Fish and Game employees Our purpose did not require a data reliability Complete for Game (Fish and Game): whose wages were charged to the Oil Spill assessment. Instead, we needed to gain the purposes California State Accounting Prevention and Administration Fund (spill fund) assurance that the population was complete. of this audit and Reporting System between July 1, 2010, and June 30, 2011. • We performed data-set verification (CALSTARS) procedures and found no issues. Data for the period • We verified completeness by tracing a July 1, 2010, through haphazard selection of time sheets to the data June 30, 2011. and found no errors. State Lands Commission To make a selection of State Lands’ employees Our purpose did not require a data reliability Complete for (State Lands): whose wages were charged to the spill fund assessment. Instead, we needed to gain the purposes CALSTARS between July 1, 2010, and June 30, 2011. assurance that the population was complete. of this audit Data for the period • We performed data-set verification July 1, 2010, through procedures and found no issues. June 30, 2011. • We verified completeness by tracing a haphazard selection of time sheets to the data and found no errors. State Controller’s Office To determine the spill fund’s revenues, We did not perform accuracy or completeness Undetermined (state controller): expenditures, and fund balance for the period testing; however, we performed data-set reliability for Budgetary/Legal July 1, 2006, through June 30, 2011. verification procedures and found no issues. the purposes Basis System Additionally, we verified that the spill fund’s of this audit expenditures as recorded in CALSTARS agreed Data for the period to the state controller’s records for the period July 1, 2006, through we reviewed. June 30, 2011. Sources: California State Auditor’s analysis of various documents and data obtained from the entities listed in the table. California State Auditor Report 2011-123 17 August 2012 Audit Results Until Recently, the Department of Fish and Game Misstated the Financial Condition of the Oil Spill Prevention and Administration Fund Until June 30, 2011, and at least as far back as fiscal year 2006–07, fund condition statements for the Oil Spill Prevention and Administration Fund (spill fund) misstated the funds available for appropriation by the Legislature. The governor’s budget, which is largely based on the fund condition statements, includes the fund balance to show the balance of money in a fund that is available for appropriation.2 We reviewed the fund balance reported in the governor’s budget during our audit period—fiscal years 2006–07 through 2010–11—and found that as of June 30, 2011, the spill fund’s balance had finally been corrected. However, as Table 4 indicates, in four of the five years of our audit period the fund balance, which appeared in the governor’s budget, was misstated. Table 4 Ending Fund Balances for the Oil Spill Prevention and Administration Fund Fiscal Years Ending June 30, 2007, Through June 30, 2011 (In Thousands) FUND BALANCE FUND BALANCE REPORTED IN THE STATE FUND BALANCE REPORTED IN THE CONTROLLER’S OFFICE OVERSTATEMENT OR FISCAL YEAR END GOVERNOR’S BUDGET RECORDS (UNDERSTATEMENT) June 30, 2007 $18,781 $14,229 $4,552 June 30, 2008 11,994 12,986 (992) June 30, 2009 13,622 10,858 2,764 June 30, 2010 9,829 9,638 191 June 30, 2011 8,424 8,425 (1) Sources: California State Auditor’s analysis of governors budgets for fiscal years 2008–09 through 2012–13, data obtained from the State Controller’s Office’s Budgetary/Legal Basis system, and financial information provided by the Department of Fish and Game. Please refer to the Introduction’s Scope and Methodology for our assessment of the Budgetary/Legal Basis system’s data reliability. Our review of the written procedures in place before April 2012 showed that the Department of Fish and Game’s (Fish and Game) budget branch did not include a step to reconcile the fund balance reported in the governor’s budget to the State Controller’s Office’s (state controller) records. The state controller’s records contain up-to-date accounting information provided by the departments that use the fund, consisting primarily of Fish and Game, the State 2 A “fund balance” is the amount of money in a fund that is available for appropriation, and in the governor’s budget, three fund condition statements present the summary of the operations of a fund for the previous, current, and budget year. 18 California State Auditor Report 2011-123 August 2012 Lands Commission (State Lands), and the Board of Equalization. The omission of this step contributed to the misstatement of the ending fund balance during our audit period. In April 2012, after we brought this issue to the attention of a budget branch supervisor, the supervisor updated the procedures with input from staff within Fish and Game’s accounting services branch (accounting branch) to include a reconciliation of the fund balance. According to Fish and Game’s deputy director of the administration division, the same procedures were used to prepare all Fish and Game fund condition statements for inclusion in the governor’s budget. As a result, the fund condition statements for other funds that the budget branch prepares for inclusion in the governor’s budget may contain similar misstatements. Although written procedures directing staff to reconcile the fund balance to the state controller’s records were not in place at the time, before preparing the spill fund’s fund condition statements for the 2012–13 governor’s budget published in January 2011, the fiscal information systems administrator (fiscal administrator) explained that budget branch staff, at the recommendation of the accounting branch, reconciled the amounts reported in the fund condition statements with the amounts reported in the state controller’s records for the period ending June 30, 2010. However, the fiscal administrator stated that a clerical error caused the fund balance reported in the governor’s budget to be overstated by $191,000 for the fiscal year ending June 30, 2010, as shown in Table 4. In April 2012, when we brought this error to the attention of a budget branch supervisor, Fish and Game staff updated its existing procedures to include a step to reconcile past-year amounts reported in the governor’s budget with the state controller’s records. The errors we noted in the fund The errors we noted stemmed primarily from a lack of experience condition statements stemmed and training on the part of those preparing fund condition statements primarily from a lack of experience within Fish and Game’s budget branch. According to Fish and and training on the part of Game’s deputy director of the administration division, three analysts those preparing fund condition were responsible for preparing fund condition statements for the statements within Fish and Game’s spill fund during different times throughout our audit period, yet budget branch. none had experience in preparing such statements. Additionally, although a supervisor within the budget branch indicated that some of the analysts responsible for preparing fund condition statements during our audit period had received training from the Department of Finance (Finance) related to budget preparation, he explained that this training only included a general section on fund condition statements and did not go into detail on how to prepare a fund condition statement. Not surprisingly, this lack of experience and relevant training meant the analysts were unaware that the procedures in place during our audit period omitted a step essential to accurately preparing fund condition statements. California State Auditor Report 2011-123 19 August 2012 Further, although managers in Fish and Game’s budget branch reviewed the work performed by its analysts, the managers consistently failed to identify the previously noted errors in the fund condition statements during our audit period. According to the previous budget officer of the budget branch, he reviewed the fund condition statements each year before submitting the information to Finance for inclusion in the governor’s budget. However, his review failed to identify and resolve significant errors in the spill fund’s fund condition statement. Additionally, one of the three supervisors successively overseeing the work of the budget analysts during fiscal years 2007–08 through 2010–11 asserted that he also reviewed the spill fund’s fund condition statements before submitting them to the previous budget officer of the budget branch. Despite these reviews, the fund balance was misstated during four of the five years of our audit period. Therefore, we question whether any of the budget branch staff preparing or overseeing the preparation of the spill fund’s fund condition statements during the period of our audit had enough experience or training to ensure that the fund balance as reported in the governor’s budget was accurate. Fish and Game’s budget branch experienced high employee turnover during our audit period. Since fiscal year 2006–07, a supervisor in the budget branch stated that, based on his best recollection, the branch lost one budget officer, two supervisors, and one budget analyst, all of whom were involved in preparing the spill fund’s fund condition statements. According to the deputy over administration, staffing the budget branch with experienced The high turnover rate, combined staff has been difficult. She explained that the high turnover rate, with inexperienced staff and a lack combined with inexperienced staff and a lack of complete written of complete written procedures, procedures, contributed to the misstatements of the fund balance. contributed to the misstatements of These issues now raise the possibility that other fund balances have the spill fund’s balance. been misstated for other Fish and Game funds within the budget branch’s purview. Certain Practices May Have Affected Decisions Regarding Recent Fee Increases The spill office administrator is required each year to produce a three-year projection of the spill fund’s revenues and expenditures. Based on the Office of Spill Prevention and Response’s (spill office) former acting administrator’s (former administrator) June 2011 projection, the spill fund was projected to have a negative fund balance of $17.7 million by the end of fiscal year 2013–14. Relying at least in part on this financial information, the Legislature approved an increase in the per-barrel fee to cover the projected deficit. However, the fund balances used in developing the three-year projection were not as accurate as they could have been. Because the financial 20 California State Auditor Report 2011-123 August 2012 condition of the spill fund drives the amount at which the per-barrel and nontank vessel fees are set, it is possible that—had the projection been based on complete and correct financial information and included the anticipated recovery of indirect administrative costs— the fee increases approved in 2011 might have been less. The Spill Office’s Projections That, in Part, Supported Recent Fee Increases Contained Inaccuracies State law imposes certain requirements on the spill office related to its revenues and reserve levels, or fund balance. According to state law, the administrator must set a fee sufficient to carry out the purposes of the statute and must provide a reasonable reserve for contingencies. To ensure that the fee is appropriate, state law requires the administrator to annually project revenues and expenditures over three fiscal years, including the current year (three-year projection). The former administrator provided a member of the Legislature with the spill office’s June 2011 three-year projection, which stated that the spill fund would have a negative ending fund balance of nearly $9.4 million at the end of fiscal year 2012–13 and roughly $17.7 million at the end of fiscal year 2013–14. Subsequently, this three-year projection was referenced in the Senate’s latest bill analysis for the recent increase to the per-barrel fee. In developing the three-year projection, the former administrator believed the spill office could not rely solely on the financial information maintained by Fish and Game’s budget branch, so he also used financial data that his office gathered independently. Although his lack of confidence in the budget branch’s financial data may have been warranted, the spill office lacked written procedures directing staff on how to prepare the three-year projection. Consequently, the three-year projection contained inaccurate financial information. According to the program analyst who prepared the three-year projection, she did not consult the budget branch or the accounting branch to verify the accuracy of the financial information included in the projection. Further, she Although certain financial data, explained that she did not reconcile this financial information to including the beginning and the state controller’s records because she lacked the knowledge ending fund balances for fiscal to perform this operation without the guidance of any written years 2008–09 and 2009–10 were procedures. As a result, certain financial data, including the inaccurate, ultimately this financial beginning and ending fund balances for fiscal years 2008–09 and data closely reflected the spill fund’s 2009–10, were inaccurate. Ultimately, however, due in part to clerical actual fund condition based on the errors, this financial data closely reflected the spill fund’s actual state controller’s records due in part condition based on the state controller’s records. Moving forward, to clerical errors. we believe it is critical that the spill office take the steps necessary to ensure that financial information included in its three-year projections is accurate, such as developing written procedures for staff to follow when preparing the three-year projections. California State Auditor Report 2011-123 21 August 2012 The Spill Fund Temporarily Incurred Administrative Costs That May Have Played a Role in the Need to Increase Fees One factor possibly affecting the fund condition on which the three-year projection was based was the method Fish and Game used during this period to calculate the federal government’s share of its indirect administrative costs, a method described below. At least as far back as fiscal year 2006–07 and continuing through fiscal year 2010–11, Fish and Game undercharged the Federal Trust Fund (federal fund) for the federal government’s share of these costs. Using this method meant that the other funds administered by Fish and Game, including the spill fund, were overcharged for the indirect costs that the federal fund did not absorb, an error which ultimately may have led Fish and Game to reduce its various fund balances. As a result, the various Fish and Game funds had fewer resources to pay for designated program costs in at least each of the past five fiscal years. According to Fish and Game’s accounting branch, the State’s accounting system does not generate specific reports nor can this information be feasibly determined to quantify the impact this issue had on the spill fund. However, Fish and Game’s method for Fish and Game’s method for recouping its indirect costs caused the recouping its indirect costs caused spill fund’s expenditures for indirect costs to be higher than they the spill fund’s expenditures for should have been for at least the past five fiscal years. This situation indirect costs to be higher than they may have played some role in the spill office projecting a fund should have been for at least the balance deficit, prompting the Legislature to approve an increase in past five fiscal years. the spill fund’s fees effective January 2012. The federal government allows state agencies that administer federal programs to charge the federal fund an approved rate— known as the indirect cost rate—for its share of a department’s indirect administrative costs. Typically, indirect administrative costs include the expenditures that benefit multiple programs or units within a department, such as the costs associated with accounting, personnel services, general administration, and facilities maintenance. Generally, before the start of each fiscal year, Fish and Game estimates the costs it expects to incur in the upcoming fiscal year and, using these costs, develops a fixed indirect cost rate (fixed rate), which it submits to the U.S. Department of the Interior for review and approval. The U.S. Department of the Interior allows Fish and Game to estimate the costs that are part of its calculation of the fixed rate using the actual costs of a prior year, budgetary data for the current year, or a combination of the two. Two years later when the actual costs are known, Fish and Game calculates the difference between the actual costs and the costs it previously estimated to determine the amount that was overcharged or undercharged. Fish and Game then applies that amount to the estimated indirect costs in its calculation of the current year’s fixed rate to compensate for the difference. 22 California State Auditor Report 2011-123 August 2012 Until fiscal year 2010–11, with the U.S. Department of the Interior’s approval, Fish and Game chose to use budgeted expenditures, as reported in the governor’s budget, as the basis for determining its fixed rate. However, the resulting estimate of costs led to a fixed rate that was significantly lower than the rate necessary to recoup its share of indirect administrative costs. Specifically, the ratio of estimated indirect costs to estimated direct costs drives the calculation of the fixed rate, The Effect of Direct Costs on the Calculation of the Fixed Indirect Cost Rate as shown in the text box. Thus, if the amount of estimated direct costs included in the ratio is too Estimated Indirect Costs high or too low, the calculated fixed rate will result = Fixed Indirect Cost Rate Estimated Direct Costs in an under- or overcharge of indirect administrative costs to the federal fund. During our audit period, two factors significantly increased the estimated If estimated direct costs If estimated direct costs direct costs that caused the fixed rate to be too low. were greater than actual were lower than actual direct costs, then the fixed direct costs, then the fixed Primarily, Fish and Game included expenditures indirect cost rate (fixed rate) rate would have been would have been lower. higher. Thus, there will be for bond funds, which incur very little indirect Thus, there will be an an overcharge of indirect administrative costs, in the estimated amount of undercharge of indirect administrative costs to the administrative costs to the Federal Trust Fund. direct costs it used to calculate its fixed rate for Federal Trust Fund. those years. In addition, Fish and Game used Source: Auditor generated. budgeted expenditures to arrive at its fixed rate during years when it actually spent much less than the amount it budgeted for direct costs. When combined, these factors resulted in the estimated direct costs being much higher than they should have been, causing the fixed rate to be too low. In May 2011, after receiving direction from the U.S. Department of the Interior, Fish and Game discontinued including the expenditures related to bond funds in its estimates and is also now using actual expenditures from a prior year rather than budgeted expenditures as a basis to calculate its fixed rate. However, as conditions change, Fish and Game will need to regularly reassess whether using budgeted expenditures or actual expenditures will produce the most accurate results. Because Fish and Game used the earlier calculation method for several years, by fiscal year 2010–11 the difference between the amount it had charged the federal government for indirect administrative costs, using estimated and actual costs, resulted in the department undercharging the federal fund by a total of $27.3 million. The federal government has agreed to allow Fish and Game to recoup this amount over three years, beginning in fiscal year 2011–12 to compensate for the accumulated difference between the estimated and actual costs. This increase will recoup $1.3 million in fiscal year 2011–12 and $13 million in fiscal years 2012–13 and 2013–14. Fish and Game officials asserted that they chose to spread this difference in these costs over three years to reduce the burden on federal grant programs and to mitigate the amount the State would have to supply as the required matching fund component in any single year. California State Auditor Report 2011-123 23 August 2012 Had Fish and Game based its fixed rate on actual rather than budgeted expenditures and not included bond fund expenditures during our five-year audit period, the rate that it charged the federal fund for indirect administrative costs may have been higher. As a result, the other funds administered by Fish and Game may not have incurred the indirect costs that the federal fund was The spill fund may have reflected undercharged and, therefore, did not absorb. In particular, the a higher fund balance than it spill fund may have reflected a higher fund balance than it actually actually had; thus, the projections had. Thus, the projections of the negative fund balances that the of the negative fund balances that spill office prepared in June 2011 may have resulted in greater fee the spill office prepared in June 2011 increases than were actually needed. Finally, because the spill fund may have resulted in greater fee will benefit from the federal fund absorbing a greater share of the increases than it actually needed. indirect administrative costs through the end of fiscal year 2013–14, the spill office will need to consider the reduction in the spill fund’s indirect administrative costs when projecting its fund balance and, if necessary, adjust the fees accordingly moving forward. The Spill Office Could Improve Its Relationship With Fish and Game and State Lands Through Written Policies and Procedures In 2008 the Joint Legislative Audit Committee asked us to examine the spill office’s internal organization policies with regard to transferring employees and the effect of these policies on the spill office’s ability to respond to spills. In our August 2008 report on the spill office, we determined that Fish and Game’s restructuring of certain positions appeared to have caused friction between the spill office and Fish and Game management. In particular, we reported that, since 2000, Fish and Game had restructured some functions of the spill office so that legal, communications, enforcement, and information technology (IT) staff report to managers in other Fish and Game units rather than to managers in the spill office. In general, the change seemed to have had little effect on the spill office’s operations, according to the managers in charge of three of those functions. Nevertheless, we reported that the limited problems we identified, along with serious reservations by both the past administrator of the spill office and the deputy administrator at the time our report was issued, suggested the need for a better understanding between Fish and Game management and the spill office on their roles and authority related to these employees. To help reduce this friction, we recommended that the spill office and other Fish and Game units discuss their individual authorities and better define their roles in managing spill prevention staff, consistent with the administrator’s statutory responsibilities and the other needs of Fish and Game. 24 California State Auditor Report 2011-123 August 2012 In conducting our fieldwork, we learned that concerns regarding the spill office’s relationship with Fish and Game persist and that additional concerns have been raised regarding the spill office’s fiscal relationship with State Lands. In particular, in June 2011 the Oil Spill Technical Advisory Committee (committee), which, among other responsibilities, provides public input and independent judgment concerning the actions of the spill office administrator, released its 2009–2010 Biennial Report by the Oil Spill Technical Advisory Committee to the Governor and the Legislature (2011 report). In this report, the committee stated that the programmatic, fiscal, and administrative relationship between the spill office and Fish and Game continues to be of concern. To follow up on these concerns, we interviewed members of the committee as well as officials from the spill office, Fish and Game, and State Lands. The committee’s 2011 report cited a provision of state law that has resulted in spill office employees reporting to non-spill office supervisors, which the committee asserted is patently evident in the enforcement, legal, and IT divisions of the spill office.3 As enacted in 1990, the Lempert-Keene-Seastrand Oil Spill Prevention and Response Act (act) establishes the administrator for oil spill response and, among other things, gives the administrator the authority to appoint spill office employees and administer the spill fund in accordance with state law. In 2001 the Legislature amended provisions of law that became effective in 2002 that apply generally to Fish and Game to specify, “notwithstanding any other provision of law,” that all Fish and Game employees are responsible to the director of Fish and Game in carrying out their duties and responsibilities. Although the amendment was declaratory of existing law, the former administrator nonetheless The Oil Spill Technical Advisory stated that staff from the spill office may have been placed under Committee is very troubled by the the direct control of the director of Fish and Game as a result of administrator’s lack of direct line of this legislative change. The committee stated in its 2011 report that authority over spill office staff and as the person ultimately responsible for California’s oil program, is concerned that the requirement the administrator’s lack of direct line of authority over spill office that these staff report to non-spill staff is very troubling and it is concerned that the requirement to office supervisors will usurp the report to non-spill office supervisors will usurp the authority of the authority of the administrator and administrator and undermine the California program. During our undermine the California program. interviews, one member of the committee stated that she discussed the impact resulting from this change to state law during a 2011 California Fish and Wildlife Strategic Vision Project meeting, which is intended to establish a strategic vision for Fish and Game and the California Fish and Game Commission, but commented that her concerns on this issue were met by indifference and resistance. 3 As mentioned in Table 2 of the Scope and Methodology section of this audit report, we followed up on the restructuring of the legal and communications functions and determined that there were no reportable issues. California State Auditor Report 2011-123 25 August 2012 It is unclear whether the Legislature intended the 2002 amendments related to the appointment power of the director of Fish and Game It appears that Fish and Game to have an impact on the reporting structure of the spill office. has interpreted and applied the It appears that Fish and Game has interpreted and applied the 2002 amendments in a manner 2002 amendments in a manner that has impaired the spill office that has impaired the spill office administrator’s authority to fully implement the act. As a result, it administrator’s authority to fully may be desirable for the Legislature to clarify its intent concerning implement the act. the 2002 amendment. In its 2011 report the committee noted that it learned about decisions made by Fish and Game’s law enforcement division (enforcement) to remove or replace State On-Scene Coordinators (on-scene coordinators) during the response to oil spills without the advice or consent of the spill office administrator. During our interviews, committee members stated that the on-scene coordinator during the October 2009 Dubai Star oil spill, which spilled 400 gallons of oil into the San Francisco Bay, was relieved by an inexperienced enforcement warden, without the approval of the spill office’s administrator. However, the chief of enforcement (enforcement chief) stated that the warden who relieved the on-scene coordinator was highly qualified for the role. The enforcement chief and the former administrator stated that they participated in weekly executive meetings and monthly meetings together in which issues, including those related to staffing, could be communicated and addressed. Further, according to the former administrator, the spill office and enforcement have worked together since the Dubai Star oil spill to discuss staffing decisions during oil spill events. However, because the former administrator no longer works for the spill office, there is no guarantee that this arrangement will continue with future administrators. As a result, written policies and procedures would be in the best interest of all concerned to ensure that such collaboration continues. The committee also stated in its 2011 report that it had concerns about the relationship between the spill office and Fish and Game’s IT unit. We met with a few committee members to clarify these concerns and were told that spill office employees were unable to gain access to their IT equipment during an IT service outage. According to Fish and Game’s previous chief information officer, after the former Office of the State Chief Information Officer—now the California Technology Agency—directed all state departments to consolidate their IT services and operations, the spill office’s IT hardware was relocated in June 2011 to Fish and Game headquarters. According to the spill office’s IT services unit chief, during an IT service outage in October 2011 spill office staff were denied access to their hardware because Fish and Game staff were responding to the issue. According to Fish and Game’s previous chief information 26 California State Auditor Report 2011-123 August 2012 officer, although Fish and Game’s IT unit met with the spill office to discuss lessons learned from the incident, they did not develop formal written policies and procedures detailing how to respond to future IT service outages. The spill office’s former administrator Without an official plan of action stated that the spill office sent a comprehensive list of IT issues to for future IT service outages, the Fish and Game; however, due to turnover in Fish and Game’s IT spill office has little assurance that unit, the spill office has yet to receive a response. Without an official it can respond to an oil spill promptly plan of action for future IT service outages, the spill office has during such outages. little assurance that it can respond to an oil spill promptly during such outages. In addition, the committee’s 2011 report described concerns that the spill office administrator was not being given the chance to review budget change proposals from State Lands that would directly affect the spill fund, potentially resulting in a loss of control over the fiscal integrity of the spill fund. According to the spill office’s scientific branch chief and State Lands’ chief of administrative services (administrative chief), at times State Lands did not communicate with the spill office when it submitted budget change proposals that affected the spill fund. For example, in fiscal year 2007–08, State Lands requested an additional $702,000 annually to fund three new engineering positions and one new research analyst position, all three to be paid through the spill fund, but it did not communicate this request to the former spill office administrator. Without such information, the administrator, who is responsible under state law for administering the spill fund, is unable to ensure whether the spill fund has a sufficient balance to maintain the spill office’s operations. State Lands’ administrative chief stated that State Lands recently assured the committee that it will submit budget change proposals to the spill office administrator in the future and will work with the administrator to determine if the spill fund balance can sustain the fiscal effects of such proposals and that any request is consistent with the allowable uses of the fund. We verified that State Lands sent its budget change proposal concepts for fiscal year 2013–14 to the spill office in June 2012. However, although State Lands shared with the spill office its most recent budget change proposal, without written policies and procedures in place, the spill office cannot ensure that this arrangement will continue. Employees Are Generally Charging the Spill Fund for Authorized Purposes In our August 2008 report we raised concerns regarding the spill office’s administration of the spill fund. That report described instances in which some Fish and Game employees inappropriately charged the spill fund for activities not related to California State Auditor Report 2011-123 27 August 2012 oil spill prevention. Additionally, the 2008 audit report noted that the daily activity reports for some spill prevention wardens had insufficient information to differentiate between spill prevention and general activities. Money in the spill fund can be used only for statutorily authorized purposes related to oil spill Some Authorized Purposes of the Oil Spill prevention activities, such as those shown in the Prevention and Administration Fund text box. Our 2008 report concluded that employees’ activities had erroneously been charged • Implement oil spill prevention programs, and research to the spill fund because of a lack of guidance from prevention and control technology. Fish and Game management or because the • Study improved oil spill prevention and response. employees failed to submit time sheets. In response • Finance environmental and economic studies relating to to our finding, Fish and Game issued guidance to its the effects of oil spills. employees instructing them on how to charge time • Implement, install, and maintain emergency programs, for specific activities. To determine whether Fish equipment, and facilities to respond to, contain, and and Game’s corrective actions were effective, we clean up oil spills. reviewed 36 personnel costs charged to the spill • Respond to an imminent threat of an oil spill. fund during fiscal year 2010–11. For each of the charges identified, we obtained a time sheet and a Source: California Government Code, Section 8670.40(e). job duty statement to determine whether the charge was allowable and found no exceptions. Our August 2008 report also identified spill prevention wardens whose personnel costs were paid entirely or almost entirely by the spill fund, even though they may have performed general activities not related to spill prevention. The acting administrator of the spill office at the time acknowledged in our report that spill prevention wardens were encouraged to perform some general activities but that they were not directed to charge time to other Fish and Game funds for these activities, except for certain rare occasions. The acting administrator estimated that between 75 percent and 90 percent of a spill prevention warden’s time is spent in a marine environment and on activities related to spill prevention but that virtually all of their time is charged to the spill fund. Additionally, our 2008 report concluded that the daily activity reports that we reviewed maintained by some of the spill prevention wardens had insufficient information to differentiate between spill prevention and general activities. As a result, we recommended that the spill office and Fish and Game take steps to ensure that spill prevention wardens’ time is charged appropriately, such as performing a time study of wardens to use as a basis for allocating their time between the spill fund and other Fish and Game funding sources. In its most recent response to the 2008 report, Fish and Game stated that it conducted three time studies to address this recommendation and also developed funding management tools to help both spill and non-spill wardens charge their working time to the appropriate fund. These tools allow all wardens to 28 California State Auditor Report 2011-123 August 2012 code work efforts not in support of the spill fund to other specific funding sources. Supervisors and managers review the use of these codes monthly to verify the appropriateness of the charges and periodically to verify that funding charges are within allotted limits and that the charges to specific funding sources are appropriate. The enforcement chief stated that Fish and Game implemented this new time-reporting system in July 2011, the Web-based component of which has been in use since January 2012 and is still being refined. This new system contains a detailed listing of all Fish and Game warden activities and the specific fund to be charged for each activity. Our review of the new time-reporting system and 10 daily activity reports found that the wardens recorded sufficient details to ensure that each activity was charged to the proper fund. However, our review of 24 time sheets from State Lands’ employees revealed one instance in which an employee charged an unallowable general activity to the spill fund. Specifically, we found that in November 2010 an employee charged eight hours to the spill fund for meetings related to planning a holiday event. According to State Lands’ administrative chief, the marine facilities division has two primary funding sources: the spill fund and the Marine Invasive Species fund. The administrative chief stated that charges by marine facilities employees for general administrative activity, such as training, are split between the spill fund, at 75 percent, and the Marine Invasive Species fund, at 25 percent. According to the assistant chief of State Lands’ marine facilities division, the eight hours of meetings should have been distributed between the spill fund and the Marine Invasive Species fund rather than charged entirely to the spill fund and that this mistake was missed by the supervisor who reviewed the time sheet. However, given that the spill fund may be charged only for activities related to oil spill prevention, we do not believe that the fund should have been charged for any of the time spent planning the holiday event. In addition, we question whether this expenditure was an appropriate use of state resources. The assistant chief asserted that in response to the supervisor’s mistake, all supervisors were reminded to be more careful during their time sheet reviews; however, the assistant chief could not provide any formal documentation of this reminder. The chief of State Lands’ marine facilities division asserted that although State Lands does not provide its supervisors with written Even though State Lands’ instructions for reviewing time sheets, its supervisors receive the supervisors currently receive same time sheet training as marine facilities division staff as well as general time sheet training, we additional state-mandated training regarding their responsibilities believe additional procedures when they assume supervisorial duties. Even though State Lands’ detailing how supervisors supervisors currently receive general time sheet training, we believe should perform their time sheet additional procedures detailing how supervisors should perform reviews would provide clarity and their time sheet reviews would provide clarity and consistency consistency to the review process. California State Auditor Report 2011-123 29 August 2012 to the review process. In particular, their reviews should include ensuring that the spill fund is charged only for activities related to oil spill prevention. Further, if State Lands had such procedures in place during our audit period, its supervisor may have prevented the incorrect charge of holiday planning meetings to the spill fund. Recommendations To prepare and report accurate fund condition statements for inclusion in the governor’s budget each year, Fish and Game should do the following: • Ensure that staff in its budget branch follow written procedures to develop fund condition statements. • Train both new and existing staff on how to prepare fund condition statements for inclusion in the governor’s budget. To ensure that three-year projections of the spill fund’s revenues, expenditures, and fund balances, all of which are used to determine fee rates, are based on accurate financial information, the spill office should, at a minimum, do the following: • Develop written procedures directing staff on how to prepare the three-year projection, including steps to verify the accuracy of the financial information in the projection. In developing these procedures, the spill office should consult with Fish and Game’s accounting branch and budget branch to confirm that these procedures are thorough and complete. • Consider the reduction in the spill fund’s costs, as a result of the recovery of indirect administrative costs, when projecting its fund balance moving forward. To prevent under- or over-recovery of federal funds, Fish and Game should regularly reassess whether using budgeted expenditures or actual expenditures will produce the most accurate results. To eliminate confusion about the authority of the spill office and its relationship with Fish and Game, the Legislature should consider amending state law to clarify its intent regarding the administrator’s authority. 30 California State Auditor Report 2011-123 August 2012 To ensure that the spill office continues to work consistently with other entities to resolve issues with the use of staff and equipment and that it has the necessary resources to carry out its operations, the spill office should develop written policies and procedures with the following department and divisions: • Fish and Game enforcement regarding staffing decisions. • Fish and Game’s IT unit regarding the coordination of response to system outages. • State Lands regarding its disclosure of budget change proposals affecting the spill fund. To comply with state law, State Lands should develop time sheet review procedures to ensure that its employees charge the spill fund only for oil spill prevention activities and that those charges are accurate. We conducted this audit 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. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives specified in the scope section of the report. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Respectfully submitted, ELAINE M. HOWLE, CPA State Auditor Date: August 14, 2012 Staff: Laura G. Boll, Project Manager Andrew J. Lee Jason Beckstrom, MPA Earl Hsu Tim Jones Legal Counsel: Donna Neville, Associate Chief Counsel Stephanie Ramirez-Ridgeway, JD IT Audit Support: Benjamin Ward, CISA, ACDA Kim Buchanan, MBA For questions regarding the contents of this report, please contact Margarita Fernández, Chief of Public Affairs, at 916.445.0255. California State Auditor Report 2011-123 31 August 2012 Appendix A OIL SPILL PREVENTION AND ADMINISTRATION FUND REVENUES AND EXPENDITURES AND THEIR STATUTORY JUSTIFICATION The Joint Legislative Audit Committee (audit committee) asked us to determine which state and local government entities received funds from the Oil Spill Prevention and Administration Fund (spill fund) during fiscal years 2006–07 through 2010–11 and to determine the spill fund’s revenues and expenditures for each fiscal year since 2006–07. The audit committee also asked us to determine the justification or statutory authority used for appropriating or transferring funds from the spill fund to each entity that receives funds. Table A on the following page presents this information. As mentioned in the Introduction, most of the spill fund’s revenues come from two sources—a per-barrel fee on crude oil and petroleum products received at marine terminals in California and a nontank vessel fee collected from certain vessels. Table A shows that the Department of Fish and Game (Fish and Game) and the California State Lands Commission (State Lands) accounted for nearly all of the spill fund’s expenditures since fiscal year 2006–07, while the Board of Equalization, the State Controller’s Office (state controller), the Office of Environmental Health Hazard Assessment, the Department of Human Resources, and the Department of Finance collectively accounted for $1.6 million of the $167.2 million, or nearly 1 percent of the spill fund’s total expenditures from fiscal years 2006–07 through 2010–11. In addition, the local government entities that received funds through local assistance grants awarded by the spill office collectively accounted for $5.7 million of the $167.2 million, or just over 3 percent of the fund’s total expenditures during our audit period from fiscal years 2006–07 through 2010–11. The audit committee also asked us to determine the fund balance of the spill fund for each fiscal year beginning in 2006–07. As noted in the Audit Results, in four of the five years of our audit period, the fund balance which appeared in the governor’s budget was misstated. In part, these misstatements were a result of Fish and Game not properly including a step in its written procedures to reconcile the spill fund’s financial condition to the state controller’s financial records until April 2012. As of June 30, 2011, the fund balance has finally been corrected. We present the fund balance for the spill fund in Table 4 on page 17 of the Audit Results. In addition, Table A shows that expenditures were consistently greater than revenues for each fiscal year we reviewed. 32 California State Auditor Report 2011-123 August 2012 Table A Oil Spill Prevention and Administration Fund Revenues and Expenditures and Their Statutory Justification Fiscal Years 2006–07 Through 2010–11 REVENUES FISCAL YEAR STATE DEPARTMENT STATUTORY JUSTIFICATION 2006–07* 2007–08 2008–09 2009–10 2010–11 TOTALS Board of Equalization California Government Code, (BOE) (per-barrel fees) Section 8670.40 (a) $21,267,794 $28,522,697 $26,577,449 $25,245,832 $24,637,010 $126,250,782 Current‑year revenues 28,070,274 27,944,671 26,852,950 25,325,034 24,760,037 132,952,966 Prior‑year adjustments (6,802,480) 578,026 (275,501) (79,202) (123,027) (6,702,184) Department of Fish and California Government Code, Game (other revenues) Section 8670.41(a) 5,538,815 6,397,265 5,679,188 5,875,458 6,131,449 29,622,175 Current‑year revenues 5,402,083 6,266,779 5,196,411 5,782,000 6,057,464 28,704,737 Prior‑year adjustments 136,732 130,486 482,777 93,458 73,985 917,438 Total Revenues $26,806,609 $34,919,962 $32,256,637 $31,121,290 $30,768,459 $155,872,957 EXPENDITURES FISCAL YEAR STATE DEPARTMENT STATUTORY JUSTIFICATION 2006–07 2007–08 2008–09 2009–10 2010–11 TOTALS State Controller’s Office California Government Code, (state controller) Sections 11270 and 11274 $31,118 $31,361 $(276) $35,215 $84,897 $182,315 Board of Equalization California Government Code, Section 8670.40(e)(6) 233,100 250,083 253,787 213,724 180,057 1,130,751 State Lands Commission California Public Resources Code, 9,382,969 10,231,558 9,990,637 9,932,084 10,192,923 49,730,171 Section 8759 3560‑001 State Operations 9,500,182 10,242,519 9,783,342 9,643,491 10,172,548 49,342,082 Reserve for Encumbrances (117,213) (10,961) 207,295 288,593 20,375 388,089 Department of Fish California Government Code, and Game Section 8670.40(e) 22,356,637 25,758,226 24,051,418 23,174,541 22,049,951 117,390,773 3600‑001 State Operations 22,534,513 24,674,791 22,370,658 21,306,759 20,158,941 111,045,662 3600‑101 Local Assistance 518,772 953,591 1,970,367 1,007,853 1,282,186 5,732,769 Reserve for Encumbrances (696,648) 129,844 (289,607) 859,929 608,824 612,342 Office of Environmental California Fish and Game Health Hazard Assessment Code, Section 5654, California - - - 93,535 107,615 201,150 Government Code, Section 3980‑001 8670.38, and Budget Acts of State Operations - - - 98,206 104,041 202,247 2009 and 2010 Reserve for Encumbrances - - - (4,671) 3,574 (1,097) Department of California Government Code, Human Resources Sections 11270 and 11274 7,082 9,086 4,695 14,027 (1,741) 33,149 Department of Finance California Government Code, Sections 11270 and 11274 - 1,363 1,675 1,361 1,508 5,907 State controller’s California Government Code, adjustments (June to July Section 13302(d)(2) payroll deferral) - - - (1,259,000) (262,126) (1,521,126) Total Expenditures $32,010,906 $36,281,677 $34,301,936 $32,205,487 $32,353,084 $167,153,090 Sources: California State Auditor’s analysis of data obtained from the state controller’s Budgetary/Legal Basis system and relevant laws and regulations. Please refer to Table 3 in the Introduction for our assessment of the Budgetary/Legal Basis system’s data reliability. * In fiscal year 2003–04 the BOE overreported the spill fund’s per-barrel fee revenue by $5.8 million and did not correct the error until fiscal year 2005–06. Accordingly, in fiscal year 2006–07 the state controller recorded a $6.7 million prior-year adjustment to its records, reducing the fund balance and revenue in this fiscal year, in part to correct for the overreported revenue. California State Auditor Report 2011-123 33 August 2012 Appendix B STATUS OF PRIOR RECOMMENDATIONS In 2008 the Joint Legislative Audit Committee (audit committee) asked us to assess the planning, oversight, and administrative activities of the Office of Spill Prevention and Response (spill office) and the coordinated response to the November 7, 2007, Cosco Busan oil spill in the San Francisco Bay. In August 2008 we issued a report titled Office of Spill Prevention and Response: It Has Met Many of Its Oversight and Response Duties, but Interaction With Local Government, the Media, and Volunteers Needs Improvement, Report 2008-102. This report concluded that although the spill office had met many of its key responsibilities related to the oversight of contingency planning and oil spill response organizations, it needed to update the state contingency plan as required by law and improve its efforts to involve local governments in the contingency planning process. In that report, we made 15 recommendations to the spill office. In response, the spill office provided information to us that we used to assess its implementation of these recommendations. We presented these assessments in our February 2009 and February 2010 special reports to Assembly and Senate Standing/Policy Committees, titled Implementation of State Auditor’s Recommendations, reports 2009-406 and 2010-406 (subcommittee reports). We also presented these assessments in our January 2010, January 2011, and January 2012 reports titled Recommendations Not Fully Implemented After One Year: The Omnibus Audit Accountability Act of 2006 (accountability reports). Table B on the following pages summarizes those assessments presented in the subcommittee and accountability reports as well as our current findings. We concluded that the spill office has fully implemented 13 of the recommendations and partially implemented the remaining two, discussed in the Audit Results and referenced in Table B. 34 California State Auditor Report 2011-123 August 2012 B elbaT snoitadnemmoceR fo sutatS TXET DETALER AINROFILAC EHT ETAD TNERRUC NI ETATS( ROTIDUA ETATS TROPER FO SUTATS EHT DETROPER )ROTIDUA FI # EGAP( NOITADNEMMOCER S’ROTIDUA ETATS EHT ,ELBACILPPA FI SAW NOITADNEMMOCER )ELBACILPPA 2102 ENUJ FO SA )S(GNIDNIF TNERRUC NOITANIMRETED STI ROF ELANOITAR S’ROTIDUA ETATS EHT FO YRAMMUS DETNEMELPMI YLLUF NOITADNEMMOCER toN ylluF sa detadpu saw nalp etats ehT saw )nalp etats( nalP ycnegnitnoC llipS liO etatS tfard ehT 0102 yraunaJ ni seitivitca s’etatS eht taht erusne oT 1 elbacilppa detnemelpmi sniatnoc dna 0102 yraunaJ fo eettimmocbuS weiveR eht dna srentrap lanretxe htiw derahs etelpmoc era llips lio na ot esnopser eht fo snoitces ot secnerefer htiw ecnadrocca ni eettimmoC llipS liO ycnegaretnI etatS eht fo rehto htiw detargetni llew dna ycnegnitnoc aera dna lanoiger llips eht ,rehtruF .01.4758 noitceS ,edoC tnemnrevoG ainrofilaC dna hsiF fo tnemtrapeD eht ,stroffe .stnemele deriuqer revoc taht snalp dna ,sesnopser dedivorp ,stnemmoc dettimbus deweiver ecffio llipS fo ecffiO )emaG dna hsiF( s’emaG ot pu si nalp siht ,noitidda nI taht detats ecffio llips ehT .nalp eht otni meht gnitaroprocni si )ecffio llips( esnopseR dna noitneverP ainrofilaC htiw ecnadrocca ni etad ni rotartsinimda ecffio llips eht yb devorppa saw nalp etats eht nalp etats eht etadpu ylraluger dluohs .8.4758 noitceS ,edoC tnemnrevoG .9002 rebmeceD fo snoitces ot secnerefer edulcni dna taht snalp aera dna nalp lanoiger eht .stnemele deriuqer revoc toN ylluF deunitnoc sah ecffio llips ehT dedrawa ti 90–8002 raey lacsfi ni taht detats ecffio llips ehT 0102 yraunaJ htiw snalp lacol etargetni retteb oT 2 elbacilppa detnemelpmi tnemnrevog lacol htiw krow ot 000,056$ naht erom gnilatot stnarg gniniart dna tnempiuqe 62 sepyt rehto ni seitivitca esnopser eht eht ,elpmaxe roF .seicnega ecffio llips eht ,noitidda nI .seicnega tnemnrevog lacol ot peek ot dna ,snalp ycnegnitnoc fo niatrec detivni ecffio llips gniniart dna tnempiuqe gnidivorp rotcartnoc eht taht deton ecffio llips eht ,etad ot pu snalp lacol ot seicnega tnemnrevog lacol eht etelpmoc dluow dna snoisses gniniart eerht detcudnoc stnemnrevog lacol htiw krow dluohs esicrexe potelbat a ni etapicitrap ,yllaniF .9002 ,13 rebotcO yb snoisses gniniart gniniamer dluohs dna noitapicitrap evorpmi ot ni 1102 rebmeceD ni dleh tnemnrevog lacol a fo noisulcni eht rof gniwolla egaugnal tnarg lanoitidda rehtehw redisnoc .ainrofilaC ,dnomhciR raen ro ni sllips rof dnammoc defiinu eht ni evitatneserper .dedeen si gnidnuf /tsaoC htroN eht ot dedda neeb sah yaB ocsicnarF naS eht .nalP ycnegnitnoC aerA lartneC/atleD dna yaB ocsicnarF naS toN ylluF .elbacilppa toN llips-tsop“ a rof tnemeriuqer eht taht detats ecffio llips ehT 2102 yraunaJ eht ,sweiver llips-tsop ot drager htiW 3 elbacilppa detnemelpmi elbisnopser eht ;segnellahc lagel otni nur ylenituor sah ”weiver rehtehw enimreted dluohs ecffio llips nalp sti ni seicneicfied ro tluaf timda ot tnatculer si ytrap evitceffe na era sweiver llips-tsop eht eht taht detats ecffio llips eht ,rehtruF .seussi ytilibail ot eud nalp rof saera gniyfitnedi rof snaem tsaoC .S.U eht ro/dna ecffio llips eht yb detcudnoc snoitagitsevni spets ekat neht dna tnemevorpmi siht rof ecruos retteb a si llips eht fo esuac eht gnidrager drauG era sweiver eht taht erusne rehtie ot elbisnopser eht ni desserdda eb neht nac hcihw ,noitamrofni morf meht etanimile ro dettimbus llips eht ,eroferehT .etairporppa fi ,nalp ycnegnitnoc s’ytrap .snoitaluger sti devomer taht detaglumorp saw gnikamelur taht detats ecffio .1102 ,2 enuJ evitceffe ”,weiver llips-tsop“ a rof tnemeriuqer eht toN ylluF potelbat fo noitceles a no desaB ylluf si tinU sesicrexE dna sllirD sti taht detats ecffio llips ehT 0102 yraunaJ rof ssenderaperp lessev erusne oT 4 elbacilppa detnemelpmi hguorht 9002 ni dleh sesicrexe kcart ot desu metsys esabatad sti taht dna deniart dna deffats dluohs ecffio llips eht ,sllips lio dna deniatbo ecffio llips eht ,1102 ylluf si seirtsudni emitiram dna lio eht yb sesicrexe dna sllird noitatnemucod niater dna niatbo detaler noitatnemucod deniater .deniatniam ylreporp dna detadpu deriuqer fo noitelpmoc ot detaler deriuqer fo noitelpmoc eht ot .sesicrexe potelbat .sesicrexe potelbat California State Auditor Report 2011-123 35 August 2012 TXET DETALER AINROFILAC EHT ETAD TNERRUC NI ETATS( ROTIDUA ETATS TROPER FO SUTATS EHT DETROPER )ROTIDUA FI # EGAP( NOITADNEMMOCER S’ROTIDUA ETATS EHT ,ELBACILPPA FI SAW NOITADNEMMOCER )ELBACILPPA 2102 ENUJ FO SA )S(GNIDNIF TNERRUC NOITANIMRETED STI ROF ELANOITAR S’ROTIDUA ETATS EHT FO YRAMMUS DETNEMELPMI YLLUF NOITADNEMMOCER toN ylluF era stsop dnammoc tnedicnI ,eettimmoC aerA ogeiD naS eht taht detats ecffio llips ehT 1102 yraunaJ ni smelborp lacitsigol diova oT 5 elbacilppa detnemelpmi ycnegnitnoc aera eht ni dedulcni ,drauG tsaoC .S.U eht dna ecffio llips eht yb deriahc-oc llips eht ,sllips lio ot gnidnopser trop drauG tsaoC .S.U eht rof snalp defiitnedierp fo tsil a poleved ot eettimmocbus a dehsilbatse aera htiw etaroballoc dluohs ecffio ,ogeiD naS ,ocsicnarF naS rof saera ehT .aera eht ni snoitacol tsop dnammoc tnedicni elbatius yfitnedi ot ainrofilaC ni seettimmoc .hcaeB gnoL/selegnA soL dna ogeiD naS rotceS-drauG tsaoC .S.U eht defiitnedi eettimmocbus era taht sretnec dnammoc laitnetop noitrop nrehtuos eht ni tsop dnammoc etairporppa eht sa lla ssessop dna yletairporppa dezis eht fo noitrop nrehtron eht ni sllips roF .ytnuoC ogeiD naS fo .tnempiuqe snoitacinummoc yrassecen s’dabslraC fo ytic eht defiitnedi eettimmocbus eht ,ytnuoc dnammoc tnedicni elbatius a sa retneC snoitarepO ycnegremE fo mudnaromem a dehsilbatse drauG tsaoC .S.U ehT .tsop .ytilicaf eht fo esu rof edisnaecO fo ytic eht htiw gnidnatsrednu toN ylluF sti detelpmoc ecffio llips ehT rof margorp a depoleved sah ti taht detats ecffio llips ehT 2102 yraunaJ nosiail a sa elor sti nehtgnerts oT 6 elbacilppa detnemelpmi nosiail rof sdradnats noitacfiilauq defiitnedi dah ecffio llips ehT .htped ffats nosiail eht gnidnapxe eht dna stnemnrevog lacol neewteb ni ffats deniart sah ti dna ,srecffio eht saw hcihw ,strepxe rettam tcejbus noitisop nosiail eerht ecffio llips eht ,dnammoc defiinu .elor taht metsys dnammoc tnedicni lacitirc-noissim lla rof laog laitini ot snalp sti htiw eunitnoc dluohs ecffio llips ehT .sllfi ylenituor ecffio llips eht taht snoitisop rof sdradnats noitacfiilauq poleved depoleved evah strepxe rettam tcejbus eseht taht detats ffats erom niart ot dna srecffio nosiail ta gnivres rof srebmem ffats rof margorp gniniart nosiail a dluohs ecffio llips ehT .elor taht rof retnec snoitarepo eht ni ro tsop dnammoc tnedicni eht rehtie sa dengissa ffats taht erusne osla ni ffats lareves ,ecffio llips eht ot gnidroccA .otnemarcaS ni ot sllird ni etapicitrap srecffio nosiail deniart neeb evah strepxe rettam tcejbus eht ot noitidda llips eht ,noitidda nI .ecneirepxe niag dna esuoh-ni hguorht gniniart boj-eht-no rieht gnitteg era dna sti ni ffats taht erusne dluohs ecffio .sllird yrtsudni yrassecen lla edivorp retnec snoitarepo snoitacinummoc gnidulcni ,troppus tnenopmoc nosiail a depoleved ti taht detats ecffio llips ehT ni srecffio nosiail ot ,tnempiuqe dna ,sboj ,sksat sedulcni taht launaM retneC snoitarepO eht rof .dlefi eht snoitarepO eht detavitca ti taht dna noitamrofni lanoitidda tnedicni ratS iabuD 9002 rebotcO eht gnirud nosiail retneC ni tneve imanust ediwetats eht dna yaB ocsicnarF naS eht ni tnacfiingis dedivorp nosiail retneC snoitarepO ehT .1102 hcraM eht degdirb dna recffio nosiail dlefi eht ot troppus lacitirc tsop dnammoc eht neewteb noitacinummoc rof deen dna ,etats ,lacol( seicnega rehto dna ,etaneS ,ylbmessA eht dna htiw devlovni yltcerid ro enecs eht no ton erew taht )laredef .esnopser eht .gniogno eb lliw tnempoleved lliks dna noitacude gniunitnoC dna niart ot eunitnoc ot snalp ti taht detats ecffio llips ehT dlefi dna retnec snoitarepo htob rof ffats nosiail defiitnedi llird dna sllird dnetta ot deen lliw ffats nosiail detangiseD .snoitisop .slliks rieht niatniam ot ylraluger sesicrexe . . . egap txen no deunitnoc 36 California State Auditor Report 2011-123 August 2012 TXET DETALER AINROFILAC EHT ETAD TNERRUC NI ETATS( ROTIDUA ETATS TROPER FO SUTATS EHT DETROPER )ROTIDUA FI # EGAP( NOITADNEMMOCER S’ROTIDUA ETATS EHT ,ELBACILPPA FI SAW NOITADNEMMOCER )ELBACILPPA 2102 ENUJ FO SA )S(GNIDNIF TNERRUC NOITANIMRETED STI ROF ELANOITAR S’ROTIDUA ETATS EHT FO YRAMMUS DETNEMELPMI YLLUF NOITADNEMMOCER toN ylluF ecffiO llipS/GSCU tnioJ“ ehT ecffiO llipS/GCSU tnioJ“ eht etorw ti ,ecffio llips eht ot gnidroccA 0102 yraunaJ stroper dna smrofrep ti taht erusne oT 7 elbacilppa detnemelpmi noitacfiitnauQ llipS liO rof ”locotorP ti dettimbus dna 9002 ylrae ni ”noitacfiitnauQ llipS liO rof locotorP dna ylkciuq snoitaluclac emulov llips ot si emulov llips eht woh sebircsed ecffio llips ehT .9002 hcraM yb tcirtsiD htnevelE s’drauG tsaoC eht ot dluohs ecffio llips eht ,yletarucca .defiitnauq yletarucca dna ylemit eb denimreted rednammoC tcirtsiD s’drauG tsaoC .S.U eht taht detats drauG tsaoC .S.U eht htiw etaroballoc enecS-nO laredeF hcae ni saw locotorp eht rof ecalp reporp eht taht ,slocotorp noitaluclac llips hsilbatse ot eht taht detats ecffio llips ehT .nalP ycnegnitnoC aerA s’rotanidrooC eht dna sdeen noitatropsnart gnidulcni smudnedda nalP ycnegnitnoC aerA eht ni decalp eb ot si locotorp .snoitaluclac s’ytitne hcae fo gnirahs txen eht ta snalP ycnegnitnoC aerA eht ni decnerefer eb lliw dna hsilbatse osla dluohs ecffio llips ehT noitacfiitnauq taht detats ecffio llips eht ,rehtruF .etadpu deludehcs ffats taht erusne ot serudecorp ycnegnitnoc llips lio deriuqer sti ni tnemele dradnats a emoceb sah ot snoitaluclac llips troper yltpmorp ratS iabuD eht ni desu ylreporp saw locotorp eht dna sllird nalp llips eht ,rehtruF .rotanidrooc etats eht eht fo noitcafsitas eht ot ,9002 ,03 rebotcO no tnedicni llips lio snoitaluclac llips edulcni dluohs ecffio etatS eht ,rotanidrooC enecS-nO laredeF eht .g.e( dnammoC defiinU .sllird sti fo trap sa esoht dna )ytraP elbisnopseR eht dna ,rednammoC enecS-nO .esnopser llips eht gnizylana toN ylluF na otni deretne ecffio llips ehT cilbup gnorts a detaerc sah ti taht detats ecffio llips ehT 1102 yraunaJ eeyolpme etats a taht erusne oT 8 elbacilppa detnemelpmi emaG dna hsiF htiw tnemeerga tnacav sti gnillfi dedulcni sah hcihw ,maet recffio noitamrofni elbaliava si sllips lio ni elbaegdelwonk ffats ’snoitaler cilbup niatbo ot sti gnitnemgua dna noitisop recffio noitamrofni cilbup a gnirud snoitaler cilbup ni tsissa ot lio ni elbaegdelwonk era ohw evisnetxe na htiw laudividni na gnirih yb ffats tnemeganam ffats snoitaler cilbup ,esnopser llips ecffio llips eht ,noitidda nI .sllips ,yllanoitiddA .dnuorgkcab esnopser ycnegreme dna sriaffa cilbup dluohs ecffio snoitacinummoc eht ni rof egap hctaWllipSlaC eht sesu snoitisop recffio noitamrofni tnatsissa taht detats ecffio llips eht ecffio llips ehT .sllird llips ni etapicitrap noitamrofni fo gnitsop etaidemmi desu metsyS dnammoC tnedicnI eht rednu detaerc neeb evah ot slocotorp poleved osla dluohs .tenretnI eht no dna esnopser ycnegreme rof krowemarf tnemeganam eht sa sa hcus ,noitamrofni yek taht erusne tnatsissa eht llfiluf ot detangised neeb evah taht ffats lanoitidda detanimessid si ,sreetnulov fo elor eht ni detapicitrap dna sgniniart elpitlum detelpmoc evah selor .esnopser llips a ni ylrae cilbup eht ot ecffio llips ehT .srecffio noitamrofni cilbup dael eht htiw sllird dna deludehcs neeb osla evah sgniniart sisirc erutuf taht detats neewteb detnemelpmi neeb sah tnemeerga snoitarepo na noitacinummoC fo ecffiO s’emaG dna hsiF dna ecffio llips eht lanoitidda rof )hcaertuO dna noitacudE( hcaertuO dna noitacudE llips eht ,noitidda nI .esnopser llips rof ffats evreser dna troppus evah hcaertuO dna noitacudE morf slaudividni taht detats ecffio eht taht detats ecffio llips eht ,tsaL .gniniart dna sllird dednetta ycnegreme llips lio rof detangised ,egap beW hctaWllipSlaC ffats ecffio llips 51 htiw evil si ,snoitacinummoc esnopser tnedicnI eht ssorca( noitamrofni gnitsop rof esu sti ni deniart noitamrofni cilbup—metsys noitazinagro metsyS dnammoC emaG dna hsiF gniwolloF .)snoitarepO ,gninnalP ,nosiail ,recffio neeb sah krowten laicos eht ,erudecorp gnitarepo dradnats noitubirtsid aidem serahs won ecffio llips eht dna dehsilbatse cilbup s’ecffio llips eht taht os hcaertuO dna noitacudE htiw stsil eht ni elihw noitamrofni etubirtsid nac maet recffio noitamrofni .thgin ro yad emit yna ta dna ylkciuq erom dlefi California State Auditor Report 2011-123 37 August 2012 TXET DETALER AINROFILAC EHT ETAD TNERRUC NI ETATS( ROTIDUA ETATS TROPER FO SUTATS EHT DETROPER )ROTIDUA FI # EGAP( NOITADNEMMOCER S’ROTIDUA ETATS EHT ,ELBACILPPA FI SAW NOITADNEMMOCER )ELBACILPPA 2102 ENUJ FO SA )S(GNIDNIF TNERRUC NOITANIMRETED STI ROF ELANOITAR S’ROTIDUA ETATS EHT FO YRAMMUS DETNEMELPMI YLLUF NOITADNEMMOCER toN ylluF htiw detacinummoc ecffio llips ehT eht yb devorppa ,1192 lliB ylbmessA taht deton ecffio llips ehT 0102 yraunaJ eht taht erusne dluohs ecffio llips ehT 9 elbacilppa detnemelpmi gnidrager ffats krowten efildliw hcraes efildliw delio evitcaorp sdda ,8002 rebmetpeS ni ronrevog efildliw( krowteN eraC efildliW deliO krowten efildliw eht dna ,gniniart efildliw eht fo sucof yramirp a sa stroffe eucser noitcelloc dna a sniart dna sefiitnedi )krowten .ffats deniart sah ot rotartsinimda ecffio llips eht seriuqer osla llib sihT .krowten yrrac ot ffats fo rebmun tneicffius ,eucser ,tcelloc ,yfitnedi ot ytiliba eht sah etatS eht taht erusne ni deniltuo seitivitca yrevocer tuo ,stnemeriuqer defiiceps ot gnidrocca efildliw delio taert dna a fo tneve eht ni snalp ycnegnitnoc rof tnempiuqe ycnegreme gnikcots ,sreetnulov gniniart gnidulcni .llips egral efildliw eht rof gnidnuF .gnffiats lanoitidda gnidivorp dna ,eucser ot 90–8002 raey lacsfi rof noillim 5.1$ morf desaercni krowten taht syas krowten efildliw ehT .01–9002 raey lacsfi rof noillim 2$ rehserfer dna ,sgniniart ,spohskrow fo rebmun a detcudnoc sah ti mrofrep ot tnatsissa snoitarepo dlefi efildliw a derih dna ,sesruoc troppus ot dna sdoirep llipsnon gnirud seitivitca ssenidaer .sllips lio gnirud stroffe eucser efildliw toN ylluF .elbacilppa toN eht tuoba snoitseuq s’ecffio llips eht ot dednopser AHSO/laC 0102 yraunaJ etsaw suodrazah taht tnetxe eht oT 01 elbacilppa detnemelpmi eucser efildliw rof yrassecen gniniart etsaw suodrazah fo level ot reirrab a era stnemeriuqer gniniart etsaw suodrazah eht taht detacidni AHSO/laC .sreetnulov deniart fo srebmun tneicffius gniniatniam deriuqer yltnerruc level eht morf decuder eb ton dluoc gniniart ot eunitnoc dluohs ecffio llips eht ,ffats rof selor troppus ni desu eb dluoc sreetnulov deniartnu taht tub lanoitapuccO ainrofilaC eht htiw yfiralc .stroffe eucser efildliw /laC( noitartsinimdA htlaeH dna ytefaS rof stnemeriuqer decuder rehtehw )AHSO elbatpecca era gniniart etsaw suodrazah yrevocer no gnitsissa sreetnulov rof htiw gnikrow redisnoc dluohs dna ,smaet siht taht erusne ot krowten efildliw eht laitnetop ot elbaliava ylediw si gniniart .llips a erofeb sreetnulov . . . egap txen no deunitnoc 38 California State Auditor Report 2011-123 August 2012 TXET DETALER AINROFILAC EHT ETAD TNERRUC NI ETATS( ROTIDUA ETATS TROPER FO SUTATS EHT DETROPER )ROTIDUA FI # EGAP( NOITADNEMMOCER S’ROTIDUA ETATS EHT ,ELBACILPPA FI SAW NOITADNEMMOCER )ELBACILPPA 2102 ENUJ FO SA )S(GNIDNIF TNERRUC NOITANIMRETED STI ROF ELANOITAR S’ROTIDUA ETATS EHT FO YRAMMUS DETNEMELPMI YLLUF NOITADNEMMOCER 02 hguorht 71 yllaitraP llips eht detatssim emaG dna hsiF sti gnitcejorp troper a detaerc ecffio llips eht 9002 yraunaJ nI 0102 yraunaJ evreser etairporppa na erusne oT 11 detnemelpmi ni gniraeppa ecnalab dnuf s’dnuf llips eht ,emit taht tA .31–2102 raey lacsfi hguorht ecnalab dnuf noitneverP llipS liO eht rof ecnalab eht fo ruof rof tegdub s’ronrevog eht tesffo ot stnemtsujda raey-dim gnikam saw ti taht dias ecffio ,)dnuf llips( dnuF noitartsinimdA dna raey-evfi ruo gnirud sraey lacsfi evfi .lio detropmi morf seunever desaerced yllaunna dluohs ecffio llips eht .doirep tidua eht fo ssenelbanosaer eht ssessa eef lerrab-rep eht dna ecnalab evreser si eef lerrab-rep eht taht erusne oT .stcudorp muelortep dna lio edurc no eht seriuqer wal etats ,etairporppa llips eht ,tnemssessa launna siht gnisU tcejorp yllaunna ot rotartsinimda ro serutidnepxe tsujda dluohs ecffio revo serutidnepxe dna seunever .yrassecen sa eef lerrab-rep eht eht gnidulcni ,sraey lacsfi eerht .)noitcejorp raey-eerht( raey tnerruc eht fo rotartsinimda gnitca remrof ehT 1102 enuJ a deraperp ecffio llips ,dnuf llips eht fo noitcejorp raey-eerht laicnanfi no ,trap ni ,desab eh hcihw derehtag ecffio sih noitamrofni ecffio llips eht ,oslA .yltnednepedni gnitcerid serudecorp nettirw dekcal raey-eerht eht eraperp ot woh no ffats ,yltneuqesnoc ,dna noitcejorp etaruccani deniatnoc noitcejorp eht ,drawrof gnivoM .noitamrofni laicnanfi llips eht taht lacitirc si ti eveileb ew ot yrassecen spets eht ekat ecffio noitamrofni laicnanfi taht erusne snoitcejorp raey-eerht sti ni dedulcni nettirw gnipoleved sa hcus ,etarucca si nehw wollof ot ffats rof serudecorp .snoitcejorp eht gniraperp 82 hguorht 62 ylluF fo gnitset ruo gnitcudnoc nI 9002 ni senilediug gnitroper-emit sti detadpu ecffio llips ehT 0102 yraunaJ degrahc si dnuf llips eht taht erusne oT 21 detnemelpmi emaG dna hsiF rof steehs emit .seeyolpme lla ot senilediug eht dedivorp sah ti taht detats dna ,seitivitca noitneverp llips lio rof ylno yfitnedi ton did ew ,seeyolpme emaG dna hsiF dna ecffio llips eht eht ot segrahc etairporppani yna :gniwollof eht od dluohs .dnuf llips seeyolpme ot senilediug edivorP • egrahc ot nehw gninrecnoc dna dnuf eht ot seitivitca rof sdnuf rehto egrahc ot nehw .seitivitca lareneg California State Auditor Report 2011-123 39 August 2012 TXET DETALER AINROFILAC EHT ETAD TNERRUC NI ETATS( ROTIDUA ETATS TROPER FO SUTATS EHT DETROPER )ROTIDUA FI # EGAP( NOITADNEMMOCER S’ROTIDUA ETATS EHT ,ELBACILPPA FI SAW NOITADNEMMOCER )ELBACILPPA 2102 ENUJ FO SA )S(GNIDNIF TNERRUC NOITANIMRETED STI ROF ELANOITAR S’ROTIDUA ETATS EHT FO YRAMMUS DETNEMELPMI YLLUF NOITADNEMMOCER 82 hguorht 62 ylluF wen a detnemelpmi emaG dna hsiF sa seiduts emit lareves gnitcudnoc ot noitidda nI 2102 yraunaJ llips taht erusne ot spets ekaT • 31 detnemelpmi llips sti rof metsys gnitroper-emit wal s’emaG dna hsiF ,troper roirp ruo ni dednemmocer degrahc si emit ’snedraw noitneverp serudecorp ehT .snedraw noitneverp gnidnuf depoleved )tnemecrofne( noisivid tnemecrofne gnimrofrep sa hcus ,yletairporppa emag eriuqer metsys wen eht rof snedraw llipsnon dna llips htob pleh ot sloot tnemeganam a sa esu ot snedraw fo yduts emit a erutan eht yficeps ot snedraw sloot esehT .dnuf etairporppa eht ot emit gnikrow rieht egrahc ’snedraw eht gnitacolla rof sisab yfitnedi ot dna seitivitca rieht fo eht fo troppus ni ton stroffe krow edoc ot snedraw lla wolla rehto dna dnuf eht neewteb emit degrahc eb dluohs taht dnuf eht dna srosivrepuS .secruos gnidnuf cfiiceps rehto ot dnuf llips .secruos gnidnuf emaG dna hsiF sa ,rehtruF .seitivitca esoht rof eht yfirev ot ylhtnom sedoc eseht fo esu eht weiver sreganam eb dluohs yduts emit a hcuS ruo ,stluseR tiduA eht ni denoitnem deweiver neht era sedoc esehT .segrahc eht fo ssenetairporppa taht erusne ot yllacidoirep detadpu gnitroper-emit wen eht fo weiver era segrahc gnidnuf taht yfirev ot tnemeganam yb yllacidoirep .etarucca dna dilav sniamer ti stroper ytivitca yliad 01 dna metsys gnidnuf cfiiceps ot segrahc eht taht dna stimil dettolla nihtiw noitneverp llips eht taht dnuof .etairporppa era secruos sliated tneicffius dedrocer snedraw saw ytivitca hcae taht erusne ot .dnuf reporp eht ot degrahc toN ylluF emit fo gnitset ruo gnitcudnoc nI eht fo emit eht taht os stnemtsujda edam ecffio llips ehT 0102 yraunaJ egrahc tnerruc eht eunitnocsiD • 41 elbacilppa detnemelpmi ,seeyolpme emaG dna hsiF rof steehs .degrahc ylreporp si troper ruo ni denoitnem yenrotta ew yenrotta eht rof dnuf eht ot etairporppani yna yfitnedi ton did ew mrofrep ton seod ohw defiitnedi .dnuf llips eht ot segrahc .seitivitca noitneverp llips . . . egap txen no deunitnoc 40 California State Auditor Report 2011-123 August 2012 TXET DETALER AINROFILAC EHT ETAD TNERRUC NI ETATS( ROTIDUA ETATS TROPER FO SUTATS EHT DETROPER )ROTIDUA FI # EGAP( NOITADNEMMOCER S’ROTIDUA ETATS EHT ,ELBACILPPA FI SAW NOITADNEMMOCER )ELBACILPPA 2102 ENUJ FO SA )S(GNIDNIF TNERRUC NOITANIMRETED STI ROF ELANOITAR S’ROTIDUA ETATS EHT FO YRAMMUS DETNEMELPMI YLLUF NOITADNEMMOCER 62 hguorht 32 yllaitraP rehto ,troper tidua roirp ruo ecniS dna noitazinagro latnemtraped evorpmi ot troffe na nI 0102 yraunaJ sah ecffio llips eht taht erusne oT 51 detnemelpmi lanoitazinagro gnidrager seussi tsehgih eht ta smargorp lacitirc-noissim reviled dna snoitarepo dna ,ti ot elbaliava secruoser yrassecen ,ecnatsni roF .decafrus evah noitcirf dna erutcurts lanoitazinagro sti denfier emaG dna hsiF ,level esu eht gnidrager noitcirf ecuder ot ,stluseR tiduA eht ni ebircsed ew sa dilos a edivorp oT .seitilibisnopser dna selor denfied ylraelc hsiF rehto dna ecffio llips eht ,ffats fo niatrec dna ecffio llips eht hguohtla ,spihsnoitaler gnitroper tcerid yb detceffa esoht rof krowemarf rieht ssucsid dluohs stinu emaG dna evah emaG dna hsiF nihtiw snoisivid :spets gniwollof eht koot ecffio llips eht enfied retteb dna seitirohtua evitcepser ,seussi eseht sserdda ot dekrow tnemeganam eht ni hcae fo elor eht tfieneb dluoc devlovni seitrap eht eht htiw etaroballoc ot deerga sah tnemecrofne emaG dna hsiF .a tnetsisnoc ffats noitneverp llips fo dna seicilop nettirw gnipoleved yb noitacfiiton edivorp ot dna seicnacav gnillfi nehw ecffio llips yrotutats s’rotartsinimda eht htiw ralimis taht erusne ot serudecorp .derrucni era 000,5$ revo fo sesahcrup nehw fo sdeen rehto eht dna seitilibisnopser .erutuf eht ni rucco ton od seussi dluoc snoissucsid hcuS .emaG dna hsiF sti yb decneirepxe neeb evah segnahc lanoitarepo laminiM .b gnirih ni elor s’ecffio llips eht yfiralc lanimirc dna livic lla taht noitpecxe eht htiw ,hcnarb lagel cfiiceps tuo lleps ,seeyolpme gnirfi dna eb lliw lareneG yenrottA eht fo ecffiO eht ot derrefer sesac ffats woh yfitnedi dna ,sdeen gniniart ytuped lesnuoC lareneG fo ecffiO s’emaG dna hsiF ot detcerid .dednuf eb lliw .weiver laitini rof rotcerid ta deniamer evah snoitcnuf )TI( ygolonhcet noitamrofni llA .c s’emaG dna hsiF htiw noitanidrooc ylkeeW .ecffio llips eht ssucsid ot tuo deirrac si TI fo rotcerid ytuped tnatsissa .margorp eht fo sdeen erutuf dna stcejorp gniogno ,stroffe hcaertuo dna ,noitacude ,noitacinummoc evorpmi oT .d sriaffa lanretxe dna noitamrofni cilbup s’ecffio llips eht llips eht ot kcab detacoler yllacisyhp neeb evah snoitisop a derih ti taht detats emaG dna hsiF .sretrauqdaeh s’ecffio dnuorgkcab snoitacinummoc evisnetxe na htiw reganam ytuped eht htiw etanidrooc dna ffats tcerid dna eganam ot dna snoitacinummoC fo ecffiO s’emaG dna hsiF fo rotcerid .lennosrep ycnega ,lagel eht rof snoitcnuf gnisahcrup dna gnirih lla ,rehtruF .ecffio llips eht ta niamer snoisivid TI dna ,noitacinummoc llips a gnirud elbaliava era secruoser etauqeda taht erusne oT ot deniart-ssorc neeb evah ediwtnemtraped lennosrep ,tneve .seitivitca noitacinummoc dna esnopser mrofrep tcA ytilibatnuoccA tiduA subinmO ehT :raeY enO retfA detnemelpmI ylluF toN snoitadnemmoceR deltit 2102 yraunaJ dna ,1102 yraunaJ ,0102 yraunaJ ni desaeler stroper s’rotiduA etatS ainrofilaC ehT :secruoS yciloP/gnidnatS etaneS dna ylbmessA ot stroper laiceps 0102 yraurbeF dna 9002 yraurbeF ruo ni detneserp sa sesnopser tidua raey-eno dna ,htnom-xis ,yad-06 s’ecffio llips eht fo stnemssessa ruo dna ,6002 fo .snoitadnemmoceR s’rotiduA etatS fo noitatnemelpmI deltit seettimmoC California State Auditor Report 2011-123 41 August 2012 (Agency comments provided as text only.) July 27, 2012 California Natural Resources Agency 1416 Ninth Street, Suite 1311 Sacramento, California 95814 Ms. Elaine M. Howle, State Auditor Bureau of State Audits 555 Capitol Mall, Suite 300 Sacramento, California 95814 Dear Ms. Howle: Thank you for providing the Agency with an opportunity to review the Bureau of State Audits’ (BSA) draft report entitled Oil Spill Prevention and Administration Fund: The Department of Fish and Game and the Office of Spill Prevention and Response Need to Improve Their Administration of the Spill Fund. The audit focused on The Department of Fish and Game (DFG) and the State Lands Commission tracking, management and expenditure of Oil Spill Prevention and Administration Fund. My staff and I have reviewed the report with DFG and the State Lands Commission and discussed the issues identified. I believe that this audit clearly demonstrates that DFG has made significant improvements in its administering of the fund. While the report notes improvements that can be made, DFG has taken actions to remediate these short comings. Enclosed are DFGs and the State Lands Commission responses to your draft report. In closing, I would like to acknowledge the efforts of the BSA audit team; they conducted the audit in a professional and courteous manner that was appreciated by my staff. Sincerely, (Signed by: John Laird) John Laird Secretary for Natural Resources 42 California State Auditor Report 2011-123 August 2012 (Agency comments provided as text only.) July 30, 2012 California Department of Fish and Game 1416 9th Street, Rm 1205 Sacramento, CA 95814 Elaine M. Howle, State Auditor California State Auditor Bureau of State Audit 555 Capitol Mall, Suite 300 Sacramento, CA 95814 Subject: Bureau of State Audits Report #2011-123 Dear Ms. Howle: Thank you for the opportunity to respond to the audit on the Oil Spill Prevention and Administration Fund (OSPAF). The Department of Fish and Game (Fish and Game) appreciates the efforts of your audit team to improve the processes and procedures for the OSPAF. I take seriously the view that public service is an honor requiring us to operate to the highest standards. I also appreciate the role your Bureau plays in helping agencies achieve such standards. Fish and Game has already implemented many of the improvements that the audit recommends. Fish and Game agrees with and has incorporated the Bureau of State Audits recommendations as it administers the OSPAF. Below are the recommendations and Fish and Game’s responses. Recommendation: To prepare and report accurate fund condition statements for inclusion in the governor’s budget each year, Fish and Game should do the following: • Ensure that staff in its budget branch follows written procedures to develop fund condition statements. • Train both new and existing staff on how to prepare fund condition statements for inclusion in the governor’s budget. Response: Agree. Fish and Game agrees and will ensure that staff in our budget branch follow written procedures to develop fund condition statements. Fish and Game has also trained both new and existing staff on how to prepare fund condition statements for inclusion in the governor’s budget. Recommendation: To ensure that three-year projections of the spill fund’s revenues, expenditures, and fund balances, which are used to determine fee rates, are based on accurate financial information, the spill office should, at a minimum, do the following: • Develop written procedures directing staff on how to prepare the three-year projection, which should include steps to verify the accuracy of the financial information included in the projection. In developing these procedures, the spill office should consult with Fish and Game’s accounting and budget branch to confirm they are thorough and complete. California State Auditor Report 2011-123 43 August 2012 • Consider the reduction in the spill fund’s costs, as a result of the recovery of indirect administrative costs, when projecting its fund balance moving forward. Response: Agree. Fish and Game agrees and will ensure that staff in our OSPR Office will consult with Fish and Game’s accounting and budget branch to confirm they are thorough and complete and will consider the reduction in the spill fund’s costs, as a result of the recovery of indirect administrative costs, when projecting its fund balance moving forward. Recommendation: To prevent under- or over-recovery of federal funds, Fish and Game should regularly reassess whether using budgeted expenditures or actual expenditures will produce the most accurate result. Response: Agree. Fish and Game agrees and will regularly reassess whether using budgeted expenditures or actual expenditures will produce the most accurate result. Recommendation: To ensure that the spill office continues to work consistently with other entities to resolve issues regarding the use of staff and equipment and that it has the necessary resources to carry out its operations, the spill office should develop written policies and procedures with the following departments and/or divisions: • Fish and Game’s enforcement division regarding staffing decisions. • Fish and Game’s IT unit regarding the coordination of response to system outages. • State lands regarding its disclosure of budget change proposals affecting the spill fund. Response: Agree. Fish and Game agrees and will ensure that the spill office will continue to work consistently with other entities to resolve issues regarding the use of staff and equipment, including written policies and procedures, and that it has the necessary resources to carry out its operations. Again, thank you for the opportunity to provide comments to the audit. The activities described in the audit pre-date my service as director. However, the responsibility to implement solutions is mine. Therefore, I intend to personally monitor our performance on your recommendations. Please contact me or Kevin Hunting, Chief Deputy Director, at (916) 653-7667, if you have any questions. Sincerely, (Signed by: Charlton H. Bonham) Charlton H. Bonham Director 44 California State Auditor Report 2011-123 August 2012 (Agency comments provided as text only.) July 25, 2012 California State Lands Commission 100 Howe Avenue, Suite 100-South Sacramento, CA 95825-8202 Elaine M. Howle, CPA State Auditor Bureau of State Audits 555 Capitol Mall, Suite 300 Sacramento, CA 95814 Dear Ms. Howle: Initially, I want to acknowledge that the audit conducted by the Bureau of State Audits (Bureau) provided the staff of the California State Lands Commission (Commission) a valuable review and analyses of expenditures from the Oil Spill Prevention and Administration Fund (OSPAF). We have reviewed the draft report and agree with both of the Bureau’s recommendations and are already working to implement them. Commission staff concurs with the recommendation to share budget change proposal information regarding the OSPAF with the Administrator. We have shared such information with the Administrator over the past two budget cycles and will work with the Administrator’s staff to reach a more formal, mutually agreed upon process for the future. Commission staff also concurs with the need for additional timesheet training and supervisory review procedures. We will be taking measures to improve the supervisorial review process and provide new training for all staff in timesheet completion. Work is already underway to review current program account allocations and clarify the coding of administrative costs. Again, we appreciate the efforts of the Bureau in providing constructive criticism and analyses of past and present practices, as well as its recommendations, which we look forward to implementing. The Commission and its staff are committed to the prevention of oil spills from occurring in California’s coastal and other navigable waterways in the most efficient and cost effective manner. Sincerely, (Signed by: Curtis L. Fossum) Curtis L. Fossum Executive Officer California State Auditor Report 2011-123 45 August 2012 cc: Members of the Legislature Office of the Lieutenant Governor Little Hoover Commission Department of Finance Attorney General State Controller State Treasurer Legislative Analyst Senate Office of Research California Research Bureau Capitol Press