CSA
Summary
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Investigations
of Improper
Activities by State
Employees:
August 2002 Through January 2003
April 2003
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April 17, 2003 Investigative Report I2003-1
The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
State Capitol
Sacramento, California 95814
Dear Governor and Legislative Leaders:
Pursuant to the California Whistleblower Protection Act, the Bureau of State Audits presents its
investigative report summarizing investigations of improper governmental activity completed from
August 2002 through January 2003.
Respectfully submitted,
ELAINE M. HOWLE
State Auditor
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Investigations
of Improper
Activities by State
Employees:
August 2002 Through January 2003
CONTENTS
Summary 1
Chapter 1
Health and Human Services Agency Data
Center: Improper Contracting Practices and
Conflicts of Interest 7
Chapter 2
Department of Industrial Relations: Improper Travel,
Lodging, and Relocation Expenses 13
Chapter 3
Department of Fish and Game: Mismanagement,
Contracting Improprieties, Conflicts of Interest, and
Discreditable Conduct 21
Chapter 4
Department of Mental Health, Atascadero State
Hospital: Improper Contracting Practices, Conflicts of
Interest, Incompatible Activities, and Violations of
Nepotism Policy 27
Chapter 5
Department of Developmental Services, Sonoma
Developmental Center: Failure to Ensure That a
Peace Officer Met Training Requirements 35
Chapter 6
Department of Developmental Services, Porterville
Developmental Center: Illegal Hiring 39
Chapter 7
San Jose State University: Misuse of
State Equipment 43
Chapter 8
Department of Industrial Relations: Breach of
Security During an Examination 45
Chapter 9
Department of Forestry and Fire Protection: Misuse of
State Resources and Equipment 47
Chapter 10
California State University, Northridge: Violations of
Telecommuting and Nepotism Policies 49
Chapter 11
Department of Mental Health, Vacaville Psychiatric
Program: Improper Use of State Telephone 53
Chapter 12
Department of Forestry and Fire Protection: Misuse of
State Property and Resources 55
Appendix A
Activity Report 57
Appendix B
State Laws, Regulations, and Policies 61
Appendix C
Incidents tUncovered by Other Agencies 69
Index 73
California State Auditor Investigative Report I2003-1 11
SUMMARY
RESULTS IN BRIEF
The Bureau of State Audits (bureau), in accordance
with the California Whistleblower Protection Act (act)
contained in the California Government Code, beginning
with Section 8547, receives and investigates complaints of
Investigative Highlights . . . improper governmental activities. The act defines “improper
governmental activity” as any action by a state agency or
State employees engaged in
improper activities, including employee during the performance of official duties that violates
the following: any state or federal law or regulation; that is economically
wasteful; or that involves gross misconduct, incompetence, or
þ Influenced a $345,000
state contract that was inefficiency. To enable state employees and the public to report
awarded to a prospective these activities, the bureau maintains the toll-free Whistleblower
employer. Hotline (hotline): (800) 952-5665 or (866) 293-8729 (TDD).
þ Improperly received
$17,529 in travel If the bureau finds reasonable evidence of improper governmental
reimbursements. activity, it confidentially reports the details to the head of the
employing agency or the appropriate appointing authority. The
þ Treated employees
act requires the employer or appointing authority to notify the
inappropriately and
improperly claimed bureau of any corrective action taken, including disciplinary
479 hours of leave. action, no later than 30 days after transmitting the confidential
investigative report and monthly thereafter until the corrective
þ Awarded contracts
totaling more than action concludes.
$75,000 to businesses
owned by relatives. This report details the results of the 12 investigations completed
þ Used state computers to by the bureau and other state agencies on our behalf between
access adult chat rooms August 1, 2002, and January 31, 2003, that substantiated
during work hours and complaints. Following are examples of the substantiated improper
provided false information
activities and actions the agencies have taken to date.
on an employment
application.
þ Divulged examination
questions to another HEALTH AND HUMAN SERVICES AGENCY DATA CENTER
testing candidate.
A manager influenced a $345,600 contract between the Health
þ Used state resources to and Human Services Agency Data Center (data center) and a private
make personal long-
company with whom he was negotiating future employment
distance calls, send
personal e-mails, and ship while he was still employed at the data center. Further, as the
packages to a friend. individual performing the services under this contract, the
manager derived a material benefit from the contract. The cost to
þ Used a state-owned
the State for the manager’s services as a consultant was more than
cellular phone to make
$327 in personal calls. three times the previous cost of his state salary and benefits, despite
the fact that his job duties did not significantly change.
continued . . .
California State Auditor Investigative Report I2003-1 11
DEPARTMENT OF INDUSTRIAL RELATIONS
An official improperly received reimbursement for relocation,
State departments engaged commuting expenses, lodging, and meals. The Department of
in the following improper Industrial Relations determined that the official improperly
activities:
received reimbursement of $5,726 for lodging and relocation
þ Allowed a supervisor to expenses over a 20-month period, but we found that an
exercise the powers of a
additional $11,803 of the official’s travel expenses were
peace officer when he did
improper, bringing the total improper travel costs to $17,529.
not meet the necessary
requirements to do so.
þ Illegally appointed two
individuals to psychologist DEPARTMENT OF FISH AND GAME
positions.
A manager engaged in contracting improprieties involving a
þ Failed to monitor
business owner who also worked part-time for the Department
telecommuting employees.
of Fish and Game (department). The employee’s companies
billed $62,000 in invoices, which regional staff split into smaller
purchase orders in order to circumvent bidding requirements.
The manager also sought payment for another $60,000 that one
of the companies had invoiced, despite not knowing whether a
contract was in place or whether the company had provided the
services listed on the invoice.
The company’s owner violated conflict-of-interest and
incompatible-activity laws when he submitted an invoice for
payment during the same time he worked as a department
employee. The manager also subjected subordinates to
inappropriate treatment, conduct that the department
concluded was inexcusable and a discredit to the State. The
manager further claimed and received 479 hours of annual and
sick leave to which he was not entitled.
DEPARTMENT OF MENTAL HEALTH, ATASCADERO
STATE HOSPITAL
The Atascadero State Hospital (hospital) awarded 21 projects
totaling more than $75,000 to three businesses owned by
relatives of an employee, and the hospital employees responsible
for sending the jobs out to bid failed to follow the hospital’s
bidding procedures. One employee, who initiated work requests
for 14 of the 21 projects in question, received more than $5,600
in payments from one of these companies, violating conflict-
of-interest laws. We also determined that two of the employee’s
relatives violated state contracting law because they submitted
bids and were awarded projects during the same period the
22 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 33
hospital employed them as seasonal employees. Furthermore,
the hospital violated department nepotism policies by allowing
an employee to supervise family members.
DEPARTMENT OF DEVELOPMENTAL SERVICES,
SONOMA DEVELOPMENTAL CENTER
The Sonoma Developmental Center (center), under the
Department of Developmental Services, allowed a supervisor
to exercise a peace officer’s powers even though he did
not meet the requirements to do so. Specifically, when the
center hired the supervisor as a peace officer in 1995, it
failed to ensure that he met the training requirements for
the position. When the center learned of the problem in
January 2000, it informed the supervisor that he was not to
use his peace-officer powers until he completed the required
training, which he did in February 2000.
DEPARTMENT OF DEVELOPMENTAL SERVICES,
PORTERVILLE
The Porterville Developmental Center (center), under the
Department of Developmental Services (department), illegally
appointed two individuals to psychologist positions. The
department investigated and found that the two employees
did not have the required qualifications to be appointed as
psychologists. In addition, the investigation showed that the
center failed to follow its own hiring procedures. The employees
subsequently transferred to psychology-associate positions.
SAN JOSE STATE UNIVERSITY
An employee of San Jose State University (university), used state
computers to access adult chat rooms during work hours. The
employee also provided false information on her employment
application to the university. The employee’s supervisor
instructed her to stop spending work time in computer chat
rooms. The employee continued to chat online. The university
investigated the allegations against the employee. Based on
the evidence that staff gathered confirming the allegations, the
university decided to terminate the employee. However, the
employee resigned when presented with the evidence.
22 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 33
DEPARTMENT OF INDUSTRIAL RELATIONS
An employee participating in a promotional examination
compromised the security of the exam. Specifically, the
employee sent an e-mail message divulging the examination
questions to another testing candidate. A form the employee
signed prior to her exam expressly prohibited discussing and
giving information about the examining panel’s questions
to another competitor. In addition, because the employee’s
responsibilities within the Department of Industrial Relations
included planning, developing, and administering civil
service examinations, as well as ensuring the security and
confidentiality of exam questions, the employee was well aware
of the seriousness of her breach of security. These factors resulted
in the termination of this employee.
DEPARTMENT OF FORESTRY AND FIRE PROTECTION
An employee of the Department of Forestry and Fire Protection
(CDF) used state equipment to make long-distance calls and
to send personal e-mails during work hours. In addition, the
employee used a state-paid shipping account to send packages
to a friend. We do not know how much his improper use of
state time cost the State. However, CDF determined that the
employee’s long-distance phone calls cost $237 and his shipping
charges $219. CDF suspended the employee for 31 days without
pay and required him to pay restitution of $456.
CALIFORNIA STATE UNIVERSITY, NORTHRIDGE
California State University, Northridge, failed to monitor its
telecommuting employees adequately. Although university
policy requires supervisors to meet with their telecommuting
employees to provide job assignments and review completed
work, one employee failed to report to campus for more than
one year.
DEPARTMENT OF MENTAL HEALTH
An administrator improperly used his state-owned cellular
phone to make $327 in personal phone calls over a 17-month
period. The Department of Mental Health required the
44 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 55
administrator to repay the State for the cost of the personal calls
and instructed him not to make personal calls on his state-issued
cellular phone.
DEPARTMENT OF FORESTRY AND FIRE PROTECTION
An employee resided on state property in her motor home and
used state utilities without paying a rental fee, violating state
and Department of Forestry and Fire Protection policy. n
44 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 55
66 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 77
CHAPTER 1
Health and Human Services Agency
Data Center: Improper Contracting
Practices and Conflicts of Interest
ALLEGATION I2002-652
A manager of the Health and Human Services Agency
Data Center (data center) violated conflict-of-interest
laws.
RESULTS AND METHOD OF INVESTIGATION
We investigated and substantiated the allegations. Our
investigation showed that work the manager performed
A manager negotiated
influenced the formation of a $345,600 contract between the
employment with a
data center and company 1, a private corporation that the
company while he was
manager began to work for as an independent contractor the
in a position to influence
next business day after he ended his employment with the data
a $345,000 contract
center. Our investigation further revealed that the manager
between the data center
was negotiating with company 1 for employment while he was
and that company.
in a position to influence the contract. As the individual who
then performed the services under this contract, the manager
also derived a material benefit from the contract by receiving
compensation for those services.
Because the manager performed work that was relied on to
establish a contract between the data center and company 1,
a prospective employer with whom he was negotiating while
employed by the data center, we believe the manager violated
the Political Reform Act (act).1 In addition, because the manager
derived a material financial benefit from a contract that he
influenced, we believe he violated other conflict-of-interest laws.
To investigate the allegation, we reviewed various internal
documents from the data center and its contract with
company 1. We also reviewed applicable conflict-of-interest
laws and regulations. Finally, we interviewed several data center
employees and a representative of company 1. We then gave
1For a detailed description of the laws pertaining to the improper activities discussed in
this chapter, see Appendix B.
66 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 77
Health and Human Services Agency Data Center
each person a written summary of the interview and asked
him or her to review the statement and to make any necessary
changes. We also asked each of these individuals to sign the
statement under penalty of perjury to ensure accuracy. One
data center official, official A, met with us and responded to
our inquiries, but refused to sign his statement. Although we
report our understanding of what he told us, we have less
confidence in the accuracy of our understanding because of his
unwillingness both to confirm the statement and to certify it
under penalty of perjury. In fact, after reviewing it, official A
told us he found that the statement did not accurately reflect
what he had said in response to our questions and that rather
than taking the time to indicate corrections, he decided simply
to return the statement and request that we not contact him
further regarding this matter.
Company 1’s representative did not return a signed copy of his
statement. According to the representative, he was unable to
make changes to the statement before the release of this report
due to time constraints. However, he told us that he would
submit a signed statement as his business permits. Therefore, we
report our understanding of his statements during the interview,
which two of our investigators witnessed. We also contacted the
data center manager for an interview, but he declined. Therefore,
we report our understanding of the manager’s activities based on
the documentation we reviewed and our other interviews, but
we are unable to provide the manager’s perspective.
BACKGROUND
The data center, formerly known as the Health and Welfare Data
Center, provides large-scale computer processing and telecom-
The data center munication services to the departments within the California
provides large-scale Health and Human Services Agency. The mission of the data
computer processing center is to provide its users with information technology
and telecommunication leadership, services, and technical infrastructure that allow them
services to departments to deliver quality program services.
within the California
Health and Human The manager began working for the data center in 1985 and
Services Agency. held the position of software asset manager from August 1999
until he left state service in December 2001. His duties at the
data center consisted of negotiating and procuring software and
hardware products; renegotiating prices, terms, and conditions
of existing hardware and software contracts as necessary
to reduce costs; preparing the annual budget for software
88 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 99
Health and Human Services Agency Data Center
acquisitions and monitoring actual expenditures against
that budget; and managing the software portfolio to ensure
that the data center and vendors were in compliance with
contract terms.
THE MANAGER’S ACTIVITIES CREATED A CONFLICT OF
INTEREST
While employed at the data center, the manager was involved
in work directly related to a contract from which he personally
and materially benefited, thus violating a state law that prohibits
employees from having a financial interest in any contract they
make in their official capacity. For an employee to participate
in the process of developing, negotiating, or executing such a
contract is a violation of the law.
Additionally, because the manager influenced a decision
directly relating to company 1, the company to which
the data center ultimately awarded the contract and with
which he was negotiating future employment, we believe
the manager violated the act. The act prohibits state
officials from making, participating in making, or using
their positions to influence governmental decisions directly
relating to a prospective employer with whom they are
negotiating or with whom they have any arrangement
concerning prospective employment. The formation of a
contract is a governmental decision that this prohibition
covers. This section of the act applies to state administrative
officials, including employees such as the manager. An
employee who makes decisions concerning contracts or
who participates in research or analysis that is used in the
establishment of a contract is considered to be participating
in a governmental decision and is subject to this prohibition.
Under this prohibition, an employee may be considered to
be “negotiating” with a prospective employer after having
an interview or discussing an offer of employment with the
employer or the employer’s agent.
The Manager Was Directly Involved in Preparing the
Contract With Company 1
While he was employed at the data center, the manager drafted
the statement of work that is incorporated as part of the contract
between the data center and company 1, a private consulting
88 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 99
Health and Human Services Agency Data Center
firm that the manager began to work for one business day after
The manager drafted ending his state employment. A statement of work is a written
contract language that description of the tasks that the contractor will perform to
was incorporated into satisfy particular needs of a state agency; the parties developing
the contract between a statement of work can be the buyer (in this case, the data
the data center and a center) or the buyer and the contractor (company 1). It describes
company that he began the State’s and contractor’s responsibilities, contract duration,
working for one business tasks for the contractor to perform, payment methods, and
day after ending his other provisions.
employment with the State.
Official A stated that the manager disclosed his intent to leave
the data center, and because official A was not aware of anyone
else in state service who could perform the job as well as the
manager, he decided that, as long as it was legal, the data center
would contract for the manager’s services through whichever
company he chose to affiliate with.2 Official B told us that
because the data center would essentially be contracting out for
services that the manager had previously provided, three data
center officials (officials A, B, and C) made the decision that the
manager would draft the statement of work used for the contract
with company 1 to ensure that the services the data center
contracted for accurately reflected the manager’s duties as a data
center employee.
The Manager Was Also Indirectly Involved in the Contract
with Company 1
During his employment at the data center, the manager was also
indirectly involved in creating the contract between the data
center and company 1 because he prepared documents that data
center staff ultimately relied on to establish the contract.
We learned that the manager drafted a budget-change proposal
requesting additional funds to allow the data center to hire a
consultant for software asset management.3 Although the data
center never officially submitted this budget-change proposal
to the Department of Finance, another data center employee
relied on it to prepare a feasibility-study report that the data
center used for a proposed contract with company 2, which it
2 As we mentioned, official A found that our summary of his statements did not accurately
reflect his responses. Nevertheless, because he refused to clarify our summary, we
report our understanding of his statements during our interview, which two of our
investigators witnessed.
3 A budget-change proposal is a document that state agencies submit to the Department
of Finance when they seek either to change the level of service or funding sources
for activities the Legislature has authorized or to propose new program activities not
currently authorized.
1100 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 1111
Health and Human Services Agency Data Center
originally considered as a possible provider of software asset
management.4 The supporting materials for this proposed
contract included a statement of work that the manager
developed, specifically identifying the manager as the individual
who would perform the services under this proposed contract.
Although the proposed contract was never executed, the data
center used language from this same feasibility-study report for
the contract it established with company 1, indirectly making
the manager’s work product an integral part of the contracting
process with company 1.
We also substantiated that while he was employed at the
data center, the manager negotiated for employment with
company 1. According to a representative of company 1, the
manager approached him in November 2001 and asked what
he would have to do to work for company 1. The representative
told us that the manager told him he had an opportunity to
provide consulting services to the data center. The representative
further stated that he and the manager had several
conversations about the conditions the manager would have
to meet before company 1 would hire him. The representative
said that official B later contacted him about the type of services
company 1 could provide. The representative’s understanding
was that the manager was planning to leave state service and
that the data center wanted to retain the manager’s services.
According to the representative, official B provided him with
a draft copy of the statement of work for a contract to provide
software asset management. The representative was not aware
that the manager had developed the statement of work used
for the contract. The data center and company 1 collaborated
to finalize the statement of work, and on December 10, 2001,
company 1 submitted the final statement of work to the data
center, identifying the manager as the individual who would
provide the agreed-upon services.
The manager’s services The manager began negotiating with company 1 as early as
under the contract cost November 2001 but did not terminate his employment with
the State more than the State until December 14, 2001. The next business day,
three times the previous December 17, 2001, the data center entered into the contract
cost of his state salary with company 1, and the former data center manager began
and benefits, despite the working at the data center for company 1 on that same day. The
fact that his duties were cost to the State for the manager’s services under this contract
essentially the same.
4 A feasibility-study report documents the results of a feasibility study the agency
conducts to address a business problem or opportunity; it identifies measurable
business objectives and functional business requirements. The agency uses it to present
the business case for investing in an information technology project.
1100 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 1111
Health and Human Services Agency Data Center
was more than three times the previous cost of his state salary
and benefits, despite the fact that the manager’s duties were
essentially the same. Although the original contract termination
date was December 31, 2002, the data center canceled it on
October 17, 2002, for “internal business considerations.” We
determined that company 1 billed the data center a total of
$237,960 for the manager’s services over the 10-month period
the contract was in effect. By comparison, the data center paid
only $76,447 for the manager’s services for the 10-month period
just prior to his departure from state service.
POTENTIAL PENALTIES AFFECT BOTH THE MANAGER
AND THE CONTRACT
Because the manager performed work that was related both
directly and indirectly to a contract between his state employer
Because the manager and company 1, with whom he was negotiating for private
violated state contracting employment during his state employment, and because he
laws, the State may be worked under a contract from which he derived a material
entitled to recover all benefit, the manager violated state laws; consequently, he could
payments made under be subject to a fine of up to $1,000, be forever disqualified from
the contract and the holding any office in the State, and may be subject to other
manager faces potential penalties as well. Additionally, under these circumstances the
penalties, including fines State may be entitled to recover any payments made to the
and disqualification from contracting party.
holding any office in state
service.
AGENCY RESPONSE
The data center reports that immediately upon information
from this report being available for release it will refer relevant
portions of this report to appropriate authorities, including the
Fair Political Practices Commission and the attorney general
for evaluation of the alleged violations of the act. At the same
time, the data center will request a review by the Department
of Personnel Administration to determine whether any adverse
action against employees who may have aided or assisted in
the violation of any state laws is warranted. The data center
also has provided mandatory in-service training to educate
key employees involved in the procurement process of their
responsibilities under the act and other state laws. n
1122 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 1133
CHAPTER 2
Department of Industrial
Relations: Improper Travel, Lodging,
and Relocation Expenses
ALLEGATION I2002-605
An official with the Department of Industrial Relations
(department) improperly claimed reimbursements for
relocation and commute expenses for travel between his
residence near San Diego and his headquarters in San Francisco.
The official also improperly claimed payment for lodging and
meals incurred within a close proximity of his headquarters.
RESULTS AND METHOD OF INVESTIGATION
At the time we received the allegation, the department was
already investigating these issues, and we asked that it report
its findings to our office. The department concluded that
the official improperly claimed $5,726 in travel costs related
to relocation and lodging expenses. After receiving the
department’s report, we performed some additional analysis and
follow-up work and determined that the official had claimed an
additional $11,803 in improper travel expenses.
To investigate the allegations, the department reviewed the
official’s travel expenses from the time of his employment with
the department in April 2000 through November 2001. It also
reviewed pertinent state regulations and policies. We reviewed
the department’s report and its supporting documents; we also
interviewed department employees, including the investigator
and the official.
BACKGROUND
The objective of the department is to protect California’s
workforce, improve working conditions, and advance
opportunities for profitable employment. It oversees the State’s
workers’ compensation system; promulgates and enforces laws
relating to wages, hours, and conditions of employment; and
assists in negotiations when a work stoppage is threatened.
1122 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 1133
Department of Industrial Relations
The department also enforces labor and workplace safety and
health laws for more than 14 million workers and 1.3 million
employers throughout California.
Headquartered in San Francisco, the official travels extensively,
giving speeches, attending meetings, and overseeing 19 district
offices located throughout the State. The travel expense claims
(travel claims) he submits for reimbursement note his residence
and headquarters location. Although his headquarters location
is San Francisco, his travel claims indicate that most of his travel
begins and ends in San Diego, which is located near the home
address he lists on his travel claims.
THE OFFICIAL CLAIMED IMPROPER TRAVEL COSTS
The department concluded that the official improperly claimed
reimbursement of $5,726 for lodging and relocation expenses
between April 2000 and November 2001. We found that
an additional $11,803 of the official’s travel expenses were
improper, bringing the total improper travel costs to $17,529.
Table 1 summarizes the improper travel expenses the official
claimed.
TABLE 1
Improper Travel Expenses the Official Claimed
Improper Claims the Department Identified
Relocation expenses $ 4,939
Lodging within 50 miles of San Francisco headquarters 787
Total improper expenses identified by the department 5,726
Improper Claims the Bureau of State Audits Identified
Relocation expenses 43
Meals and incidentals incurred within 50 miles of San Francisco
headquarters 1,082
Weekend rental car with no explanation given 635
Lodging within 50 miles of San Diego residence 2,334
Travel costs for trips between San Diego residence and San Francisco
headquarters 3,941
Travel costs for trips between San Diego residence and Sacramento 3,768
Total improper expenses identified by the Bureau of State Audits 11,803
Total improper expenses identified by the Bureau of State Audits
and the department $17,529
1144 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 1155
Department of Industrial Relations
THE OFFICIAL CLAIMED RELOCATION EXPENSES BUT
DID NOT RELOCATE
The State reimbursed the official for relocation expenses when
he neither relocated nor obtained the necessary approval for
the reimbursement. State regulations allow individuals who
must change their place of residence (relocate) in order to
accept employment with the State to receive reimbursement
for a maximum of 30 days’ temporary lodging and meals at the
headquarters location.5 Employees receiving this benefit must
obtain approval in advance from the director of the Department
of Personnel Administration (DPA). Regulations also allow a
onetime mileage reimbursement for the distance between an
employee’s old and new residences, at the rate of 9 cents per
mile. To be eligible for relocation expenses, an employee must
change his or her place of residence for the purpose of accepting
employment with the State.
The department found that $4,939 of the official’s $4,982 claim
for relocation expenses was improper, and it recommended
disallowing these costs. The official claimed $1,524 in
The official claimed relocation expenses for meals and lodging within 30 days of
nearly $5,000 for his appointment without prior approval from DPA, and he
relocation expenses but claimed $2,554 in relocation costs beyond the 30 days allowed.
failed to relocate. In addition, the official incurred $904 in airfares related to his
relocation claims. Of this amount, the department disallowed
$861 but determined that the remaining $43, which represents
a 9-cent-per-mile reimbursement for relocation travel between
the official’s home near San Diego and his headquarters in
San Francisco, should be allowed. However, we determined that
the State should not have paid the $43 because the official did
not relocate.
The fact that the official claimed reimbursement for relocation
expenses when he did not relocate concerns us. The official
told us that he intended to move near San Francisco; however,
he later determined that the cost of real estate, combined with
his belief that he could perform his duties effectively from
any location in the State, made the move prohibitive and
unnecessary.
5 For a more complete description of the regulations concerning travel, lodging, and
relocation expenses, see Appendix B.
1144 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 1155
Department of Industrial Relations
THE OFFICIAL SUBMITTED IMPROPER CLAIMS FOR
LODGING AND MEAL EXPENSES
The official also made improper claims for lodging and meals.
State regulations prohibit payment of per diem expenses
such as meals and lodging if the employee incurs the expense
within 50 miles of headquarters. The department reported
that the official improperly received $787 in reimbursement
for unallowable lodging expenses that he incurred within
50 miles of the official’s headquarters location. Our analysis
determined that the official also improperly received $1,082
in meal and incidental expenses incurred within 50 miles of his
San Francisco headquarters.
THE OFFICIAL CLAIMED OTHER UNALLOWABLE
EXPENSES
California regulations specify that each agency shall determine
whether the travel is necessary and whether it represents the
State’s best interest. Further, these regulations state that the
agency shall not allow expenses arising from travel between
an employee’s home and headquarters and that when a trip
commences or terminates at the employee’s home, the travel
The official incurred nearly distance subject to reimbursement shall be computed based
$50,000 in travel costs on the lesser of the distance between the employee’s home
within the 20-month and the destination or the distance between the employee’s
period we reviewed. headquarters and the destination. In addition, state regulations
prohibit reimbursement for per diem or other subsistence
expenses on the premises of an employee’s primary dwelling. A
DPA representative advised us that this prohibition, although
not expressly stated in the regulations, extends to any per
diem expenses incurred within 50 miles of an employee’s
residence. Nevertheless, of $47,790 in travel costs the official
incurred between April 2000 and November 2001, the State
paid $2,334 for 24 days of lodging in San Diego, which is within
35 miles of the official’s home, $3,941 for flights between
San Diego and his San Francisco headquarters, and $3,768 more
than he was entitled to receive for costs associated with flights
between San Diego and Sacramento.6
6 The $47,790 includes $31,831 in travel claims that the official submitted for reimbursement
and $15,929 in travel expenses not included on a travel claim, but that the State paid
directly to a vendor. This figure does not include any relocation expenses.
1166 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 1177
Department of Industrial Relations
Our review of the official’s travel claims shows that between
April 2000 and November 2001, he claimed an expense of some
kind on 304 days. Of these days, the official spent all or part
of 206 days (68 percent) in San Diego.7 Moreover, our analysis
shows that for almost every week within the 20-month period
we reviewed, he regularly traveled at state expense to San Diego
on Fridays and back to his headquarters in San Francisco on
Mondays. Although state regulations prohibit reimbursement
for commuting expenses between home and headquarters, the
department reimbursed these expenses.
THE OFFICIAL INCURRED UNNECESSARY RENTAL CAR
EXPENSES
A portion of the rental car expenses the official claimed was
for weekend rentals for which he stated no business purpose.
California regulations require state officers and employees to
indicate the purpose of each trip and meal for which they claim
reimbursement. Although the department did not address the
issue, we found that of the $3,417 in rental car expenses the
official incurred during the 20-month period we reviewed,
$635 related to vehicles he rented in San Diego on weekends.
The official incurred The official’s travel claims, and the explanation of travel he
more than $600 worth submitted to the department after it began its investigation, do
of weekend car rental not provide any business reasons for these weekend vehicle
expenses near his home. rentals. As a result, these rental car expenses appear to be
unallowable according to state regulations. Although he
described only two specific examples, the official responded
to our queries about these rental car expenses by stating that
he had a business need for the vehicle rentals for most of
the weekends; however, in some instances, he indicated that
keeping the vehicle over the weekend and not paying for
shuttle transportation to and from the rental car location was
simply more convenient. Although such an arrangement may
have been more convenient for the official, it is somewhat
unclear whether these car rental expenses were in the State’s
best interest.
7 Our analysis does not include the official’s claims for relocation expenses because such
costs are not consistent with business-related travel.
1166 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 1177
Department of Industrial Relations
THE DEPARTMENT DID NOT QUESTION THE OFFICIAL’S
TRAVEL CLAIMS
We found that even though a majority of the $31,831 in travel
claims that the official submitted lacked sufficient explanations
for his trips, as state regulations require, the department
approved his claims. We spoke with executives A and B about
the department’s process for reviewing and approving travel
claims, because they had approved a number of the official’s
claims. Both executives told us they do not or usually do not
attempt to verify the purpose of each trip listed on the claims.
Executive A told us he followed a previously established process
of disallowing any expenses the official incurred in San Diego
as well as costs associated with trips between San Diego and
any location within 50 miles of the official’s San Francisco
headquarters.
Nevertheless, the department paid approximately $2,334
for 24 days of lodging expenses the official incurred in
San Diego and $3,941 for flights he took between San Diego
and San Francisco or Oakland. When we provided executive A
with an example of a travel claim he approved for lodging
expenses the official had incurred in San Diego, executive A
said that he should not have approved it. He further
explained that the costs the State pays directly, such as airfare
and rental car expenses, may have been paid even though they
should have been disallowed, because his review was limited to
the official’s reimbursement claims.
We also found that the department paid $5,520 for flights the
official took between San Diego and Sacramento. However,
The department paid we determined that the department paid $3,768 more than
$3,768 more than state regulations allow because these trips began and ended
state regulations allow in San Diego, near the official’s residence. Based on mileage
for the official’s travel reimbursement rates, the State should have paid $1,752 for the
between San Diego and distance he traveled between his San Francisco headquarters
Sacramento. and Sacramento, which is substantially less than the distance
between San Diego and Sacramento.
AGENCY RESPONSE
The department reported that, in addition to the $5,726
it required the official to reimburse the State for improper
relocation and travel expenses it had identified through its
1188 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 1199
Department of Industrial Relations
investigation, it required the official to reimburse the State for
the $43 in improper relocation expenses and the $1,082 in
meal and incidental expenses he incurred within 50 miles of
the official’s headquarters identified in this report. Further, the
department reported that it will require an executive level
civil service officer familiar with state reimbursement rules to
authorize all exempt employee travel claims before submitting
them to the accounting department for processing. The
department also reported that it will require a senior level (or
higher) accounting officer to audit all exempt employees’ travel
claims before making payment.
After the department began its investigation of the official’s
travel expenses, and well after the official had incurred the
expenses and received reimbursement, the department consulted
By determining that the with DPA to determine which costs were proper. DPA provided
official’s headquarters the department with an interpretation of DPA rule 599.616 that
in San Francisco found that it was permissible for the department to designate
would also be his the official’s primary dwelling as one and the same with his
primary dwelling, the San Francisco headquarters. Based on that consultation, the
department allowed department decided that, for the purpose of determining which
the official to travel costs were valid and in compliance with state requirements, it
between San Francisco would consider the official’s San Francisco headquarters to be
and San Diego at state his “primary residence.” This determination was based on the
expense. California Code of Regulations, Title 2, Section 599.616.1(b),
which states that a place of primary dwelling shall be
designated for each state officer and employee and that the
primary dwelling shall be defined as the actual dwelling
place that bears the most logical relationship to the employee’s
headquarters and shall be determined without regard to any
other legal or mailing address.
The department’s determination that the official’s primary
dwelling was one and the same as the San Francisco
headquarters allowed the official to travel between San Francisco
and San Diego at state expense, based on the assumption that
all such travel is for a business purpose. Consequently, the
department did not recommend that the official repay the State
for $2,334 in lodging expenses and $635 in rental car expenses
he incurred in San Diego, the $3,768 overpayment for trips the
official took between San Diego and Sacramento, or the $3,941
in airfare for flights between San Diego and San Francisco.
Since the department determined that for the purpose of
calculating travel expenses, the official’s residence is his
1188 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 1199
Department of Industrial Relations
headquarters in San Francisco and not where he resides (near
San Diego), these expenses became allowable; however, we
question this determination and find no indication that
the official’s headquarters is an “actual dwelling place.”
Moreover, the department does not appear to have used
the best interests of the State as its guiding principle when
making this after-the-fact determination that contradicted
statements on the travel claims. Although the department
disagrees with our conclusion, it officially changed the
official’s headquarters to a location in Los Angeles that bears
a more logical relationship to where the official purportedly
conducts much of his business, effective February 1, 2003. n
2200 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 2211
CHAPTER 3
Department of Fish and Game:
Mismanagement, Contracting
Improprieties, Conflicts of Interest,
and Discreditable Conduct
ALLEGATIONS I2002-636, I2002-725, AND I2002-947
A manager of the Department of Fish and Game
(department) claimed vacation and sick leave hours
he was not entitled to receive, engaged in various
contracting improprieties, and mistreated employees.
RESULTS AND METHOD OF INVESTIGATION
We asked the department to investigate the allegations on our
behalf. The department reported that the manager had engaged
in or contributed toward irregularities in contracting and leave
accounting. The manager’s regional office had not updated the
State’s leave-accounting system for over two years, and after it
took steps to correct the system, the manager retained 479 hours
of leave balances that he was not entitled to receive—a potential
benefit worth $20,322.
In addition, the manager and other regional staff engaged in
various contracting improprieties involving a business owner
who also worked part-time for the department (employee A).
Regional staff split $62,000 in purchases the region made
from companies that employee A owned or was affiliated with
into smaller purchase orders in order to circumvent bidding
requirements, thereby denying other companies the opportunity
to compete for the State’s business. The manager also sought
payment for $60,000 in costs for which employee A’s company
had billed the department despite not knowing whether a
contract was in place for the work or whether the company
had provided the services the department required. In
addition, employee A violated conflict-of-interest laws
because his company billed the department more than $10,000
during the same time he worked as a department employee.
2200 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 2211
Department of Fish and Game
The department also concluded that the manager subjected
subordinates to inappropriate treatment and that his behavior
was inexcusable and a discredit to the State.
BACKGROUND
During September 2001 the department began an Equal
Employment Opportunity (EEO) investigation that focused on
allegations that the manager engaged in unprofessional and
discourteous treatment of subordinates. On October 24, 2001,
the department directed its audit branch to review other
alleged improprieties that EEO investigators had uncovered,
including suspected irregularities in contracts and leave
balances and potential conflicts of interest. Subsequently, the
department requested that its legal staff conduct a follow-up
review to address some of the issues that the audit branch’s
review had raised.
THE DEPARTMENT MISMANAGED ITS LEAVE-
ACCOUNTING SYSTEM
State law requires agencies to maintain effective systems of
internal controls to minimize fraud, errors, abuse, and waste of
government funds.8 By maintaining internal accounting and
The manager claimed
administrative controls, state agencies gain reasonable assurance
479 hours of leave
that the measures they have adopted protect state assets,
to which he was not
provide reliable accounting data, promote operational efficiency,
entitled—a benefit
and encourage adherence to managerial policies. However, a
potentially worth more
manager of one of the department’s regions failed to maintain
than $20,000.
and follow effective systems of control. The manager’s region
had not made monthly updates to the State’s leave-accounting
system for more than two years, and even after the region
took steps to bring the system up to date, the manager claimed
479 hours of leave balances to which he was not entitled.
The State’s leave-accounting system tracks vacation, sick leave,
and annual leave as well as other employee leave balances,
such as compensatory time off and personal holidays. The
leave-accounting system automatically posts credits to the
employees’ monthly leave balances, but regional staff must
account for any leave its employees have taken—which it had
not done for more than two years. Thus, for the 180 regional
employees the manager oversaw, the region reported leave
8 For a more complete description of the laws pertaining to the improper activities
discussed in this chapter, see Appendix B.
2222 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 2233
Department of Fish and Game
balances that were greater than the employees’ actual balances.
In doing so, the region exposed the State to undue liability in
that employees might have taken more leave than they were
entitled to. Also, employees may have found planning vacations
difficult, given that they did not receive an accurate accounting
of their leave balances. To correct this problem, regional
staff, under the manager’s direction, began reconciling each
employee’s leave balances. However, this process was flawed,
as at least one employee, the manager, claimed 479 hours
of sick leave and annual leave that he was not entitled to, a
benefit worth approximately $20,322. In addition, in some
instances regional staff were unable to locate employees’
time sheets. In such cases, their only recourse was to grant
those employees the automatic leave accrual, even though
the employees might already have taken time off, because the
region lacked supporting documentation by which to reduce
the employee’s leave balances.
One employee who was involved in correcting the region’s
leave-accounting system, employee B, told the department that
beginning in 1999 through June 2001, the region did not update
the leave-accounting system. This meant that an employee’s
leave balances would continue to accrue each month but
would not reflect any leave the employee might have taken. To
correct these errors, employee B and another member of the
region’s staff obtained employee time sheets and began keying
in the information regarding each employee’s leave balances.
Employees then received an itemized printout that detailed
their monthly leave balances and showed how the department
had arrived at the new, corrected balance. All employees could
dispute any balances they believed were not accurate by provid-
ing documentation to support their claims. In those instances in
which regional staff could not locate time sheets, they allowed
for the automatic leave accrual.
According to employee B, most employees agreed with the
Although the manager recalculations. Staff easily resolved most cases in which
asserted that he individuals identified discrepancies; these ranged from eight
had support for the to 16 hours. However, some controversy remained involving
479 hours of leave to the manager’s leave balances. The department concluded that
which he claimed he was the manager received a combined 479 hours of sick and annual
entitled, the department leave hours to which he was not entitled. Employee B told the
concluded that the department that the manager had disputed the recalculation
support was inadequate. and, rather than provide documentation to support his dispute,
had supplied employee B with amounts he believed were correct.
2222 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 2233
Department of Fish and Game
Employee B said that she felt uncomfortable but she keyed the
manager’s figures into the leave-accounting system, even though
he failed to provide adequate support. When the department’s
investigators questioned him, the manager stated that he had
support for these adjustments; however, after reviewing the
information the manager provided, the department concluded
that the support was inadequate.
THE MANAGER AND OTHER EMPLOYEES VIOLATED
CONTRACTING LAWS AND PROCEDURES
State laws governing contracts are intended to eliminate
favoritism, fraud, and corruption, as well as provide all qualified
bidders with a fair opportunity to enter the bidding process,
thereby stimulating competition in a manner conducive to
sound fiscal policies. To ensure this, state laws and policies
By splitting $62,000 generally require state agencies to solicit competitive bids when
worth of purchases into contracting. Public Contract Code, Section 10329, states that no
five separate transactions, person shall willfully split a single transaction into a series of
regional staff were able to transactions for the purposes of evading bidding requirements.
circumvent competitive- Despite this prohibition, regional staff split various transactions
bidding requirements. into smaller ones. These transactions related to the purchase of
equipment or services provided by companies that a seasonal
employee of the department (employee A) owned or was
affiliated with. For example, from February through June 2001,
company 1 and company 2 invoiced the department a total of
$62,000 for five underground storage tanks used to provide
water for sheep and deer. Instead of treating this as one
transaction, regional staff spread these costs among five
purchase orders, thereby circumventing competitive-bidding
requirements. The department confirmed that these companies
are related; finding that employee A is the chief executive officer
of company 1 and the founder of company 2. Both companies
also list the same business address.
In another example, company 3 invoiced the department
a total of $21,000 for work related to a project to plant
grain for dove and pheasant. Instead of treating this work
as a single transaction, regional staff prepared six short-
form contracts for varying amounts under $5,000 to avoid
competitive-bidding requirements. Company 3 is also related
to employee A: its owner is the president of company 2,
which employee A founded.
2244 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 2255
Department of Fish and Game
The department also determined that supporting documents
associated with the purchase of the five underground storage
tanks lacked evidence that the department actually obtained
a bid. Specifically, two of the five purchase orders include
bid sheets indicating that staff obtained two bids, one from
company 2 and another from a competitor. However, after
reviewing these purchases and interviewing regional staff,
the department concluded that no evidence indicated that
company 2 provided a bid; staff merely copied one of the bid
sheets, thereby using the same bid sheet to justify two purchases.
Two other bid sheets, which the manager signed, falsely reflected
that company 2 had sole-source status and therefore was not
subject to competitive-bidding requirements. The manager also
admitted that he was the one who prepared the bid sheets, even
though the sheets indicate that regional staff prepared them.
The manager and regional staff also allowed company 2 to begin
work related to the underground storage tanks and the planting
projects before the department had established contracts for the
work, thereby exposing the State to additional liabilities. For
example, the manager sought approval to pay a $60,000 invoice
that company 2 submitted for planting grain for the dove and
pheasant project. However, when the department interviewed
the staff biologist overseeing the project, he said that the
department had not yet written a contract for these services and
that company 2 was more than six months from completing
the work for which it had billed the department. Although the
department indicated that it had not yet paid these costs at the
time of our review, this example further illustrates the careless
manner in which the manager oversaw contractor activities.
EMPLOYEE A VIOLATED CONFLICT-OF-INTEREST LAWS
California Government Code, Section 19990, states that a
state officer or employee shall not engage in any employment,
An employee violated activity, or enterprise that is clearly inconsistent, incompatible,
state law when his in conflict with, or inimical to his or her duties. In addition,
private business the Public Contract Code, Section 10410, states that no state
submitted an invoice of officer or employee shall contract on his or her own behalf as
more than $10,000 to the an independent contractor with any state agency to provide
department for payment. services or goods. The department concluded that employee A
violated these prohibitions because his company, company 1,
submitted a $10,667 invoice for one underground storage
2244 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 2255
Department of Fish and Game
tank at the time he was a state employee. The department,
however, concluded that several factors influenced whether
there was a need to take further action regarding this violation.
First, the department discovered that another member of the
regional staff, employee C, actually prepared the invoice using
company 1’s letterhead on behalf of the company. Second, the
department reported that employee A is no longer working for
the State.
THE MANAGER MISTREATED SUBORDINATES
The department investigated several complaints concerning
the manager’s conduct and concluded that from about
December 2000 through May 2001, the manager made sexually
suggestive comments or jokes in the presence of female
staff members (who found his comments offensive), made
inappropriate gestures to a staff member on several occasions,
repeatedly cursed in staff members’ presence, and intimidated
staff by yelling at them to an extent that they perceived as
unprofessional.
AGENCY RESPONSE
As we mentioned previously, the department conducted three
separate reviews—the EEO investigation, the audit branch
review, and the follow-up legal review—to look into the various
allegations involving the manager. The department concluded
The department these reviews by initiating an administrative action against
concluded that the the manager on May 16, 2002, for violating provisions of the
manager’s conduct Government Code: inexcusably neglecting his duty; treating
was unprofessional the public or other employees inappropriately; and breaching
and a discredit to the other norms of good behavior, either during or after duty hours,
department. in a way that discredited the department. In a subsequent
agreement with the department, which the manager signed
on May 31, 2002, he agreed to take a 5 percent reduction in
pay beginning May 31, 2002, and ending October 30, 2002;
have his leave balances reduced by 479 hours; and complete
department-specified training, including topics on management
techniques, equal employment opportunity, conflicts of interest,
and contracting. However, the department did not reduce the
manager’s leave balances by the agreed-upon amounts until
February 4, 2003, after we made further inquiries into the matter. n
2266 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 2277
CHAPTER 4
Department of Mental Health,
Atascadero State Hospital: Improper
Contracting Practices, Conflicts of
Interest, Incompatible Activities, and
Violations of Nepotism Policy
ALLEGATION I2000-649
We received an allegation that employees at
Atascadero State Hospital (hospital), part of
the Department of Mental Health (DMH), failed
to properly obtain bids for projects the hospital awarded to
businesses owned by relatives of a hospital employee.
RESULTS AND METHOD OF INVESTIGATION
We investigated and substantiated the allegation as well as other
improper activities. The hospital awarded 21 projects totaling
more than $75,000 to three businesses (companies 1, 2, and 3)
belonging to family members of an employee, employee A.
However, employees responsible for obtaining bids for these
projects, including employee A, did not follow the hospital’s
bidding procedures. In addition, employee A, who initiated 13 of
the 14 projects that the hospital awarded to company 1, received
more than $5,600 in payments from the company, creating
a conflict of interest. We also determined that the owners of
company 1 and company 2 were seasonal employees of the
hospital during the same period that their businesses submitted
bids and were awarded projects, violating state contracting law.
Finally, we found that the hospital had violated its nepotism
policy by allowing employees to supervise family members.
To investigate the allegation, we researched applicable state
laws and regulations as well as department and hospital policies
and procedures. We also reviewed purchase and service orders
between companies 1, 2, and 3, and the hospital. We contacted
various companies listed as providing bids for jobs that the
hospital awarded to companies 1, 2, and 3. In addition, we
reviewed financial records of employee A and employment
histories of the subject employees. Finally, we interviewed the
2266 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 2277
Department of Mental Health, Atascadero State Hospital
subject employees and other pertinent staff. To individuals who
orally provided us with relevant information, we gave a written
summary of what they said. We then asked them to review the
summary for accuracy and to make any necessary changes. We
also asked each of these individuals to sign the summary under
penalty of perjury to ensure the accuracy of our understanding
of the information provided. However, we were unable to
interview employee A.
BACKGROUND
The mission of the hospital is to design and provide treatment
for mentally ill and disordered patients; to provide professional
evaluations and recommendations to the courts and other
agencies; and to maintain security and control of patients in a
safe, therapeutic, and supportive environment. The Department
of General Services (General Services) has granted the hospital
delegated purchase authority for individual purchases.9 This
delegated authority provides an annual expenditure amount
from which authorized hospital staff can make individual
purchases through a competitive-bidding process without
having to obtain General Services’ approval. Since April 2000,
the hospital’s purchasing procedures have required employees
to obtain three bids for purchases exceeding $500. For purchases
cited here that the hospital made prior to this period, hospital
procedures required three competitive bids for purchases greater
than $200.
EMPLOYEES DID NOT FOLLOW HOSPITAL BIDDING
PROCEDURES FOR PROJECTS AWARDED TO BUSINESSES
BELONGING TO AN EMPLOYEE’S FAMILY MEMBERS
During the period October 1998 through December 2000, the
An employee initiated hospital awarded at least 21 projects with purchase and service
work requests for orders totaling more than $75,000 to three companies owned
13 projects that the by relatives of employee A. Employee A initiated work requests
hospital awarded to his for 14 projects, 13 of which the hospital awarded to his father’s
father’s business and business, company 1, and one of which was awarded to a
another project that was business owned by one of his brothers, company 2. A second
awarded to a company employee, employee B, initiated one project the hospital
owned by the employee’s awarded to company 1 and two projects it awarded to a business
brother. owned by another of employee A’s brothers, company 3. A third
9 For a detailed description of the laws and policies pertaining to the improper activities
we discuss in this chapter, see Appendix B.
2288 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 2299
Department of Mental Health, Atascadero State Hospital
employee, employee C, initiated three projects that the hospital
awarded to company 2. These employees’ actions effectively
circumvented procurement policies intended to ensure that the
State receives the best value for its money.
As Table 2 on the following page shows, the hospital
awarded 14 projects totaling nearly $65,000 to company 1,
five projects to company 2, and two projects to company 3.
Hospital purchasing policies required competitive bids for all
of these projects.
Despite this requirement, employees responsible for soliciting
and obtaining bids for the projects did not properly obtain bids
and instead simply awarded them to the businesses belonging
to employee A’s family members. According to employee B, who
approved a number of these projects, the project initiator is
responsible for soliciting and obtaining bids in most instances.
Thus, employees A, B, and C would have been responsible for
obtaining competitive bids for these projects. As we mentioned
previously, we were unable to interview employee A. Employee B
said that if he were the initiator, he believed he would have
obtained the required bids, but he said that the procurement
forms may sometimes have listed him as the initiator when
in fact he had asked staff to obtain the bids. Employee C said
he had obtained the necessary bids, and he explained that in
instances in which companies were unable or unavailable to
perform the work, he would indicate this information on the
procurement form and consider it to be a bid.
Supporting documentation for the projects we reviewed indicate
that the hospital obtained at least three bids, as hospital
Hospital employees procurement procedures require. However, when we contacted
violated procurement a sample of six businesses listed as bidders for jobs awarded to
policies and denied employee A’s relatives, four of these businesses stated that they
other companies the had no record or knowledge of having provided such bids to
opportunity to compete the hospital for these jobs, and two businesses said they had
for the State’s business been contacted or might have been contacted but that neither
by failing to obtain bids received enough information to prepare a bid. In fact, one
or to provide enough company told us that it could not find anything to indicate it
information so that had provided bids to the State, even though hospital employees
bidders could provide had listed the company as having provided bids for five of
competitive estimates for the 21 jobs the hospital awarded to employee A’s relatives.
the hospital projects. Consequently, based on the responses of the companies we
contacted, it appears as though hospital employees violated
procurement policies and denied other companies the
2288 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 2299
Department of Mental Health, Atascadero State Hospital
TABLE 2
Hospital Projects Awarded to Employee A’s Relatives
Company 1
Project
Awarded Date of Request Project Initiator Project Amount*
1 10/22/1998 Employee B $ 3,904
2 11/02/1998 Employee A 709
3 02/16/1999 Employee A 999
4 02/25/1999 Employee A 999
5 06/18/1999 Employee A 375
6 05/23/2000 Employee A 15,149
7 06/12/2000 Employee A 15,642
8 06/15/2000 Employee A 3,105
9 06/16/2000 Employee A 3,078
10 06/27/2000 Employee A 1,000
11 08/16/2000 Employee A 850
12 09/08/2000 Employee A 2,547
13 10/19/2000 Employee A 3,223
14 11/16/2000 Employee A 13,294
Total amount awarded to Company 1 64,874
Company 2
15 03/15/1999 Employee A 999
16 06/05/2000 Employee C 999
17 06/26/2000 Employee C 500
18 08/10/2000 Employee C 700
19 10/18/2000 None provided 500
Total amount awarded to Company 2 3,698
Company 3
20 06/16/2000 Employee B 4,297
21 12/05/2000 Employee B 2,864
Total amount awarded to Company 3 7,161
Grand total amount awarded $ 75,733
Source: Hospital service and purchase order records.
*All projects required the hospital to solicit competitive bids.
3300 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 3311
Department of Mental Health, Atascadero State Hospital
opportunity to compete for the State’s business by failing to
obtain bids or to provide enough information so that bidders
could provide a competitive estimate for the hospital projects.
In addition, the employees did not adhere to hospital policy
requiring written documentation of bids. The hospital
purchasing policies require that employees obtain detailed
written bids on the bidding company’s letterhead for purchases
over $2,500. The policy states that these bids must be attached
to the requisition form. However, when we asked to see
documentation pertaining to bids over the $2,500 limit for the
projects that companies 1, 2, and 3 received, a representative
from the hospital accounting unit told us that the hospital
was not enforcing the policy to obtain written bids at the time
the projects were awarded. This employee, who is responsible
for receiving bid documentation obtained by staff during the
procurement process, explained to us that the hospital did not
begin enforcing this policy until September 2001. As a result, the
hospital enabled employees to procure goods or services without
ensuring that it actually solicited and received bids and that the
State paid the lowest price.
EMPLOYEE A’S FINANCIAL INTEREST IN COMPANY 1
CREATED A CONFLICT OF INTEREST
Employee A violated conflict-of-interest laws and departmental
policies by initiating at least 13 projects awarded to company 1,
which his father owned, while having a financial interest in
the company. California law states that public officials are
prohibited from making, participating in the making of, or
attempting to influence governmental decisions in which they
have a financial interest. Further, California law prohibits state
officers or employees from creating a contract in which the
employee has a financial interest. A violation of these laws
constitutes a conflict of interest. Additionally, department policy
prohibits employees from seeking or receiving any gratuities,
An employee initiated gifts, personal loans, or discounted property or services from
contracts awarded to a anyone doing business with DMH.
company from which he
received compensation. During the period in which employee A initiated hospital
project contracts awarded to company 1, he received
payments from the company. Between November 1998 and
May 2001, employee A received $5,653 in payments from
company 1 and its owner. According to company 1’s owner,
3300 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 3311
Department of Mental Health, Atascadero State Hospital
most of the money employee A received was for a personal
loan, and the remainder was compensation for work that
employee A performed for company 1.
THE OWNERS OF COMPANY 1 AND COMPANY 2,
WHILE SEASONAL EMPLOYEES AT THE HOSPITAL,
VIOLATED CONFLICT-OF-INTEREST PROHIBITIONS AND
DMH’S NEPOTISM POLICY
The owners of company 1 and company 2, while working at the
hospital as seasonal employees, submitted bids for a number of
the jobs that the hospital awarded to the two companies, thus
violating sections of the California Public Contracting Code.
Specifically, it prohibits any state employee from contracting
on his or her own behalf as an independent contractor with
any state agency to provide goods or services. Additionally,
unless his or her employment requires it, the Public Contracting
Code prohibits state employees from engaging in any activity,
enterprise, or employment from which the employee receives
compensation or in which the employee has a financial
interest and is sponsored or funded by any state agency or
department through or by state contract. It also prohibits
separated or former employees of the State from entering into
any contract for which the employee was involved in any part
of the decision-making process relevant to the contract while
employed by the State.
We determined that the hospital awarded five projects to
company 1 during periods in which its owner was an employee
at the hospital and that it awarded two projects to company 2
Two employees during that owner’s employment at the hospital, thereby
violated state violating California contracting laws. Both owners admitted
contracting laws by that they had submitted bids from their respective companies
submitting bids for while they were employed as seasonal workers, but they said
projects, which the that they did not at any time perform work on hospital projects
hospital ultimately while employed there. Company 2’s owner added that even
awarded to their though his company may have been awarded a hospital contract
private businesses, while he was employed there, he was not informed that his
while employed as company had won the contract until after his employment with
seasonal workers with the hospital had ended. This, however, does not alter the fact
the hospital. that their companies benefited materially from the formation of
these contracts.
3322 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 3333
Department of Mental Health, Atascadero State Hospital
We also determined that the hospital violated DMH’s nepotism
policy that expressly prohibits family members from directly
supervising one another. According to employee B, company 1’s
owner was never supervised by his son, employee A, while
company 1’s owner was employed at the hospital. However,
company 1’s owner told us that his son had supervised jobs
he worked on during his own employment at the hospital as a
seasonal employee. Additionally, company 2’s owner admitted
that his father, company 1’s owner, supervised him while both
were in the hospital’s employ as seasonal employees.
AGENCY RESPONSE
The hospital reports that it is taking adverse action against
employees B and C but no adverse action is possible for
employee A, who died in 2002. Additionally, the hospital
has taken steps to improve its procurement procedures and
will correct improprieties detected during this investigation
by making additional changes to their documentation and
bidding procedures and will formulate written policies to
address all inappropriate activities identified in this report. n
3322 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 3333
Blank page inserted for reproduction purposes only.
3344 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 3355
CHAPTER 5
Department of Developmental
Services, Sonoma Developmental
Center: Failure to Ensure That
a Peace Officer Met Training
Requirements
ALLEGATION I2000-676
The Sonoma Developmental Center (center), under the
Department of Developmental Services (department),
allowed a supervisor to exercise the powers of a peace
officer even though he did not meet the requirements to do so.
RESULTS AND METHOD OF INVESTIGATION
We investigated and substantiated the allegations. Specifically,
when the center hired the supervisor as a peace officer in 1995,
it failed to ensure that he met the training requirements for the
position. Although the supervisor had worked as a peace officer
in the early 1980s, he had a significant break in law enforcement
service; as a result, he no longer met the training requirements
for peace officers.
To conduct the investigation, we examined a Commission
on Peace Officer Standards and Training (POST) review of the
department’s recruitment and training records for peace officers.
In addition, we reviewed the center’s police logs and interviewed
department and center employees, including the peace officer.
BACKGROUND
In part through its developmental centers and regional
centers, the department provides services and support for over
155,000 children and adults with developmental disabilities.
The department operates five developmental centers that
provide services to individuals who require programs, training,
care, treatment, and supervision in a structured health-
facility setting on a 24-hour basis. The department maintains
its own law enforcement personnel at the developmental
3344 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 3355
Department of Developmental Services, Sonoma Developmental Center
centers, comprising both uniformed peace officers and special
investigators, to keep the peace; prevent crime; investigate
offenses occurring on the grounds; and protect clients,
employees, visitors, and state property. Their duties and
responsibilities closely resemble those of city, county, and
university campus law enforcement officers.
The department is a certified agency of POST. POST is
responsible for setting minimum selection and training
standards for California law enforcement officers, and state law
requires those working as peace officers to meet these standards.
Participating agencies agree to abide by POST’s standards, and
POST conducts periodic reviews to determine compliance with
those standards. It conducted reviews at the department in 1997,
1999, and 2001.
THE SUPERVISOR DID NOT HAVE THE AUTHORITY TO
EXERCISE PEACE-OFFICER POWERS
Although he did not have the authority to do so, the supervisor
exercised peace-officer powers, including issuing traffic citations
and making at least one arrest. We examined a 1999 POST
review of the department’s recruitment and training records
The supervisor did not that concluded the supervisor did not meet the necessary
meet necessary training requirements to exercise peace-officer powers. The California
requirements. Penal Code, Section 832(e), requires individuals who
previously completed a California Penal Code 832 Arrest
and Firearms Course (PC 832 training) to requalify prior to
exercising peace-officer powers if they have had a three-year
or longer break in service as a California peace officer, with
certain limited exceptions.
The supervisor worked as a peace officer for a local California
law enforcement agency during the early 1980s and completed
a course that included the PC 832 training. He left that job in
1984 and worked in a non-peace-officer position with another
local agency until approximately 1991. Because he was in a non-
peace-officer position, POST later concluded that the supervisor’s
PC 832 training had expired and was no longer valid as of
June 5, 1987, three years after he left his peace-officer position.
The center hired the supervisor and appointed him to a peace-
officer position effective June 1995, eight years after his PC 832
training expired. However, we found no specific evidence that
the center checked the supervisor’s compliance with PC 832. In
3366 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 3377
Department of Developmental Services, Sonoma Developmental Center
a letter dated December 16, 1999, POST notified the department
of the results of its review. In that letter, POST concluded that
the supervisor’s PC 832 training had expired and that he must
attend and pass a PC 832 course prior to exercising any peace-
officer duties. Further, POST suggested that the department
remove the supervisor from any duties that might require him
to make an arrest, serve an arrest warrant (including a traffic
citation), or serve any court order.
On January 3, 2000, the department notified the center of
POST’s findings. On that same day, the center notified the
supervisor that he was not in compliance with the PC 832
requirement and would need to complete the training.
Further, the center told the supervisor that he was not to
use his peace-officer powers until he completed the required
training. Although the supervisor believed he had already met
all the requirements for his position, he agreed to take the
training and completed the five-day training between January 31
and February 4, 2000. Between January 3 and February 7,
the supervisor remained in his position and was allowed to
supervise his staff but not to exercise peace-officer powers. The
center reinstated the supervisor’s peace-officer powers effective
February 7, 2000, after he had completed the POST training.
We did not review the supervisor’s activities during his entire
tenure with the center (which began in June 1995); however,
in an attempt to quantify instances in which the supervisor
exercised peace-officer powers without the legal authority to
do so, we examined the center’s police logs for 1999. For each
officer on duty, the logs indicate various activities, including
During 1999, without the areas they patrol, traffic citations they issue, and arrests they
the authority to do so, make. According to those logs, the supervisor issued 41 citations
the supervisor issued during 1999 and made one arrest. Although the consequences
41 citations and made of the supervisor’s issuing citations and making arrests when he
one arrest. did not have peace-officer powers are unclear, POST advised the
department to seek legal advice on any civil lawsuits or com-
plications with criminal complaints that might arise from the
supervisor not having peace-officer powers.
POST FOUND ANOTHER IMPROPER APPOINTMENT
In its August 2001 report, POST noted that the department
had appointed another employee to a peace-officer position at
another state developmental center (Porterville Developmental
Center) even though he also had a three-year or longer break
3366 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 3377
Department of Developmental Services, Sonoma Developmental Center
in service as a peace officer. POST concluded that the employee
needed to complete the PC 832 training before he could work
as a peace officer. However, the department had appointed
the employee to his peace-officer position on April 1, 1999,
and the employee did not complete the PC 832 training until
April 26, 2002, more than three years after his appointment. We
did not attempt to quantify the number of occasions on which
the employee exercised peace-officer powers he did not have.
Again, although the actual effect of the employee’s improper
appointment is unknown, it may have created a potential
liability for the State.
AGENCY RESPONSE
To ensure that all of its peace officers meet the training
requirements mandated by POST, the department reorganized
the entire law enforcement function under its Office of
Protective Services (OPS), which reports to the director. When
the department hires for peace-officer positions, the process is
now monitored by the Professional Standards Branch of OPS
to ensure that applicants have completed all required training
before being appointed as peace officers. Further, the department
will use a database to track and monitor its peace-officers’
training and POST can review those records annually. n
3388 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 3399
CHAPTER 6
Department of Developmental
Services, Porterville Developmental
Center: Illegal Hiring
ALLEGATION I2002-952
The Porterville Developmental Center (center),
under the Department of Developmental Services
(department), illegally appointed two individuals to
psychologist positions.
RESULTS AND METHOD OF INVESTIGATION
The department investigated and substantiated the allegation.
In May 2002 the department received information that
two psychologists at the center did not meet the minimum
qualifications for the position. In October 2002, based on
an allegation this office received, we sent an inquiry to the
department, which notified us that it was already conducting
an investigation. The department reviewed applicable statutes
and the center’s procedures relating to the hiring process. The
department reviewed the credentials of all 23 of the center’s
psychologists and found that two center employees did not meet
the necessary education requirements for legal appointment
as psychologists.
BACKGROUND
In part through its developmental centers and regional centers,
the department provides services and support for over 155,000
children and adults with developmental disabilities. The
department operates five developmental centers that provide
services to individuals who require programs, training, care,
treatment, and supervision in a structured health-facility setting
on a 24-hour basis. In order to help provide services and support
for its clients, the center employs several psychologists.
3388 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 3399
Department of Developmental Services, Porterville Developmental Center
THE CENTER MADE ILLEGAL APPOINTMENTS
In violation of state law, the center appointed two individuals,
employee A and employee B, to psychologist positions,
even though neither of the individuals met the educational
requirements for the position.10 The State Personnel Board’s job
specifications for the psychologist position state that applicants
who are within six months of receiving their doctoral degree
may be admitted to the examination but cannot be appointed to
the position until they complete their degree. The ramification
of having two individuals illegally employed as psychologists is
unclear, but it could potentially lead to complaints.
Employee A
Employee A began working for the center as a psychology
intern in October 1999. That position required enrollment in
and completion of at least one year of a postgraduate program
leading to a doctoral degree in psychology. When employee A
applied for the intern position, she projected a completion date
The center failed to verify of May 2000 for her doctorate. In August 2000 employee A
whether two employees applied for the psychologist position and revised her projected
had completed the completion date for her degree to September 2000. Although
education requirements the center appointed employee A to a psychologist position
for the positions to which in October 2000, no one verified that she had completed
they were appointed. her doctoral degree, even though completion of the degree
is required prior to such an appointment. In early 2002
the department was notified that employee A did not meet
the minimum qualifications to be legally appointed to the
psychologist classification.
As of July 31, 2002, employee A still had not met the educa-
tional requirements for the position she had been working in
for nearly two years. On August 23, 2002, the center informed
employee A that it had appointed her in error, and effective
August 30, 2002, the employee voluntarily transferred to a
psychology-associate position.
Employee B
Employee B began working for the center in August 2001 as a
psychology associate. In October 2001 he took the exam for
a psychologist position with the center. In a memorandum
10 For a more complete description of the laws we discuss in this chapter, see Appendix B.
4400 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 4411
Department of Developmental Services, Porterville Developmental Center
dated October 3, 2001, an adviser at the school employee B
was attending projected that he would complete the
requirements for his doctoral degree by April 2002. As we
mentioned previously, applicants who are within six months
of receiving their degree may be admitted to the examination
but cannot be appointed until they receive the degree. The
center appointed employee B to a psychologist position on
October 31, 2001. Employee B questioned the exam analyst
about the appropriateness of his appointment because he had
not completed his doctorate, but the analyst assured him that
nothing hindered his appointment. As with employee A, no one
at the center verified whether employee B had completed his
doctoral degree prior to his appointment as a psychologist.
As of July 31, 2002, employee B still had not met the educational
requirements for his position. Effective October 31, 2002,
employee B voluntarily transferred back to a psychology-
associate position.
EMPLOYEE A AND CENTER EMPLOYEES FAILED TO
FOLLOW OTHER CENTER HIRING PROCEDURES
On July 28, 2000, a program within the center advertised a
vacancy for a psychologist position. The proper procedure is for
names of applicants who submit their applications to the exams
unit to be incorporated with the list of eligible candidates. As
of the August 4, 2000, final filing date, the exams unit had
received two applications, one from employee C and one from
employee D, which it forwarded to the appropriate program to
schedule interviews. Subsequently, a nursing coordinator for the
program directly accepted applications from employee A and
another employee, employee E. The exam analyst later wrote a
note on employee E’s application form acknowledging that the
The center accepted two employee had changed his mind and decided to apply for the
additional applications position. The analyst’s notation indicates that the exams unit
after the final filing date was aware of employee E’s application, although the employee
had already passed. had submitted it to the wrong individual and apparently after
the final filing date. Center procedures state that an applicant
submitting an application after the final filing date must obtain
approval from the center’s personnel officer for admission to the
interview process.
However, no record indicates that the exams unit was aware that
the nursing coordinator also directly accepted an application
from employee A. If employee A had submitted her application
4400 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 4411
Department of Developmental Services, Porterville Developmental Center
directly to the exams unit as procedure required, its staff could
have determined that she did not currently meet the educational
requirements for the position and notified the program
personnel. Neither employee A nor the nursing coordinator
notified the exams unit of employee A’s application; as a result,
the exams unit did not find out about the application until after
it had interviewed employee A and approved her appointment
to the position.
By failing to follow its own procedures, the center does not have
assurance that it appropriately reviews applications to verify that
applicants meet the minimum qualifications. Further, the center
is giving preferential treatment to some employees by accepting
late applications as well as applications that applicants did not
file with the appropriate unit. These actions could result in
allegations of state liability.
AGENCY RESPONSE
The department conferred with the State Personnel Board
and has taken corrective action by having employees A and B
voluntarily transfer to psychology-associate positions. In
addition, the center has implemented new procedures to prevent
this type of illegal appointment from occurring in the future.
The new procedures include a stringent process for review of
applicants’ credentials by at least three levels of personnel,
including two levels at the center and one at the department. n
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CHAPTER 7
San Jose State University: Misuse of
State Equipment
ALLEGATION I2002-795
A San Jose State University (university) employee accessed
adult chat rooms on the Internet during work hours,
using a university computer. The employee also falsified
her employment qualifications by indicating that she had
graduated from high school.
RESULTS AND METHOD OF INVESTIGATION
We asked the university to investigate the allegations on
our behalf. The university substantiated the allegations.
To investigate, the university examined the employee’s
performance evaluations, computer records, and high school
transcripts and spoke with the employee and her supervisors.
The university concluded that the employee, despite previous
admonishments, continued to misuse university resources and
provided false information on her employment application
form.11 Specifically, the employee’s supervisor counseled her
on two occasions not to use the computer for personal reasons
during work hours; on a semiannual performance evaluation,
the supervisor instructed her to stop spending work time in
computer chat rooms. In spite of these warnings, the university
investigation revealed that the employee continued to use
university equipment to regularly access adult chat rooms and
Internet gambling Web sites during work hours.
In addition, the university substantiated that the employee had
falsified her employment qualifications by indicating that she
had graduated from high school, even though her high school
records indicated that she did not graduate.
11 For a more detailed description of the law we discuss in this chapter, see Appendix B.
4422 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 4433
San Jose State University
AGENCY RESPONSE
The university elected to terminate the employee. However,
when the university presented the evidence to the employee for
her response, she decided to resign. n
4444 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 4455
CHAPTER 8
Department of Industrial Relations:
Breach of Security During an
Examination
ALLEGATION I2002-988
An employee of the Department of Industrial Relations
(department) participating in an examination
compromised the exam by revealing information about
the questions to another testing candidate.
RESULTS AND METHOD OF INVESTIGATION
We asked the department to investigate the allegation on our
behalf. The department told us it had already investigated and
substantiated the allegation. Its investigators examined e-mail
records and interviewed the two employees.
One employee, whose On August 20, 2002, the department held interview examina-
job duties included tions for an associate-level position. The department found that
overseeing examination on that same day, two employees shared information about the
security, gave another questions. Specifically, employee A took the examination first.
employee an unfair Immediately after completing her interview, employee A sent an
advantage by divulging e-mail message to employee B, who was yet to be interviewed,
information about the divulging information about the examination questions, thereby
exam questions. not only breaching examination security but giving employee B
an unfair advantage over other candidates.
As a part of the examination process, employee A signed a
form explaining that the law expressly prohibits discussing or
giving information about questions asked by the examining
panel to another competitor.12 This form also stated that the
department may take formal disciplinary action, up to and
including dismissal, against violators. In addition, because
employee A’s responsibilities included planning, developing, and
administering civil service examinations such as this one, as well
as overseeing examination security and confidentiality of exam
questions, employee A should have been aware that divulging
12 For a description of the state law pertaining to sharing examination information, see
Appendix B.
4444 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 4455
Department of Industrial Relations
information about an exam is a serious breach of security. When
a department investigator interviewed her, employee A stated
that at the time she wrote the e-mail, she did not consider it
to be a breach of exam confidentiality. However, in hindsight,
she agreed that it was a breach. The e-mail did, in fact, reveal
the contents of the examination to a competitor before the
competitor took the exam.
AGENCY RESPONSE
Effective November 1, 2002, the department terminated
employee A and issued an informal reprimand to employee B
before transferring her to another division within the
department. n
4466 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 4477
CHAPTER 9
Department of Forestry and Fire
Protection: Misuse of State Resources
and Equipment
ALLEGATION I2002-964
An employee for the Department of Forestry and Fire
Protection (CDF) used state equipment to correspond
with and to send gifts to a friend.
RESULTS AND METHOD OF INVESTIGATION
We asked CDF to investigate the allegation on our behalf. CDF
substantiated the allegation and other improprieties. CDF
determined that the employee mailed 16 personal packages to a
friend at CDF’s expense, incurring $219 in shipping charges. The
employee also accumulated $237 in long-distance charges for
personal calls. Because the employee made these personal calls
Only 14 of the 831 during work hours, CDF concluded that the State lost 33 hours
e-mails the employee of productive time—the equivalent of $553 in state-paid wages.
sent or received during In addition, CDF recovered 831 e-mails either sent or received
a nine-day period were by the employee during a nine-day period. Of these, only 14,
related to state business. or 2 percent, related to state business. Finally, CDF determined
that the employee violated department policy when a review
of the employee’s computer records revealed he had stored
approximately 230 pictures, most of which were adult-oriented
material, on network and hard drive directories.13
To investigate the allegation, CDF obtained and reviewed the
employee’s state phone records, e-mail directory, and shipping
records. We sent CDF shipping reports listing packages that the
employee sent to his friend, as well as copies of correspondence
between the employee and the friend.
13 For a more complete description of the regulations and laws discussed in this chapter,
see Appendix B.
4466 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 4477
Department of Forestry and Fire Protection
AGENCY RESPONSE
CDF reported that it suspended the employee for 31 days with-
out pay. CDF also required the employee to pay restitution of
$456 to the State for the combined phone and shipping charges.
The unit in which the violation occurred now requires all of
its employees to review and sign copies of CDF’s incompatible-
activities policy. In addition, the unit sent out reminders to all
staff about the inappropriateness of using state resources for
nonstate purposes. n
4488 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 4499
CHAPTER 10
California State University,
Northridge: Violations of
Telecommuting and Nepotism Policies
ALLEGATIONS I2002-802 AND I2000-877
We received allegations that a California State
University, Northridge (CSUN), employee violated
telecommuting policies and that CSUN did not
properly supervise the employee. In addition, a manager
violated CSUN’s nepotism policy.
RESULTS AND METHOD OF INVESTIGATION
We asked CSUN to investigate the allegations on our behalf.
Although CSUN concluded that no improper governmental
activities occurred, we believe, based on the evidence it
provided, that the allegations were substantiated. To conduct
its investigation, CSUN interviewed university employees and
reviewed pertinent records, including policies, procedures,
performance reviews, status reports, and prior investigations.
EMPLOYEES RARELY REPORTED TO THE OFFICE
CSUN confirmed that one telecommuter, employee A, failed
to report to the office for more than one year. According to
CSUN policy, telecommuting employees must meet with their
A telecommuting supervisors to receive assignments and review completed work.14
employee failed to report CSUN’s investigation found that although the majority
to her office for more of telecommuters come to campus to pick up their work,
than a year. employee A did not report to campus for more than a year and
another telecommuter rarely reported to campus. In both of
these cases, the employees’ spouses, who worked at the campus,
facilitated the employees’ ability to stay at home by transporting
work back and forth.
14 For a detailed description of the laws and policies we discuss in this chapter, see
Appendix B.
4488 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 4499
California State University, Northridge
CSUN INADEQUATELY SUPERVISED TELECOMMUTERS
CSUN failed to establish adequate control measures to properly
evaluate its telecommuters’ performance. State law requires
each state agency to establish and maintain a system of internal
accounting and administrative controls. Internal controls are
necessary to provide public accountability and are designed
to minimize fraud, errors, abuse, and waste of government
funds. CSUN did not document performance standards for
the quantity and quality of work to be performed, making it
difficult to measure the performance of its telecommuting
employees. Specifically, the telecommuters’ work must pass
through a second level of processing where staff detect
and report errors to the supervisor; however, CSUN did not
routinely maintain statistics on the error rate. In addition,
employee A’s supervisor relied on weekly time reports rather
than status reports to monitor the telecommuters’ activity. By
failing to measure telecommuters’ performance adequately,
CSUN cannot accurately determine the quality and quantity
of its telecommuting employees’ work.
A MANAGER VIOLATED CSUN’S NEPOTISM POLICY
CSUN also discovered that a manager participated in personnel
decisions concerning a close relative, employee B. A California
A manager recommended State University policy on nepotism prohibits employees
salary increases for a from making personnel decisions pertaining to a close
close relative. relative. CSUN found that over the years the manager signed
off as a reviewing officer on several performance evaluations
of a close relative and also completed several nomination
recommendations for the relative to receive salary increases.
AGENCY RESPONSE
Although CSUN agrees that a reasonable interpretation of its
telecommuting policy would be for telecommuting employees
to report to the campus to receive assignments and review
completed work, it also believes that a supervisor can adequately
assign and review work by e-mail and telephone in many
situations. Nevertheless, CSUN hired a consultant to review its
telecommuting program, and it now requires telecommuters to
report to campus for performance evaluations and mandatory
meetings. It is also considering rotating those employees
interested in participating in its telecommuting program.
Further, CSUN said it would establish written performance
5500 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 5511
California State University, Northridge
standards to evaluate the quantity and quality of telecommuters’
work. For business reasons, CSUN reassigned employee A to
a position on campus. With regard to the manager, CSUN
said that the manager understands he must recuse himself from
any personnel decisions concerning close relatives. In addition,
employee B resigned in March 2002. n
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5522 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 5533
CHAPTER 11
Department of Mental Health,
Vacaville Psychiatric Program:
Improper Use of State Telephone
ALLEGATION I2002-726
An administrator at the Vacaville Psychiatric Program
(VPP) improperly made personal calls on a state-issued
cellular phone.
RESULTS AND METHOD OF INVESTIGATION
We asked the Department of Mental Health (DMH) to
investigate the allegation on our behalf. VPP had already
investigated the allegation in July 2002, and DMH reported
the findings to us. VPP reviewed the administrator’s cellular
phone bills from December 2000 through May 2002 and
concluded that during the 17-month period, the administrator
violated state law by improperly using his state-issued cellular
phone to make personal calls totaling $327.15
AGENCY RESPONSE
VPP asked the administrator to repay the State for the cost of
the personal calls, which he did in August 2002. Further, VPP
instructed the administrator not to make personal calls using
his state-issued cellular phone. VPP will continue to monitor the
administrator’s cellular-phone usage. n
15 For a detailed description of the laws pertaining to the improper activities we discuss in
this chapter, see Appendix B.
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5544 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 5555
CHAPTER 12
Department of Forestry and Fire
Protection: Misuse of State Property
and Resources
ALLEGATION I2002-631
An employee of the Department of Forestry and Fire
Protection (CDF) parked her motor home on state
grounds without paying the associated rent and utilities.
RESULTS AND METHOD OF INVESTIGATION
We asked CDF to investigate the complaint on our behalf. We
obtained photographs showing that the employee apparently
connected to state utilities by running an electrical cord from
her motor home to an adjacent building, and we forwarded
these to CDF. CDF substantiated that the employee parked her
motor home adjacent to a department emergency-command
center (command center) without paying the appropriate rental
fees as department and state policy require.16
To investigate the allegation, CDF reviewed relevant department
and state policies and interviewed the manager of the unit
where the employee worked. The manager said that the
employee was allowed to park her motor home next to the
command center and sleep in it during nonwork hours because
her residence was a considerable commute from the unit and
sleeping quarters at the unit were limited. Nevertheless, the
employee received a personal benefit because she was not asked
to pay the required rental fees.
AGENCY RESPONSE
CDF reported that the employee has permanently removed the
motor home from the unit and is no longer using state utilities
for personal use.
16 For a more detailed description of these policies, see Appendix B.
5544 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 5555
We conducted this review under the authority vested in the California State Auditor by
Section 8547 et seq. of the California Government Code and applicable investigative and
auditing standards. We limited our review to those areas specified in the results and method
of investigation sections of this report.
Respectfully submitted,
ELAINE M. HOWLE
State Auditor
Date: April 17, 2003
Investigative Staff: Ken L. Willis, Manager, CPA
Scott Denny, CPA, CFE
Cynthia A. Sanford, CPA
Mike Urso
Audit Staff: Theresa M. Carey, CPA
Renju Jacob
Daniel Jones
Sang Park
5566 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 5577
APPENDIX A
Activity Report
The Bureau of State Audits (bureau), headed by the state
auditor, has identified improper governmental activities
totaling $11.6 million since July 1993, when it reactivated
the Whistleblower Hotline (hotline), formerly administered
by the Office of the Auditor General. These improper activities
include theft of state property, false claims, conflicts of
interest, and personal use of state resources. The state auditor’s
investigations also have substantiated improper activities that
cannot be quantified in dollars but that have had a negative
social impact. Examples include violations of fiduciary trust,
failure to perform mandated duties, and abuse of authority.
Although the bureau investigates improper governmental
activities, it does not have enforcement powers. When it
substantiates allegations, the bureau reports the details to
the head of the state entity or to the appointing authority
responsible for taking corrective action. The California
Whistleblower Protection Act (act) also empowers the state
auditor to report these activities to other authorities, such as law
enforcement agencies or other entities with jurisdiction over the
activities, when the state auditor deems it appropriate.
The individual chapters describe the corrective actions that
agencies took on cases in this report. Table A.1 on the follow-
ing page summarizes all the corrective actions that agencies
have taken since the bureau reactivated the hotline. In addition,
dozens of agencies have modified or reiterated their policies and
procedures to prevent future improper activities.
5566 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 5577
TABLE A.1
Corrective Actions Taken
July 1993 Through January 2003
Type of Corrective Action Instances
Referrals for criminal prosecution 73
Convictions 7
Job terminations 48
Demotions 10
Pay reductions 13
Suspensions without pay 13
Reprimands 145
New Cases Opened
August 2002 Through January 2003
From August 1, 2002, through January 31, 2003, we opened
237 new cases.
We receive allegations of improper governmental activities in
several ways. Callers to the hotline at (800) 952-5665 reported
127 (54 percent) of our new cases.16 We also opened 108 new
cases based on complaints we received in the mail and three
based on complaints from individuals who visited our office.
Figure A.1 shows the sources of all the cases we opened from
August 2002 through January 2003.
FIGURE A.1
Sources of 237 New Cases Opened
August 2002 Through January 2003
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16 In total, we received 2,115 calls on the hotline from August 2002 through January 2003.
However, 1,357 (64 percent) of the calls were about issues outside our jurisdiction. In
these cases, we attempted to refer the caller to the appropriate entity. An additional 637
(29 percent) were related to previously established case files.
5588 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 5599
Work on Investigative Cases
August 2003 Through January 2003
In addition to the 237 new cases we opened during this six-
month period, we had 84 previous cases awaiting review
or assignment as of January 31, 2003: 22 were still under
investigation, either by this office or by other state agencies, or
were awaiting completion of corrective action. Consequently,
343 cases required some review during this period.
After reviewing the information we gathered from complainants
and preliminary reviews, we concluded that 138 cases did not
warrant complete investigation because of lack of evidence.
The act specifies that the state auditor can request the assistance
of any state entity or employee in conducting an investigation.
From August 1, 2002, through January 31, 2003, state agencies
investigated 31 cases on our behalf and substantiated allegations
on nine (64 percent) of the 14 cases they completed during
the period. In addition, we independently investigated nine
cases and substantiated allegations on four of the five cases
we completed during the period. As of January 31, 2002, we
had 164 cases awaiting review or assignment. With the
Department of Industrial Relations, we investigated and
substantiated allegations on one other case. Figure A.2
shows the disposition of the 343 cases we worked on from
August 2002 through January 2003.
FIGURE A.2
Disposition of 343 Cases
August 2002 Through January 2003
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���������� ������
��� ���
5588 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 5599
6600 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 6611
APPENDIX B
State Laws, Regulations, and Policies
This appendix provides more detailed descriptions of the
state laws, regulations, and policies that govern employee
conduct and prohibit the types of improper governmental
activities that this report describes.
CAUSES FOR DISCIPLINING STATE EMPLOYEES
The California Government Code, Section 19572, enumerates
the various causes for disciplining state civil service employees.
These causes include incompetency; inefficiency; inexcusable
neglect of duty; insubordination; dishonesty; misuse of state
property; fraud in securing employment; and other failure of
good behavior, either during or outside of duty hours, of a
nature that causes discredit to the appointing authority or the
person’s employment with the State.
CRITERIA CONCERNING CONTRACTING
Chapters 1 and 4 report contracting improprieties.
The California Government Code, Section 1090, prohibits state
employees from having a financial interest in any contract in
which they participate in making a decision in their official
capacity. The penalties for any employee who willfully violates
this prohibition are a fine of not more than $1,000 or imprison-
ment in state prison; the employee is permanently disqualified
from holding any office in the State.
REQUIREMENTS AND PROHIBITIONS OF THE POLITICAL
REFORM ACT OF 1974
Chapters 1 and 4 report violations of the Political Reform Act.
Section 87100 of the California Government Code, part of the
Political Reform Act of 1974, states that no public official shall
make, participate in making, or in any way attempt to use an
official position to influence a government decision in which
that public official knows or has reason to know that he or she
has a financial interest. The law defines a financial interest as
6600 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 6611
any business entity in which the public official holds an office,
is an employee, or has a direct or indirect investment of $1,000
or more. Participation in decision making includes negotiations,
advice by way of research, investigation, or preparation of
reports or analyses for the decision maker.
The California Government Code, Section 87407, specifies
that no state administrative official, elected state officer, or
designated employee of the Legislature shall make, participate
in making, or use his or her official position to influence
any governmental decision directly relating to any person
with whom he or she is negotiating, or has any arrangement
concerning prospective employment.
REGULATIONS COVERING TRAVEL EXPENSE REIMBURSEMENTS
AND PAYMENT OF RELOCATION EXPENSES
Chapter 2 reports improper payment of travel or commuting
expenses.
The California Code of Regulations, Title 2, Section 599.615.1,
decrees that each state agency shall determine the necessity
for travel and that such travel shall represent the State’s
best interest. Section 599.616.1(a) prohibits payment
of per diem expenses such as meals and lodging if the
employee incurs the expense within 50 miles of headquarters.
Section 599.616.1(b) specifies that a place of primary dwelling
shall be designated for each state officer and employee and that
the primary dwelling shall be defined as the actual dwelling
place of the employee that bears the most logical relationship to
the employee’s headquarters and shall be determined without
regard to any other legal or mailing address.
Section 599.626.1 of the California Code of Regulations
stipulates that reimbursement for travel expenses will be made
only for the method of transportation that is in the State’s
best interest and, regardless of the employee’s normal mode of
transportation, disallows expenses that arise from travel between
home or garage and headquarters. When a trip begins or ends
at the employee’s home, the distance the employee travels
shall be computed from the lesser of the employee’s home or
headquarters.
Section 599.638.1(d) of the California Code of Regulations
requires state officers and employees to state the purpose of each
trip and meal for which they claim reimbursement.
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Finally, the California Code of Regulations, Section 599.723.1,
allows employees who must change their place of residence
for the purpose of accepting employment with the State, with
advance approval of the director of the Department of Personnel
Administration, to receive reimbursement for a maximum of
30 days’ temporary lodging and meals at their headquarters
location. The Code of Regulations further allows employees to
receive reimbursement for travel from the old residence to the
new residence at a rate of 9 cents per mile.
CRITERIA GOVERNING STATE MANAGERS’
RESPONSIBILITIES
Chapters 3 and 10 report weaknesses in management
controls.
The Financial Integrity and State Manager’s Accountability Act
of 1983 (act) contained in the California Government Code,
beginning with Section 13400, requires each state agency
to establish and maintain a system or systems of internal
accounting and administrative controls. Internal controls are
necessary to provide public accountability and are designed
to minimize fraud, abuse, and waste of government funds.
In addition, by maintaining these controls, agencies gain
reasonable assurance that the measures they adopt protect state
assets, provide reliable accounting data, promote operational
efficiency, and encourage adherence to managerial policies.
The act also states that the elements of a satisfactory system of
internal accounting and administrative control shall include a
system of authorization and record-keeping procedures adequate
to provide effective accounting control over assets, liabilities,
revenues, and expenditures. Further, this act requires that the
agency correct promptly any weaknesses it detects.
INCOMPATIBLE ACTIVITIES DEFINED
Chapters 3, 8, 9, and 11 report incompatible activities.
Prohibitions on incompatible activity exist to prevent
state employees from bending to outside influences in the
performance of their official duties or from receiving rewards
from outside entities for any official actions. Section 19990 of
the California Government Code prohibits a state employee
from engaging in any employment, activity, or enterprise that is
clearly inconsistent, incompatible, in conflict with, or inimical
to his or her duties as a state officer or employee. This law
6622 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 6633
specifically identifies certain incompatible activities, including
using state time, facilities, equipment, or supplies for private
gain or advantage.
It also includes using the prestige or influence of the State for
one’s own or another’s private gain or advantage. In addition,
it prohibits state employees from receiving or accepting money
or any other consideration from anyone other than the State for
performing his or her duties.
CRITERIA CONCERNING BIDDING REQUIREMENTS
Chapter 3 reports failure to follow bidding requirements.
Public Contract Code, Section 100, provides all qualified bidders
with a fair opportunity to bid, thereby stimulating competition
in a manner conducive to sound fiscal practices. Additionally,
Public Contract Code, Section 10329, states that no person shall
willfully split a single transaction into a series of transactions for
the purposes of evading bidding requirements.
The Department of General Services has delegated purchasing
authority to the Department of Mental Health (DMH) for
purchases under $15,000 and requires DMH employees to
obtain a minimum of two quotes for all purchases over a
certain amount. For fiscal year 1998–99, this amount was
$1,000; for fiscal years 1999–2000 and 2000–01, it was
$2,500. Atascadero State Hospital purchasing procedures
require employees to obtain a minimum of three bids for any
requisitions over a certain amount. For fiscal year 1998–99, this
amount was $200; for fiscal years 1999–2000 and 2000–01 it
was $500. Hospital purchasing procedures require employees to
obtain three written bids for requisitions greater than $2,500.
PROHIBITIONS AGAINST CONFLICTS OF INTEREST
Chapters 3 and 4 report conflicts of interest.
Section 10410 of the California Public Contract Code specifically
prohibits a state employee from contracting on his or her own
behalf with any state agency to provide services or goods.
Further, it prohibits state employees from engaging in any
employment, activity, or enterprise for which they receive
compensation or in which they have a financial interest and
that is sponsored or funded by any state agency or department
6644 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 6655
through or by a state contract unless the employment, activity,
or enterprise is required as a condition of the employee’s regular
state of employment.
Furthermore, Section 10411 prohibits former employees of the
State from entering into any contract in which the employee
engaged in any of the negotiations, transactions, planning,
arrangements, or any part of the decision-making process
relevant to the contract while employed by the State for the
two-year period beginning on the date the person left state
employment.
Additionally, DMH Policy Directive 713 prohibits employees
from seeking or receiving any gratuity, gifts, personal loans, or
discounted property or services from anyone doing business
with the department.
PROHIBITIONS AGAINST NEPOTISM
Chapters 4 and 10 report violations of nepotism policies.
DMH’s nepotism policy (Special Order No. 420) specifically
prohibits work situations in which one or more members of a
personal relationship are in a direct supervisor-subordinate
relationship. Personal relationships include, but are not
limited to, associations by blood, adoption, marriage, and/or
cohabitation or romantic and sexual relationships.
The California State University’s Executive Order 340 states that
no one may serve in capacities that require him or her to make
decisions on a close relative’s personnel status.
TRAINING REQUIRED OF PEACE OFFICERS
Chapter 5 reports failure to ensure that a peace officer met
training requirements.
The California Penal Code (code), Section 832, states that peace
officers shall satisfactorily complete an introductory course
of training that the Commission on Peace Officer Standards
and Training prescribes. With few exceptions and according
to Section 832(e), any person completing the described
training who has a three-year or longer break in service as a
peace officer shall pass the examination described in the code
prior to exercising the powers of a peace officer.
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CRITERIA CONCERNING HIRING PRACTICES
Chapter 6 discusses illegal appointments.
Section 18900(a) of the California Government Code decrees
that the State shall establish eligibility lists as a result of free
competitive examinations open to persons who lawfully may
receive appointments to any position within the class for which
these examinations are held and who meet the minimum
qualifications requisite to the performance of the duties
of that position as prescribed by the specifications for the
class or by board rule. Further, Section 19050 requires the
appointing powers to fill all civil service appointments,
including promotions, in strict accordance with the civil
service laws and rules.
The Personnel Management Policy and Procedures Manual,
Section 395, provides examples of illegal appointments,
including a department’s allowing a person to compete in an
examination when the person does not meet the minimum
qualifications for competition and later appoints that person
from the eligibility list.
PROHIBITIONS AGAINST USING STATE RESOURCES FOR
PERSONAL GAIN
Chapters 7, 9, and 12 report personal use of state resources.
The California Government Code, Section 8314, prohibits state
officers and employees from using state resources such as land,
equipment, travel, or time for personal enjoyment, private gain,
or personal advantage or for an outside endeavor not related to
state business. If the use of state resources is substantial enough
to result in a gain or an advantage to an officer or employee for
which a monetary value may be estimated, or a loss to the State
for which a monetary value may be estimated, the officer or
employee may be liable for a civil penalty not to exceed $1,000
for each day on which a violation occurs plus three times the
value of the unlawful use of state resources.
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CRITERIA CONCERNING EXAMINATION SECURITY
Chapter 8 reports a breach in examination security.
The California Government Code, Section 19680(c), states that it
is unlawful for any person willfully to furnish to any person any
special or secret information for the purpose of either improving
or injuring the prospects of any person examined or certified or
to be examined or certified.
Further, according to Section 19681(b), it is unlawful for any
person to obtain examination questions or other examination
material except by specific authorization either before,
during, or after an examination or use or purport to use any
such examination questions or materials for the purpose of
instructing, coaching, or preparing candidates for examinations.
CRITERIA GOVERNING TELECOMMUTING EMPLOYEES
Chapter 10 reports on violations of telecommuting policies.
The telecommuting agreement of California State University,
Northridge, states that the employee will meet with the
supervisor to receive assignments and to review completed
work. Further, staff is responsible for arranging to secure new
work and for returning completed work to the office in an
orderly and timely manner.
CRITERIA CONCERNING HOUSING AND
SPACE RENTAL CHARGES
Chapter 12 reports on violations of rental regulations.
The California Department of Forestry and Fire Protection’s
(CDF) Accounting Procedures Handbook, Section 3639.7.1,
requires CDF units to use a rental agreement when renting
housing units, trailer pads, and spaces to employee-tenants.
Further, Section 3639.6.1 states that the employee-tenant will
pay the most current fair-market rental rates unless the current
collective bargaining unit agreements limit these.
Section 599.645(b) of the California Code of Regulations, Title 2,
states that the monthly space rental charge for a privately
owned trailer is $9 per month.
6666 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 6677
THE PROHIBITION AGAINST MAKING GIFTS OF
PUBLIC FUNDS
Chapter 12 reports a situation that constituted a gift of
public funds.
The California Constitution, Article XVI, Section 6, prohibits
gifts of public funds. In determining whether to consider an
appropriation of public funds a gift, the primary question is
whether funds are to be used for a public or private purpose.
6688 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 6699
APPENDIX C
Incidents Uncovered by Other
Agencies
Section 20080 of the California State Administrative
Manual requires state government departments to notify
the Bureau of State Audits (bureau) and the Department
of Finance of actual or suspected acts of fraud, theft, or
other irregularities they have identified. What follows is a
brief summary of incidents involving state employees that
departments reported to the bureau from August 2002 through
January 2003. Although many state agencies do not yet report
such irregularities as required, some vigorously investigate such
incidents and put considerable effort into creating policies and
procedures to prevent future occurrences. (Note that all the
incidents we show in Appendix C have been resolved; we will
not publish any report that would interfere with or jeopardize
any ongoing internal or criminal investigation.)
Seven state entities notified the bureau of 28 instances of
improper governmental activity that they had resolved from
August 2002 through January 2003. Those entities were the
California State University system, the Department of Forestry
and Fire Protection, the Department of Motor Vehicles, the
Franchise Tax Board, the Department of Rehabilitation, the
Department of Social Services, and the Department of Parks
and Recreation. Incidents resulting in monetary loss to the
State totaled $432,431. Violators’ restitution of $203,903 has
mitigated the financial losses of some of these entities.
CALIFORNIA STATE UNIVERSITY
Five California State University campuses reported improper
governmental activities. One campus reported two separate
incidents involving fraudulent activity. In one case, two
employees improperly used $610 from an auxiliary organization
for bridal and baby showers while claiming the expenses were
for staff training. The campus suspended the two employees for
30 days without pay. A third employee improperly approved
these expenses and was suspended for three days without pay.
A second case involved a nonstate employee’s attempt to cash
6688 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 6699
a payroll check he had obtained fraudulently. Although the
employee who was responsible for the check stock from which
the check was missing, denied any direct involvement with the
impropriety; the campus held her responsible for the incident
and terminated her within her probationary period because
she failed to demonstrate she could perform her duties in an
acceptable manner.
A second campus also reported two incidents of improper
governmental activity. The first involved an employee whom
the campus suspected of improper recruiting practices. In the
course of the investigation, the campus obtained information
indicating that the employee was also working for several
campus and noncampus vendors during the normal working
days, thus abusing both state funds and resources. The employee
ultimately resigned before the end of the investigation. In
another investigation, this same campus reported a loss of
nearly $22,000 as a result of a student assistant’s embezzlement
of parking meter funds. The campus terminated the student
assistant, and the courts later convicted him of felony grand
theft. The campus expects full restitution of these funds.
An additional two campuses reported incidents of
embezzlement. One campus reported that a state employee
embezzled $152,000 over four years. The campus terminated
the individual, who served nearly five months in jail and
has made full restitution of all the stolen funds. The other
campus determined that a temporary employee working as a
cashier had a cash shortage of more than $2,000 during two
cashiering sessions. The campus terminated the employee’s
services after she failed to report to work. The campus has not
been able to locate the employee to determine the cause of the
shortage or to recover the misssing funds.
A fifth campus reported that an employee fraudulently claimed
$70,000 for travel and entertainment costs, improperly
transferred $42,000 of campus funds to other projects, and
forged federal audits that cost the campus $50,000 to correct.
The employee resigned his position and made partial restitution.
The courts found the employee guilty on nine felony charges
and sentenced him to county jail for one year.
7700 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 7711
DEPARTMENT OF FORESTRY AND FIRE PROTECTION
The Department of Forestry and Fire Protection (CDF)
investigated an incident of embezzlement. The employee
claimed and received payment for $3,800 in improper salary
and travel advances from several funds, including one of which
she was custodian. In addition to demoting the employee, CDF
required her to make full restitution of these funds and barred
her access to all departmental fiscal functions in the future.
DEPARTMENT OF MOTOR VEHICLES
The Department of Motor Vehicles (DMV) advised us of
16 investigations that its staff completed, which substantiated
improper activities by DMV employees. One of these
investigations involved an employee selling fraudulent driver’s
licenses or other related documents to as many as 37 people,
many of whom were undocumented immigrants. DMV
estimates that these individuals paid a total of $28,000 for the
privilege of driving; none took the written, vision, or driving
tests. The DMV also uncovered the following improprieties:
• One employee inappropriately touched clients during the
driving portion of the exam. As a result of its investigation,
the department terminated the employee.
• In order to avoid assessment fees, one employee filed
falsified documents and caused another employee to enter
falsified documents on his behalf. The employee transferred
to another state department before DMV completed its
investigation, and it has referred this case to the legal
authorities for further action. DMV also investigated and
substantiated 13 other incidents of improper database access
or other computer-related improprieties.
FRANCHISE TAX BOARD
The Franchise Tax Board (FTB) reported that an employee
fraudulently cashed approximately $55,000 worth of checks
by altering the payee’s name on checks that taxpayers had
submitted for payment of taxes. FTB terminated the employee.
7700 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 7711
DEPARTMENT OF REHABILITATION
The Department of Rehabilitation (DOR) investigated an
employee who altered a travel advance check that DOR had
issued to another employee. In the course of its investigation,
DOR determined that the employee also stole cash and personal
belongings from coworkers, resulting in a total theft of nearly
$700 in cash as well as other items including two credit cards.
The employee voluntarily resigned.
DEPARTMENT OF SOCIAL SERVICES
In response to an anonymous complaint, the Department of
Social Services (DSS) investigated and substantiated that an
employee improperly used both his e-mail account and Internet
access for personal use. DSS noted that during a 76-hour
period, the employee downloaded various unapproved
programs. It also noted that 65 of the 87 e-mails the employee
sent or received during this time were of a personal nature.
After determining that the employee had spent only 25 percent
of his work hours on work-related activities during this time,
DSS counseled the employee and advised him that any similar
conduct in the future could result in adverse action.
DEPARTMENT OF PARKS AND RECREATION
In response to a law enforcement agency’s inquiry, the
Department of Parks and Recreation (DPR) investigated an
employee who fraudulently rented storage facilities under the
name of California State Parks Nonprofit. DPR also concluded
that the employee stole $721 worth of state property. It
dismissed the employee, whom the courts subsequently
convicted of these and other charges unrelated to his state
employment.
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INDEX
Allegation
Department/Agency Number Allegation Page Number
California State University, I2002-802, Violations of telecommuting and nepotism policies 49
Northridge I2000-877
Developmental Services, Porterville I2002-952 Illegal hiring 39
Developmental Center
Developmental Services, Sonoma I2000-676 Failure to ensure that a peace officer met training 35
Developmental Center requirements
Fish and Game I2002-636, Mismanagement, contracting improprieties, 21
I2002-725, conflicts of interest, and discreditable conduct
I2002-947
Forestry and Fire Protection I2002-964 Misuse of state resources and equipment 47
Forestry and Fire Protection I2002-631 Misuse of state property and resources 55
Health and Human Services Agency I2002-652 Improper contracting practices and conflicts of 7
Data Center interest
Industrial Relations I2002-605 Improper travel, lodging, and relocation expenses 13
Industrial Relations I2002-988 Breach of security during an examination 45
Mental Health, Atascadero State I2000-649 Improper contracting practices, conflicts of interest, 27
Hospital incompatible activities, and violations of nepotism
policy
Mental Health, Vacaville Psychiatric I2002-726 Improper use of state telephone 53
Program
San Jose State University I2002-795 Misuse of state equipment 43
7722 California State Auditor Investigative Report I2003-1 California State Auditor Investigative Report I2003-1 7733
cc: Members of the Legislature
Office of the Lieutenant Governor
Milton Marks Commission on California State
Government Organization and Economy
Department of Finance
Attorney General
State Controller
State Treasurer
Legislative Analyst
Senate Office of Research
California Research Bureau
Capitol Press
7744 California State Auditor Investigative Report I2003-1