CSA
Summary
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Investigations
of Improper
Activities by
State Employees:
July 2003 Through December 2003
March 2004
I2004-1
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March 24, 2004 Investigative Report I2004-1
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
July 2003 through December 2003.
Respectfully submitted,
ELAINE M. HOWLE
State Auditor
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CONTENTS
Summary 1
Chapter 1
Department of Corrections, California State Prison-
Los Angeles County: Misappropriation of State Funds 7
Chapter 2
California Youth Authority: Incompatible Activities
and Misuse of State Resources 15
Chapter 3
Department of Social Services: Incompatible Activities,
Misuse of State Resources, and Falsification of
Educational Background 19
Chapter 4
Department of Consumer Affairs, Bureau for Private
Postsecondary and Vocational Education: Improper
Disclosure of Confidential Information 21
Chapter 5
California Unemployment Insurance Appeals Board:
Improper Contracting 23
Chapter 6
Department of Transportation: Misappropriation
of State Funds 27
Chapter 7
Office of Criminal Justice Planning:
Conflict of Interest 29
Chapter 8
Department of Corrections, Pleasant Valley
State Prison: Improper Hiring 31
Chapter 9
Department of Forestry and Fire Protection:
Misuse of State Resources and Equipment 33
Chapter 10
Department of Transportation: Misrepresentation of
Educational Qualifications 35
Chapter 11
Department of Transportation: Misuse of
State Property 39
Chapter 12
Department of Corporations: Misuse of
State Equipment 41
Chapter 13
Department of Justice: Improper Use of
State Resources and Equipment 43
Appendix A
Activity Report 45
Appendix B
State Laws, Regulations, and Policies 49
Appendix C
Incidents Uncovered by Other Agencies 55
Index 57
California State Auditor Report I2004-1 11
SUMMARY
RESULTS IN BRIEF
The Bureau of State Audits (bureau), in accordance with the
California Whistleblower Protection Act (Whistleblower Act)
contained in the California Government Code, beginning
Investigative Highlights . . . with Section 8547, receives and investigates complaints of
improper governmental activities. The Whistleblower Act defines
State employees engaged in
an “improper governmental activity” as any action by a state
improper activities, including
agency or employee during the performance of official duties that
the following:
violates any state or federal law or regulation; that is economically
þ Misappropriated money wasteful; or that involves gross misconduct, incompetence, or
the California State
inefficiency. The Whistleblower Act authorizes the state auditor
Prison-Los Angeles County
received from production to investigate allegations of improper governmental activities
companies that filmed at and to publicly report on substantiated allegations. To enable
the prison.
state employees and the public to report these activities, the
þ Directed employees to bureau maintains the toll-free Whistleblower Hotline (hotline):
perform tasks related to (800) 952-5665 or (866) 293-8729 (TTY).
his outside employment
on state time.
If the bureau finds reasonable evidence of improper governmental
þ Used state resources to activity, it confidentially reports the details to the head of the
operate a private business. employing agency or to the appropriate appointing authority. The
Whistleblower Act requires the employer or appointing authority
þ Failed to deposit recycling
money received for to notify the bureau of any corrective action taken, including
materials state employees disciplinary action, no later than 30 days after transmittal of the
collected from highways
confidential investigative report and monthly thereafter until the
into a state bank account.
corrective action concludes.
þ Participated in the
formation of a contract This report details the results of the 13 investigations
with a company
completed by the bureau or by other state agencies on our
employing her spouse.
behalf between July 1, 2003, and December 31, 2003, that
þ Misrepresented professional substantiated complaints. This report also summarizes actions
qualifications to meet the
that state entities took as a result of investigations presented
minimum requirements of
here or reported previously by the bureau. Following are
a state position.
examples of the substantiated improper activities and actions
þ Used a state-owned
the agencies have taken to date.
computer to visit 3,000
adult-oriented Web sites.
continued on next page
California State Auditor Report I2004-1 11
State departments engaged DEPARTMENT OF CORRECTIONS, CALIFORNIA STATE
in the following PRISON-LOS ANGELES COUNTY
improper activities:
The California State Prison-Los Angeles County (Los Angeles
þ Contracted with one of its
County Prison) of the Department of Corrections (Corrections)
employees and paid her
$13,579 for interpreting mismanaged $3,300 it collected from television and motion
and translating services. picture production companies that filmed at the prison for
þ Hired an employee costs prison staff incurred when providing security for film
who did not meet the production activities. An employee responsible for coordinating
minimum qualifications with production companies misappropriated $1,500 that the
for the position.
Los Angeles County Prison received from a television show for
filming at the prison by directing money that should have been
deposited into the department’s general operating fund into the
prison’s employee association, an association used to support
activities boosting employee morale. Additionally, Los Angeles
County Prison could not demonstrate that it was reimbursed the
$1,800 in costs it incurred to accommodate filming parts of two
movies at the prison.
Los Angeles County Prison also participated in an improper plan to
route $4,150 in donations it received from production companies
through an inmate religious account before subsequently
transferring the money into the employee association so that
donors could claim their donation as a tax-deductible contribution.
CALIFORNIA YOUTH AUTHORITY
A manager with the California Youth Authority (Youth Authority)
violated state law by engaging in incompatible activities and
wasting state resources when he directed two of his employees
to perform work related to his outside employment during their
state work time.
DEPARTMENT OF SOCIAL SERVICES
A Department of Social Services (Social Services) employee used
state equipment and personnel to conduct his personal business.
The employee excessively used state resources including fax,
Internet, e-mail, telephone, printer, and computer to run his
personal business and to conduct other personal matters. In
addition, the employee directed another employee to complete
faxes relating to his personal matters and his personal business
on state time.
22 California State Auditor Report I2004-1 California State Auditor Report I2004-1 33
Social Services also obtained evidence that led them to question
whether the employee ever obtained a college diploma, a
requirement for appointment to his position. Social Services
asked the employee for proof of college completion, but he
resigned in June 2003 instead. Social Services later confirmed
that the employee had not received a college diploma.
CALIFORNIA UNEMPLOYMENT INSURANCE
APPEALS BOARD
The Unemployment Insurance Appeals Board (Appeals Board)
paid one of its employees $13,579 for interpreting and translating
services she provided between September 2002 and July 2003.
State law prohibits a state employee from contracting on his or her
own behalf with any state agency to provide services or goods.
An Appeals Board official, Official A, sent an e-mail notification
in 1998 to other Appeals Board officials, notifying them that
state employees were not allowed to enter into such contracts.
Regardless, the employee told us that she checked with both
the official in charge of her office, Official B, and her supervisor
before she began to work as a contractor and that these officials
gave her permission to do so. According to Official B, other
employees had contracted with the Appeals Board in the past,
and both the employee and Official B said they were unaware of
the prohibition.
DEPARTMENT OF TRANSPORTATION
Supervisors from two different Department of Transportation
(Caltrans) districts improperly spent money their employees
had received for recycling materials collected from highways.
A maintenance supervisor from one district (Supervisor A)
received $865.80 for material that his employees collected
from highways. Supervisor A directed an employee to take
the materials to a recycling company that paid the employee
in cash, and the employee gave the money to Supervisor A.
Supervisor A stated he spent the money on building crew morale
and did not personally benefit in any manner.
A supervisor from another district (Supervisor B) also received
money his employees collected from recycling materials.
Supervisor B instructed his employees to collect checks payable
to him from recycling companies, which Caltrans reported
he probably deposited in his personal bank account. District
22 California State Auditor Report I2004-1 California State Auditor Report I2004-1 33
management did not determine or inquire about how much
money Supervisor B received from recycling, or when he started
this practice, because he discontinued it in July 2002, a year
before district management completed its investigation. Caltrans
determined that Supervisor B spent the money he received on a
barbecue for his employees.
Caltrans intends to ask for reimbursement for the $865.80
that Supervisor A received but does not intend to ask for
reimbursement from Supervisor B because he discontinued the
practice before Caltrans completed its investigation. Caltrans
instructed Supervisor B’s staff to have the recycling company
make the checks out to Caltrans in the future and send them
directly to its accounting division for deposit. It also plans to
provide training to Supervisor A’s staff to ensure proper handling
of money received from recycling. Caltrans also plans to place a
letter of warning in Supervisor A’s personnel file.
OFFICE OF CRIMINAL JUSTICE PLANNING
A manager in the Office of Criminal Justice Planning (OCJP)
violated state law that prohibits a public officer from being
financially interested in a contract made in his or her official
capacity. The manager was directly involved in the formation of
a $641 contract between the OCJP and an office supply retailer
that employs the manager’s spouse.
DEPARTMENT OF CORRECTIONS, PLEASANT VALLEY
STATE PRISON
In April 1997 Pleasant Valley State Prison (Pleasant Valley Prison),
part of the Department of Corrections (Corrections), hired an
employee who did not possess the minimum requirements for
the position. The job specifications for the employee’s position
require the equivalent to graduation from college and completion
of one additional year, or 24 semester units, of graduate study in
an accredited school. The employee possessed a college degree
but completed only 12 semester units of graduate study related to
her discipline. As a result of this improper appointment, the State
paid the employee $86,000 more than she was entitled to receive
based on her qualifications.
44 California State Auditor Report I2004-1 California State Auditor Report I2004-1 55
DEPARTMENT OF FORESTRY AND FIRE PROTECTION
An employee of the California Department of Forestry and Fire
Protection (CDF) used his state computer to visit 3,000 adult-
oriented Web sites between September 2002 and December 2002.
As discipline for these infractions, CDF reported that it reduced
the employee’s pay by five percent for four months.
DEPARTMENT OF TRANSPORTATION
A Department of Transportation (Caltrans) employee
misrepresented his educational qualifications to meet the
minimum requirements when he applied for a position with
Caltrans. As discipline for these infractions, Caltrans reported
that it reduced the employee’s salary by 5 percent for three
months. It also reported that it will require all future employee
candidates with nonaccredited degrees to present evaluations
from a specific credential-evaluation organization, verifying
that they have the appropriate educational qualifications. n
44 California State Auditor Report I2004-1 California State Auditor Report I2004-1 55
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66 California State Auditor Report I2004-1 California State Auditor Report I2004-1 77
CHAPTER 1
Department of Corrections, California
State Prison-Los Angeles County:
Misappropriation of State Funds
ALLEGATION I2003-0896
The California State Prison-Los Angeles County
(Los Angeles County Prison) of the Department of
Corrections (Corrections) mismanaged money collected
from television and motion picture production companies that
filmed at the prison.
RESULTS AND METHOD OF INVESTIGATION
We investigated and substantiated the allegation. Los Angeles
County Prison failed to ensure the State was reimbursed for
$3,300 in costs prison staff incurred when providing security
for film production activities. Employee A, who was responsible for
coordinating with production companies, misappropriated $1,500
Los Angeles County Prison received from a television show for
filming at the facility by directing the money to an association
used to support activities related to boosting employee morale
rather than ensuring that the State was reimbursed for these
costs. By directing this money to the Los Angeles County Prison
employee association, Employee A violated state laws that require
state money to be deposited into the State Treasury and make it
a crime for any persons responsible for the receipt, safekeeping,
transfer, or disbursement of public money to misappropriate
state funds.1 Also, Los Angeles County Prison could not
demonstrate that it received $1,800 to reimburse costs it incurred
to accommodate filming parts of two movies at the facility. By
allowing the film companies to use the prison facilities without
reimbursing the prison for its costs, the Los Angeles County
Prison violated the state laws prohibiting gifts of public funds
for private purposes.
In addition, Los Angeles County Prison participated in an
improper plan to route $4,150 in donations it received from
production companies through an inmate religious account,
1For a more detailed description of the laws discussed in this chapter, see Appendix B.
66 California State Auditor Report I2004-1 California State Auditor Report I2004-1 77
Department of Corrections
so that donors could claim their donation as a tax-deductible
contribution, and subsequently transferred the money into an
employee association account. Because the employee association
lacked the authority to accept tax-deductible donations and
intended to use the money for purposes other than those listed as
eligible for tax-deductible contributions, Los Angeles County Prison
violated federal laws governing nonprofit religious organizations.
To investigate the allegation, we reviewed applicable state and
federal laws and Corrections policies and procedures. We also
reviewed records of productions filmed at the prison, the employee
association’s financial records, financial transactions involving
the prison inmate religious account, and records of production
companies that filmed at Los Angeles County Prison maintained
by the California Film Commission. Furthermore, we interviewed
employees at Corrections, an employee with the California Film
Commission, and representatives from the film industry.
BACKGROUND
Any Corrections institution may receive requests for permission
to conduct audio, video, or photographic activities. To address
these requests, Corrections developed policies and procedures
governing requests from news media, such as daily television or
radio stations, or from producers of non-news media. Non-news
productions, such as the documentaries, feature and short films,
and television series at issue in this report, must go through
screening, permitting, security, and approval processes before
Corrections will grant access to film crews.
Corrections policy also addresses how institutions should
bill production companies for costs the State incurs while
accommodating production requests and how institutions may
accept donations from these companies. Corrections policy
states that production companies must pay for personnel costs
when they disrupt the normal routine of the institution, require
special arrangements, or require the assignment of additional
personnel to cover the production crew. This policy is consistent
with the State Constitution’s prohibition against making a gift
of public funds or resources for a private purpose. Corrections
policy also allows institutions to receive contributions from the
production companies for the inmate welfare fund or another
beneficiary that has been approved by the Corrections director.
88 California State Auditor Report I2004-1 California State Auditor Report I2004-1 99
Department of Corrections
As we discuss later in this chapter, Los Angeles County Prison
solicited donations from production companies for its employee
association, which it used to promote employee morale by
paying for activities such as employee parties and bereavement
acknowledgements, or by participating in activities involving
community-based charities. The employee association is not a
legitimate nonprofit organization that is qualified to accept tax-
deductible donations.
AN EMPLOYEE MISAPPROPRIATED STATE FUNDS BY
DIRECTING A PRODUCTION COMPANY PAYMENT INTO
AN EMPLOYEE ASSOCIATION ACCOUNT
In violation of state laws, Employee A, an individual responsible
for coordinating with and billing production companies for costs
incurred by Los Angeles County Prison, directed a television show
that filmed at the facility to pay $1,500 to the prison’s employee
association, not to the State’s General Fund (General Fund), as a
reimbursement. On July 14, 2002, the television show’s film crew
shot a segment at the prison. However, we found no evidence
An employee directed that Employee A billed the television show for costs the prison
a production company incurred to accommodate the film crew or that the television
to pay $1,500 to an show reimbursed the State for these costs. The records Employee A
employee association fund, provided to us indicate that he instructed the television show
rather than reimburse the to make its payment to the employee association and that he
State for its costs. handled the payment as a donation. Two days after receiving this
payment, the employee association, which had only $254 in its
account beforehand, spent $800 for an employee barbecue.
Employee A’s mishandling of this money violated several state
laws. State law provides that state funds must be deposited in
the custody of the state treasurer unless otherwise authorized
by the Department of Finance. State law also provides
that any state employee who deposits state money in any
manner not prescribed may be subject to forfeiture of his or
her employment. Because the State had incurred expenses
in monitoring the television show production, the amount
received from the television show that covered these expenses
was subject to these requirements. In addition, Section 424 of
the California Penal Code makes it a crime for any public officer
or any other person charged with the receipt, safekeeping,
transfer, or disbursement of public money to knowingly keep a
false account, make a false entry or erasure in any account, use
public money for a purpose not authorized by law, or willingly
fail to transfer the money as required by law. Individuals in
88 California State Auditor Report I2004-1 California State Auditor Report I2004-1 99
Department of Corrections
violation of this law may also be disqualified from holding any
office in the State and are subject to imprisonment for up to
four years. California courts have held that all persons having
some degree of control over public funds are subject to this law
regardless of specific fraudulent intent.
BY FAILING TO ENSURE THE STATE WAS REIMBURSED
FOR COSTS IT INCURRED ON OTHER PRODUCTIONS,
LOS ANGELES COUNTY PRISON MADE A PROHIBITED
GIFT OF PUBLIC FUNDS
Since October 2001, 12 production crews filmed at Los Angeles
County Prison.2 Of these 12 productions, six shot scenes for
feature or short films, four filmed documentaries, and two taped
segments for television shows. Although it received some payments
from production companies to offset its costs, Los Angeles County
Prison failed to ensure the State was reimbursed for $3,300 of
The Los Angeles County those monitoring costs. As previously discussed, this includes a
Prison failed to ensure it $1,500 payment associated with a television production that
was reimbursed $1,800 Los Angeles County Prison did not return to the State. The
in costs incurred to remaining $1,800 relates to costs prison staff incurred while
accommodate two film providing security for two films shot in April and May 2002.
production companies Because it could not demonstrate the State had been reimbursed
filming there in 2002. the $1,800 for these private endeavors, Los Angeles County Prison
violated state law, which prohibits the State from making a gift of
public funds or resources for a private purpose.
In addition, the lack of accountability related to the collection
of this money violates state law requiring a system of internal
controls to guard against fraud and waste of government funds.
Specifically, the law requires each state agency to establish
and maintain a system or systems of internal accounting and
administrative controls. Necessary for public accountability,
internal controls are designed to minimize fraud, abuse, and
waste of government funds. Also, 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. Section 13400 of the California Government Code,
the Financial Integrity and State Manager’s Accountability
Act (Accountability Act) also states that the elements of a
satisfactory system of internal accounting and administrative
2We obtained this information from Los Angeles County Prison and the California Film
Commission, the state entity that issues film permits to production companies seeking
to film on state property.
1100 California State Auditor Report I2004-1 California State Auditor Report I2004-1 1111
Department of Corrections
controls shall include a system of authorization and record-
keeping procedures adequate to provide effective accounting
control over assets, liabilities, revenues, and expenditures.
Further, the Accountability Act requires that detected weaknesses
be corrected promptly.
Employee A, who was responsible for coordinating with these
two production crews, told us he assigned prison staff, including
himself, to monitor these productions. He also said he billed
each production company for the prison’s costs but could
not locate any of the records he said he had for these films.
Employee A admitted that although he believed he invoiced
the production companies for these costs, he never followed
up to ensure they were paid. Instead, he said, he instructed the
production companies to mail their payments to the Los Angeles
County Prison business services unit. However, a business
services unit manager we spoke with said he had no knowledge
of such payments. As a result, neither Employee A nor the
business services unit could demonstrate that Los Angeles
County Prison ever billed the production companies for these
costs nor that these production companies, if billed, ever
reimbursed the State.
LOS ANGELES COUNTY PRISON IMPROPERLY ROUTED
DONATIONS THROUGH AN INMATE RELIGIOUS
ACCOUNT BEFORE TRANSFERRING THE MONEY TO THE
EMPLOYEE ASSOCIATION
According to federal tax law, a charitable contribution is a
donation or gift to, or for the use of, a qualified organization.
Donors may treat these contributions as a deduction for
The Los Angeles County purposes of their federal income tax liability only if they make
Prison violated federal them to qualified organizations, which include nonprofit groups
tax laws by improperly that are religious, charitable, educational, scientific, or literary
directing $4,150 in in purpose. A qualified organization may only use the charitable
donations received from contributions it receives for those purposes for which the
production companies organization is created and holds money received “in trust” for
through an inmate those purposes.
religious account before
transferring the money Despite these requirements, a prison official approved a plan
into the employee recommended by Employee B to direct $4,150 in donations
association account. received from production companies through an inmate
religious account maintained by Los Angeles County Prison,
which was authorized to receive charitable contributions, before
transferring the money to the employee association, which was
1100 California State Auditor Report I2004-1 California State Auditor Report I2004-1 1111
Department of Corrections
not qualified to accept tax-deductible donations. As shown in
the Table, Los Angeles County Prison deposited donations of
$900, $250, $2,500, and $500 into the inmate religious account,
and then transferred the money to the employee association.
According to Employee B, she asked a subordinate who managed
the inmate religious account to accept these donations.
Employee B then had the money transferred to the employee
association, even though the association lacked the authority to
receive tax-deductible donations and intended to use the money
for nonqualifying purposes. The employee association used most
of the money, about $2,900, to purchase exercise equipment
for the prison employees’ gym. By improperly receiving and
handling these payments, Los Angeles County Prison violated
the laws governing charitable donations that require the money
be used for the purposes for which it was received.
TABLE
Productions Filmed at the Prison From October 2001 Through July 2003
Monitoring Monitoring Donations Payments
Costs Costs Not Directed Through Deposited
Date of Production Production Monitoring Returned to Returned to Inmate Religious to Employee
Production Shoot Crew Size Type Costs* the State the State Account Association
Production #1 10/17/01 2 Documentary 0 0 0 0 0
Production #2 04/29/02 6 Feature film $ 1,060 0 $1,060 0 0
Production #3 05/29/02 50 Feature film 740 0 740 0 0
Production #4 07/14/02 6 Television 1,500 0 1,500 0 $1,500
series
Production #5 11/19/02 20 Short film 2,148 $ 2,148 0 0 0
Production #6 12/08/02 170 Feature film 11,180 11,180 0 $ 900 900
12/09/02
Production #7 01/18/03 20 Short film 1,920 1,920 0 0 0
Production #8 02/19/03 10 Feature film 1,960 1,960 0 250 250
Production #9 03/22/03 50 Television 6,940 6,940 0 2,500 2,500
series
500 500
Production #10 04/08/03 2 Documentary 0 0 0 0 0
Production #11 06/13/03 3 Documentary 0 0 0 0 0
Production #12 07/17/03 3 Documentary 0 0 0 0 0
Totals $27,448 $24,148 $3,300 $4,150 $5,650
* For productions #4 through #9, monitoring costs represent the amounts Los Angeles County Prison received from production companies. For
documentaries (productions #1, #10, #11, and #12) Los Angeles County Prison reported it did not incur any monitoring costs. Because the prison
had no records for productions #2 and #3, we calculated monitoring costs based on our review of employee attendance records.
1122 California State Auditor Report I2004-1 California State Auditor Report I2004-1 1133
Department of Corrections
The diversion and use of these charitable contributions for a
purpose other than the religious purposes for which they were
received violates laws that require these contributions to be held
in trust and used only for the authorized purposes for which
they were received.
AGENCY RESPONSE
As of the date of this report, Corrections’ review was still ongoing
but it reported that the Los Angeles County Prison suspended the
use of the employee association funds and all activities related to
the employee association pending development of operational
procedures, bylaws, and direction from its management. The
Los Angeles County Prison is also reviewing all film records
to determine whether it billed and received payment from
production companies for monitoring costs. n
1122 California State Auditor Report I2004-1 California State Auditor Report I2004-1 1133
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1144 California State Auditor Report I2004-1 California State Auditor Report I2004-1 1155
CHAPTER 2
California Youth Authority:
Incompatible Activities and
Misuse of State Resources
ALLEGATION I2002-648
Am anager (Manager A) of the California Youth Authority
(Youth Authority) directed two of his employees
(employees A and B) to perform work related to his
outside employment on state time.
RESULTS AND METHOD OF INVESTIGATION
We asked the Youth Authority to investigate the allegation
on our behalf; it substantiated this and other allegations. To
investigate, the Youth Authority interviewed several of its
employees, including Manager A and employees A and B. In
addition, it reviewed state law, files from the computers of
employees A and B, and the time and attendance records of
Employee B.
Manager A violated state law by engaging in incompatible activities
and misusing state resources when he directed employees A and B
to perform tasks related to his outside employment as a teacher at
a community college during their state employment.3 Because
Manager A directed both employees to work on projects related
to his outside employment as a college instructor on state time,
the resources of the Youth Authority were used to perform
these projects.
IN VIOLATION OF STATE LAW, MANAGER A DIRECTED
EMPLOYEES A AND B TO PERFORM NONSTATE TASKS
RELATED TO HIS OUTSIDE EMPLOYMENT
State law prohibits employees from using state resources
for personal gain and from engaging in activities that are
incompatible with their duties as state employees. Manager A
violated these laws when he improperly directed two of his
3For a more detailed description of the laws discussed in this chapter, see Appendix B.
1144 California State Auditor Report I2004-1 California State Auditor Report I2004-1 1155
California Youth Authority
employees to spend state time assisting him on tasks related
to his outside employment as a college instructor. Although
Manager A and Employee B denied it, the Youth Authority
substantiated the allegation based on the statements of several
employees, including Employee A, who admitted that he
completed numerous projects for Manager A that were related
to Manager A’s outside employment. In addition, the Youth
Authority found a number of files from employees A and B’s
computers that related to Manager A’s outside employment.
Employee A admitted to completing numerous projects for
Manager A, some of which were projects related to Manager A’s
Employee A explained college classes. Manager A would present some of the projects
he felt threatened by in staff meetings and then use them for his college classes.
Manager A and completed Although the manager also used some of the course materials
projects related to these employees were directed to assist with during his state
Manager A’s college classes employment, the Youth Authority determined that other
to avoid being replaced by materials that the employees assisted with appear to have been
another employee. used solely in the manager’s outside employment. Employee A
explained he felt threatened by Manager A and completed the
projects to avoid being replaced by another employee.
Employee B denied working on Manager A’s nonstate projects.
When Youth Authority investigators questioned her about
the numerous documents they copied from her computer
that were related to Manager A’s college classes, she explained
that she could not remember typing some of the documents
and others were merely used as templates to complete state
projects. However, other employees stated that Employee B
completed tasks for Manager A that were related to his outside
employment. One employee apparently complained repeatedly
to a coworker that she felt overworked because Employee B
spent so much time doing work for Manager A’s college classes.
Although Employee B and Manager A denied the allegation, we
agree with the Youth Authority’s conclusion that Manager A
directed employees A and B to perform numerous projects
related to Manager A’s outside employment based on the
materials the Youth Authority found on employees A and B’s
computers and the statements of Youth Authority employees,
including Employee A.
1166 California State Auditor Report I2004-1 California State Auditor Report I2004-1 1177
California Youth Authority
AGENCY RESPONSE
In November 2003, the Youth Authority recommended a 30-day
suspension without pay for Manager A and employees A and B.
However, none of the employees served the suspension.
Manager A retired in December 2002, before the Youth
Authority completed its investigation. The Youth Authority is
proceeding with its recommendation regarding employees A
and B and expects to resolve the matter in a few months. n
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1188 California State Auditor Report I2004-1 California State Auditor Report I2004-1 1199
CHAPTER 3
Department of Social Services:
Incompatible Activities, Misuse of
State Resources, and Falsification
of Educational Background
ALLEGATION I2002-1042
AD epartment of Social Services (Social Services) employee
used a state phone and state fax machine to conduct his
outside personal business.
RESULTS AND METHOD OF INVESTIGATION
We asked Social Services to investigate on our behalf. Social Services
reported that it had already substantiated the allegation as
well as other improper activities. To investigate the allegation,
Social Services reviewed documents, fax logs, and the
employee’s e-mail, Internet, and phone usage. Social Services
also interviewed the employee.
State laws prohibit employees from using state resources for
personal gain and from engaging in activities that are incompatible
with their duties as state employees.4 Social Services found that
the employee used state resources, including fax, Internet,
e-mail, telephone, printer, and computer excessively, to run his
outside personal business and to conduct other personal matters.
In addition, it found that the employee directed another state
employee to complete faxes relating to his personal matters
and his personal business. Despite being warned of these
improprieties, beginning in April 2002, the employee continued
to misuse state resources until Social Services began a formal
review of the matter in February 2003 and initiated adverse
action against him in March 2003.
Furthermore, in April 2003, Social Services obtained evidence
that led it to question whether the employee ever obtained a
college degree, as required by the position. Social Services asked
the employee for proof of his college diploma, but he resigned
in June 2003 instead of supplying proof. Social Services later
4For a more detailed description of the laws discussed in this chapter, see Appendix B.
1188 California State Auditor Report I2004-1 California State Auditor Report I2004-1 1199
Department of Social Services
confirmed that the employee had not received his college
diploma. The employee may have violated state law, which
requires that an employee must accept an appointment in
good faith in order to be eligible to receive the compensation
Although required by his promised by the employer. State regulations further specify
position, the employee this obligation by requiring that a person accepting an
had not obtained a appointment with the State must provide complete, factual,
college degree. and truthful information necessary for a proper appointment.
The regulations further state that an employee must make
a reasonable attempt to seek correction of any aspect of the
appointment that he or she knows is illegal.
AGENCY RESPONSE
Social Services reported that it counseled the employee on several
occasions regarding state policy on the inappropriate use of state
time and resources and issued him a training plan. Social Services
also reported that it initiated adverse action against the employee
in March 2003 but did not complete the action because the
employee resigned from state service in June 2003. n
2200 California State Auditor Report I2004-1 California State Auditor Report I2004-1 2211
CHAPTER 4
Department of Consumer Affairs,
Bureau for Private Postsecondary
and Vocational Education: Improper
Disclosure of Confidential Information
ALLEGATION I2003-0652
The Bureau for Private Postsecondary and Vocational
Education (BPPVE), part of the Department of Consumer
Affairs (Consumer Affairs), improperly disclosed
confidential personal information.
RESULTS AND METHOD OF INVESTIGATION
We asked Consumer Affairs to investigate on our behalf and
it substantiated the allegation. To conduct its investigation,
Consumer Affairs reviewed applicable laws and documentation
related to the confidential information. In addition, it
interviewed BPPVE and Consumer Affairs staff and others.
BACKGROUND
The BPPVE is responsible for approving and regulating private
postsecondary educational institutions and for establishing
educational standards that serve as the minimum standard
for instructional quality and institutional stability for private
postsecondary schools in California. Its primary objective is
to develop a strong, vigorous, and widely respected private
postsecondary and vocational education sector. In performing
this role, the BPPVE regulates 3,000 educational institutions
serving an estimated 400,000 students.
In violation of state law,
BPPVE inadvertently
THE BPPVE IMPROPERLY DISCLOSED
mailed confidential loan
CONFIDENTIAL INFORMATION
information and Social
Security numbers to an The BPPVE violated state law when it mailed confidential
unauthorized outside party. student information for several students, including Social
Security numbers and loan information, to a student who had
2200 California State Auditor Report I2004-1 California State Auditor Report I2004-1 2211
Department of Consumer Affairs
submitted a request for her own personal loan information.
The Information Practices Act of 1977 (IPA) imposes various
requirements on state agencies concerning the collection, use,
and dissemination of personal information, and specifically
prohibits a state agency from disclosing any personal
information about an individual in a manner that links that
personal information to the individual, except under certain
specified circumstances. The IPA defines personal information to
include the name and Social Security number of an individual.
Related provisions of state law designed to ensure effective
compliance with the IPA require that state agencies enact
and maintain a permanent privacy policy. Consumer Affairs
concluded that the BPPVE’s inadvertent release of the students’
Social Security numbers and financial information violated both
the IPA and Consumer Affairs permanent privacy policy.
AGENCY RESPONSE
Consumer Affairs reported that the BPPVE immediately took
corrective actions to address the inadvertent release of personal
information. The BPPVE performed a comprehensive review of the
process it followed in this situation and noted that its procedures
were consistent with statutory requirements, but avoidable human
error caused the inappropriate disclosure. The BPPVE has now
centralized all its Public Records Act requests through a designated
employee overseen by the BPPVE’s deputy chief and, when
necessary, Consumer Affairs legal staff is consulted. n
2222 California State Auditor Report I2004-1 California State Auditor Report I2004-1 2233
CHAPTER 5
California Unemployment Insurance
Appeals Board: Improper Contracting
ALLEGATION I2003-0836
The California Unemployment Insurance Appeals Board
(Appeals Board) improperly contracted with one of its
employees and paid her $13,579 to provide interpreting
and translating services.5
RESULTS AND METHOD OF INVESTIGATION
We investigated and substantiated this allegation. To investigate
the allegation, we examined several types of documentation,
including all of the invoices submitted by the employee for
interpreting and translating services, files pertaining to cases the
employee worked on, and the employee’s time and attendance
records. In addition, we reviewed applicable laws and interviewed
Appeals Board employees.
BACKGROUND
The Appeals Board conducts hearings of cases concerning claims
for unemployment and disability benefits. These cases are appeals
of determinations made by the Employment Development
Department (EDD). The Appeals Board also holds hearings on
petitions from taxpayers concerning assessments made by EDD’s
tax branch. If the taxpayers are not proficient in English, they
may require the services of an interpreter. The Appeals Board is
responsible for providing an interpreter at the hearings and may
also need to translate correspondence from the taxpayer.
5Interpreting refers to verbal communications, whereas translating refers to written
communications.
2222 California State Auditor Report I2004-1 California State Auditor Report I2004-1 2233
California Unemployment Insurance Appeals Board
THE APPEALS BOARD IMPROPERLY CONTRACTED WITH
ONE OF ITS EMPLOYEES
In violation of state law, the Appeals Board paid one of its
employees $13,579 for interpreting and translating services she
provided between September 2002 and July 2003.6 State law
prohibits state employees from contracting on their own behalf
as independent contractors with any state agency to provide
services or goods. An Appeals Board official, Official A, sent an
e-mail in 1998 to several other board officials notifying them
that employees were not allowed to enter into contracts with
the Appeals Board. Regardless of this notice, the employee told
us that when she checked with both the official in charge of
The Appeals Board her office, Official B, and her supervisor before she began to
violated state law when work as a contractor, they gave her permission to contract with
it agreed to allow the her state employer. According to Official B, other employees
employee to work as a had contracted with the Appeals Board in the past, and both
contractor as long as she the employee and Official B said they were unaware of the
performed the work on prohibition. Officials are expected to be aware of the laws they
her own time. are charged with administering. As a result, the Appeals Board
violated state law when it agreed to allow the employee to work
as a contractor as long as she performed the work on her own time.
Official B told us that he did not receive Official A’s e-mail and
was therefore unaware of the prohibition. We confirmed that
at the time of Official A’s 1998 e-mail, Official B’s position was
not one that was included on Official A’s distribution list for the
e-mail message. In August 2003, the supervisor learned of
the prohibition when she attended a meeting for Appeals Board
support staff. On September 2, 2003, just over a month after we
began our investigation, Official A sent another e-mail to board
officials that reiterated the prohibition. This time Official B
received the e-mail, and he told us that he informed the employee
she would no longer be able to contract with the State.
THE EMPLOYEE CONTRACTED WITH THE STATE FOR
INTERPRETING SERVICES
The employee billed the State $7,929 for interpreting at
146 hearings. Interpreters are typically paid $55 for up to
90 minutes.7 We found only one hearing the employee
participated in that lasted 90 minutes, and most of the hearings
6 For a more detailed description of the laws discussed in this chapter, see Appendix B.
7 In the event that the taxpayer does not appear for the hearing, the interpreter is still
allowed to bill the State $55 for their time.
2244 California State Auditor Report I2004-1 California State Auditor Report I2004-1 2255
California Unemployment Insurance Appeals Board
were 20 minutes or less. For each day she works for the State,
the employee completes a sign-in sheet where she indicates the
beginning and ending time of her workday and typically makes
a notation regarding the length of her lunch period. Most of the
hearings for which the employee performed interpreting services
were scheduled close to noon, and the employee made notations
on the sign-in sheets to indicate she took only a half-hour lunch
that day because she was at a hearing.8 In almost every instance
when she billed the State for interpreting services, she made
a corresponding notation on the sign-in sheet to indicate that
fact. Therefore, it appears that the employee was performing the
interpreting work on her own time and was not in any way trying
to conceal the fact that she was performing contract work for the
Appeals Board.
THE EMPLOYEE ALSO PROVIDED TRANSLATING
SERVICES
The employee also performed 253 written translations at a cost
to the State of $5,650. Translators are paid $20 per hour for their
services. Taxpayers who are not proficient in English may submit
letters to the Appeals Board in their native language that then
must be translated to English. From about the time she began
performing translating work for the Appeals Board, it appears
the employee translated all or almost all of the letters requiring
translations that were written in her language of expertise.
According to the employee, when the Appeals Board received
documents that required translation, other board employees
would leave them on her desk. The employee told us that she
took the documents home and worked on them on her own time;
she usually printed the translated text at home but occasionally
e-mailed it to herself at work so she could print it there.
AGENCY RESPONSE
The Appeals Board stated that it was apparent the situation
occurred because Official B was not aware that Appeals Board
employees were prohibited from contracting with the State. This
prohibition is now covered in the Appeals Board’s mandatory
ethics training program. In addition, the executive director met
with Official B to review office procedures and provided him with a
counseling memorandum regarding the specific breach of rules. n
8The hearings are held in the same building in which the employee works.
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2266 California State Auditor Report I2004-1 California State Auditor Report I2004-1 2277
CHAPTER 6
Department of Transportation:
Misappropriation of State Funds
ALLEGATION I2002-874, I2002-981
Supervisors from two different Department of Transportation
(Caltrans) districts improperly spent money their
employees had received for recycling materials collected
from highways.
RESULTS AND METHOD OF INVESTIGATION
Caltrans investigated and substantiated the allegations. To
investigate, Caltrans district management interviewed the two
supervisors and other Caltrans employees.
Although state law strongly encourages the recycling of
various materials and specifically requires state agencies to
take various measures designed to promote recycling, two
supervisors violated the law by improperly spending recycling
money. Section 8314 of the Government Code 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.
Caltrans policy states that employees who receive recycling
money shall take the money directly to the district cashier
for deposit; Caltrans uses this money to fund state highways.
Additionally, state laws and administrative policies limit the
circumstances under which employees may hold state funds
outside the State Treasury.9 Section 16506 of the California
Government Code requires that all money belonging to the
State under the control of any state employee other than
the state treasurer shall be deposited under conditions that the
director of finance prescribes. California Government Code 16510
provides that any employee who deposits state money in any
manner not prescribed by the Department of Finance may be
subject to forfeiture of his or her employment. Furthermore,
9For a more detailed description of the laws discussed in this chapter, see Appendix B.
2266 California State Auditor Report I2004-1 California State Auditor Report I2004-1 2277
Department of Transportation
Section 8002 of the State Administrative Manual specifies that
in order to open an account outside of the State Treasury, a
department must request approval from the Department of
Finance, justifying the need for such an account.
A maintenance supervisor from one district (Supervisor A)
received $865.80 for material that his employees collected from
highways and took to a recycling center. Supervisor A directed
an employee to take the materials the district collected to a
recycling company that paid the employee in cash. The employee
gave the money to Supervisor A, who kept the money in a desk
drawer. The supervisor stated he spent the money on building
the morale of the crew, which included coffee and refreshments,
staff barbecues, and flowers and cards for employees who were ill.
Two supervisors improperly According to Supervisor A, he did not purchase anything personal
spent recycling money on with the recycling money or personally benefit in any manner.
employee-related functions
rather than return the A supervisor from another district, Supervisor B, also received
money to the State. money his employees collected from recycling materials.
Supervisor B instructed his employees to collect checks payable
to him from recycling companies. Caltrans reported that he
likely deposited these checks in his personal bank account and
did not return the money to Caltrans. District management did
not determine or inquire about how much money Supervisor B
received from recycling, or when he started this practice, because
he discontinued it in July 2002, a year before district management
completed its investigation. Caltrans found that Supervisor B
spent the money he received on a barbecue for his employees.
AGENCY RESPONSE
Caltrans intends to ask for reimbursement for the $865.80
that Supervisor A received, but it does not intend to ask for
reimbursement from Supervisor B because he discontinued
the practice a year before Caltrans completed its investigation.
Caltrans instructed Supervisor B’s staff to have the recycling
company make the checks out to Caltrans and send them
directly to its accounting division for deposit. It also plans to
provide training to Supervisor A’s staff to ensure proper handling
of money received from recycling. Caltrans also plans to place a
letter of warning in Supervisor A’s personnel file. n
2288 California State Auditor Report I2004-1 California State Auditor Report I2004-1 2299
CHAPTER 7
Office of Criminal Justice Planning:
Conflict of Interest
ALLEGATION I2003-0902
Am anager in the Office of Criminal Justice Planning
(OCJP) violated state law that prohibits a public officer
from being financially interested in a contract made in
his or her official capacity.10
RESULTS AND METHOD OF INVESTIGATION
We investigated and substantiated the allegation. Our investigation
showed that the manager was directly involved in the formation
of a $641 contract between the OCJP and an office supply retailer
that employs the manager’s spouse. Because the manager derived a
financial benefit from the contract with a company that employs
her spouse, we believe she violated Section 1090 of the California
Government Code pertaining to conflicts of interest.11
To investigate the allegation, we reviewed purchase requests,
purchase orders, and other internal documents relating to all
transactions between the OCJP and the office supply company
from April 1999 through August 2003. We also reviewed
department policies and applicable conflict-of-interest laws.
Finally, we interviewed several OCJP employees and the manager.
THE MANAGER CREATED A CONFLICT OF INTEREST
While employed at the OCJP, the manager was involved in work
directly related to the approval of a contract that she personally
benefited from, thus violating the California Government Code,
which prohibits employees from being financially interested in
any contract made by them in their official capacity. Section 1090
of this code does not define when an official is financially
interested in a contract. However, the attorney general has
10 In accordance with the State Budget Act of 2003-04, the OCJP no longer exists effective
January 1, 2004. Based on direction from the Department of Finance, the office’s programs
are being transferred to other agencies.
11 For a more detailed description of the laws discussed in this chapter, see Appendix B.
2288 California State Auditor Report I2004-1 California State Auditor Report I2004-1 2299
Office of Criminal Justice Planning
interpreted this prohibition broadly and has found that an
employee who participates in the formation of a contract with an
entity that employs his or her spouse has a financial interest in
that contract and, therefore, may be in violation of Section 1090
of the Government Code.
According to OCJP policy, when an employee had a need for a
purchase that was not available through the State, he or she was
to submit a purchase request to the business management branch.
Once the branch received the request, it was the responsibility
of the procurement officer to solicit bids and select a vendor.
However, the procurement officer did not obtain this bid or take
part in the decision to select the company chosen for the project.
According to a subordinate, the manager reviewed two bids
previously obtained by the business management branch and
had the subordinate obtain another bid, suggesting she do so
from the office supply company where her spouse is employed.
The subordinate added that the manager awarded the contract to
the company, which was the lowest bidder, and directed her
to draft a purchase request, even though neither the manager
nor her subordinate ordinarily review, obtain, or select bids. The
purchase request used for this project was signed by the manager
The manager was and included an invoice from the company, which indicated to
involved in work directly the procurement officer that the OCJP had already selected this
related to a contract that company for the project. The manager maintains that she was not
she benefited from. involved in the selection of the company and that her signature
on the purchase request does not mean that she awarded the
contract. However, the manager acknowledged that she signed
the purchase request knowing that the company had bid the
job at the amount listed on the purchase request. This evidence
indicates that the manager was involved in the decision to select
the company that employs her spouse for the project.
AGENCY RESPONSE
The Governor’s Office of Emergency Services reported that it
recently absorbed the programs and personnel of the former
OCJP, and is in the process of determining the appropriate
level of disciplinary action to take against the manager. n
3300 California State Auditor Report I2004-1 California State Auditor Report I2004-1 3311
CHAPTER 8
Department of Corrections, Pleasant
Valley State Prison: Improper Hiring
ALLEGATION I2002-792
Pleasant Valley State Prison (Pleasant Valley Prison), part
of the Department of Corrections (Corrections), hired an
employee who did not possess the minimum requirements
for the position.
RESULTS AND METHOD OF INVESTIGATION
We investigated and substantiated the allegation. To investigate the
allegation, we obtained and reviewed applicable state regulations
and policies. In addition, we interviewed the employee, her former
supervisor, and other Corrections employees. Finally, we obtained
and reviewed files the State Personnel Board (Personnel Board) had
concerning the employee’s hire and discussed the Personnel Board’s
review with appropriate staff.
In April 1997, Pleasant Valley Prison hired the employee even
though she had not completed one additional year of graduate
study in an accredited school, as stated in the job specifications.
State policy stipulates that, in general, an individual having
completed 24 semester units as a graduate student would meet
the one-year requirement.12 Although the employee possessed a
college degree and had completed 12 semester units of graduate
study related to her discipline at an accredited school, she did
not possess the required 24 semester units. As a result of this
improper appointment in 1997, the State has since paid the
Pleasant Valley Prison paid employee approximately $86,000 more than she was entitled to
the employee $86,000 receive based on her qualifications.
more than she was entitled
to receive based on The employee told us that the individuals she interviewed with
her qualifications. knew she had completed only 12 semester units of graduate work.
The employee’s supervisor said he, along with Pleasant Valley
Prison’s personnel staff, concluded that the employee met the
minimum qualifications because she had completed one year
of graduate studies at an accredited university. The supervisor
also said that the university told him that individuals who take
12 For a more detailed description of the laws discussed in this chapter, see Appendix B.
3300 California State Auditor Report I2004-1 California State Auditor Report I2004-1 3311
Department of Corrections
six or more units per semester in graduate classes are considered
full-time students. However, we believe this conclusion was
flawed in that it failed to address whether the employee
completed the required 24 semester units. In addition, when we
asked the Personnel Board about this matter, it concluded that the
employee did not meet the educational requirements. Further,
the Personnel Board determined that although the employee had
accepted the appointment in good faith, Pleasant Valley Prison
failed to uphold state regulations concerning the making of good-
faith appointments because it did not ensure that the employee
met the appropriate job requirements before hiring her.
AGENCY RESPONSE
Corrections reported that because the appointment was made
in good faith and because the one-year statute of limitation for
canceling illegal good-faith appointments had passed, it would
not pursue adverse action. In addition, Corrections reported that
it counseled Pleasant Valley Prison staff on the proper method
of clearing a certification list, and clarified that one year of
graduate study equals 24 semester units. n
3322 California State Auditor Report I2004-1 California State Auditor Report I2004-1 3333
CHAPTER 9
Department of Forestry and Fire
Protection: Misuse of State Resources
and Equipment
ALLEGATION I2002-1076
An employee for the California Department of Forestry
and Fire Protection (CDF) used state equipment to view
adult-oriented Web sites.
RESULTS AND METHOD OF INVESTIGATION
CDF investigated and substantiated the allegation. It found that
the employee violated state law that requires a state employee to
devote his or her full time and attention to state duties by using
his state computer excessively for purposes unrelated to work,
visiting 3,000 adult-oriented Web sites between September 2002
and December 2002.13 To investigate the allegation, CDF
interviewed witnesses, and the California Highway Patrol
(Highway Patrol) performed a forensic investigation on the
employee’s state computer. The Highway Patrol found evidence
supporting the allegation that the employee used his state
computer to view adult-oriented Web sites.
AGENCY RESPONSE
CDF reported that the adverse action against the employee
consisted of a 5 percent reduction in pay for four months. n
13 For a more detailed description of the laws discussed in this chapter, see Appendix B.
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3344 California State Auditor Report I2004-1 California State Auditor Report I2004-1 3355
CHAPTER 10
Department of Transportation:
Misrepresentation of
Educational Qualifications
ALLEGATION I2002-742
AD epartment of Transportation (Caltrans) employee
misrepresented his educational qualifications to meet the
minimum requirements when he applied for a position as
a transportation engineer.
RESULTS AND METHOD OF INVESTIGATION
We asked Caltrans to investigate on our behalf; the department
reported that it had already received and investigated the
allegation. It initially concluded that the employee erroneously
indicated he had the educational background required of
transportation engineers when he applied for the position. In
response to our request to investigate the allegation, Caltrans
conducted some additional analysis and determined that the
employee failed in his duty to provide accurate information when
he applied for the position. After receiving the Caltrans report, we
performed some follow-up work and validated its analysis.
To conduct its investigation, Caltrans reviewed documents the
employee submitted as proof of his educational qualifications
when he applied for two different positions and asked him to
submit any additional information that could prove he possessed
the educational qualifications required for a transportation
engineer. We reviewed the Caltrans report and supporting
documents and interviewed Caltrans managers and the employee.
THE EMPLOYEE MISREPRESENTED HIS
EDUCATIONAL QUALIFICATIONS
The employee knowingly misrepresented his educational
qualifications when he applied for a transportation engineer
position at Caltrans by indicating that he met the minimum
qualifications for the position. By knowingly misrepresenting
his educational qualifications, the employee violated state law,
3344 California State Auditor Report I2004-1 California State Auditor Report I2004-1 3355
Department of Transportation
which requires that an employee must accept an appointment
in good faith in order to be eligible to receive the promised
compensation. State regulations further specify this obligation
by requiring that in order to accept an appointment with the
State, a person must provide complete, factual, and truthful
information necessary for a proper appointment.14 This
regulation also requires that an employee make a reasonable
attempt to correct any aspects of the appointment, such as false
preemployment information, that the employee knows are illegal.
To meet the minimum qualifications for the transportation
engineer position, applicants must fulfill any one of three
standards. One standard allows an individual to meet the
minimum qualifications by possessing a degree from a
nonaccredited institution that includes the basic engineering
courses normally covered in a standard four-year college
engineering program and by passing a written examination
When applying to take covering basic engineering. When applying to take the engineering
the engineering exam, exam, the employee indicated that he possessed the educational
the employee indicated background necessary to meet this standard when he did not.
that he possessed the
necessary education when Because the employee indicated that he possessed a degree from
he did not. a nonaccredited institution, Caltrans allowed him to take the basic
engineering exam, which he passed. After he passed the exam,
the employee submitted a state employment application to
Caltrans that indicated he had a diploma in civil engineering
and provided documents, translated from another language into
English, which appeared to confirm his education was sufficient
to meet the necessary standard. Caltrans did not confirm that
these translated documents were authentic or accurate.
Approximately a year after it hired the employee, Caltrans received
an allegation that he did not possess the minimum educational
background required for the transportation engineer position.
In response to the allegation, Caltrans submitted the employee’s
transcripts to an independent translator who determined that the
employee’s education was not sufficient to meet the standard.
Caltrans informed the employee that he needed to provide
additional information to show that he possessed the minimum
educational qualifications required, but the employee failed
to do so. Based on its initial review, Caltrans determined that
the employee erroneously indicated that he met the minimum
qualifications for the position and demoted him to a lesser position
for which he did meet the minimum qualifications.
14 For a more detailed description of the laws discussed in this chapter, see Appendix B.
3366 California State Auditor Report I2004-1 California State Auditor Report I2004-1 3377
Department of Transportation
Shortly after he applied for the transportation engineer position,
the employee also applied for another position at Caltrans. For
each position, the employee submitted documents to show he
met the required qualifications. During its initial investigation,
Caltrans only reviewed the educational documents the employee
submitted for the transportation engineer position. After
it received our request to investigate the allegation on our
behalf, it conducted some additional analysis and reviewed the
educational documents the employee submitted for the other
position. These documents included a credential evaluation report
that Caltrans apparently did not receive when the employee
submitted his transportation engineer application. The credential
evaluation report concluded that the employee’s degree was not
equivalent to a four-year college engineering degree but was
instead equivalent to a high school diploma. The employee told
us that he did not purposefully deceive Caltrans and believes the
credential evaluation report was either accidentally not included
with his transportation engineer application or was lost when he
sent the report to Caltrans via fax machine. Regardless, because
the employee indicated that he earned a degree from a four-year
college despite possessing the credential evaluation report that
indicated otherwise, Caltrans determined that the employee
failed in his duty to provide accurate information when he
participated in the transportation engineer exam.
AGENCY RESPONSE
As mentioned, Caltrans demoted the employee to a lesser
position for which he did meet the minimum qualifications. In
addition, Caltrans reduced the employee’s salary by 5 percent
for three months. It also reported that it will require all future
transportation engineering candidates with nonaccredited
degrees to present an evaluation from a specific credential
evaluation organization, verifying that they have completed a
four-year college engineering curriculum. n
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3388 California State Auditor Report I2004-1 California State Auditor Report I2004-1 3399
CHAPTER 11
Department of Transportation:
Misuse of State Property
ALLEGATION I2003-0793
AD epartment of Transportation (Caltrans) employee
misused his state telephone and state computer to
purchase and sell automobiles and automobile parts on
the Internet.
RESULTS AND METHOD OF INVESTIGATION
We asked Caltrans to investigate the allegation on our behalf.
Caltrans substantiated the allegation and took disciplinary
action against the employee. To conduct its investigation,
Caltrans performed a forensic examination of the employee’s
computer and obtained and analyzed his state telephone records
for inappropriate calls.
State laws prohibit employees from using state resources
for personal gain and from engaging in activities that are
incompatible with their duties as state employees.15 Caltrans’
analysis of the employee’s computer files showed frivolous use
of its network connection. The employee created digital music
files and other files related to his personal business of buying
and selling automobiles and automobile parts on the Internet.
In addition, Caltrans discovered that between February and
July 2003, the employee made 101 calls totaling 164 minutes to a
company that appear to be related to his personal business.
AGENCY RESPONSE
Caltrans informed us that it served the employee with a letter
of warning, which it will place in his personnel file for a period
up to three years. Caltrans also counseled the employee on the
appropriate use of state resources. n
15For a more detailed description of the laws discussed in this chapter, see Appendix B.
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4400 California State Auditor Report I2004-1 California State Auditor Report I2004-1 4411
CHAPTER 12
Department of Corporations: Misuse
of State Equipment
ALLEGATION I2002-1102
An attorney (employee) at the Department of Corporations
(Corporations) used a state fax machine in the
conduct of his personal business as a Certified Public
Accountant (CPA).
RESULTS AND METHOD OF INVESTIGATION
We gave Corporations copies of faxes sent to the employee at
his state office and asked it to investigate the allegation on our
behalf. Corporations substantiated the allegation. State law
prohibits employees from engaging in any employment activity
that is incompatible with their duties as state employees.16 This
law specifically requires that employees devote their full time,
attention, and efforts to their state employment during their
hours of duty as state employees.
As part of his state job, the employee works with a wide variety
of business clients. To investigate, Corporations reviewed all
its program databases to determine if the businesses shown on
the fax copies were related to the employee’s CPA business or
were clients of Corporations. After confirming that the specific
documents were not related to Corporations’ clients, senior
management interviewed the employee. The employee admitted
that the documents belonged to clients of his CPA business and
confirmed that he occasionally had information faxed to him at
his state office. In addition, Corporations spot-checked recent
fax activity listings to identify any faxes to or from these entities
or other clients of the employee. It found none.
AGENCY RESPONSE
Corporations counseled the employee on his lack of judgment
and directed him to review the appropriate California Code
sections regarding outside employment and incompatible
16 For a more detailed description of the laws discussed in this chapter, see Appendix B.
4400 California State Auditor Report I2004-1 California State Auditor Report I2004-1 4411
Department of Corporations
activities, such as using state equipment for personal gain.
It directed the employee to stop using the fax machine for
personal business and informed him that if he failed to follow
this directive or engaged in any other inappropriate behavior,
adverse action would be taken. n
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CHAPTER 13
Department of Justice: Improper Use
of State Resources and Equipment
ALLEGATION I2002-842
AD epartment of Justice (Justice) deputy attorney
(employee) used state equipment to obtain confidential
information about another state employee for an inquiry
he was conducting in his capacity as a private citizen.
RESULTS AND METHOD OF INVESTIGATION
Justice had already received and investigated a similar allegation.
It confirmed that the employee misused state office equipment
and directed him to avoid using the equipment for any activities
other than those directly associated with his official duties.
4422 California State Auditor Report I2004-1 California State Auditor Report I2004-1 4433
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: March 24, 2004
Investigative Staff: Ken L. Willis, Manager, CPA
Scott Denny, CPA, CFE
Arn Gittleman, CPA, CFE, CGFM
Renju Jacob
Cynthia A. Sanford, CPA
Mike Urso
Audit Staff: Siu-Henh Ung
Legal Counsel: Donna Neville, JD
4444 California State Auditor Report I2004-1 California State Auditor Report I2004-1 4455
APPENDIX A
Activity Report
The Bureau of State Audits (bureau), headed by the state
auditor, has identified improper governmental activities
totaling $13.5 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 (Whistleblower 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 following
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.
4444 California State Auditor Report I2004-1 California State Auditor Report I2004-1 4455
TABLE A.1
Corrective Actions
July 1993 Through December 2003
Type of Corrective Action Instances
Referrals for criminal prosecution 74
Convictions 7
Job terminations 56
Demotions 10
Pay reductions 18
Suspensions without pay 15
Reprimands 156
New Cases Opened Between
July 2003 and December 2003
From July 1, 2003, through December 31, 2003, the bureau
opened 250 new cases.
The bureau receives allegations of improper governmental
activities in several ways. Callers to the hotline at (800) 952-5665
or (866) 293-8729 (TTY) reported 132 of our new cases in this
time period.17 The bureau also opened 116 new cases based on
complaints it received in the mail and two based on complaints
from individuals who visited the office. Figure A.1 shows the sources
of all the cases opened from July 2003 through December 2003.
FIGURE A.1
Sources of 250 New Cases Opened
July 2003 Through December 2003
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17 In total, the bureau received 2,342 calls on the hotline from July 2003 through
December 2003. However, 1,487 (63 percent) of the calls were about issues outside the
bureau’s jurisdiction. In these cases, the bureau attempted to refer the caller to the appropriate
entity. An additional 714 calls (30 percent) were related to previously established case files.
4466 California State Auditor Report I2004-1 California State Auditor Report I2004-1 4477
Work on Investigative Cases
July 2003 Through December 2003
In addition to the 250 new cases opened during this six-month
period, 217 previous cases awaited review or assignment as of
July 1, 2003; 48 were still under investigation by this office or by
other state agencies or were awaiting completion of corrective
action. Consequently, 515 cases required some review during
this period.
After reviewing the information gathered from complainants and
preliminary reviews, the bureau concluded that 151 cases did not
warrant complete investigation because of lack of evidence.
The Whistleblower Act specifies that the state auditor can request
the assistance of any state entity or employee in conducting an
investigation. From July 1, 2003, through December 30, 2003,
state agencies investigated 43 cases on the bureau’s behalf
and substantiated allegations on 12 (60 percent) of the 20 cases
they completed during the period. In addition, the bureau
independently investigated 12 cases and substantiated allegations
on five of the eight completed during the period. As of
December 31, 2003, the bureau had 251 cases awaiting review or
assignment. Figure A.2 shows the disposition of the 515 cases the
bureau worked on from July 2003 through December 2003.
FIGURE A.2
Disposition of 515 Cases
July 2003 Through December 2003
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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
absence without leave or neglect of duty; insubordination;
dishonesty; misuse of state property; and other failure of good
behavior, either during or outside of duty hours, that is of such a
nature that it causes discredit to the appointing authority or the
person’s employment.
GIFT OF PUBLIC FUNDS
Chapter 1 reports on gift of public funds.
The California Constitution, Section 6, Article XVI, prohibits the
giving of any gift of public money or thing of any value to any
corporation for a private purpose. This constitutional prohibition
is designed to ensure that the resources of the State will be
devoted to public purposes.
CRITERIA PERTAINING TO RECEIVING
CHARITABLE CONTRIBUTIONS
Chapter 1 reports violation of codes and policy pertaining to
receiving charitable contributions.
California Department of Corrections Operations Manual,
Section 13050.16.1, states that media or producers are welcome
to contribute toward the inmate welfare fund or make other
director-approved contributions to the institution, facility, or
parole region. Gifts and gratuities shall not be given directly to
inmates or parolees.
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According to federal tax law (26 United States Code, Section 170),
a charitable contribution is a donation or gift to, or for the use
of, a qualified organization.
EMBEZZLEMENT OR MISAPPROPRIATION OF STATE FUNDS
Chapter 1 reports violations of California Penal Code,
Section 424.
Section 424 of the California Penal Code provides that public
officers or any other persons charged with the receipt, safekeeping,
or disbursement of public money who knowingly keep a false
account, make a false entry or erasure in any account, use public
money for a purpose not authorized by law, or willingly fail to
transfer the money as required by law may be disqualified from
holding office in the State and are subject to imprisonment for up
to four years.
HOLDING FUNDS OUTSIDE OF THE STATE TREASURY
Chapters 1 and 6 report on the improper holding of state
funds outside of the State Treasury.
State laws and administrative policies limit the circumstances
under which employees may hold state funds outside the State
Treasury. Section 16305.2 of the California Government Code
defines “state money” as all money in the possession of or
collected by any state agency or department, except for money
in the Local Agency Investment Fund. In Bennett v. Superior Court,
131 Cal.App.2d 841, the court stated that the proper criterion
to determine whether certain funds are public money is not
ultimate ownership but rather the official character in which
these funds are received or held.
Section 16305.3 of the California Government Code provides that
state funds must be deposited in the custody of the state treasurer
unless otherwise authorized by the director of finance or deposited
directly in the State Treasury. Section 16506 requires that all money
belonging to the State under the control of any state employee
other than the state treasurer shall be deposited under conditions
that the director of finance prescribes. Further, Section 16510
provides that any state employee who deposits state money in any
manner not prescribed by the director of finance may be subject
to forfeiture of his or her employment. Furthermore, the State
5500 California State Auditor Report I2004-1 California State Auditor Report I2004-1 5511
Administrative Manual, Section 8002, specifies that in order to
open an account outside of the State Treasury, a department must
request approval from the Department of Finance, justifying the
need for such an account.
CRITERIA GOVERNING STATE MANAGERS’
RESPONSIBILITIES
Chapters 1 and 5 report weaknesses in management controls.
The Financial Integrity and State Manager’s Accountability Act
of 1983 (Accountability 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 have adopted
protect state assets, provide reliable accounting data, promote
operational efficiency, and encourage adherence to managerial
policies. The Accountability 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, when detected, weaknesses must
be corrected promptly.
INCOMPATIBLE ACTIVITIES DEFINED
Chapters 2, 3, 5, 9, 11, and 12 report incompatible activities.
Incompatible activity prohibitions exist to prevent state
employees from being influenced in the performance of their
official duties or from being rewarded by 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 specifically identifies certain
incompatible activities, including using state time, facilities,
equipment, or supplies for private gain or advantage.
5500 California State Auditor Report I2004-1 California State Auditor Report I2004-1 5511
Incompatible activities also include using the prestige or influence
of the State for one’s private gain or advantage or the private
gain of another. In addition, state employees are prohibited from
receiving or accepting money or any other consideration
from anyone other than the State for the performance of their
duties. Further, Section 19990 prohibits state employees from not
devoting their full time, attention, and efforts to their state jobs
during hours of duty as state employees.
PROHIBITIONS AGAINST USING STATE RESOURCES FOR
PERSONAL GAIN
Chapters 2, 3, 9, 11, and 13 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 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.
CONTRACTING IMPROPRIETIES
Chapters 5 and 7 report violations of contracting rules.
California Government Code, Section 1090, prohibits state
employees from being financially interested in any contract
in which they participate in making a decision in their official
capacity. Any employee who willfully violates this prohibition is
punishable by a fine of not more than $1,000 or by imprisonment
in state prison and is forever disqualified from holding any
office in the State. The Public Contracting Code provides that
the State award contracts fairly. Section 10410 prohibits any
state employee from contracting on his or her own behalf as an
independent contractor with any state agency to provide services
or goods.
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CRITERIA PERTAINING TO ACCEPTING EMPLOYMENT
WITH THE STATE
Chapters 2, 3, 8, and 10 report violations of state
employment rules.
California Code of Regulations, Title 2, Section 8, states that in
order to accept an appointment in good faith, an employee must
provide the appointing power with complete, factual, and truthful
information necessary for a proper appointment and make
a reasonable attempt to seek correction of any aspects of the
appointment that the employee knows are illegal.
To meet the minimum qualifications for the transportation
engineer position one must meet one of the following standards.
Standard one:
Graduation from a four-year curriculum in civil engineering
accredited by the Accreditation Board for Engineering
Technology. (Registration as a senior in such a curriculum
will admit an applicant to the competition, but he or she
must produce evidence of graduation before being considered
eligible for appointment.) (Possession of a valid certificate as
an Engineer-in-Training issued by the California State Board of
Registration for Professional Engineers and Land Surveyors, or
issued by another jurisdiction and accepted by the California
Board in lieu of the first division of the examination as an
engineer may be substituted for the required education.)
Standard two:
Possession of equivalent qualifications may be demonstrated
by graduation from an engineering curriculum that includes
the basic engineering courses normally covered in a standard
four-year engineering curriculum and by qualifying in a written
examination covering basic engineering. (Registration as a senior
in such a curriculum will admit an applicant to the qualifying
examination, but he or she must produce evidence of graduation
before being considered eligible for appointment.)
Standard three:
A master’s or doctoral degree in a civil engineering curriculum
from a college or university that has a baccalaureate degree
program in a civil engineering curriculum that is accredited by
the Accreditation Board of Engineering Technology. (Registration
as a candidate in such a curriculum will admit an applicant
to the competition but he or she must produce evidence of
graduation before being considered eligible for appointment.)
5522 California State Auditor Report I2004-1 California State Auditor Report I2004-1 5533
To meet the minimum qualifications for the librarian position,
employees must achieve the equivalent to graduation from
college and completion of one additional year of graduate study
in a library school accredited by the American Library Association.
(Registration as a graduate student in a library school accredited
by the American Library Association will admit applicants to the
examination, but he or she must submit evidence of completion
before being considered eligible for appointment.)
State policy (State Personnel Board’s State Selection Manual,
Vol. 2, Section 6200.200), clarifies that those individuals having
completed 24 semester units as a graduate student would meet
the one-year requirement.
5544 California State Auditor Report I2004-1 California State Auditor Report I2004-1 5555
APPENDIX C
Incidents Uncovered by Other Agencies
Section 20080 of the California State Administrative Manual
requires 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
July 2003 through December 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 included here have been resolved; the
bureau does not publish any report that would interfere with or
jeopardize an ongoing internal or criminal investigation.
Six state entities notified the bureau of 15 instances of improper
governmental activity that they had resolved from July 2003
through December 2003. Those entities were the California State
University system, the Franchise Tax Board, the Department of
Consumer Affairs, the Department of Forestry and Fire Protection,
the Department of Motor Vehicles, and the Air Resources Board.
Incidents resulting in monetary loss to the State totaled $20,184.
Recovery and restitution of about $4,844 has mitigated the
financial losses of some of these entities.
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INDEX
Allegation Page
Department/Agency Number Allegation Number
Consumer Affairs, Bureau for Private I2003-0652 Improper disclosure of confidential 21
Postsecondary and Vocational Education information
Corporations I2002-1102 Misuse of state equipment 41
Corrections, California State Prison- I2003-0896 Misappropriation of state funds 7
Los Angeles County
Corrections, Pleasant Valley State Prison I2002-792 Improper hiring 31
Forestry and Fire Protection I2002-1076 Misuse of state resources and equipment 33
Justice I2002-842 Improper use of state resources 43
and equipment
Office of Criminal Justice Planning I2003-0902 Conflict of interest 29
Social Services I2002-1042 Incompatible activities, misuse of state 19
resources, and falsification of educational
background
Transportation I2002-742 Misrepresentation of educational 35
qualifications
Transportation I2002-874/ Misappropriation of state funds 27
I2002-981
Transportation I2003-0793 Misuse of state property 39
Unemployment Insurance Appeals Board I2003-0836 Improper contracting 23
Youth Authority I2002-648 Incompatible activities and misuse of 15
state resources
5566 California State Auditor Report I2004-1 California State Auditor Report I2004-1 5577
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
5588 California State Auditor Report I2004-1