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California State Auditor Report Number : I2015-1

Investigations of Improper Activities by State Agencies and Employees
Violations of State Law Including Failure to Seek Competitive Bids, Increase Rental Rates, Properly Dispose of Surplus Property, and Adequately Supervise
July 2014 Through June 2015

August 27, 2015 Investigative Report I2015-1

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 California State Auditor presents its investigative report summarizing investigations that were completed between July 2014 and June 2015 concerning allegations of improper governmental activities.

This report details 10 substantiated allegations involving several state departments. Through our investigations, we found failure to seek competitive bids, failure to increase rental rates, waste of state funds, failure to properly dispose of surplus state property, an improper gift of public funds, and neglect of supervisory duties. In total for the 10 substantiated allegations, we identified over $4.2 million in wasted funds, improper payments, and misuse of state time.

For example, California Correctional Health Care Services improperly used a master agreement when it procured $17 million in goods and services to upgrade the electrical infrastructure within state prisons beginning 2011. Of this $17 million, it wasted $3.2 million because it paid the contractor to do nothing more than process invoices of the subcontractor, who performed all of the work. Furthermore, Correctional Health Care improperly paid the contractor $1.6 million in advance for goods and services that the subcontractor did not provide until nearly a year later.

Another investigation revealed that the California Department of Transportation (Caltrans) failed to increase rental rates to reflect fair market value for state land rented by wireless communications companies. Caltrans’ failure to increase rates cost the State nearly $883,000 in revenue from July 1, 2012, through September 30, 2014.

State departments must report to the state auditor any corrective or disciplinary action taken in response to recommendations made by the state auditor no later than 60 days after we notify the agency or authority of the improper activity and monthly thereafter until corrective action is completed.

Respectfully submitted,

State Auditor

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