Report 2011-120 All Recommendation Responses

Report 2011-120: California Department of Transportation: Its Poor Management of State Route 710 Extension Project Properties Costs the State Millions of Dollars Annually, Yet State Law Limits the Potential Income From Selling the Properties (Release Date: August 2012)

Recommendation #1 To: Transportation, Department of

To ensure that it collects fair market rents for the SR 710 properties on the State's behalf, Caltrans should, using the fair market rent determinations for all SR 710 properties it recently prepared and excluding those in its affordable rent program, adjust the tenants' rents to fair market after providing them with proper notice.

Agency Response*

Caltrans continues to implement rental rate adjustments as previously described. However, because the rental market rates in Southern California continue to escalate at a fast pace, fewer tenants are at fair market rent. In October 2015, District 7 had 115 tenants paying fair market rent. This number decreased to 46 tenants because, during the most recent rental rate evaluations, the fair market rent escalated sufficiently so as to move a large number of tenants to the "below market rent" category. Additionally, the total number of properties rented with the potential of eventually being rented at fair market rent increased from 206 in 2015 to 254 currently. This number increased because some tenants no longer qualified for the Affordable Rent Program; consequently, they were moved out of the program, but were moved to a rent level "below fair market rent." Attachment 1 shows examples of properties with rent increases from 2015 to 2016.

Of the 208 tenants currently paying less than fair market rent, there are 93 tenants whose rent is within 25 percent of fair market rent. These tenants will have annual increases of 10 percent annually. Seventy-nine tenants are between 25 and 50 percent below fair market rent and 36 tenants between 50 and 87 percent below market rent. These tenants will have their rent increased twice per year until they are within 25 percent of market rent. It should be noted that the majority of tenants will take longer to get to fair market rent if rental market rates continue to escalate.

Finally, District 7 has 111 tenants in the Affordable Rent Program, which is a decrease from the 175 tenants in the program in 2015. The decrease stems from some tenants no longer qualifying for the program, as mentioned above, and other tenants who moved out of the properties.

  • Response Type†: Annual Follow Up
  • Completion Date: June 2016
  • Response Date: October 2016

California State Auditor's Assessment of Status: Fully Implemented

Caltrans has implemented a process to increase rental rates to fair market value for all tenants not in its affordable rent program. Our review in May 2017 of Caltrans' process for raising rents to fair market rates found significant improvements, including the use of a tracking system and dedicated staff to ensure rent increases are timely and accurate.


Agency Response*

Caltrans continues to implement rental rate adjustments (increases and decreases) instituted with the first wave of rental rate adjustments on March 1, 2013. The ultimate goal is that all rental rates are gradually adjusted to fair market rent or the Affordable Rent Level, if applicable.

Rent increase cycles continue to take place on April 1 and October 1 of each year, and notices are sent to affected tenants sixty days or more before their rent increase becomes effective; the most recent rent increase notices were sent to tenants in August 2015 to be effective in October 2015. Currently, there are 89 tenants out of 206 (which excludes 175 tenants in the affordable rent program) paying fair market rent. As of October 2015, there will be an additional 26 tenants paying fair market rent. Of the remaining 91 tenants, 82 are less than 25 percent below fair market rent and are expected to be at fair market rent within the next cycle of rent increases. The remaining 9 tenants will continue to see incremental rent adjustments until their rent is also at the fair market rent. One other circumstance to consider is that, in general, fair market rent has appreciated since the audit report was issued, thereby further delaying the achievement of having all relevant tenants paying fair market rent.

Evaluation of the last two adjustment cycles revealed that although all market rental rate evaluations were completed in a timely fashion and a number of increases were indicated as completed, a group of rental rate adjustments were inadvertently omitted and not entered into the Right of Way Property Management System. The missing group includes ARP and market rate tenants, and Caltrans is taking steps to adjust these tenancies within the October 1 cycle.

Caltrans is in the process of implementing a File Maker Pro system to track rental rate adjustments and continues to strive toward assurance that tenants are paying fair market rent as appropriate.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: to be determined
  • Response Date: September 2015

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

As previously stated, Caltrans implemented the rental rate increases as of March 1, 2013, and rental rates are being gradually raised to fair market rent or to the Affordable Rent Level, whichever is applicable.

The tenants whose rent is more than 25 percent below fair market rent are subject to 10 percent rental rate increases every six months. The tenants whose rent is less than 25 percent below fair market rent are subject to annual rent increases of 10 percent. However, per the Affordable Rent Program (ARP) regulations, tenants in the ARP whose rent is below fair market rent or the Affordable Rent Level are now being increased on an annual basis only, based on yearly income calculations.

Rent increases are effective annually in April 1st and October 1st. Notices are sent to tenants sixty days or more before their rent increase becomes effective. The most recent rent increase notices were sent to 49 tenants on August 2, 2014, to be effective in October 2014. As of September 2014, there are 43 fair market rent tenants who received semi-annual rent increases effective October 1, 2014. The remaining six tenants in the rent increase list are on the October 1st cycle for their annual rent increase.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: to be determined
  • Response Date: October 2014

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

Please refer to our one-year response.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: To be determined
  • Response Date: October 2013

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

As previously stated, Caltrans implemented the rental rate increases as of March 1, 2013, and rental rates are being gradually raised to fair market rent or to the Affordable Rent Level, whichever is lower. The tenants whose rent is more than 25 percent below fair market rent are having their rent increased by 10 percent every six months and the tenants whose rent is less than 25 percent below fair market rent are having their rent increased 10 percent every year. Rental rates for the tenants in the Affordable Rent Program (ARP) are also being increased by 10 percent every six months or every year. However, the benchmark for tenants in the ARP is the Affordable Rent Level or the fair market rent, whichever is lower. Caltrans anticipates receiving $269,055 for the current fiscal year in additional rental income from all rent increases in District 7.

  • Response Type†: 1-Year
  • Estimated Completion Date: to be determined
  • Response Date: August 2013

California State Auditor's Assessment of Status: Partially Implemented


Agency Response*

Caltrans stated that it completed its assessment of rental rate increases and, on December 28, 2012 sent letters to all SR 710 tenants notifying them of its intent to incrementally raise rents to the fair-market rate effective March 1, 2013. Caltrans stated it is on schedule to implement the rental rate increases.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Partially Implemented


Agency Response*

Caltrans stated that it is in the process of assessing rental rate increases to fair market rent and has sent letters to all SR 710 tenants requesting their financial information. Caltrans also stated that, once it completes its analysis of all of the information, it will work with the Business, Transportation and Housing Agency (agency) to determine the best course of action for it and the State. Caltrans anticipates that, after providing the affected tenants with the requisite 60-day notice, rental rate increases will be effective March 1, 2013. (See 2013-406, p. 168)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #2 To: Transportation, Department of

To ensure that it collects fair market rents for the SR 710 properties on the State's behalf, Caltrans should make only limited exceptions to charging fair market rent and document the specific public purpose that is served in any case that it does not charge fair market rent.

Agency Response*

Caltrans continues to implement rental rate adjustments as previously described. However, because the rental market rates in Southern California continue to escalate at a fast pace, fewer tenants are at fair market rent. In October 2015, District 7 had 115 tenants paying fair market rent. This number decreased to 46 tenants because, during the most recent rental rate evaluations, the fair market rent escalated sufficiently so as to move a large number of tenants to the "below market rent" category. Additionally, the total number of properties rented with the potential of eventually being rented at fair market rent increased from 206 in 2015 to 254 currently. This number increased because some tenants no longer qualified for the Affordable Rent Program; consequently, they were moved out of the program, but were moved to a rent level "below fair market rent." Attachment 1 shows examples of properties with rent increases from 2015 to 2016.

Of the 208 tenants currently paying less than fair market rent, there are 93 tenants whose rent is within 25 percent of fair market rent. These tenants will have annual increases of 10 percent annually. Seventy-nine tenants are between 25 and 50 percent below fair market rent and 36 tenants between 50 and 87 percent below market rent. These tenants will have their rent increased twice per year until they are within 25 percent of market rent. It should be noted that the majority of tenants will take longer to get to fair market rent if rental market rates continue to escalate.

Finally, District 7 has 111 tenants in the Affordable Rent Program, which is a decrease from the 175 tenants in the program in 2015. The decrease stems from some tenants no longer qualifying for the program, as mentioned above, and other tenants who moved out of the properties.

  • Response Type†: Annual Follow Up
  • Completion Date: June 2016
  • Response Date: October 2016

California State Auditor's Assessment of Status: Fully Implemented

Caltrans seeks to collect fair market rent from all tenants with the exception of those who qualify for the affordable rent program (program). Our review in May 2017 of Caltrans' process for annually verifying tenants' eligibility for the program found significant improvements such as a more robust income certification packet, which requires that tenants complete a form requesting the release of their tax information, and a secondary review of tenant eligibility. Additionally, for those files we tested, our review found tenants in the program received an accurate and timely rent increase to their most current affordable rent level, as applicable.


Agency Response*

Please see response to No. 1 - response applies to 1 and 2

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: to be determined
  • Response Date: September 2015

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

Please see response to No. 1 - response applies to 1 and 2

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: to be determined
  • Response Date: October 2014

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

Please refer to our one-year response.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: To be determined
  • Response Date: October 2013

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

The ARP was offered to all tenants who qualified and currently there are 206 tenants in the ARP statewide; 49 of these tenants existed in the ARP prior to the expansion. District 7 has 176 tenants that are renting from the SR 710 properties; 130 tenants are new to the ARP and 46 were already in the ARP. Presuming all 206 tenants remain in their properties and in the ARP, Caltrans expects to receive $1,985,544 in the current fiscal year in rental income from the tenants. Caltrans estimates that if these tenants were not in the ARP and received a 10 percent increase semi-annually, a maximum of an additional $314,569 in rental income would be generated in the current fiscal year.

  • Response Type†: 1-Year
  • Estimated Completion Date: to be determined
  • Response Date: August 2013

California State Auditor's Assessment of Status: Partially Implemented


Agency Response*

Caltrans stated that it and the Business, Transportation, and Housing Agency (agency) determined that an expanded Affordable Rent Program (ARP) would be offered, and emergency regulations were approved by the Office of Administrative Law (OAL) on December 24, 2012. The letters sent to all SR 710 tenants on the rental rate increase also included information on how to apply for the ARP. Caltrans plans to notify the tenants who applied for the ARP, by the stated deadline, whether they qualify by February 15, 2013.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Partially Implemented


Agency Response*

Caltrans stated that it is in the process of assessing rental rate increases to fair market rent and has sent letters to all SR 710 tenants requesting their financial information. Caltrans also stated that, once it completes its analysis of all of the information, it will work with the agency to determine the best course of action for it and the State. Caltrans anticipates that, after providing the affected tenants with the requisite 60-day notice, rental rate increases will be effective March 1, 2013. (See 2013-406, p. 168)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #3 To: Transportation, Department of

To ensure that all taxable fringe benefits or gifts state employees receive are appropriately included in their gross income, Caltrans should establish procedures to notify state employees who rent SR 710 properties that they may be subject to tax implications.

Agency Response*

Caltrans stated that it received the independent legal counsel's opinion, which indicated there is no tax liability for State employees paying below-market rent under these circumstances, and shared the opinion with the State Controller's Office (SCO). According to Caltrans, the SCO reviewed the opinion and consulted with the legal counsel for the Franchise Tax Board (FTB) on the matter. Caltrans stated that, on February 12, 2013, the SCO reported to the agency that it and the FTB concurred with the independent legal counsel's opinion. Finally, Caltrans stated that it subsequently notified State employees who are tenants.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

Caltrans stated that it has notified state employees who rent SR 710 properties that they may be subject to tax implications. However, Caltrans did not specifically address whether or not it established procedures. (See 2013-406, p. 168)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #4 To: Transportation, Department of

To ensure that all taxable fringe benefits or gifts employees receive are appropriately included in their gross income, Caltrans should continue to work with its information technology division to generate the reports necessary for it to provide the State Controller's Office (state controller) with the value of the state housing for its employees monthly.

Agency Response*

Based on the legal opinion discussed in the six-month status update, Caltrans determined that there is no tax liability involved and considered this action complete. However, Caltrans had not addressed recommendation 2 (b) which is now being addressed. The Division of Accounting worked with Information Technology (IT) to complete the re-creation of the reports needed to identify rent paid by Caltrans employees for State-provided housing. Caltrans IT staff continues to generate the reports necessary to identify the value of State housing in order to report it as a fringe benefit to the SCO. The Division of Accounting has been submitting fringe benefit reports to the SCO on a monthly basis since October 2012. For a copy of the most recent report, please see Attachment 1.

  • Response Type†: 1-Year
  • Completion Date: October 2012
  • Response Date: August 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

Caltrans did not specifically address this recommendation in its 6-month response.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: No Action Taken


Agency Response*

Caltrans did not specifically address this recommendation. (See 2013-406, p. 168)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: No Action Taken


Recommendation #5 To: Transportation, Department of

To ensure that all taxable fringe benefits or gifts state employees receive are appropriately included in their gross income, Caltrans should work with the state controller to identify the statute of limitations for employers to report adjustments to employee gross income to the federal Internal Revenue Service and the California Franchise Tax Board.

Agency Response*

Caltrans stated that it received the independent legal counsel's opinion, which indicated there is no tax liability for State employees paying below-market rent under these circumstances, and shared the opinion with the State Controller's Office (SCO). According to Caltrans, the SCO reviewed the opinion and consulted with the legal counsel for the Franchise Tax Board (FTB) on the matter. Caltrans stated that, on February 12, 2013, the SCO reported to the agency that it and the FTB concurred with the independent legal counsel's opinion. Finally, Caltrans stated that it subsequently notified State employees who are tenants.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

Caltrans stated that it obtained consent from the Attorney General's Office (attorney general) to retain independent legal counsel specializing in taxation to provide legal advice on the tax issues raised in this recommendation. Caltrans also stated that it sent a request for proposal on September 14, 2012, to several law firms listed on the State Bar of California's (state bar) Web site. According to Caltrans, upon receiving a legal opinion from the selected firm, it and the agency will evaluate the appropriate course of action for it and the State. (See 2013-406, p. 169)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #6 To: Transportation, Department of

To ensure that all taxable fringe benefits or gifts state employees receive are appropriately included in their gross income, Caltrans should work with the state controller to identify the difference between the fair market rental value of the SR 710 housing and the rent state employees paid for that housing during the applicable calendar years related to the federal and state statute of limitations.

Agency Response*

Caltrans stated that it received the independent legal counsel's opinion, which indicated there is no tax liability for State employees paying below-market rent under these circumstances, and shared the opinion with the SCO. According to Caltrans, the SCO reviewed the opinion and consulted with the legal counsel for the FTB on the matter. Caltrans stated that, on February 12, 2013, the SCO reported to the agency that it and the FTB concurred with the independent legal counsel's opinion. Finally, Caltrans stated that it subsequently notified State employees who are tenants.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

Caltrans stated that it obtained consent from the attorney general to retain independent legal counsel specializing in taxation to provide legal advice on the tax issues raised in this recommendation. Caltrans also stated that it sent a request for proposal on September 14, 2012, to several law firms listed on the state bar's Web site. According to Caltrans, upon receiving a legal opinion from the selected firm, it and the agency will evaluate the appropriate course of action for it and the State. (See 2013-406, p. 169)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #7 To: Transportation, Department of

To ensure that all taxable fringe benefits or gifts state employees receive are appropriately included in their gross income, Caltrans should work with the state controller to determine if it needs to revise the W-2 forms for the other employees to whom Caltrans provided housing benefits, including the four employees who worked at its Chilao Maintenance Station.

Agency Response*

Caltrans stated that it received the independent legal counsel's opinion, which indicated there is no tax liability for State employees paying below-market rent under these circumstances, and shared the opinion with the SCO. According to Caltrans, the SCO reviewed the opinion and consulted with the legal counsel for the FTB on the matter. Caltrans stated that, on February 12, 2013, the SCO reported to the agency that it and the FTB concurred with the independent legal counsel's opinion. Finally, Caltrans stated that it subsequently notified State employees who are tenants.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

Caltrans stated that it obtained consent from the attorney general to retain independent legal counsel specializing in taxation to provide legal advice on the tax issues raised in this recommendation. Caltrans also stated that it sent a request for proposal on September 14, 2012, to several law firms listed on the state bar's Web site. According to Caltrans, upon receiving a legal opinion from the selected firm, it and the agency will evaluate the appropriate course of action for it and the State. (See 2013-406, p. 169)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #8 To: Transportation, Department of

To ensure that all taxable fringe benefits or gifts state employees receive are appropriately included in their gross income, Caltrans should provide information to the other state agencies so that they can submit the standard form for reporting the value of the housing provided to their employees for the applicable past calendar years to the state controller. Caltrans should continue to submit this information monthly to the applicable state agencies until the state employees are no longer renting the SR 710 properties at below-market rates.

Agency Response*

Caltrans stated that it received the independent legal counsel's opinion, which indicated there is no tax liability for State employees paying below-market rent under these circumstances, and shared the opinion with the SCO. According to Caltrans, the SCO reviewed the opinion and consulted with the legal counsel for the FTB on the matter. Caltrans stated that, on February 12, 2013, the SCO reported to the agency that it and the FTB concurred with the independent legal counsel's opinion. Finally, Caltrans stated that it subsequently notified State employees who are tenants.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

Caltrans stated that it obtained consent from the attorney general to retain independent legal counsel specializing in taxation to provide legal advice on the tax issues raised in this recommendation. Caltrans also stated that it sent a request for proposal on September 14, 2012, to several law firms listed on the state bar's Web site. According to Caltrans, upon receiving a legal opinion from the selected firm, it and the agency will evaluate the appropriate course of action for it and the State. (See 2013-406, p. 169)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #9 To: Transportation, Department of

To ensure that the affordable rent policy is enforceable and that only eligible tenants receive the benefit of the policy, Caltrans should adopt regulations in accordance with the Administrative Procedure Act (APA) if the director determines that it is appropriate to continue to offer affordable rent to certain tenants.

Agency Response*

The Office of Administrative Law approved the Affordable Rent Program regulations on January 7, 2014. Tenants' household incomes are being annually reviewed using income certification forms as required in Caltrans' Right of Way Manual, Chapter 11.

  • Response Type†: Annual Follow Up
  • Completion Date: January 2014
  • Response Date: October 2014

California State Auditor's Assessment of Status: Fully Implemented

The regulations cited by Caltrans can be found at Title 21 of the California Code of Regulations, sections 2653 through 2658.


Agency Response*

Please refer to our one-year response.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: December 2013
  • Response Date: October 2013

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

As noted in the status update for Recommendation No. 1, Caltrans expanded the ARP statewide to other eligible tenants concurrent with the rental rate increases. Caltrans continues with the process of adopting permanent regulations for the ARP and anticipates that this will happen by the end of 2013. In the meantime, Caltrans received an extension for the emergency regulations from the Office of Administrative Law on June 24, 2013.

  • Response Type†: 1-Year
  • Estimated Completion Date: December 2013
  • Response Date: August 2013

California State Auditor's Assessment of Status: Partially Implemented


Agency Response*

Caltrans stated that it and the agency determined that continuing to offer the ARP and expanding it to other eligible tenants was the appropriate action to take concurrent with the rental rate increases effective March 1, 2013. The emergency regulations were approved by the OAL on December 24, 2012, and the permanent regulations are expected to be in place by August 31, 2013. Caltrans plans to notify the tenants who applied for the ARP, by the stated deadline, whether they qualify by February 15, 2013.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Partially Implemented


Agency Response*

Caltrans stated that the director is reviewing the affordable rent program to determine if it is appropriate to continue offering it to certain tenants and/or to expand it to include other tenants. Caltrans also stated that it is expected that the director will make a decision by November 2012. (See 2013-406, p. 170)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Pending


Recommendation #10 To: Transportation, Department of

To ensure that the affordable rent policy is enforceable and that only eligible tenants receive the benefit of the policy, Caltrans should annually review and document the tenants' household incomes using income certification forms. If tenants no longer qualify for the program because their income exceeds the income requirement or one of the income-producing tenants in the household has been replaced by a new tenant, it should increase their rent to fair market rates after giving proper notice.

Agency Response*

In September 2012, Caltrans instructed its staff to annually review the tenants' eligibility using the income certification forms as required in Chapter 11 of Caltrans' Right of Way Manual (manual). On August 15, 2013, District 7 management sent out a memo to its staff reminding them of the need to follow the requirements in the manual. For a copy of the memo and relevant section of the manual , please see Attachment 2.

  • Response Type†: 1-Year
  • Completion Date: August 2013
  • Response Date: August 2013

California State Auditor's Assessment of Status: Fully Implemented

Caltrans has a policy of annually reviewing income for tenants in the affordable rent program (program). Our review in May 2017 of Caltrans' process for annually verifying tenants' eligibility for the program found significant improvements such as a more robust income certification packet, which requires that tenants complete a form requesting the release of their tax information, and a secondary review of tenant eligibility. Additionally, our review found tenants who did not qualify for the affordable rent program received rent increases to raise their rent to fair market rates.


Agency Response*

Caltrans stated that it and the agency determined that continuing to offer the ARP and expanding it to other eligible tenants was the appropriate action to take concurrent with the rental rate increases effective March 1, 2013. The emergency regulations were approved by the OAL on December 24, 2012, and the permanent regulations are expected to be in place by August 31, 2013. Caltrans plans to notify the tenants who applied for the ARP, by the stated deadline, whether they qualify by February 15, 2013.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Partially Implemented


Agency Response*

Caltrans stated that the director is reviewing the affordable rent program to determine if it is appropriate to continue offering it to certain tenants and/or to expand it to include other tenants. Caltrans also stated that the director's decision is expected by November 2012. (See 2013-406, p. 170)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Pending


Recommendation #11 To: Transportation, Department of

To ensure that the repairs it makes to the SR 710 properties are necessary and reasonable, Caltrans should document its rationale for approving project change orders.

Agency Response*

Caltrans District 7 management provided Right of Way staff instructions on the procedures required to document the rationale for approving project change orders before approval. Please see Attachment 3 for a copy of the September 27, 2012, memo that includes the procedures.

  • Response Type†: 1-Year
  • Completion Date: September 2012
  • Response Date: August 2013

California State Auditor's Assessment of Status: Fully Implemented

Caltrans has established a process for approving additional scope of work related to original task (repair) orders. Our review of repair files in May 2017 found that documentation supported the necessary and reasonable nature of work that was additional to the original scope of work.


Agency Response*

Caltrans' District 7 office management developed a form that requires staff to document their rationale for approving project change orders before approval.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Partially Implemented

Caltrans did not provide a copy of the procedures it issued to staff instructing them on how to use the form.


Agency Response*

Caltrans' District 7 office management issued a memo on September 27, 2012, instructing staff to document their rationale for approving project change orders, effective immediately. Caltrans also stated that it is on track to complete the specific policy and procedures to ensure compliance and the related training by December 31, 2012. (See 2013-406, p. 170)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #12 To: Transportation, Department of

To ensure that the repairs it makes to the SR 710 properties are necessary and reasonable, Caltrans should conduct annual field inspections of the properties.

Agency Response*

Caltrans' District 7 office management issued a memo on September 27, 2012, instructing staff to conduct annual field inspections of the properties, effective immediately. Caltrans stated that it has completed all of the 433 inspections and that it has a process in place to ensure the field inspections occur annually for each property.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

Caltrans' District 7 office management issued a memo on September 27, 2012, instructing staff to conduct annual field inspections of the properties, effective immediately. Caltrans stated that as of October 9, 2012, it had completed 371 of the 433 inspections and that it is on target to complete the remaining inspections by December 31, 2012. (See 2013-406, p. 170)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #13 To: Transportation, Department of

To ensure that the repairs it makes to the SR 710 properties are necessary and reasonable, Caltrans should discontinue performing roofing repairs on properties its roof assessments indicate are in good condition, unless a new assessment indicates a repair is needed.

Agency Response*

Caltrans' District 7 office management issued a memo on September 27, 2012, requiring all roof repair orders to have an updated assessment to determine if the repairs are necessary, effective immediately. In addition, Caltrans has established a policy that requires the use of cost-recovery forms to analyze the cost of necessary repairs. Caltrans stated its District 7 office assessed 24 pending roof orders and performed a cost-recovery analysis for each order. The analyses indicated that the repairs for all 24 roofs were necessary. Finally, Caltrans stated that its requirement for roof assessments will work in tandem with its cost-recovery policy, therefore it chose not to issue a specific policy for the roof assessments.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

Caltrans' District 7 office management issued a memo on September 27, 2012, requiring all roof repair orders to have an updated assessment to determine if the repairs are necessary, effective immediately. Caltrans also stated that it is on track to complete the specific policy and procedures to ensure compliance by December 31, 2012. (See 2013-406, p. 171)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #14 To: Transportation, Department of

To ensure that the repairs it makes to the SR 710 properties are necessary and reasonable, Caltrans should incorporate roof assessments as part of its annual field inspections of the properties.

Agency Response*

Caltrans District 7 management provided staff with instructions on the procedures required to incorporate roof assessments as part of the annual field inspections. Please see Attachment 3 for a copy of the September 27, 2012, memo that includes the procedures and Attachment 4 for a copy of the June 24, 2013, memo "Property Management Roof Inspection Procedures."

  • Response Type†: 1-Year
  • Completion Date: June 2013
  • Response Date: August 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

Caltrans stated that it incorporated roof assessments as part of its annual inspections of properties. Caltrans also provided a copy of the form that staff must complete for roof assessment requests.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Partially Implemented

Caltrans did not provide a copy of the procedures it issued to staff requiring them to incorporate roof assessments as part of the annual inspections and instructing them on how to use the form.


Agency Response*

Caltrans stated that it incorporated roof assessments as part of its annual inspections of properties. Caltrans also stated that it is on track to complete the specific policy and procedures to ensure compliance by December 31, 2012. (See 2013-406, p. 171)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #15 To: Transportation, Department of

To ensure that the repairs it makes to the SR 710 properties are necessary and reasonable, Caltrans should develop a written policy to ensure that it considers the cost-effectiveness of repair costs for historic and nonhistoric projects in relation to the potential rental income for the property. Such a policy should establish the maximum acceptable cost-recovery period for the amount it will spend for repairs, above which the repairs will be considered wasteful.

Agency Response*

Please see Attachment 5 for a copy of the "Property Management Cost Recovery Analysis Policy" implemented on June 26, 2013. This policy requires the use of cost-recovery forms to analyze the cost of necessary repairs, and has established 36 months as the maximum acceptable cost-recovery period.

  • Response Type†: 1-Year
  • Completion Date: June 2013
  • Response Date: August 2013

California State Auditor's Assessment of Status: Fully Implemented

Caltrans has established a written policy that ensures repairs to SR 710 properties are necessary and reasonable by considering the cost-effectiveness of repairs in relation to rental income for the property. Our review in May 2017 found that files reflected a consistent use of a cost analysis form with a 36 month maximum recovery period.


Agency Response*

Caltrans stated that it now has a policy in place that requires the use of cost-recovery forms to analyze the cost of necessary repairs and that establishes 36 months as the maximum acceptable cost-recovery period. Caltrans also stated that it plans to conduct training during March 2013 to instruct staff on the proper use of the form.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Partially Implemented

Caltrans did not provide a copy of the policy.


Agency Response*

Caltrans stated that it is developing a policy to assess the cost-effectiveness of repair costs, which will include evaluating a cost-recovery period for repairs. Caltrans also stated that it is on track to issue the policy and provide training to all employees by December 31, 2012. (See 2013-406, p. 171)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #16 To: Transportation, Department of

To ensure that the repairs it makes to the SR 710 properties are necessary and reasonable, Caltrans should establish a process to ensure it evaluates the cost-effectiveness of any repair before authorizing it.

Agency Response*

Please see Attachment 5 for a copy of the "Property Management Cost Recovery Analysis Policy" implemented on June 26, 2013. This policy requires the use of cost-recovery forms to analyze the cost of necessary repairs, and has established 36 months as the maximum acceptable cost-recovery period.

  • Response Type†: 1-Year
  • Completion Date: June 2013
  • Response Date: August 2013

California State Auditor's Assessment of Status: Fully Implemented

Caltrans has established a process to ensure it evaluates the cost-effectiveness of repairs before it authorizes them. Our review in May 2017 found that files reflected a consistent use of Caltrans' cost analysis process.


Agency Response*

Caltrans stated that it now has a policy in place that requires the use of cost-recovery forms to analyze the cost of necessary repairs and that establishes 36 months as the maximum acceptable cost-recovery period. Caltrans also stated that it plans to conduct training during March 2013 to instruct staff on the proper use of the form.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Partially Implemented

Caltrans did not provide a copy of the policy.


Agency Response*

Caltrans stated that its District 7 office management is developing a standardized process for evaluating the cost-effectiveness of repairs. Caltrans also stated that it anticipates implementing this process and providing training to the appropriate staff by December 31, 2012. (See 2013-406, p. 171)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #17 To: Transportation, Department of

To ensure that the repairs it makes to the SR 710 properties are necessary and reasonable, Caltrans should retain in its project files evidence to support the necessity and reasonableness of repairs, such as change orders, annual field inspections, and analyses of cost-effectiveness.

Agency Response*

Caltrans' District 7 office management issued a memo on September 27, 2012, instructing staff to retain the required evidence to support the necessity and reasonableness of repairs in the project files, effective immediately. Caltrans stated that it now requires the forms documenting cost-recovery analysis, change orders, and roof assessments to be attached to the annual inspection documents and retained in the maintenance file.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Fully Implemented

Caltrans retains evidence to support its determinations that repairs of SR 710 properties are necessary and reasonable including, but not limited to, photo evidence of conditions, cost analyses, scope of work documentation, and repair authorizations. Our review in May 2017 found significant improvement in the documentation Caltrans retained after June 2016.


Agency Response*

Caltrans' District 7 office management issued a memo on September 27, 2012, instructing staff to retain the required evidence to support the necessity and reasonableness of repairs in the project files, effective immediately. Caltrans also stated that it is on track to issue the specific policy and provide training to the appropriate staff by December 31, 2012. (See 2013-406, p. 172)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #18 To: Transportation, Department of

To ensure that the State achieves cost savings for the repairs made to the SR 710 properties, Caltrans should periodically perform more comprehensive analyses of viable options for repairing the properties. If Caltrans determines that General Services is the best option, it should ensure that it properly executes an interagency agreement in accordance with the State Contracting Manual.

Agency Response*

Caltrans and DGS finalized the interagency agreement on April 19, 2013, and subsequently amended it on June 26, 2013. A copy of the interagency agreement is located in Attachment 6 and a copy of the amendment in Attachment 7. The amendment was necessary to add language related to prevailing wage requirements.

  • Response Type†: 1-Year
  • Completion Date: June 2013
  • Response Date: August 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

Caltrans hired a consultant to conduct a cost comparison of options for maintenance of the SR 710 properties. The consultant concluded that General Services is providing the most cost-effective services for the maintenance work being performed on the SR 710 properties. The consultant acknowledged that the sample size was limited because only a small number of companies in the contracting community participated in the study. However, the consultant believes that the study provides a good general indication of costs. Caltrans also stated that is continuing to work with General Services to execute an interagency agreement by March 31, 2013.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Partially Implemented


Agency Response*

Caltrans stated that it is evaluating the best method to perform a cost comparison of options for the maintenance of the SR 710 properties. Caltrans anticipates completing the cost comparison by December 31, 2012. Caltrans also stated that, in the meantime, it initiated the execution of an interagency agreement with General Services. (See 2013-406, p. 172)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #19 To: General Services, Department of

To ensure that it appropriately executes interagency agreements with other state agencies, General Services should provide training to construction unit staff.

Agency Response*

Effective July 1, 2013, DGS has consolidated its purchasing and contracting functions in a new office within its Administration Division, the Office of Business and Acquisition Services (OBAS). Consequently, the Direct Construction Unit (DCU) is no longer responsible for executing interagency agreements. Instead, this responsibility rests with OBAS' professional procurement staff.

It should be noted that, although no longer directly responsible for executing interagency agreements, DCU has taken action to ensure that applicable staff are fully aware of the state's requirements for the use of those types of contracts. Specifically, the area managers for DCU's Northern and Southern Area Offices and the primary administrative staff for those offices have attended the Services Contract Workshop course offered by the California Procurement & Contracting Academy (Cal-PCA). The Cal-PCA course is taught by staff from the DGS Office of Legal Services and includes coverage of the state's requirements for the use of interagency agreements to contract with other state agencies.

  • Response Type†: 1-Year
  • Completion Date: July 2013
  • Response Date: August 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

General Services stated that the construction unit has scheduled its staff to attend the Services Contract Workshop course offered by the California Procurement and Contracting Academy (Cal-PCA), which will be held in April 2013. General Services also stated that this course is taught by staff from its office of legal services and includes coverage of the State's requirements for the use of interagency agreements to contract with other state agencies.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Partially Implemented


Agency Response*

General Services stated that the construction unit will schedule its staff to attend the Services Contracting course offered by the California Procurement and Contracting Academy (Cal-PCA). General Services also stated that this course is taught by staff from its office of legal services and includes coverage of the State's requirements for the use of interagency agreements to contract with other state agencies. (See 2013-406, p. 172)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Pending


Recommendation #20 To: Transportation, Department of

To ensure that General Services performs only necessary repairs and that its costs are reasonable, Caltrans should ensure that its staff adhere to relevant contracting policies, including retaining evidence of its approval of General Services' repair work before and after the completion of a project in the project file.

Agency Response*

Caltrans' District 7 office management issued a memo on September 27, 2012, instructing staff to retain the required evidence to support the necessity and reasonableness of repairs in the project files, effective immediately. Caltrans stated that its District 7 office is retaining evidence of approving General Services work before and after project completion in the maintenance file for each property.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

Caltrans' District 7 office management issued a memo on September 27, 2012, instructing staff to retain the required evidence to support the necessity and reasonableness of repairs in the project files, effective immediately. Caltrans stated the required evidence would include approval of General Services' work before and after project completion. Caltrans also stated that it is on track to issue the specific policy and provide training to the appropriate staff by December 31, 2012. (See 2013-406, p. 172)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #21 To: Transportation, Department of

To ensure that General Services performs only necessary repairs and that its costs are reasonable, Caltrans should reconcile General Services' estimates for the repair projects with the scope of work the Department of Finance (Finance) approved in the transfer request form, and, if applicable, explain any differences.

Agency Response*

Caltrans District 7 management provided instructions on the procedures required to perform monthly reconciliations between the scope of work approved in the Form 22 and DGS' estimates. Please see Attachment 8 for a copy of the July 22, 2013, memo entitled, "Project Reconciliation Tracking and Reporting Procedures."

  • Response Type†: 1-Year
  • Completion Date: July 2013
  • Response Date: August 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

Caltrans' District 7 office developed a Project Estimate Reconciliation form to use when there are differences between the scope of work approved in the transfer request form and General Services' repair estimate. Caltrans stated that the reconciliation is done on a monthly basis and has been applied to all repairs performed between March 2012 and December 2012.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Partially Implemented

Caltrans did not provide a copy of the procedures it issued to staff instructing them on how to use the form and requiring them to perform the monthly reconciliation.


Agency Response*

Caltrans stated that it is meeting with General Services to develop a process to reconcile the estimates for repairs with the scope of work in the transfer request forms. Caltrans expects this process to be in place by December 31, 2012. (See 2013-406, p. 173)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #22 To: Transportation, Department of

To ensure that General Services performs only necessary repairs and that its costs are reasonable, Caltrans should reconcile the actual work General Services performs to the scope of work approved in the project work plans.

Agency Response*

Caltrans District 7 management provided instructions to staff on reconciling the actual work DGS performs to the scope of work approved in the project work plans for non-emergency jobs. Please see Attachment 8 for a copy of the "Project Reconciliation Tracking and Reporting Procedures" memo dated July 22, 2013.

  • Response Type†: 1-Year
  • Completion Date: July 2013
  • Response Date: August 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

Caltrans' District 7 office developed a Project Actuals Reconciliation form to use when reconciling the actual work General Services performs to the scope of work approved in the project work plans for non-emergency jobs.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Partially Implemented

Caltrans did not provide a copy of the procedures it issued to staff instructing them on how to use the form.


Agency Response*

Caltrans stated that it is meeting with General Services to develop a process to reconcile the actual work performed to the scope of work approved in the project work plans. Caltrans expects this process to be in place by December 31, 2012. (See 2013-406, p. 173)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #23 To: Transportation, Department of

To ensure that General Services performs only necessary repairs and that its costs are reasonable, Caltrans should reconcile the actual expenditures for the projects listed in the transfer request form approved by Finance and the approved budget in the project work plans with General Services' actual expenditures for each project.

Agency Response*

Caltrans is now receiving expenditure data from DGS and is using the modified March 2012 tracking spreadsheet to reconcile actual expenditures to the approved budget for the work being done by DGS. Please see Attachment 9 for a copy of the modified tracking spreadsheet.

  • Response Type†: 1-Year
  • Completion Date: March 2013
  • Response Date: August 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

Caltrans stated that it is using its March 2012 tracking spreadsheet to reconcile actual expenditures to the approved budget for the work being done by General Services.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Partially Implemented

The effectiveness of this spreadsheet is contingent upon Caltrans' implementation of recommendation 24 and its ability to obtain the necessary data to monitor costs from General Services.


Agency Response*

Caltrans stated that it is using its March 2012 tracking spreadsheet to reconcile actual expenditures to the approved budget for the work being done by General Services. However, the effectiveness of this spreadsheet is contingent upon Caltrans' implementation of recommendation 2.4.e. Further, Caltrans did not specifically address whether or not it reconciles the actual expenditures for the projects listed in the transfer request form approved by Finance. (See 2013-406, p. 173)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #24 To: Transportation, Department of

To ensure that General Services performs only necessary repairs and that its costs are reasonable, Caltrans should modify its March 2012 tracking spreadsheet to ensure that it contains sufficient information for Caltrans to effectively monitor repair costs.

Agency Response*

The March 2012 tracking spreadsheet was modified to ensure that it contained sufficient information for Caltrans to effectively monitor repair costs. Please see Attachment 8 for a copy of the modified March 2012 tracking spreadsheet.

  • Response Type†: 1-Year
  • Completion Date: March 2013
  • Response Date: August 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

Caltrans stated that it is working with General Services to obtain the necessary data to monitor repair costs by March 1, 2013 and will immediately modify the March 2012 tracking spreadsheet to effectively monitor these costs.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Partially Implemented


Agency Response*

Caltrans stated that it is working with General Services to obtain the necessary data to monitor repair costs. Caltrans anticipates it will complete the final modifications to its March 2012 tracking spreadsheet on or before December 31, 2012. (See 2013-406, p. 173)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #25 To: General Services, Department of

To ensure that it charges its clients appropriately for the work it performs, General Services should reassess the construction unit's methodologies for determining the hourly burden rate and direct administration fees.

Agency Response*

DCU has revised its rate and cost estimating processes for the 2013/14 fiscal year to fully address the State Auditor's concerns. Specifically, the revised process provides that DCU's hourly burden rate be calculated based on prior year expenditure data and projected billable hours. Further, the process provides that a predetermined percentage for various individual types of administrative fees will no longer be added to estimates for new projects started during the 2013/14 fiscal year. Instead, the costs are either being included in the hourly burden rate or estimated individually on a project by project basis.

  • Response Type†: 1-Year
  • Completion Date: July 2013
  • Response Date: August 2013

California State Auditor's Assessment of Status: Fully Implemented

The Department of General Services has revised its method for calculating its hourly burden rate and applying direct administration fees, using prior year expenditure data and billable hours, and adjusting for any known or projected increases or decreases. We reviewed the department's methodology for determining its hourly burden rate and determined the process is based on supportable information and is mechanically correct.


Agency Response*

General Services revised its rate-setting process for fiscal year 2013-14 to ensure that the hourly burden rate is accurately and properly calculated based on prior year expenditure data and projected billable hours.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Partially Implemented

General Services did not provide the revisions made by its construction unit or the methodology for determining the direct administration fee.


Agency Response*

General Services stated that its construction unit will revise its rate-setting process for fiscal year 2013–14 to fully address the state auditor's concerns. General Services also stated that the revised process will ensure that the construction unit's hourly burden rate and direct administration fees are accurately and properly calculated based on prior year expenditure data and projected billable hours. Further, General Services stated that, to date, the construction unit has consulted with General Services' budget, accounting, and information technology staff on improvements that can be made to its rate and fees calculation function. (See 2013-406, p. 174)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #26 To: General Services, Department of

To ensure that it charges its clients appropriately for the work it performs, General Services should ensure that the construction unit's methodologies are sound and that it can properly support them.

Agency Response*

As discussed in response to the previous recommendation, DCU has revised its rate and cost estimating processes for the 2013/14 fiscal year to fully address the State Auditor's concerns. The revised processes were developed in consultation with appropriate DGS budget, accounting and information technology staff. DCU's Policy and Procedures Manual also has been updated to reflect the processes.

  • Response Type†: 1-Year
  • Completion Date: July 2013
  • Response Date: August 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

General Services revised its rate-setting process for fiscal year 2013-14 to ensure that the hourly burden rate is accurately and properly calculated based on prior year expenditure data and projected billable hours.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Partially Implemented

General Services did not provide the revisions made by its construction unit to the methodology for determining the direct administration fee.


Agency Response*

General Services stated that its construction unit will revise its rate-setting process for fiscal year 2013–14 to fully address the state auditor's concerns. General Services also stated that the revised process will ensure that the construction unit's hourly burden rate and direct administration fees are accurately and properly calculated based on prior year expenditure data and projected billable hours. Further, General Services stated that, to date, the construction unit has consulted with General Services' budget, accounting, and information technology staff on improvements that can be made to its rate and fees calculation function. (See 2013-406, p. 174)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #27 To: General Services, Department of

To determine if the construction unit's use of casual laborers to perform work not in their job specifications, such as procurement, is cost-effective, General Services should perform an analysis comparing the cost of paying the casual laborers at the prevailing wage rate and the cost of paying permanent civil service employees. If it finds that using permanent employees is cost-effective for the State, General Services should seek approval for additional permanent employees to perform those functions.

Agency Response*

General Services stated that its construction unit completed an analysis of the cost effectiveness of its practice of using a limited number of casual laborers to occasionally perform office administrative type tasks, such as procurement. The analysis determined that there was sufficient ongoing workload and cost-effectiveness data to justify the hiring of a staff services analyst to oversee/perform these tasks. General Services stated that a staff services analyst was hired on January 2, 2013.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

General Services stated that its construction unit is in the final stages of analyzing the cost effectiveness of its practice of using a limited number of casual laborers to occasionally perform office administrative type tasks, such as procurement. (See 2013-406, p. 174)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #28 To: General Services, Department of

To ensure that the casual laborers charge only for their actual hours worked on projects, General Services should require that the civil service supervisor who has knowledge of the time the casual laborer works approve the casual laborer's daily time report and the Activity Based Management System time charges.

Agency Response*

General Services' construction unit implemented new time reporting policies and procedures that fully address this recommendation.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

General Services did not specifically address this recommendation. (See 2013-406, p. 175)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: No Action Taken


Recommendation #29 To: General Services, Department of

To ensure that the casual laborers charge only for their actual hours worked on projects, General Services should ensure that the daily time reports for casual laborers contain the appropriate task codes, the laborer's signature, and the approval of a civil service supervisor.

Agency Response*

General Services' construction unit implemented new time reporting policies and procedures that fully address this recommendation.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

General Services did not specifically address this recommendation. (See 2013-406, p. 175)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: No Action Taken


Recommendation #30 To: General Services, Department of

To ensure that the casual laborers charge only for their actual hours worked on projects, General Services should update its construction unit manual to formalize its standard practice of using daily job reports for each project.

Agency Response*

General Services' construction unit implemented new time reporting policies and procedures that fully address this recommendation.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

General Services did not specifically address this recommendation. (See 2013-406, p. 175)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: No Action Taken


Recommendation #31 To: General Services, Department of

To ensure that the casual laborers charge only for their actual hours worked on projects, General Services should retain the daily job reports and the daily time reports in the project files.

Agency Response*

DCU has placed a high priority on strengthening its time reporting practices to ensure the accurate charging of projects for casual laborer work. As part of this process, DCU has implemented new time reporting policies and procedures which fully address the State Auditor's recommended actions including the retention of time reports in the official project file.

  • Response Type†: 1-Year
  • Completion Date: May 2013
  • Response Date: August 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

General Services' construction unit implemented new time reporting policies and procedures, but they do not include instructions for staff to retain the daily job, time, and expense report (DCU-2880).

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Partially Implemented


Agency Response*

General Services did not specifically address this recommendation. (See 2013-406, p. 175)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: No Action Taken


Recommendation #32 To: General Services, Department of

To ensure that it complies with its nepotism policy, General Services should have its office of human resources review and approve its existing temporary authorization appointments for casual laborers. If the office of human resources finds that personal relationships exist, General Services should take appropriate action in accordance with its policy.

Agency Response*

As noted in prior status reports, DGS determined that its Office of Audit Services (OAS) would be the most appropriate entity to review DCU's operations for compliance with the department's nepotism policy. In a report dated April 29, 2013, OAS presented its conclusion that DCU has established sufficient policies and procedures to prevent nepotism in the hiring of its casual trades employees. Specifically, based on the results of its evaluation of appointment documentation for a sample of recent casual trades' employee hires and interviews of numerous permanent civil service management and staff, OAS determined that DCU's hiring practices provide reasonable assurance that nepotism is not occurring in the hiring of casual trades employees.

In addition, to provide additional guidance to staff, on February 22, 2013, Administrative Order 13-01 was issued amending the DGS' nepotism policy. The amended policy clearly states that employees will not use their authority or the influence of their position to secure the authorization of employment or benefit for a person closely related by blood, marriage, or other significant relationship as defined in the administrative order.

To ensure that its employees are fully aware of the department's current nepotism policy, DCU provided a copy of the department's amended policy to each of its permanent civil service employees. This process included each employee signing the nepotism policy document acknowledging the receipt and understanding of the policy. Further, DCU now includes the administrative order in the hiring packages of its casual trades' employees.

  • Response Type†: 1-Year
  • Completion Date: April 2013
  • Response Date: August 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

General Services stated that its office of audit services is conducting a review of the construction unit's operations to determine compliance with the nepotism policy, which it expects will be completed in March 2013. General Services also stated that it is updating its nepotism policy, as well as the nepotism process contained in its Personnel Operations Manual, to provide additional guidance to staff. General Services plans to issue its updated nepotism policy by May 2013. Further, General Services stated that, upon issuance of the new policy, its office of human resources will work with the construction unit to ensure that the construction unit's staff are fully trained on its nepotism policy and practices.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Partially Implemented


Agency Response*

General Services stated that its office of audit services is conducting a review of the construction unit's operations to determine compliance with the nepotism policy. General Services also stated that it is updating its nepotism policy, as well as the nepotism process contained in its Personnel Operations Manual, to provide additional guidance to staff. General Services plans to issue its updated nepotism policy by October 31, 2012. Further, General Services stated that, upon issuance of the new policy, its office of human resources will work with the construction unit to ensure that the construction unit's staff are fully trained on its nepotism policy and practices. (See 2013-406, p. 175)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #33 To: General Services, Department of

To ensure that the construction unit complies with the State's procurement laws and policies, General Services should require the construction unit to immediately discontinue its current procurement practices that are inconsistent with the State's procurement laws and policies.

Agency Response*

General Services stated that the construction unit has taken actions to discontinue any procurement practices that do not fully comply with state requirements, including the implementation of additional policies and procedures that ensure the rotating of suppliers and obtaining a minimum of two quotes for all purchases. Further, General Services stated that the construction unit headquarters staff are actively monitoring compliance with the new operating requirements.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

General Services stated that the construction unit has taken actions to discontinue any procurement practices that do not comply with state requirements, including the implementation of additional policies and procedures that ensure the rotating of suppliers and obtaining a minimum of two quotes for all purchases. Further, General Services stated that the construction unit headquarters staff are actively monitoring compliance with the new operating requirements. (See 2013-406, p. 176)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #34 To: General Services, Department of

To ensure that the construction unit complies with the State's procurement laws and policies, General Services should require the construction unit to modify the procurement section of its manual to conform to the State's procurement laws and policies.

Agency Response*

Subsequent to the audit, DGS has significantly changed its policies, procedures and responsibilities for procurement which alleviates the need for this recommendation. Specifically, effective July 1, 2013, DGS consolidated its purchasing and contracting functions in a new office within its Administration Division, the Office of Business and Acquisition Services (OBAS). Consequently, DCU is no longer responsible for those activities. Instead, the responsibility rests with OBAS' professional procurement staff.

The DCU's role in the new procurement system is primarily limited to requesting a purchase and certifying the receipt of the goods. OBAS is now responsible for ensuring that DGS procurement practices fully comply with state requirements. This responsibility includes complying with state requirements governing the rotation of suppliers, conduct and documenting of fair and reasonable pricing analyses and verification of the performance of a commercially useful function by certified small businesses and disabled veteran business enterprises. These areas were the primary areas of concern discussed in the audit report.

  • Response Type†: 1-Year
  • Response Date: August 2013

California State Auditor's Assessment of Status: Resolved


Agency Response*

General Services stated that the construction unit is updating the procurement section of its policy manual to conform to the State's procurement requirements and plans to issue its updated policies by April 30, 2013.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Partially Implemented


Agency Response*

General Services stated that the construction unit is updating the procurement section of its policy manual to conform to the State's procurement requirements and plans to issue its updated policies by November 30, 2012. (See 2013-406, p. 176)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #35 To: General Services, Department of

To ensure that the construction unit complies with the State's procurement laws and policies, General Services should provide training to its construction unit employees regarding the State's procurement laws and policies.

Agency Response*

As discussed in response to the previous recommendation, subsequent to the audit, DGS has significantly changed its policies, procedures and responsibilities for procurement which alleviates the need for this recommendation. Specifically, effective July 1, 2013, DGS consolidated its purchasing and contracting functions in a new office within its Administration Division, the Office of Business and Acquisition Services (OBAS). Consequently, DCU is no longer responsible for those activities. Instead, the responsibility rests with OBAS' professional procurement staff.

It should be noted that, although no longer directly responsible for the procurement function, DCU has continued to enroll its purchasing staff in California Procurement & Contracting Academy courses which are offered to provide acquisition specialists with the knowledge essential to conduct purchases in compliance with state requirements. Further, all DCU personnel involved in the requisition and receipt of goods activities have attended OBAS training on the new operating practices.

  • Response Type†: 1-Year
  • Response Date: August 2013

California State Auditor's Assessment of Status: Resolved


Agency Response*

General Services stated that the construction unit has scheduled its staff to attend the Services Contract Workshop course offered by the Cal-PCA, which will be held in April 2013. General Services stated that the Cal-PCA courses provide acquisition specialists with the knowledge essential to conduct purchases in accordance with state requirements.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Partially Implemented


Agency Response*

General Services stated that, based on course availability, the construction unit is actively enrolling its purchasing staff in Cal-PCA courses that provide acquisition specialists with the knowledge essential to conduct purchases in accordance with state requirements. (See 2013-406, p. 176)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #36 To: General Services, Department of

To ensure that the construction unit complies with the State's procurement laws and policies, General Services should clarify the waiver process in the administrative order governing the small business participation goal.

Agency Response*

Subsequent to the audit, DGS significantly changed its policies, procedures and responsibilities for procurement which alleviates the need for this recommendation. Specifically, effective July 1, 2013, DGS consolidated its purchasing and contracting functions in a new office within its Administration Division, the Office of Business and Acquisition Services (OBAS). Consequently, the Direct Construction Unit (DCU) is no longer responsible for those activities. Instead, the responsibility rests with OBAS' professional procurement staff.

DCU's role in the new procurement system is primarily limited to requesting a purchase and certifying the receipt of the goods. OBAS is now responsible for ensuring that DGS procurement practices fully comply with state and DGS requirements. This responsibility includes complying with DGS policies which require the procurement of goods and services under certain dollar thresholds from certified small businesses (SB) and disabled veteran business enterprises (DVBE). In recognition of the consolidation of the purchasing and contracting functions, a recently issued administrative order addressing, in part, the award of contracts to SBs and DVBEs no longer includes provisions for the waiver process discussed in the state auditor's report.

  • Response Type†: Annual Follow Up
  • Completion Date: August 2014
  • Response Date: October 2014

California State Auditor's Assessment of Status: Resolved

General Services issued an administrative order related to contracting with small businesses, microbusinesses,and disabled veteran business enterprises that no longer includes the waiver process.


Agency Response*

Please refer to our one-year response.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: March 2014
  • Response Date: November 2013

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

Currently, DGS is in process of clarifying the waiver process discussed in the administrative order that requires department operating entities to procure goods and services under certain dollar thresholds from certified small businesses (SB) and disabled veteran business enterprises (DVBE). Specifically, DGS' Office of Small Business and DVBE Services (OSDS), which is the entity responsible for granting waivers, is actively revising the waiver process, including providing additional examples of situations (such as excessive cost impact) when waivers may be granted from purchasing from certified SBs and DVBEs. OSDS plans for this activity to be completed in March 2014.

  • Response Type†: 1-Year
  • Estimated Completion Date: March 2014
  • Response Date: August 2013

California State Auditor's Assessment of Status: Partially Implemented


Agency Response*

General Services stated that it will amend its administrative order to include additional examples of situations in which waivers may be granted. General Services plans to issue its amended administrative order by February 28, 2013, with training of department buyers to begin in the spring of 2013.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Partially Implemented


Agency Response*

General Services stated that it will amend its administrative order to include additional examples of situations in which waivers may be granted. General Services plans to issue its amended administrative order by November 30, 2012. (See 2013-406, p. 176)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #37 To: General Services, Department of

To ensure that the construction unit complies with the State's procurement laws and policies, General Services should continue its efforts to implement regulations that govern the small business certification process related to defining and enforcing violations of commercially useful function requirements.

Agency Response*

The Department of General Services (DGS) has completed its revision of the Small Business (SB) regulations, including commercially useful function provisions. On February 8, 2017, Bulletin #: P-08-17 was issued announcing the adoption of the Small Business regulations.

The DGS, Procurement Division (PD), Office of Small Business & Disabled Veteran Business Enterprise Services (OSDS) has revised California Code of Regulations (CCR), Title 2, Division 2, Chapter 3, Subchapter 8, Office of Small Business Procurement and Contracts, Sections 1896 - 1896.22, also known as the Small Business (SB) regulations. The regulations incorporated legislation chaptered between 2005 through 2015, deleted obsolete terms, and reconciled, where applicable, the SB regulations with the Disabled Veteran Business Enterprise regulations. The proposed regulations became effective on January 23, 2017.

The newly amended Small Business regulations are available at this address:

http://www.dgs.ca.gov/pd/Programs/OSDS/NoticeofRulemaking.aspx

  • Response Type†: Annual Follow Up
  • Completion Date: January 2017
  • Response Date: June 2017

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

DGS is in the final stages of completing its revision of the small business (SB) regulations, including commercially useful function provisions. Specifically, in August 2016, DGS' Office of Small Business and DVBE Services (OSDS) submitted the SB rulemaking file to the Office of Administrative Law (OAL) for its approval. Subsequently, OAL sent a list of identified issues that require DGS' attention, none of which impact the proposed revisions to the commercially useful function language. Recently, OSDS withdrew the package and is actively working with OAL staff in making the required revisions.

In November 2016, OSDS expects to complete the revision process and resubmit the package to OAL. This timeline should allow OAL's final approval to be obtained on a schedule that allows the SB regulations to be issued with an effective date of January 1, 2017.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: January 2017
  • Response Date: October 2016

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

During the 2014/15 fiscal year, DGS made a concerted effort to issue a comprehensive revision of the small business (SB) regulations, including commercially useful function provisions. As part of these efforts, DGS' Office of Small Business and DVBE Services (OSDS) took the following actions: (1) in December 2014, issued a Notice of Proposed Rulemaking to SB Regulations announcement; (2) in February 2015, provided an inspection period of the modified regulations; (3) in March 2015, held a public hearing to receive comments; and, (4) in June 2015, provided another inspection period of the modified regulations.

In July and August, in consultation with DGS legal staff, OSDS began the process of finalizing the SB regulations. The process identified sections of the proposed regulations that needed to be further researched and discussed prior to submittal of the rulemaking file to the Office of Administrative Law (OAL). As a result, DGS will not be able to meet the statutory deadline, December 28, 2015, for submittal of the file to OAL.

OSDS will restart the SB regulatory process in early 2016 and estimates that the rulemaking file will be submitted to OAL in September 2016. Subsequently, depending on OAL's response, DGS anticipates the regulations to be effective in December 2016.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: December 2016
  • Response Date: September 2015

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

As noted in our previous status reports, the DGS planned to embark on a comprehensive revision of the small business (SB) regulations, including commercially useful function (CUF) provisions, upon the issuance of new disabled veteran business enterprises (DVBE) regulations. The DVBE regulations were issued in April 2013.

At the time of our August 2013 status report, DGS' Office of Small Business and DVBE Services (OSDS) had begun working on the SB regulation revision process and roughly estimated that the Notice of Proposed Rulemaking would be submitted to the Office of Administrative Law (OAL) in December 2013. However, subsequent to that update, OSDS workload associated with implementing FI$Cal, the state's new integrated financial management system, has taken priority delaying the SB regulation development process.

Currently, OSDS estimates that the proposed SB regulation notice will be submitted to OAL in December 2014. The new regulations will include CUF provisions which are consistent with those contained in the DVBE regulations.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: Unknown
  • Response Date: October 2014

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

Please refer to our one-year response.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: Unknown
  • Response Date: November 2013

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

As noted in our previous status reports, the DGS planned to embark on a comprehensive revision of the small business (SB) regulations, including commercially useful function (CUF) provisions, upon the issuance of new disabled veteran business enterprises (DVBE) regulations. Subsequent to our six-month status report, the Office of Administrative Law (OAL) approved the new regulations and they were issued. The new DVBE regulations further expand and clarify CUF requirements.

In April 2013, DGS' Office of Small Business and DVBE Services began work on the SB regulation revision process. Although in the very early stages of the process, it is currently estimated that the Notice of Proposed Rulemaking will be submitted to OAL in December 2013. The new regulations will include CUF provisions which are consistent with those contained in the DVBE regulations.

  • Response Type†: 1-Year
  • Estimated Completion Date: Unknown
  • Response Date: August 2013

California State Auditor's Assessment of Status: Partially Implemented


Agency Response*

General Services stated that the Office of Administrative Law (OAL) is currently reviewing its revised regulations proposal.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Partially Implemented

General Services did not provide an estimate of the OAL's final approval of the regulations.


Agency Response*

General Services expects the Office of Administrative Law (OAL) will approve the final regulations by January 31, 2013. (See 2013-406, p. 177)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #38 To: General Services, Department of

To ensure that the construction unit complies with the State's procurement laws and policies, General Services should conduct an investigation of the small businesses we discussed in the report to determine if they are performing a commercially useful function.

Agency Response*

In its audit report, the State Auditor expressed concerns related to if two firms used by DCU, Blue Eagle Enterprises and Knight Muse & Associates, were performing a commercially useful function (CUF). Consequently, DGS' Office of Audit Services (OAS) was tasked with performing an audit of those firms compliance with the state's CUF provisions.

In a report dated April 29, 2013, OAS presented its conclusion that Blue Eagle Enterprises and Knight Muse & Associates were performing a CUF in providing goods and materials to DCU. Specifically, the firms were independently performing such key activities as researching and obtaining pricing information from suppliers, ordering products from those suppliers, coordinating delivery or pick-up of goods, directly paying for product costs, and billing and collecting amounts due from DGS for filled orders. Further, the firms are independent businesses (sole proprietorships) subject to a risk of loss that took title to the goods, paid sales tax on goods sold to the state, reported cost of goods sold on the federal tax return filed for their business and did not subcontract any of its primary operating responsibilities to another firm.

It should be noted that the State Auditor also expressed concerns that two other suppliers used by DCU, Nizami Supplies and Skyward Supplies, may not have performed a CUF. Although competing for numerous procurements, the two firms have been awarded an insignificant amount of purchase orders (three) by DCU. Therefore, OAS did not include those firms in the scope of its audit.

  • Response Type†: 1-Year
  • Completion Date: April 2013
  • Response Date: August 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

General Services stated that its office of audit services, in consultation with its construction unit and office of small business and disabled veterans business enterprise services, is investigating the small businesses discussed in the report to determine if they are performing a commercially useful function. General Services stated the review is in its final stages and is expected to be completed in March 2013.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Partially Implemented


Agency Response*

General Services stated that its office of audit services, in consultation with its construction unit and office of small business and disabled veterans business enterprise services, is investigating the small businesses discussed in the report to determine if they are performing a commercially useful function. (See 2013-406, p. 177)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #39 To: Transportation, Department of

To comply with the 2007 court ruling and the APA until such time as the Legislature may choose to act, Caltrans should establish regulations to govern the sales process for the SR 710 properties affected by the Roberti Bill.

Agency Response*

The Affordable Sales Program regulations were approved by the Office of Administrative Law and filed in the office of the Secretary of State on July 26, 2016. For a copy of the approved regulations, please see Attachment 2.

In addition, Caltrans entered into a contract with Win Win Consulting, Inc. for the sale of 42 surplus residential properties under the Affordable Sales Program. The sales will be conducted in accordance with Government Code Sections 54235 - 54238.7, known as the Roberti Act, and the Affordable Sales Program regulations. For a copy of the agreement, please see Attachment 3.

  • Response Type†: Annual Follow Up
  • Completion Date: July 2016
  • Response Date: October 2016

California State Auditor's Assessment of Status: Fully Implemented

Caltrans established regulations in July 2016 to govern the sale of SR 710 properties pursuant to the Roberti Bill. During our May 2017 review we found that Caltrans has initiated the sales process by issuing Conditional Offer Prior to Sale documents to current tenants.


Agency Response*

Caltrans and CalSTA published the proposed Affordable Sales Program regulations in February 2015 for public review. Comments were considered and incorporated into the revised proposed regulations published in July 2015, and adoption of the final regulations is expected to take place at the end of the year. The proposed Affordable Sales Program regulations will allow Caltrans to implement the Roberti Bill and sell the affected properties.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: December 2015
  • Response Date: September 2015

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

Caltrans solicited public comment on the text of the proposed Affordable Sales Program regulations (Roberti Bill) and held three public hearings during the summer. Caltrans will submit the final regulations to the Office of Administrative Law (OAL) and anticipates they will be adopted in early 2015.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: March 2015
  • Response Date: October 2014

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

Please refer to our one-year response.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: June 2014
  • Response Date: October 2013

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

Caltrans continues to finalize the text of the proposed Roberti Bill regulations. Due to the complexity of this issue, Caltrans and the California State Transportation Agency (CalSTA) have decided to hold two public workshops this fall for interested parties prior to finalizing the proposed regulations to be submitted to the Office of Administrative Law (OAL). After OAL approves the language, public hearings will be held as part of the regulation adoption process. Caltrans anticipates OAL adoption of the proposed regulations within the first half of 2014.

  • Response Type†: 1-Year
  • Estimated Completion Date: June 2014
  • Response Date: August 2013

California State Auditor's Assessment of Status: Partially Implemented


Agency Response*

Caltrans stated it anticipates submitting its proposed regulations to OAL for approval by April 1, 2013.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Partially Implemented


Agency Response*

Caltrans stated it anticipates submitting its proposed regulations to OAL for approval by the end of 2012. (See 2013-406, p. 177)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #40 To: Transportation, Department of

To pursue alternatives to its management of the SR 710 properties, Caltrans should prepare a cost-benefit analysis to determine if the State would save money by hiring a private vendor to manage the properties. If such savings would occur, Caltrans should seek an exemption under Government Code, Section 19130 (a), to hire a private vendor.

Agency Response*

Because the cost-benefit analysis did not lead to a clear preferred option for property management, Caltrans and CalSTA decided to not pursue any of the three alternatives evaluated in the consultant's report. Instead, Caltrans will continue to perform property management activities. As noted in the status to recommendation No. 39, the Affordable Sales Program regulations were recently approved and Caltrans is moving forward with the sale of surplus properties. Selling the properties will allow Caltrans to reduce its inventory and associated property management activity.

  • Response Type†: Annual Follow Up
  • Completion Date: October 2016
  • Response Date: November 2016

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

Caltrans and CalSTA are continuing to pursue the goal of eliminating Caltrans' role in managing SR 710 properties. As stated in the status to Recommendation No. 39, Caltrans and CalSTA are currently in the process of submitting proposed Affordable Sales Program regulations to be adopted by the Office of Administrative Law by the end of the year. Caltrans recently submitted a request for proposal for consultant contract management of the sales process. Although the scope of work for the Sales Program does not include property management, the sales effort is directed toward expeditious reduction in property management activity.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: to be determined
  • Response Date: September 2015

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

Caltrans and CalSTA are continuing to pursue the goal of eliminating Caltrans' role in managing SR 710 properties. Caltrans and CalSTA are currently in the process of adopting Affordable Sales Program regulations which will result in the sale of surplus properties beginning in 2015. A component of the Sales Program may result in contract management of all or part of the sales process by another entity. If so, the scope of work for the Sales Program may include some elements of property management. Therefore, Caltrans and CalSTA are no longer evaluating any of the three options investigated in the consultant's report.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: to be determined
  • Response Date: October 2014

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

Please refer to our one-year response.

  • Response Type†: Annual Follow Up
  • Estimated Completion Date: 2014
  • Response Date: October 2013

California State Auditor's Assessment of Status: Not Fully Implemented


Agency Response*

In light of the Cost-Benefit Analysis Study, which led to no clear preferred option, Caltrans and CalSTA continue to hold discussions with legislators to pursue the goal of eliminating Caltrans' role in managing the SR 710 properties.

  • Response Type†: 1-Year
  • Estimated Completion Date: 2014
  • Response Date: August 2013

California State Auditor's Assessment of Status: Partially Implemented


Agency Response*

Caltrans hired a consultant to perform an independent cost-benefit analysis of the following property management options for the SR 710 properties: hiring a private vendor, establishing a JPA, and transferring the properties to a local transportation entity. The consultant completed the analysis and concluded that none of the options would be deemed favorable to the State from a financial perspective. Caltrans and the agency are reviewing the final report and will work with the Legislature to determine the best option for Caltrans, the State, and the tenants.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Partially Implemented


Agency Response*

Caltrans stated it hired a consultant to perform an independent cost-benefit analysis of the following property management options for the SR 710 properties: hiring a private vendor, establishing a JPA, and transferring the properties to a local transportation entity. The local transportation entity would take over ownership and management of the properties and use the proceeds of the sale for local transportation improvements. Caltrans also stated that its first meeting with the consultant would be held in October 2012 to develop a work plan with target dates. (See 2013-406, p. 178)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation #41 To: Transportation, Department of

To pursue alternatives to its management of the SR 710 properties, Caltrans should perform an analysis to compare the cost of establishing a JPA to its current costs of managing the properties.

Agency Response*

In light of the Cost-Benefit Analysis Study, which led to no clear preferred option,Caltrans and CalSTA continue to hold discussions with legislators topursue the goal of eliminating Caltrans' role in managing the SR 710 properties.

  • Response Type†: 1-Year
  • Completion Date: December 2012
  • Response Date: August 2013

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

Caltrans hired a consultant to perform an independent cost-benefit analysis of the following property management options for the SR 710 properties: hiring a private vendor, establishing a JPA, and transferring the properties to a local transportation entity. The consultant completed the analysis and concluded that none of the options would be deemed favorable to the State from a financial perspective. Caltrans and the agency are reviewing the final report and will work with the Legislature to determine the best option for Caltrans, the State, and the tenants.

  • Response Type†: 6-Month
  • Response Date: February 2013

California State Auditor's Assessment of Status: Partially Implemented


Agency Response*

Caltrans stated it hired a consultant to perform an independent cost-benefit analysis of the following property management options for the SR 710 properties: hiring a private vendor, establishing a JPA, and transferring the properties to a local transportation entity. The local transportation entity would take over ownership and management of the properties and use the proceeds of the sale for local transportation improvements. Caltrans also stated that its first meeting with the consultant would be held in October 2012 to develop a work plan with target dates. (See 2013-406, p. 178)

  • Response Type†: 60-Day
  • Response Date: October 2012

California State Auditor's Assessment of Status: Partially Implemented


Recommendation for Legislative Action

To ensure that the State properly manages its resources, the Legislature should consider amending the state law known as the Roberti Bill to allow Caltrans to sell SR 710 properties that have a high market value at fair market prices

Description of Legislative Action

Senate Bill 416 (Chapter 468, Statutes of 2013) enacts changes to the Roberti Bill to authorize the sale of state-owned surplus residential properties to income-qualified buyers in as is condition at the buyers request. The statute also creates the SR 710 Rehabilitation Account into which Caltrans must deposit proceeds from Roberti Bill sales of properties, continuously appropriates funds in the SR 710 Account to make required repairs to homes being purchased by income-qualified buyers, and limits the total funds that can be maintained in the account to $500,000.

  • Legislative Action Current As-of: February 2014

California State Auditor's Assessment of Status: Legislation Enacted


Description of Legislative Action

SB 416 (Chapter 468, Statutes of 2013) was signed by the governor on October 1, 2013, and amends the Roberti Bill as follows:

-Provides that the "fair market value" for surplus residential properties must reflect the as-is condition of the property and take into account any repairs needed to make the property habitable.

-Allows Caltrans, at the request of an income-qualified person, to offer a residence or property for sale in "as-is" condition.

-Gives first priority for purchase of certain surplus residential properties to current tenants in good standing with all rent current and paid in full, rather than any current tenant, and second priority to former occupants who were in good standing at the time they left the home, with priority given to the most recent tenants first, before the home can be offered to purchasers who intend to be owner-occupants.

-Gives tenants of non-residential properties who are in good standing priority to purchase the property at fair market value.

-Creates the SR-710 Rehabilitation Account and requires Caltrans to deposit proceeds from Roberti Bill sales into the account.

-Continuously appropriates funds in the SR-710 Rehabilitation Account for the purpose of making required repairs to homes being purchased by income-qualified residents, and limits the total funds that can be maintained in the account to $500,000.

-Requires any funds exceeding the $500,000 amount in the SR-710 Rehabilitation Account or remaining in the account after the last property is sold, less any reimbursements due to the federal government, be transferred to the State Highway Account to be used by the California Transportation Commission exclusively to fund projects located in Pasadena, South Pasadena, Alhambra, La Cañada Flintridge, and the 90032 postal ZIP Code.

  • Legislative Action Current As-of: October 2013

California State Auditor's Assessment of Status: Legislation Enacted


Recommendation for Legislative Action

To pursue alternatives to the State's management of the SR 710 properties that would preserve its access to the right-of-way needed for the extension project, to the extent that Caltrans has determined it to be cost-beneficial to do so, the Legislature should consider the establishment of a JPA that would allow Caltrans and the affected cities to jointly manage the SR 710 properties.

Description of Legislative Action

Legislation has not been introduced to address this recommendation.

  • Legislative Action Current As-of: January 2016

California State Auditor's Assessment of Status: No Action Taken


Description of Legislative Action

N/A

  • Legislative Action Current As-of: February 2014

California State Auditor's Assessment of Status: Unknown


All Recommendations in 2011-120

Response Type refers to the interval in which the auditee is providing the State Auditor with their status in implementing recommendations made in an audit report. Auditees must submit a response regarding their progress in implementing recommendations from our reports at three intervals from the release of the report: 60 days, six months, and one year or subsequent to one year.

*Agency responses received after June 2013 are posted verbatim.


Report type

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