Report 2012-111 Summary - June 2013
California Department of Public Health:
It Needs to Improve Accuracy in Accounting and Charging for Compliance Inspections Designed to Reduce Youth Access to Tobacco and It Could Enhance Its Compliance Inspections
Our audit of the California Department of Public Health's (Public Health) administration of the Stop Tobacco Access to Kids Enforcement Act (STAKE Act) highlighted the following:
- It lacks the fiscal processes to accurately account for the expenditures related to the statewide and local compliance inspections it conducts.
- It charged local entities at least $207,000 less than what it actually needed to cover its costs for conducting 2,500 local compliance inspections.
- It is missing an opportunity to enhance its enforcement efforts because it does not obtain the names of retailers who violate state laws during annual statewide assessments so that it can include them in its compliance inspections.
- It could provide greater specificity on the youth consent form regarding any future use of the data it collects with the help of youth decoys.
RESULTS IN BRIEF
Our review of the California Department of Public Health's (Public Health) administration of the Stop Tobacco Access to Kids Enforcement Act (STAKE Act) revealed that it lacks the fiscal processes to accurately account for the expenditures related to the statewide and local compliance inspections it conducts. These compliance inspections help it identify and later issue citations to retailers that sell tobacco to youth under the age of 18, in violation of the law. Additionally, the amounts that Public Health charged local entities were at least $207,000 less than what Public Health needed to cover its costs for the 2,500 local compliance inspections it conducted during the period we reviewed. Further, although as part of the required annual random, unannounced inspections of tobacco retailers (annual retailer assessment) its contractor measures overall levels of compliance and identifies violations, Public Health does not obtain the names of these retailers so that it can include them in future compliance inspections. Thus, it is missing an opportunity to enhance its enforcement efforts. Finally, Public Health could revise its youth consent form to provide greater specificity regarding any future use of the data it collects with the help of boys and girls 15 and 16 years of age (youth decoys).
California state law requires retailers to obtain a license from the State Board of Equalization in order to sell tobacco and prohibits those retailers from selling tobacco to any person under 18. In 1992 the United States Congress enacted the Alcohol, Drug Abuse, and Mental Health Administration Reorganization Act, which includes an amendment, commonly known as the Synar Amendment, aimed at restricting youth access to tobacco. Under the Synar Amendment, the United States Department of Health and Human Services may issue a Substance Abuse Prevention and Treatment Block Grant (federal block grant) to states that have laws prohibiting the sale of tobacco to individuals under the age of 18. As a condition of receiving federal block grant funds, federal law requires states to conduct an annual retailer assessment. Part of this annual retailer assessment involves determining the percentage of retailers statewide that do not comply with laws restricting youth access to tobacco.
In response to the federal Synar Amendment, California enacted the STAKE Act, which took effect in January 1995. The STAKE Act designates Public Health as the state agency responsible for the annual retailer assessment. In addition, the STAKE Act requires Public Health to conduct undercover compliance inspections of tobacco retailers throughout the State using youth decoys. To meet the requirements of the Synar Amendment, Public Health has entered into an agreement with the San Diego State University Research Foundation (research foundation) to conduct the annual retailer assessment, which also uses youth decoys. In addition, Public Health entered into an agreement with the American Lung Association of California to recruit the youth decoys used in these compliance inspections and assessments.
Although Public Health conducts the annual retailer assessment to satisfy the federal requirement, it pays for this effort with funds from the California Tobacco Tax and Health Protection Act of 1988 (Proposition 99)—which became effective in 1989 and imposes additional taxes on tobacco products. Public Health pays for the assessment using these funds because the implementing legislation for Proposition 99 allows Public Health to conduct statewide surveillance of tobacco-related behaviors, knowledge, and attitudes and to evaluate its local and statewide tobacco control program, which is consistent with the purpose of the annual retailer assessment. In addition to the annual retailer assessment, Public Health conducts statewide compliance inspections using the federal block grant funds. It also conducts additional local compliance inspections on behalf of local entities that contract with it to further enforce the STAKE Act. The local entities reimburse Public Health for these additional inspections. Although the annual retailer assessment does not result in any further actions, the statewide and local compliance inspections result in civil penalties for retailers who violate the law.
We found that Public Health lacks the processes necessary to track costs related to the statewide and local compliance inspections. Public Health explained that its investigators are assigned to work on either the statewide compliance inspections or the local compliance inspections. Public Health charges the time and associated costs of investigators assigned to statewide compliance inspections to the Sale of Tobacco to Minors Control Account. It charges the time and associated costs of investigators assigned to local compliance inspections to its General Fund appropriation. Public Health explained that although some investigators may occasionally work on both statewide and local compliance inspections, when this occurs, it does not adjust the funding sources it charges for the investigators' time and related costs. In addition, because Public Health uses the same procedures when conducting statewide and local compliance inspections, we expected the average cost of a statewide compliance inspection to be similar to the average cost of a local compliance inspection during our period of review—fiscal years 2009-10 through 2011-12. However, we found the average cost charged for statewide compliance inspections varied substantially from the average cost charged for local compliance inspections. For example, during fiscal year 2009-10, the Food and Drug Branch of Public Health, which conducts the compliance inspections, charged an average of $667 per statewide compliance inspection compared to $204 for conducting a local compliance inspection. Without adequate accounting processes to track these costs, Public Health cannot ensure that it charges the appropriate funding source for the costs of conducting statewide and local compliance inspections.
Moreover, our review found that the rate that Public Health charged local entities during fiscal years 2009-10 through 2011-12 for conducting local compliance inspections was not adequate to cover its costs during those years. Public Health charged the cities of Los Angeles and Santa Ana $460 for each compliance inspection it conducted on their behalf and it charged Contra Costa County $485 for each such inspection. However, Public Health noted that these rates were established in 2005 and had only been adjusted for travel, if necessary. Based on its total expenditures for conducting statewide and local compliance inspections, we calculated that the average cost was $568, $584, and $784, respectively, to conduct a compliance inspection, including those conducted on behalf of three local entities, during fiscal years 2009-10 through 2011-12. Public Health agrees that its costs were higher than the reimbursements it received from local entities and it has recently increased its reimbursement rate for a new contract with the city of Los Angeles, which was executed in November 2012. However, we found that it overstated some of the costs it used to develop the rate for the new contract and would thus be overcharging the city of Los Angeles for any local compliance inspections Public Health conducts under that new contract.
In addition, Public Health is missing an opportunity to enhance its enforcement of the STAKE Act because its Tobacco Control Branch does not share the data on potential violators identified through the annual assessment with the Food and Drug Branch. Specifically, the research foundation identified 61, 57, and 42 retailers that sold tobacco products to minors during each of the three annual retailer assessments it conducted for federal fiscal years 2010, 2011, and 2012, respectively. Because the purpose of the annual retailer assessments does not include taking enforcement action against the violating retailers, Public Health's Tobacco Control Branch does not notify these retailers or take action against those who sold tobacco to minors. However, if the Tobacco Control Branch were to share this information with the Food and Drug Branch, which can impose civil penalties, the Food and Drug Branch could expand the pool of data on potential violators that would allow it to more effectively use its resources when conducting compliance inspections.
The Tobacco Control Branch stated that it does not share this information with the Food and Drug Branch because it is complying with assurances the research foundation made in its request for approval from the San Diego State University Institutional Review Board (review board)—the entity that reviews the research involving human subjects that the research foundation conducts. Although not required by the Synar Amendment or the agreement Public Health has with the research foundation, in developing its assessment protocols the research foundation sought and received approval from its review board before conducting the annual retailer assessment. The research foundation believed this approval was necessary in the event it later published research based on the data from the assessment. In its request for approval, the research foundation made several assurances to the review board, including that the identities of the retailers would not be made available to law enforcement.
Finally, we noted that although it generally complied with applicable laws related to obtaining informed consent from youth decoy participants and their parents or guardians, Public Health could expand its youth decoy and parental consent form to describe more specifically the potential use of the annual assessment data for future research. The consent form provides a description of the annual assessment and explains that participation is voluntary. However, because the research foundation has the right, based on its agreement with Public Health, to use the annual retailer assessment data for other research purposes, in the interest of full disclosure we believe—and Public Health agrees—that Public Health should include a statement on the consent form notifying the youth decoys and their parents or guardians that assessment data may be used in later research in a form that does not disclose the identity of the youth.
To ensure that it can support its labor costs, Public Health should implement a process to accurately track the time its staff spends conducting statewide compliance inspections and local compliance inspections. Further, it should allocate its expenses associated with local compliance inspections to the appropriate funding source, based on the time staff spends conducting those activities, and it should maintain accurate accounting records to reflect actual costs of statewide and local compliance inspections.
When Public Health enters into new contracts with local entities to conduct compliance inspections, it should do the following:
- Evaluate its historical costs of conducting these inspections to ensure that the existing rates are adequate to recoup its costs. If it determines that the existing rates are not adequate, it should develop a new rate that accurately reflects its true costs.
- Ensure that it maintains adequate documented support for the rate it charges for a compliance inspection.
Public Health should amend its recent contract with the city of Los Angeles to correct the rate it charges for a local compliance inspection to reflect its true cost.
To ensure that Public Health can more effectively monitor and enforce compliance with the STAKE Act, it should do the following:
- Take appropriate steps to ensure that there are no restrictions placed on the use of the data acquired during the annual retailer assessment that would preclude its use for compliance inspection purposes.
- Annually obtain the identifying information regarding the retailers that sold tobacco to minors during the annual retailer assessment and provide that information to the Food and Drug Branch.
- Include the retailers that sold tobacco to minors during the annual retailer assessment when selecting the retailers it plans to inspect as part of the statewide compliance inspections.
Public Health should add language to its youth decoy and parent or legal guardian consent form to clarify that the data obtained from the youth's participation may be used in future research in a way that will not reveal the identity of the youth.
Public Health agrees with our recommendations and outlined steps that it will take to implement them.