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July 2005 Through December 2005

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California State Auditor

Investigations of
Improper
Activities by
State Employees:

March 2006
I2006-1

The first five copies of each California State Auditor report are free.
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Bureau of State Audits
555 Capitol Mall, Suite 300
Sacramento, California 95814
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CALIFORNIA STATE AUDITOR
ELAINE M. HOWLE

STEVEN M. HENDRICKSON

STATE AUDITOR

CHIEF DEPUTY STATE AUDITOR

March 22, 2006	

Investigative Report I2006-1

The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
State Capitol
Sacramento, California 95814
Dear Governor and Legislative Leaders:
Pursuant to the California Whistleblower Protection Act, the Bureau of State Audits presents its
investigative report summarizing investigations of improper governmental activity completed from
July 2005 through December 2005.
Respectfully submitted,

ELAINE M. HOWLE
State Auditor

BUREAU OF STATE AUDITS
555 Capitol Mall, Suite 300, Sacramento, California 95814 Telephone: (916) 445-0255 Fax: (916) 327-0019 www.bsa.ca.gov/bsa

Contents
Summary	

1

Chapter 1
Department of Fish and Game:
Gift of State Resources, Mismanagement	

5

Chapter 2
Department of Corrections and Rehabilitation:
Gift of Public Funds	

19

Chapter 3
Department of Forestry and Fire Protection:
Improper Overtime Payments	

31

Chapter 4
Victim Compensation and Government Claims Board and
Department of Corrections and Rehabilitation:
Overpayments on an Employee’s Claims, Mismanagement	

39

Chapter 5
Department of Corrections and Rehabilitation:
Time and Attendance Abuse, Failure to Perform Duties	

47

Chapter 6
Employment Development Department:
Misuse of State Resources	

51

Chapter 7
Update of Previously Reported Issues	

53

Appendix A	
Activity Report	

57

Appendix B
State Laws, Regulations, and Policies	

61

Appendix C
State and Federal Referral Numbers	

71

Index	

77

SUMMARY
RESULTS IN BRIEF

Investigative Highlights . . .
State employees and
departments engaged in
improper activities,
including the following:

	 Provided gifts of free rent
of more than $87,000
to employees.

	 Failed to capture as much
as $8.3 million annually in
potential rental revenue.

	 Improperly allowed
employees to accrue
$17,164 worth of
leave credits.

	 Improperly authorized
around-the-clock overtime
payments for employees
who, as a result, received
nearly $58,000 to which
they were not entitled.

T

he Bureau of State Audits (bureau), in accordance with the
California Whistleblower Protection Act (Whistleblower Act)
contained in the California Government Code, beginning
with Section 8547, receives and investigates complaints of
improper governmental activities. The Whistleblower Act defines
an “improper governmental activity” as any action by a state
agency or employee during the performance of official duties that
violates any state or federal law or regulation; that is economically
wasteful; or that involves gross misconduct, incompetence, or
inefficiency. The Whistleblower Act authorizes the state auditor
to investigate allegations of improper governmental activities
and to publicly report on substantiated allegations. To enable
state employees and the public to report these activities,
the bureau maintains the toll-free Whistleblower Hotline
(hotline): (800) 952-5665 or (866) 293-8729 (TTY).
If the bureau finds reasonable evidence of improper governmental
activity, it confidentially reports the details to the head of the
employing agency or to the appropriate appointing authority. The
Whistleblower Act requires the employer or appointing authority
to notify the bureau of any corrective action taken, including
disciplinary action, no later than 30 days after transmittal of
the confidential investigative report and monthly thereafter
until the corrective action concludes.

	 Made duplicate
payments to an employee
of nearly $26,000.

	 Falsified time sheets to
receive $3,445 in wages
for hours not worked.

This report details the results of the six investigations completed by
the bureau or jointly with other state agencies between July 1, 2005,
and December 31, 2005, that substantiated complaints. This
report also summarizes actions that state entities took as a result of
investigations presented here or reported previously by the bureau.
Following are examples of the substantiated improper activities.

DEPARTMENT OF FISH AND GAME
The Department of Fish and Game (Fish and Game) allowed
several state employees and volunteers to reside in state-owned
homes without charging them rent. Consequently, Fish and
Game violated the state law prohibiting state officials from
providing gifts of public funds. We identified seven volunteers

California State Auditor Report I2006-1	

and six employees who resided in state-owned homes in Fish
and Game’s North Coast Region but were not required to
pay rent. Because Fish and Game provided free rent to some
employees and volunteers, the State did not receive more than
$87,000 in rental revenue to which it was entitled during a
21-year period. Therefore, that amount represents a gift of
state funds to the employees and volunteers residing in the
state‑owned homes and a loss in revenue to the State.
Additionally, when it charges an employee living on state property a
rate below the fair market value, Fish and Game must report to the
State Controller’s Office the difference between the rate charged and
the fair market value as a taxable fringe benefit; however, it failed
to do so for all of its employees across the State. As a result, state
and federal tax authorities were not notified that taxes were due
on potential housing fringe benefits totaling almost $3.5 million
for tax years 2002 through 2005, depriving those authorities of
$1.3 million in potential tax revenues to which they were entitled.
Finally, although Fish and Game is the focus of this report, it
has come to our attention that all 13 state departments that
own employee housing may be underreporting or failing to
report housing fringe benefits. According to a 2003 Department of
Personnel Administration housing report, state departments may
have failed to report housing fringe benefits totaling as much as
$7.7 million. Additionally, because departments charged employees
rent at rates far below market value, the State may have failed to
capture as much as $8.3 million in potential rental revenue in 2003.

DEPARTMENT OF CORRECTIONS AND REHABILITATION
Contrary to the terms in the collective bargaining agreement,
when a holiday fell on a scheduled day off, the Sierra Conservation
Center (center) allowed exempt employees to accrue holiday credits
for later use, even though they had not worked. For example,
between January 2002 and May 2005, the center improperly
allowed one employee to accrue 48 hours of holiday credit for
holidays that she was not scheduled to work, resulting in a gift
of public funds of $1,653 to the employee. Overall, between
January 2002 and May 2005, the center improperly allowed nine
exempt employees to accrue 516 hours, resulting in gifts of public
funds totaling $17,164.
In addition, the center allowed these nine exempt employees
to work alternate schedules involving 10-hour days, which
as a result of the language in the bargaining unit contract,
	

California State Auditor Report I2006-1

allowed them to miss work without having to charge a total of
1,460 hours to their leave balances. This management decision
resulted in a gift of public funds to the employees totaling $49,094.

DEPARTMENT OF FORESTRY AND FIRE PROTECTION
A supervisor at the Department of Forestry and Fire Protection
(Forestry) improperly authorized around‑the‑clock overtime
payments to several of his employees, which resulted in payments
totaling nearly $58,000 to which these employees were not
entitled and $3,907 for questionable overtime.
We also found that a heavy fire equipment operator at another
Forestry location received more than $16,000 in questionable or
improper overtime payments by taking advantage of a lack of
oversight by his direct supervisor and a lack of communication
among all battalion chiefs with authority to sign time sheets.

VICTIM COMPENSATION AND GOVERNMENT
CLAIMS BOARD AND DEPARTMENT OF CORRECTIONS
AND REHABILITATION
Between October 2000 and May 2002, a physician filed multiple
claims with the Victim Compensation and Government
Claims Board (Board) and the Department of Corrections and
Rehabilitation (Corrections), claiming he was entitled to a monthly
$2,700 recruitment and retention bonus given to Corrections
employees in the chief psychiatrist classification. Although we
believe the Board had no legal standing to hear the physician’s
claim, he received payments from both the Board and Corrections,
resulting in duplicate payments to the physician of $25,950.
Additionally, although both entities were aware that he was about
to receive state funds to which he was not entitled prior to receiving
his final payment, they neither adjusted the physician’s final claim
nor recovered the overpayment.

DEPARTMENT OF CORRECTIONS AND REHABILITATION
A Corrections employee falsified his time sheets and received
pay to which he was not entitled. Specifically, Corrections
identified almost 150 instances in which department sign-in logs
or timekeeping records maintained by the employee’s nonstate
employer indicated that the employee falsified his time sheets to
inflate the actual number of hours he worked at his state job. By
falsifying his state time sheets, the employee violated state law
California State Auditor Report I2006-1	



and received $2,875 in wages for hours he did not work. Further,
Corrections found at least 14 instances in which the employee
called in sick or simply did not show up to work but worked at
his second job on those days. This improper use of 134 hours of
leave resulted in payments to the employee totaling $3,960.

EMPLOYMENT DEVELOPMENT DEPARTMENT
In violation of state law, from July 2004 through October 2004,
an Employment Development Department employee made
420 personal telephone calls, or 77 percent of all her calls,
totaling 21 hours and 10 minutes, that were not related to
state business or were to her outside employer and its various
representatives. In addition, the employee inappropriately used
her state computer for personal purposes. Specifically, of the
1,229 e-mail messages stored on her state computer, 1,012, or
83 percent, were of a personal nature. n

	

California State Auditor Report I2006-1

CHAPTER 1
Department of Fish and Game: Gift of
State Resources, Mismanagement
ALLEGATION I2004-1057

T

he California Department of Fish and Game (Fish and
Game) allowed volunteers and employees to reside on
state property without requiring them to pay rent.

RESULTS AND METHOD OF INVESTIGATION
We investigated and substantiated the allegation, as well as other
improper acts. Fish and Game allowed several state employees
and volunteers to reside in state-owned homes without charging
them rent. Consequently, Fish and Game violated the state law
prohibiting state officials from providing gifts of public funds.
We identified seven volunteers and six employees who resided
in state-owned homes in Fish and Game’s North Coast Region
but were not required to pay rent for a total of 718 months
between January 1984 and December 2005. Because Fish and
Game provided free rent to these employees and volunteers,
the State did not receive more than $87,000 in rental revenue
to which it was entitled during that time.  Therefore, that
amount represents a gift of state funds to the employees and
volunteers residing in the state-owned homes and a loss in
revenue to the State.
Additionally, when it charges an employee living on state property
a rate below the fair market value, Fish and Game must report to
the State Controller’s Office the difference between the rate charged
and the fair market value as a taxable fringe benefit; however, it
failed to do so for all of its employees across the State. As a result,
state and federal tax authorities were not notified that taxes were
due on potential housing fringe benefits totaling as much as
$3.5 million for tax years 2002 through 2005, depriving those
authorities of as much as $1.3 million in potential tax revenues.
	For

a more detailed description of the laws discussed in this chapter, see Appendix B.

	This

conservative amount is based on the nominal rents Fish and Game charges when it
requires its employees to pay rent. However, if fair market value, as determined by the
Department of Personnel Administration, were applied to the 718 months of free rent
(as discussed later), this figure could be greater.

California State Auditor Report I2006-1	



Department of Fish and Game

Finally, although Fish and Game is the focus of this report, it
has come to our attention that all 13 state departments that own
employee housing may be underreporting or failing to report
housing fringe benefits. In 2003 alone, state departments may
have failed to report housing fringe benefits totaling as much as
$7.7 million. Additionally, because departments charged employees
rent at rates far below market value, the State may have failed to
capture as much as $8.3 million in potential rental revenue in 2003.
To investigate the allegation, we reviewed rental agreements and
reporting records for properties held by Fish and Game in its
North Coast Region. We also analyzed a state-owned housing
review performed by the Department of Personnel Administration
(DPA), reviewed state laws and regulations, and examined state
and department policies regarding the use of and reporting
requirements associated with state-owned homes. Finally, we
interviewed Fish and Game employees.

BACKGROUND
According to Fish and Game, many of the homes it owns in
the North Coast Region are on the grounds of hatcheries or
wildlife areas, often in remote areas. Most employees live in Fish
and Game housing either as a condition of employment or to
provide security against vandalism, theft, and deterioration of
state property. Employees or volunteers residing in state-owned
housing may provide other services, including dispensing
information to the public, reporting illegal activities, and
picking up litter. Most of the properties discussed in this chapter
are in Fish and Game’s North Coast Region.

FISH AND GAME PROVIDED FREE HOUSING TO
EMPLOYEES AND VOLUNTEERS

Fish and Game allowed
employees and volunteers
to reside on state property
without charging them
rent, providing them with
a gift of public funds of
over $87,000.

We identified at least six employees in Fish and Game’s North
Coast Region who lived on state property at some point between
January 1984 and December 2005 without paying rent, resulting
in a gift of public funds to the employees and a loss to the State
exceeding $73,000. We also identified seven volunteers in Fish
and Game’s North Coast Region who lived on state property rent
free, resulting in a gift of public funds to the volunteers and a
loss to the State of almost $14,000.
State law provides that the salary fixed by law for each state officer
is compensation in full for that office and for all services rendered
in any official capacity, and the employee cannot receive for his

	

California State Auditor Report I2006-1

Department of Fish and Game

or her own use any fee or perquisite for the performance of any
official duty. Similarly, state law governing volunteerism in state
government provides that a volunteer is an individual who offers
goods or services to any state agency without any financial gain.
In addition, the California Constitution prohibits the use of
public funds for a purely private purpose. The use of public funds
for a purely private purpose is known as a “gift of public funds.”
Because the employees’ wages are considered full compensation
and volunteers are not expected to benefit from their positions,
any additional benefit provided to employees or volunteers, in the
form of free rent, is considered a gift of public funds in violation
of state law. Table 1 shows the gift of free or reduced rent Fish and
Game provided to 13 employees and volunteers in its North Coast
Region between January 1984 and December 2005.

Table 1
Gifts of Public Funds and Rental Revenues Lost by the State
January 1984 to December 2005
Months Resided
With No Rent

Monthly Rental Value as
Determined by Fish and Game*

Gift Given to Resident;
Amount Lost by the State

Employee A

120

$200

$24,000

Employee B

131

162

21,222

Employee C†

254

34

8,636

Employee D

40

200

8,000

Employee E

31

200

6,200

Employee F

49

107

5,243

 

73,301

Resident

Gift to employees
Volunteer A

25

220

5,500

B‡

36

134

4,824

Volunteer C

11

220

2,420

Volunteer D

8

55

440

Volunteer E

7

55

385

Volunteer F

3

55

165

Volunteer G

3

55

165

Volunteer

Gift to volunteers
Combined gift to employees and volunteers

13,899
718 

$87,200

*	As of the issuance of this report, Employee D and all the volunteers listed continue to reside on state property at no charge. Employee F
no longer resides on state property, and Employees A, B, C, and E reside on state property but pay the rents listed in the “Monthly
Rental Value as Determined by Fish and Game” column.
†	Employee

C resides in a dormitory; all others reside in homes.

‡	No

prior tenant information was available for Volunteer B’s residence, so we used the lowest rate charged for a comparable home in Fish
and Game’s North Coast Region.

California State Auditor Report I2006-1	

Department of Fish and Game

Employee A resided on
state property for more
than 10 years without
paying rent. This
represents a gift of state
funds and a loss to the
State of $24,000.

Employee A, a permanent intermittent employee who works for
Fish and Game approximately nine months of the year, resided on
state property, rent free, for more than 10 years. That arrangement
represents a gift of state funds to Employee A and a total loss to
the State of $24,000 over the 10-year period. Further, a document
found in his personnel file indicates that Employee A may have
resided on state property for an additional five years without
paying rent; however, because of Fish and Game’s poor record
keeping, we could not determine the veracity of the document.
An official at Fish and Game told us that Employee A volunteers
when he is not working and for many years was the only Fish
and Game presence in the area; however, the state regulations
governing the application of rental rates to state-owned housing
do not include a provision allowing departments to waive rent
to any employee. An exception to that regulation is granted only
if the employee is entitled to receive housing as compensation
for services, which is not the case with Employee A or any other
employee or volunteer mentioned in this report.
Based on our review of records provided by Fish and Game, it
appears that Employee C, who lives in a dormitory, resided on state
property without paying rent for more than 20 years. The official
told us that free rent is provided in many instances because the
homes and dormitories are in very poor condition and Fish and
Game needs a security presence at remote locations. However,
state regulations indicate that it is the DPA’s responsibility to
reduce the rent on essential state property that is deemed to be
substandard. State regulations also allow departments, in limited
circumstances, to reduce rental rates for substandard essential
state properties; however, departments must do so in accordance
with state housing regulations, which, as previously stated, do
not allow employees or volunteers to reside on state property rent
free. Further, the regulations provide that DPA is responsible for
reviewing any special rental problems when the regulations cannot
be reasonably or equitably applied. Because Fish and Game allowed
the 13 residents we identified to live on state property rent free,
but charged rent to others who formerly or currently reside on the
same properties, it does not appear as though Fish and Game has
applied state housing regulations in an equitable manner. When
asked, the official acknowledged that he had not sought DPA’s
approval to reduce rental amounts.

	

California State Auditor Report I2006-1

Department of Fish and Game

FISH AND GAME FAILED TO REPORT THE FRINGE
BENEFIT REALIZED BY RENTERS PAYING LESS THAN
FAIR MARKET VALUE
All of the employees and volunteers living on Fish and Game
property throughout the State, not just those in the North Coast
Region, pay less than the fair market value in rent for their
residences. Federal tax regulations provide that gross income
generally includes fringe benefits, such as residing on employerprovided property while paying rent that is below the fair
market value. The difference between the fair market value and
the rental amount the employee or volunteer pays represents
a taxable fringe benefit to the resident unless residency on
state property is a condition of employment. State policy
requires state agencies to report that fringe benefit to the State
Controller’s Office on a monthly basis. However, Fish and Game
has not reported state-housing fringe benefits for any of its
employees since 2001.

Because Fish and Game
failed to report housing
fringe benefits for any of
its employees from 2002
through 2005, state and
federal tax authorities
were unaware of
$1.3 million in potential
taxes over this period.

State regulations provide that departments shall review the monthly
rental and utility rates every year and report those rates to
DPA. Based on a review of state-owned housing conducted by DPA,
as well as on information provided by the department to DPA, it
appears that Fish and Game may have understated its employees’
wages by as much as $867,000 each year from 2002 through 2005
because it did not report any fringe benefits for its employees who
reside on state property at below-market rates. As a result, over the
four-year period, state and federal tax authorities were unaware of
the potential $1.3 million in taxes associated with a total of nearly
$3.5 million in potential housing fringe benefits.
This $3.5 million also represents a potential loss in rental revenue
that the State may have received if Fish and Game had required
its employees to pay rent at the fair market value. Since housing
fringe benefits exist when the rental rate charged is less than
the fair market rate, no taxable fringe benefit would exist if Fish
and Game required its employees to pay fair market rates. A
representative of Fish and Game told us that it has not reported
any housing fringe benefits for its employees since 2000 because
it lacks the funding necessary to obtain fair market values for
its properties. The representative added that Fish and Game
considers residency to be a condition of employment for 105 of
the 154 positions held by the employees who currently reside on
	This

amount is an extrapolation based on 2003 data reported to DPA. Because Fish and Game
was unable to produce accurate fair market rental values for its homes, DPA determined fair
market values based on the Department of Housing and Urban Development’s 2003 value for
a one-bedroom home in the same county.

California State Auditor Report I2006-1	

Department of Fish and Game

state property; however, when reporting rental information to
DPA, Fish and Game indicated that it considered residency to be
a condition of employment for virtually all of the positions held
by employees and volunteers who reside on state property.

FISH AND GAME FAILED TO ADEQUATELY DEMONSTRATE
THAT RESIDENCY IS A CONDITION OF EMPLOYMENT
Although the information Fish and Game reported to
DPA indicated that virtually all of the 158 employees and
volunteers residing in its homes are doing so as a necessary
condition of employment, Fish and Game records maintained
at the North Coast Region headquarters fail to corroborate that
assertion. For example, North Coast Region records show that it
considers residency a condition of employment for only 29 of its
52 employees and volunteers residing in state-owned homes in
that region. As we mentioned earlier, when lodgings are furnished
at below fair market rates as a condition of employment, the
value received by the resident is not considered a taxable fringe
benefit. In these instances, departments are not required to report
taxable fringe benefits for housing. Internal Revenue Service
guidelines clarify that to meet the condition-of-employment test,
an employee’s residence must be the same place in which he or she
conducts a significant portion of his or her business. The regulations
further explain that for housing to be considered a condition of
employment, employees must be required to accept on-site lodgings
to perform their duties because the housing is indispensable to the
proper discharge of their assigned duties. State reporting guidelines
provided to Fish and Game representatives clarify that departments
must demonstrate and document the need for an employee to live
on the premises to satisfy the condition-of-employment test.

It appears that most of
Fish and Game’s properties
may not meet the
condition-of-employment
test and fringe benefits
should have been reported.

Based on our review of applicable federal tax law criteria for
determining residency as a condition of employment, it appears
that most of the Fish and Game properties mentioned in
this report may not have met those criteria and that housing
fringe benefits should have been reported. Further, although
we would have expected Fish and Game to document, in
employee personnel files or job descriptions, that residency was
a condition of employment, it often failed to do so.
Although we were able to find information related to residency
as a condition of employment in the personnel files of two
of the six employees mentioned in Table 1 on page 7 of this

10	

California State Auditor Report I2006-1

Department of Fish and Game

report, Employees B and C, Fish and Game’s determination
that these two employees meet the condition-of-employment
test seems arbitrary. Both employees’ personnel files contained
Fish and Game employee residency forms. Each form, signed
by the employees’ supervisor in April 2005, states that their
residency in a state-owned home is a condition of employment.
However, both employees began working in their current
positions more than five years ago, and we found nothing in
either employee’s personnel file indicating that their job duties
had changed recently in a way that would require them to
reside on state property or that residency was a condition of
employment prior to April 2005. As a result, we question Fish
and Game’s determination because it appears that for more than
five years these employees were able to discharge their duties
adequately without being required to reside on the properties
and, therefore, did not meet the condition-of-employment test.
Because Fish and Game did not properly document whether
living on state property was a condition of employment,
and because it did not demonstrate that each employee met
the condition-of-employment test, we are left to rely on the
conclusion in DPA’s report that Fish and Game failed to report
as much as $867,000 annually in taxable housing fringe benefits
provided to its employees statewide.

OTHER STATE DEPARTMENTS HAVE ALSO FAILED TO
REPORT HOUSING FRINGE BENEFITS

In 2003 state departments
may have failed to report
housing fringe benefits of
as much as $7.7 million,
depriving tax authorities
of almost $3 million in
potential tax revenues for
that year.

Although we focus on Fish and Game’s management of stateowned housing in this report, the DPA housing review shows
that other state departments that own employee housing may be
underreporting or failing to report housing fringe benefits. For
example, Table 2 on the following page shows that in 2003 state
departments may have failed to report housing fringe benefits
totaling as much as $7.7 million, depriving state and federal
tax authorities of almost $3 million annually in potential tax
revenues. Additionally, because state departments have chosen
to charge employees rent that is well below market rates, the
State may have lost as much as $8.3 million in potential rental
revenue in that year.

	As

we mentioned previously, taxable fringe benefits exist when the rental rate charged
is less than the fair market rate. Thus, no fringe benefit exists when employees pay fair
market rates.

California State Auditor Report I2006-1	

11

Department of Fish and Game

Table 2
Potential Income and Benefits Related to Rental Housing Units Held by State Departments
2003

Department

Rental
Units

Annual Income
If Rented at Fair
Market Value (FMV)

Annual Rent
Charged*

Lost State Revenue
(Difference Between FMV
and Rent Charged)†

Taxable
Fringe Benefit
Reported

Unreported
Taxable Fringe
Benefits‡

Department of Parks and Recreation

487

$4,778,496

$   763,488

$4,015,008

$373,198

$3,641,810

Department of Corrections
and Rehabilitation

176

2,139,972

909,732

1,230,240

0

1,230,240

99

1,254,360

309,240

945,120

5,728

939,392

Department of
Developmental Services
Department of Fish and Game

168

1,124,532

257,316

867,216

0

867,216

Department of Forestry and
Fire Protection

72

559,332

218,400

340,932

53,078

287,854

Department of Mental Health

40

366,720

125,472

241,248

34,031

207,217

Division of Juvenile Justice

51

371,760

136,740

235,020

69,152

165,868

Department of Transportation

42

294,984

144,324

150,660

17,300

133,360

Department of Veterans Affairs

22

235,224

97,512

137,712

9,240

128,472

Santa Monica Mountains
Conservancy

9

82,512

0

82,512

0

82,512

California Highway Patrol

6

41,184

12,732

28,452

0

28,452

Department of Food and Agriculture

5

29,184

5,844

23,340

0

23,340

California Conservation Corps

4

36,888

20,748

16,140

3,058

13,082

1,181

$11,315,148

$3,001,548

$8,313,600

$564,785

$7,748,815

Totals

Source:  2003 Department of Personnel Administration Departmental Housing Survey.
*	To determine annual rent charged, DPA multiplied by 12 what departments reported as monthly rent charged.
†	 This

amount represents what should have been reported to taxing authorities as a taxable fringe benefit.

‡	 Taxable

housing fringe benefits exist when the rental rate charged is less than the fair market rate. Thus, no taxable fringe benefit
exists when employees pay fair market rates.

AGENCY RESPONSE
Fish and Game reported that it disagrees with the amount we show
as being reportable housing fringe benefits and the associated
potential tax revenues. Specifically, Fish and Game believes our
report overstates the alleged taxable fringe benefits and associated
potential tax revenues because it has determined that a majority
of its resident employees meet the condition-of-employment test,
and that the fair market values used in the DPA review do not
accurately reflect the values of its properties.
Based on our review of applicable tax law and the records we
reviewed at Fish and Game’s North Coast Region, we determined
Fish and Game did not properly document and demonstrate that
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Department of Fish and Game

a majority of its employees met the condition-of-employment
test. Further, although we acknowledge that the fair market
values used in DPA’s review may not reflect the actual value of all
department holdings, DPA was unable to use actual fair market
values because Fish and Game failed to determine and report to
DPA the fair market value rates for any of its properties—rates it
also needed to determine to fulfill its responsibility to accurately
report the housing fringe benefits realized by its employees. Fish
and Game also reported that current budget constraints prohibit
it from obtaining appraisals to determine the most accurate fair
market values, but that it is considering requesting funding to
do so. However, Fish and Game charges its employees rent at less
than 25 percent of the fair market rates used by DPA. If current
appraisals were to value the properties at half the values used by
DPA, and if it were to raise rental rates to those fair market values,
it appears that Fish and Game could recover the cost of such
appraisals within one or two months.
In addition, Fish and Game reported that it disagrees with
our conclusion that certain personnel cannot live rent free on
state property because our report incorrectly presumes that
Fish and Game is obligated to charge fair market rates for all
of its housing and it is Fish and Game’s understanding that
rental rates are fixed and limited by state law, regulations, and
employee collective bargaining agreements.
Our conclusion in the report that Fish and Game’s provision
of rent-free housing resulted in a loss of over $87,000 is not
based on a comparison to fair market values as Fish and Game
asserts. Rather, the amount we report is based on a comparison
of free rent, shown in Table 1, versus the nominal rate Fish
and Game charges when it requires its employees to pay rent,
which appears to be well below fair market value. Additionally,
we disagree with Fish and Game’s assertion that rental rates
are fixed by state law, regulations, and employee collective
bargaining agreements. DPA is the agency responsible for
administering state housing regulations, and state law provides
that the director of DPA shall determine the fair and reasonable
value of state housing. Using information reported by Fish and
Game for DPA’s 2003 survey, DPA directed Fish and Game to
raise rental rates to fair market value and acknowledged that it
should do so in accordance with employee collective bargaining
agreements, which allow Fish and Game to raise rental rates
by 25 percent annually. Additionally, our review of records in
the North Coast Region found that Fish and Game has in fact

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Department of Fish and Game

adjusted the amount of rent it charges residents on numerous
occasions in the past, thus demonstrating that rates it charges its
residents are not “fixed.”
Finally, Fish and Game reported that it has been working with
DPA for several years as part of its commitment to ensure that
it is in compliance with laws and regulations applicable to its
properties and is committed to continuing to do so. Fish and
Game added that part of this commitment included providing
updated information regarding housing-related reporting and
withholding requirements to its employees and administrative
personnel in July 2002 and again in August 2003. However,
as we previously mentioned, Fish and Game has not reported
a state-housing fringe benefit for any of its employees since
2001 and it appears it is not in compliance with IRS regulations
governing reportable housing fringe benefits despite Fish and
Game’s assertion that it is committed to doing so.

OTHER AGENCY RESPONSES
Department of Parks and Recreation
The Department of Parks and Recreation (Parks and Recreation)
believes that state regulations relevant to state-owned housing for
employees not represented by collective bargaining agreements
(nonrepresented employees) do not allow it to raise rental
rates beyond those listed in the regulations and stated that
nonrepresented employees reside in approximately one-third of
its properties. However, after reviewing the information Parks
and Recreation submitted to DPA, it appears that nonrepresented
employees reside in less than one-tenth of its inhabited properties.
Regardless, Parks and Recreation believes that in order for it
to raise rental rates for its nonrepresented employees and not
violate state regulations, it believes DPA must update the rates
listed in state regulations. Parks and Recreation added that
many of the collective bargaining agreements under which
most of its remaining employee residents work limit its ability
to raise rental rates. However, DPA, the agency responsible for
administering state housing regulations, has specifically given
Parks and Recreation direction to raise rental rates to fair market
value and acknowledges that it should do so in accordance with
employee collective bargaining agreements, which, generally,
allow Parks and Recreation to raise rental rates by 25 percent
annually up to fair market value. After receiving this direction,
Parks and Recreation responded to DPA, requesting that DPA

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Department of Fish and Game

provide clear authority and policy direction to departments, and
inform employee unions of this direction; however, DPA has not
responded to this request.
Parks and Recreation also reported that it believes the fair market
values used in DPA’s review do not fairly represent the true value
of its homes. We acknowledge that the fair market values used in
DPA’s review may not reflect the actual value of all department
holdings; however, DPA was unable to use the actual fair market
values because Parks and Recreation failed to determine and report
to DPA accurate fair market value rates for all of its properties—rates
it also needed to determine to fulfill its responsibility to accurately
report the housing fringe benefits realized by its employees. Parks
and Recreation also contends that it provided fair market values for
its properties when it responded to DPA. However, after reviewing
the information it submitted to DPA, it appears that it provided
fair market determinations for only 298 of the 817 properties it
owns. Moreover, Parks and Recreation failed to indicate when the
last appraisal was conducted for all but 90 of the 298 properties
and had conducted appraisals on only 14 of these properties in
the previous 10 years, thus demonstrating that it did not report
accurate, up‑to‑date fair market rates to DPA. Additionally, when
responding to DPA’s survey, Parks and Recreation indicated that
residents in almost 300 of its 487 inhabited units were paying
rent at or above fair market values; however, our review of the
information it sent to DPA shows that just six of those units were
rented at or above fair market value.
Parks and Recreation also takes issue with the amounts identified
by DPA as losses in state revenue and underreported fringe
benefits because many of its employees live on state property
as a condition of employment and, therefore, there is no loss in
rental revenue to the State or fringe benefit to report. However,
after reviewing the information provided to DPA, it appears that
Parks and Recreation did not clearly indicate which, if any, of its
residents resided on state property as a condition of employment.
Specifically, even though the survey guidelines instructed Parks
and Recreation to indicate the reason for occupancy for each of its
properties, it did not list condition of employment as the reason
for occupancy for any of its properties.

Department of Corrections and Rehabilitation
The Department of Corrections and Rehabilitation (Corrections)
reported that it last established fair market value rates for all
its properties in 1999 and that it subsequently raised rents to

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Department of Fish and Game

the 1999 fair market value rates for properties at all but one
of its institutions. Corrections added that it has since raised
rates at the remaining institution and is committed to hiring a
consultant within six months to begin obtaining current fair
market value appraisals.

Department of Developmental Services
The Department of Developmental Services (Developmental
Services) reported that it believes the fair market rates used by
DPA do not accurately reflect the true value of its properties
because many of its units are single rooms without kitchens
and in some cases residents share bathrooms. We acknowledge
that the fair market rates used in the DPA review may not reflect
the actual value of all department holdings; however, DPA was
unable to use the actual fair market rates because Developmental
Services failed to determine and report to DPA the fair market
value rates for any of its properties—rates it also needed to
determine to fulfill its responsibility to accurately report the
housing fringe benefits realized by its employees.
Developmental Services also reported that it has initiated steps
to obtain fair market appraisals for all its properties and will
follow provisions in applicable collective bargaining agreements
to increase rental rates commensurate with the fair market
appraisals once they are established.

Department of Forestry and Fire Protection
The Department of Forestry and Fire Protection (Forestry) reported
that it has taken several steps to resolve state housing issues since
it reported information to DPA for its review in 2003. Specifically,
Forestry reported that it now reviews rental rates annually and
rents that are below fair market value will be raised by 25 percent
annually in accordance with applicable collective bargaining
agreements. It also reported that it currently reports taxable fringe
benefits for residents in Forestry housing on a monthly basis. In
addition, Forestry reported that the fair market rates used by DPA
do not accurately reflect the true values of its properties because
most are located within the boundaries of conservation camps
primarily occupied by prison inmates; however, it acknowledged
that annual appraisals are necessary to document the accurate
value of each unit. Finally, due to increased rental rates and
additional vacancies, Forestry reported that the difference between
fair market value and actual rental income for all of its properties
in 2005 was $32,805 and that by increasing rents 25 percent each
year, the difference will continue to decline.
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Department of Fish and Game

Department of Mental Health
The Department of Mental Health (Mental Health) reported
that it believes the fair market rates used in DPA’s review do not
accurately represent the values of its properties but acknowledged
that many, if not all of its state hospitals have been using outdated
fair market values. Mental Health also reported that it will
update its special order addressing employee housing to include
performing annual fair market value determinations and timely
reporting of housing fringe benefits. The special order will be
distributed to each of its four state hospitals and Mental Health
will monitor the hospitals for ongoing compliance. Mental Health
added that for certain purposes, such as the recruitment and
retention of interns, its state hospitals charge less than fair market
value and in these instances Mental Health will ensure that the
hospitals report the housing fringe benefits in accordance with
state and federal regulations.

Division of Juvenile Justice
The Division of Juvenile Justice reported that it last obtained fair
market value appraisals for all of its properties in 1995 and that it
subsequently raised rental rates to the 1995 fair market value rates.

Department of Transportation
The Department of Transportation (Caltrans) reported that it
believes the fair market rates used by DPA do not accurately
reflect the true value of its properties because all of its
properties are located in remote areas situated within Caltrans
maintenance facilities. Caltrans also reported that its policies
require that it charge fair market value for all employee housing
and that it update fair market values annually; however, Caltrans
was unable to explain why it did not report fair market values to
DPA. Although we did not validate its analysis, Caltrans reported
that based on its most recent fair market value determinations,
the loss of state revenue in 2003 was only $19,356 and the
amount of underreported fringe benefits was much less than
what DPA identified in its review.

Department of Veterans Affairs
The Department of Veterans Affairs (Veterans Affairs) reported
that it conducted fair market assessments of its properties in
September 2005 and that it submitted its corrected housing
information to DPA in October 2005. Veterans Affairs also

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Department of Fish and Game

reported that it established new rental rates based on the
assessments and informed its residents that the new rates will go
into effect March 1, 2006.

Santa Monica Mountains Conservancy
The Santa Monica Mountains Conservancy reported that it has
only six employees, none of whom live on state property. It
added that in lieu of rent, it currently allows nonstate employees
to reside on eight of its properties to provide and ensure
resource protection, site management, facilities security and
maintenance, and park visitor services.

California Highway Patrol
The California Highway Patrol (Highway Patrol) reported that
it determines rental rates in accordance with applicable state
regulations and that because all of its employees reside on state
property as a condition of employment, it has not underreported
housing fringe benefits. The Highway Patrol added that it is
in the process of obtaining appraisal reviews for its properties.
and is updating its policies and procedures to reflect that
assignments to its resident posts are classified as “condition of
employment.”

Department of Food and Agriculture
The Department of Food and Agriculture (Food and Agriculture)
reported that its employees currently reside on two state
properties as a condition of employment. As a result, there is no
fringe benefit to report for those residents. Food and Agriculture
added that because these properties are located near popular
resort areas, fair market values are not comparable to values of
homes in surrounding communities.

California Conservation Corps
The California Conservation Corps (Conservation Corps)
reported that it will be conducting new appraisals to determine
updated fair market values for its properties and that rental rates
will be increased to the extent allowed by law and applicable
collective bargaining units. Conservation Corps also reported
that employees residing on its properties will be taxed on the
fringe benefit amount—the difference between the rent charged
and the fair market value determined by these new appraisals—and
has informed affected employees of this fact. n

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CHAPTER 2
Department of Corrections and
Rehabilitation: Gift of Public Funds
ALLEGATION I2005-0781

T

he Department of Corrections and Rehabilitation
(Corrections) failed to exercise its management
controls, resulting in a gift of public funds at the Sierra
Conservation Center (center).

RESULTS AND METHOD OF INVESTIGATION
We investigated and substantiated the allegation. According
to the collective bargaining agreement between the State and
the American Federation of State, County, and Municipal
Employees (Union A), which covers health and social services
professionals, all employees exempt from the Fair Labor
Standards Act (exempt employees) accrue holiday credits
when they are required to work on holidays. However, the
agreement specifically provides that they do not accrue holiday
credits on days they do not work.
Contrary to the terms in the collective bargaining agreement,
when a holiday fell on a scheduled day off, the center allowed
exempt Union A employees to accrue holiday credits for later
use, even though they had not worked. For example, between
January 2002 and May 2005, the center improperly allowed
Employee E to accrue 48 hours of holiday credit for holidays
that she was not scheduled to work, resulting in a $1,653 gift
of public funds to that employee. Table 3 on the following
page shows the total gift of public funds to the nine exempt
Union A employees as a result of allowing them to accrue
holiday credits to which they were not entitled. Overall, the
center improperly allowed exempt Union A employees to
accrue 516 hours, resulting in gifts of public funds totaling
$17,164 between January 2002 and May 2005.

	For

a more detailed description of the laws, regulations, and employee contracts
discussed in this chapter, see Appendix B.

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Department of Corrections and Rehabilitation

Table 3
The Cost to the State of Allowing Nine Corrections
Employees to Improperly Accrue Holiday Credits
Year

Holiday Credit Hours
Improperly Accrued

Gifted Public Funds

2002

56

$1,913

2003

106

3,446

2004

240

7,997

2005*

114

3,808

  Totals

516

$17,164

*	The information for 2005 covers January through May.

In addition, the collective bargaining agreement for Union A
requires exempt employees to post leave only in eight-hour
increments (or their fractional equivalent depending on their
time bases) for each full day of work missed. At the same time,
the center allowed nine exempt employees to work alternate
schedules. For example, five employees worked four 10-hour
days instead of five eight-hour days. This presents a problem
when these employees take a day off, because the center charges
only eight hours against their leave balances for each day they
are absent, although they are missing 10 hours of work per
day. For example, Employee E, who was scheduled to work four
10-hour days per week, was required to post only eight hours
of leave for each full day’s absence. Similarly, when a holiday
fell on a scheduled workday and Employee E did not work, the
center allowed Employee E to charge only eight holiday hours
against her leave balance, rather than the full 10-hour workday.
Consequently, from January 2002 through May 2005, the center
failed to charge more than 198 hours against Employee E’s leave
balance for days she did not work, resulting in a gift of public
funds to her totaling $6,831.
Union A’s collective bargaining agreement specifies that
exempt employees are expected to work the hours necessary
to accomplish their assignments and defines their workload as
normally averaging 40 hours per week over a 12-month period.
However, because these exempt employees charge eight hours for
each missed 10-hour workday and the center does not require
them to make up the additional two hours, we fail to see how
the employees could average 40 hours per week over a 12-month
period. For example, after missing one workday, an exempt

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Department of Corrections and Rehabilitation

employee working an alternate work schedule can account for
only 38 hours of work that week. When asked, Employee A, who
is one of the employees listed in this report and the supervisor
of the other eight employees, confirmed that none of the
affected employees, including himself, had to make up the twohour differences by extending their workdays or by coming in
on days they were not scheduled to work.
Table 4 shows the total hours unaccounted for, by calendar year,
for the nine employees with alternate work schedules, including
hours for holidays. Overall, the center did not charge 1,460
hours to the leave balances of Union A employees who work
alternate schedules, resulting in a gift of public funds of $49,094.
Therefore, we believe the center’s decision to allow exempt
Union A employees to work alternate schedules is unreasonable
and that its failure to eliminate alternate work schedules results
in wasted state funds.

Table 4
Hours Not Charged and the Cost to the State
Hours Not Charged
Year

For Holidays

To Leave Balances

Total

Gifted Public Funds

2002

106

146

252

$  8,551

2003

134

280

414

13,821

2004

214

364

578

19,235

2005*

60

156

216

7,487

  Totals

514

946

1,460

$49,094

*	The information for 2005 covers January through May.

To investigate the allegation, we reviewed the State’s current
collective bargaining agreement with Union A and compared it
to the State’s bargaining agreement with the Union of American
Physicians and Dentists (Union B), because Union B also
represents employees in the health care field who are exempt
from the Fair Labor Standards Act. Additionally, we reviewed
employee time sheets from January 2002 through May 2005 and
certain communications between the center and Corrections.
We also interviewed center and Corrections employees,
including the center’s former acting warden. We then gave each
person a written summary of the interview and asked him or her
to review the statement and to make any necessary changes. We

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Department of Corrections and Rehabilitation

also asked each of these individuals to sign the statement under
penalty of perjury to ensure accuracy. The center’s former acting
warden met with us and responded to our inquiries, but refused
to sign his statement. Although we report our understanding
of what he told us, as witnessed by two investigators, we
have less confidence in the accuracy of our understanding of
his statements because of his unwillingness to confirm the
statement and to certify it under penalty of perjury. The center’s
health care manager provided us with a signed statement but
omitted and altered relevant information he gave to us during
the interview. Nonetheless, we report our understanding of what
he told us, as witnessed by two investigators.

Seven employees continue
to work alternate
schedules and charge
only four to eight hours
of leave when absent
from a 10-hour workday.

Although our investigation was limited to the center, Union A
represents 2,062 exempt employees throughout the State.
Therefore, this condition could be occurring in other regions
of the State and, as a result, the total cost to the State could be
significantly higher. As of the date of this report, seven of the nine
employees continue to work alternate schedules and charge only
four to eight hours of leave when absent from a 10-hour workday,
depending on their time bases. One of the employees has retired,
and another transferred to a correctional facility that does not
allow its exempt Union A employees to work alternate schedules.

BACKGROUND
The current collective bargaining agreement between the State
and Union A (Union A agreement), which is effective through
July 1, 2006, specifically states that exempt employees accrue holiday
credits when they are required to work on holidays. Further, it
specifies that exempt employees can charge leave balances only in
increments of eight hours, regardless of actual hours worked each
day when leave credits are charged. The Union A agreement also
requires the State to reasonably consider employees’ requests to work
alternate schedules. Alternate work schedules include, but are not
limited to, working four 10-hour days in one week. The center allows
both full- and part-time exempt employees represented by Union A
to work alternate schedules. For example, a full-time employee can
work four 10‑hour days, a three-quarter-time employee can work
three 10‑hour days, and a half-time employee can work two 10-hour
days to perform the requisite number of work hours in one week.

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Department of Corrections and Rehabilitation

Under the Union A agreement, exempt employees who work
four 10-hour days per week charge only eight hours against their
leave balances for each 10-hour workday missed. Half-time and
three-quarter time employees charge leave according to their
time base. For example, half-time employees charge four hours
of leave and three-quarter time employees charge six hours of
leave for each full day missed.
The State’s agreement with Union B, which like Union A covers
professionals in the health care field, similarly allows exempt
employees to work alternate schedules. However, in contrast
to the Union A agreement, the Union B agreement states that
exempt employees cannot charge leave in less than “whole-day
increments.” Thus, a Union B employee who works 10-hour days
charges 10 hours of leave for each day of work missed.

THE CENTER’S DECISION TO ALLOW EMPLOYEES TO
WORK ALTERNATE SCHEDULES PROVIDES A GIFT OF
PUBLIC FUNDS AND IS WASTEFUL
The center’s decision to allow alternate work schedules made it
more likely that exempt employees would have a scheduled day off
that fell on a holiday. In such cases, the center improperly allowed
nine exempt Union A employees to accrue holiday credits they
were not entitled to, even though the State’s collective bargaining
agreement with Union A clearly states that exempt employees are
entitled to holiday credit only when they are scheduled to work
on a holiday. By improperly allowing those employees to accrue
holiday credits on regularly scheduled days off, the center provided
gifts of public funds totaling $17,164 to exempt Union A employees
from January 2002 through May 2005, as shown in Table 5 on the
following page.

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Department of Corrections and Rehabilitation

Table 5
Gifts of Public Funds Resulting From the Center’s Decision to
Allow Exempt Union A Employees Working Alternate Schedules to
Accrue Holiday Credits on Holidays They Did Not Work
Holiday Hours and Dollars Improperly Accrued
2002
Employees

Hours

2003

Dollars

Hours

2004

Dollars

Hours

2005*

Dollars

Hours

Total

Dollars

Hours

Dollars

Full-Time Employees
Employee A

†

†

8

$   287

Employee B

40

$1,367

16

Employee C

†

†

8

Employee D

†

†

Employee E

8

Employee F
Employee G
Employee H

48

$1,812

547

8

273

212

32

897

0

0

24

846

273

32

1,094

8

0

0

14

477

†

†

16

419

8

273

12

‡

‡

‡

106

24

$   953

80

$  3,052

0

0

64

2,187

24

696

64

1,805

24

859

48

1,705

286

0

0

48

1,653

42

1,473

12

429

68

2,379

40

1,076

24

656

80

2,151

410

30

1,054

6

215

56

1,952

‡

8

280

0

0

8

280

$3,446

240

$7,997

114

$3,808

516

$17,164

Part-Time Employees

Employee I
Totals

56

$1,913

*	The information for 2005 covers January through May.
†	 This

employee did not work at the center during the indicated period.

‡	 This

employee’s approved time sheets were not available for review for the indicated time period.

According to a payroll specialist at the center, she was directed by
department personnel to allow the nine exempt employees to accrue
holiday credits when holidays fell on their regularly scheduled
days off. In a July 2004 e-mail, a department personnel analyst
advised the center’s personnel staff that exempt employees working
alternate work schedules should accrue holiday credits on their
regularly scheduled days off, as per state policy. However, this policy
applies only to six specific unions and is not applicable to Union A
employees. As a result, the center appears to have mistakenly applied
this policy to exempt Union A employees, allowing them to receive
$17,164 in holiday credits to which they were not entitled.
In addition to improperly allowing the nine exempt Union A
employees working alternate schedules to accrue holiday credit
for days they did not work, the center charged only eight hours
against an employee’s leave balance when the employee was
absent from work, including when a state holiday fell on

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Department of Corrections and Rehabilitation

a scheduled workday and the employee did not work. If the
employee was scheduled to work 10 hours on that day, this
resulted in a two-hour discrepancy. As a result of this practice,
the State paid these employees $49,094 for 1,460 hours they did
not work from January 2002 through May 2005. Table 6 shows
the gift of public funds each employee received as a result of the
center’s decision.

Table 6
Gift of Public Funds Resulting From the Center’s Decision to Allow
Exempt Union A Employees to Work Alternate Schedules
Hours Unaccounted for When Leave Balances Are Not Charged for Full 10-Hour Days
2002
Employees

Hours

2003

Dollars

2004

2005*

Hours

Dollars

Hours

Dollars

Hours

Total

Dollars

Hours

Dollars

Full-Time Employees
Employee A

†

†

10

$    359

16

$    603

6

$   239

32

$  1,201

Employee B

44

$1,503

72

2,461

70

2,441

30

1,073

216

7,478

Employee C

†

†

12

318

28

766

12

348

52

1,432

Employee D

†

†

42

1,436

58

2,031

20

716

120

4,183

70

2,392

62

2,119

42

1,461

24

859

198

6,831

80

2,674

158

5,289

100

3,425

16

572

354

11,960

Employee G

†

†

18

472

88

2,354

22

602

128

3,428

Employee H

58

1,982

40

1,367

56

1,946

8

286

162

5,581

‡

‡

‡

‡

120

4,208

78

2,792

198

7,000

252

$8,551

414

$13,821

578

$19,235

216

$7,487

1,460

$49,094

Employee E
Part-Time Employees
Employee F

Employee I
Totals

*	The information for 2005 covers January through May.
†	This

employee did not work at the center during the indicated period.

‡	This

employee’s approved time sheets were not available for review for the indicated time period.

The center has discretion to determine whether it will allow
employees to work alternate schedules, as the collective
bargaining agreement with Union A provides that management
must reasonably consider employees’ requests to work alternate
schedules. Given the restrictive language of the collective
bargaining agreement, which requires that only eight hours of
leave be charged when a 10-hour workday is missed, we believe
that allowing exempt Union A employees to work alternate
schedules is unreasonable and that the center’s failure to
eliminate the alternate work schedules is wasteful.
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25

Department of Corrections and Rehabilitation

EMPLOYEE GRIEVANCES LED TO THE DECISION TO
CONTINUE ALLOWING ALTERNATE SCHEDULES
In January 2004, a payroll specialist, employing a practice used
at the institution where she formerly worked, began charging
the leave balances of the exempt employees working alternate
schedules for the actual work hours they missed. In May 2004, an
associate warden at the center issued a memorandum informing
the health care manager at the time that exempt Union A and
Union B employees would have their leave balances charged
10 hours for each 10-hour workday missed, and that both Union A
and Union B exempt employees working alternate schedules would
have to enter into agreements with the center to ensure that the
employees’ leave balances were charged appropriately.
The alternate work schedule agreements were to be signed by each
affected employee and approved by the employee’s immediate
and secondary supervisors, the center’s health care manager or
division head, and the chief deputy warden. However, the nine
exempt Union A employees identified in our report refused to sign
agreements; therefore, it appears that the center’s management
never officially approved the employees’ alternate work schedules.
Nevertheless, the center continues to allow these exempt Union A
employees to work alternate schedules.
After the May 2004 memorandum was issued, five center
employees represented by Union A filed grievances, contending
that only eight hours of leave should be charged for absences
even when the missed workday is scheduled to be 10 hours. The
employees’ direct supervisor and the acting warden at the center
both denied the grievances; however, department management
approved the grievances in July 2004. After the department’s
decision, the center’s management expressed concern and stated
to the department’s Labor Relations Office and its regional
administrator that the center might need to deny exempt
employees the ability to work alternate schedules; however, center
management has made no such denials. As a result, full-time
exempt Union A employees continue to receive gifts of public
funds of as much as six hours’ pay when missing three days in a
workweek comprising four 10-hour days, as shown in Table 7.

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California State Auditor Report I2006-1

Department of Corrections and Rehabilitation

Table 7
Hours Charged Against Leave When a Full-Time
Exempt Union A Employee Misses Work
Days Missed
Per Week

Scheduled Work Hours
(Cumulative)

Leave Hours Charged
(Cumulative)

Difference
(Cumulative)

1

10

8

-2

2

20

16

-4

3

30

24

-6

4

40

40*

0

*	The center reviewed time sheets for several employees and revised leave records to account
for the department’s grievance decision and determined that when an employee misses a
full workweek, the employee is charged 40 hours of leave, starting in January 2004.

The loss to the State and the gift of public funds realized
by employees is even greater for employees who work on a
fractional basis. For example, when a half-time employee misses
one 10-hour workday, the employee’s leave balance is charged
only four hours, resulting in a gift of six hours’ pay. Of the nine
employees affected by the department’s decision, four work
half-time or three-quarter time. Table 8 shows the impact on the
State for employees who work on a fractional basis.

Table 8
Hours Charged Against Leave When a Part-Time
Exempt Union A Employee Misses Work
Scheduled
Work Hours
(Cumulative)

Days Missed
Per Week

½ Time

¾ Time

Leave Hours
Charged
(Cumulative)

½ Time

¾ Time

½ Time

1

1

10

10

4

2

2

20

20

N/A

3

N/A

30

¾ Time

Difference
(Cumulative)
½ Time

¾ Time

6

–6

–4

*

12

*

–8

N/A

*

N/A

*

N/A  =  not applicable.
*	The center recently reviewed time sheets for several employees and revised leave records to
account for the department’s grievance decision. As a result, starting in January 2004, when
an employee working one-half or three-quarter time misses a full workweek, the employee
is charged 20 or 30 hours of leave, respectively.

California State Auditor Report I2006-1	

27

Department of Corrections and Rehabilitation

THE DEPARTMENT AND THE CENTER CAN DISALLOW
ALTERNATE WORK SCHEDULES
State law requires agencies to maintain effective systems of
internal control to minimize fraud, errors, abuse, and waste
of government funds. By maintaining internal accounting and
administrative controls, state agencies gain reasonable assurance
that measures they have adopted protect state assets, provide
reliable accounting data, promote operational efficiency, and
encourage adherence to managerial policies. Further, state
law requires that detected weaknesses be corrected promptly
and asserts that waste and inefficiency in state government
undermine Californians’ confidence in government and reduce
the state government’s ability to address vital public needs.
We believe that the center and the department can decide to
disallow exempt Union A employees from working alternate
schedules, especially considering that allowing this practice
already has cost the State more than $66,000 for time not
worked, including holiday time, since 2002. Continuing to allow
these employees to receive gifts of public funds for time not
worked on holidays and on regular workdays is unreasonable,
as well as unfair to the State and employees working under
other union contracts. Further, we believe that by allowing
the practice, the department has violated state law prohibiting the
gift of public funds.

The center has the ability
to discontinue providing
gifts of public funds to its
employees by initiating
the process to eliminate
alternate work schedules.

28	

According to the department’s chief of labor relations, the center
can proceed with taking away alternate work schedules as long
as it makes the department aware of its intention to do so. The
center’s current health care manager supports the ability to work an
alternate schedule because he believes it offers the center increased
flexibility in providing health care coverage, particularly by mental
health professionals. However, as this report discusses, the use
of alternate work schedules by exempt Union A employees has
resulted in a loss of 1,976 hours available for patient health coverage
at the center. Thus, we fail to see how allowing this practice has
benefited the mental health patients. The center’s health care
manager also stated that the ability to work alternate schedules is a
recruitment tool used to attract applicants and, although he agrees
that employees should not receive gifts of public funds, he believes
the flexibility outweighs the gift of public funds. After we gave him
his statement, he added that this is a contract issue and he does not
have the authority to eliminate alternate work schedules. However,
as the center’s current health care manager, he is responsible for
all medical issues at the center and has the authority to start the
process to eliminate alternate work schedules if he chooses.
California State Auditor Report I2006-1

Department of Corrections and Rehabilitation

AGENCY RESPONSE
Corrections reported that the issues identified in our report are
labor relations issues and has forwarded our report to its Labor
Relations Office (LRO). As of the date of this report, the LRO has
not reported its corrective action. n

California State Auditor Report I2006-1	

29

Blank page inserted for reproduction purposes only.

30	

California State Auditor Report I2006-1

CHAPTER 3
Department of Forestry and Fire
Protection: Improper Overtime
Payments
ALLEGATIONS I2005-0810, I2005-0874, and I2005-0929

W

e received allegations under the California
Whistleblower Protection Act that several
Department of Forestry and Fire Protection (Forestry)
employees improperly received overtime payments.

RESULTS AND METHOD OF INVESTIGATION
We investigated and substantiated the allegations. A Forestry
supervisor authorized improper overtime for five air operations
officers working as pilots, which resulted in overtime payments
totaling more than $58,000. He also approved 80 hours of
questionable overtime, resulting in nearly $3,907 in pay, for two
air operations officers working in maintenance when they reported
working 24 hours a day on their time sheets. Although the State’s
collective bargaining agreement with CDF Firefighters (firefighters’
union), which includes air operations officers, does allow aroundthe-clock pay for certain employees when responding to a fire, it
does not allow air operations officers to receive this pay. Moreover,
department policy limits pilots to flying seven or eight hours per
day and to working 14 hours per day. Because air operations officers
recorded 24 hours for each day worked rather than the actual hours
worked when working as pilots, our calculation of the overpayment
is based on hours paid in excess of the 14-hour limit.
We also found that a heavy fire equipment operator at another
Forestry location received more than $16,000 in questionable or
improper overtime payments by taking advantage of a lack of
oversight by his direct supervisor and a lack of communication
among all battalion chiefs with authority to sign time sheets. In
this lax environment, the heavy fire equipment operator was able to
claim enough overtime over a two-year period to effectively increase
his average monthly salary from $3,903 to $7,566. Although we
acknowledge that efficient and effective firefighting is a critical
	For

a more detailed description of the laws, regulations, and employee contract
discussed in this chapter, see Appendix B.

California State Auditor Report I2006-1	31

Department of Forestry and Fire Protection

responsibility of Forestry, the emergency circumstances do not
relieve Forestry of the responsibility to maintain adequate payroll
controls related to overtime.
To investigate these allegations, we reviewed the State’s collective
bargaining agreement with the firefighters’ union and relevant
portions of Forestry’s procedures manual, interviewed an official
at the Department of Personnel Administration (DPA) and
Forestry staff, and reviewed employee time sheets.

BACKGROUND
Forestry’s mission is to protect the people of California from fires;
to respond to emergencies; and to protect and enhance forest,
range, and watershed values, thus providing social, economic,
and environmental benefits to citizens. Forestry’s firefighters,
fire engines, heavy fire equipment, and aircraft respond to an
average of 5,700 fires each year. The firefighters’ union represents
the air operations officers and heavy fire equipment operators.
The air operations officers mentioned in this report work in
maintenance or flight operations. Their main responsibilities
include training Forestry pilots as well as flying helicopters when
there is a shortage of fire pilots. Heavy fire equipment operators
typically operate equipment such as bulldozers, heavy-duty
transports, and trucks used to suppress fires.

THE AIR OPERATIONS SUPERVISOR APPROVED
IMPROPER OVERTIME PAY FOR EMPLOYEES

Five air operations
officers working as pilots
received more than
$58,000 in improper
overtime payments.

From January 2003 through July 2005, five air operations officers
working as pilots received more than $58,000 for overtime hours
charged in violation of either department policy or their union
agreement. In addition, two air operations officers working in
maintenance received nearly $3,907 for overtime hours that it is
not clear they actually worked.
The State’s collective bargaining agreement with the firefighters’
union provides for around-the-clock compensation when certain
employees are assigned to a fire, but does not include air operations
officers among those eligible for this type of compensation.
According to the chief of labor relations at DPA, air operations
officers should be compensated only for hours worked rather
than for all hours assigned to a fire. Forestry’s procedures manual
limits the number of hours its pilots are able to fly per day to
seven or eight hours, depending on whether a copilot is present, and
limits the total number of work hours per day for pilots to 14 hours.

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Department of Forestry and Fire Protection

Because the air operations officers’ reported overtime hours
involved pilot coverage, these employees were subject to Forestry’s
14-hour workday for pilots. Forestry establishes no such limitation
for air operations officers working in maintenance.
We reviewed time sheets for five air operations officers who
worked as pilots during fires and identified 1,063 hours in excess
of 14 hours per day for which they were compensated improperly.
Table 9 shows the improper payments to these employees, separated
according to whether the employees reported 24 hours per day or
15 to 23 hours per day on their time sheets. We were not able to
accurately determine the number of actual hours worked when air
operations officers charged 24 hours per day because they appear
to have recorded the time they were assigned to a fire, rather than
actual hours worked, on their time reports. For those instances
when air operations officers working as pilots charged more than
14 hours but less than 24 hours per day, we were similarly unable
to determine whether they charged for hours not worked or worked
in excess of allowable hours. In either case, the payments were in
violation of department policy.

Table 9
Improper Overtime Payments
January 2003 Through July 2005
Pay for More Than 14 Hours
but Less Than 24 Hours

Round-the-Clock Pay
Employee

Hours

Payments

Hours

Payments

Employee A*

470

$25,026

39

$2,087

Employee B

310

16,741

29

1,602

Employee C†

150

9,216

19

1,167

Employee D†

30

1,324

0

0

Employee E‡

0

0

16

858

960

$52,307

103

$5,714

  Subtotals
  Total Hours
  Total Payments

1,063
$58,021

*	This employee also improperly received $517 for 10 hours of time when he incorrectly
reported a 34-hour day rather than a 24-hour day. These hours are not included in this table.
†	 These

employees’ 2003 time sheets were not available for review.

‡	 This

employee also received payments totaling $3,020 for 67 hours of time between
January 2005 and June 2005 that the employee did not charge and the supervisor did not
approve. We did not review this employee’s time sheets for 2003 and 2004 for this recording
error. Forestry is responsible for accurately reporting overtime to the State Controller’s
Office, which issues payroll warrants based on the information Forestry reports. These hours
are not included in this table.

California State Auditor Report I2006-1	33

Department of Forestry and Fire Protection

The supervisor of air operations officers indicated that he
mistakenly believed they were all entitled to around-the-clock
pay when assigned to a fire. Even though Forestry helicopters do
not fly at night, he did not question the overtime hours related
to fires. According to the supervisor, in June 2004, a Forestry
headquarters time clerk raised concerns about Employee A’s
time sheet for May 2004. The supervisor indicated that he then
informed the air operations officers verbally that they were
not entitled to around-the-clock pay and at least one employee
subsequently took a voluntary demotion to a lower classification
that is entitled to around-the-clock pay.
Similar to the air operations officers working as pilots we just
discussed, maintenance officers are also not entitled to claim
around-the-clock pay. Thus, overtime payments should reflect
only actual hours worked. Therefore, we question 80 hours of
overtime for which two maintenance officers received $3,907.
Specifically, we found that one maintenance officer claimed five
consecutive 24-hour workdays and the other maintenance officer
claimed three consecutive 24-hour workdays, resulting in 80 total
hours of overtime. Although Forestry’s procedures manual does
not limit the maintenance officers to a 14-hour day, as it does
pilots, we question the hours because it does not seem reasonable
to expect an individual to work three or five consecutive 24-hour
workdays without a break for sleep. Further, these air operations
officers charged 24 hours per day during the period in which
their supervisor believed they were entitled to charge all the
time they were assigned to a fire incident, not just the hours they
actually worked. We did not question overtime that air operations
officers working in maintenance reported on days when they
recorded more than 14 hours but less than 24 hours of work.

The supervisor indicated
he did not attempt
to recover any of the
improper payments he
authorized.

The supervisor indicated that he did not attempt to recover any
of the improper payments, because it was his understanding that
he did not have the authority to recover payroll overpayments.
However, the supervisor stated that he notified his supervisor
and believed that Forestry’s Human Resources staff was aware of
the overpayments.

A LAX CONTROL ENVIRONMENT ALLOWED
ANOTHER EMPLOYEE TO CHARGE EXCESSIVE
AND QUESTIONABLE OVERTIME
Between January 2004 and December 2005, Forestry paid
Employee F, who works at a different location than the air
operations officers, approximately $87,900 for 3,919 overtime
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California State Auditor Report I2006-1

Department of Forestry and Fire Protection

hours, effectively raising his average salary over that period
from $3,903 per month to $7,566 per month. Of the approximately
$87,900 of overtime paid over this two-year period, we identified
approximately $12,588 that is questionable and another $3,445 that
is improper, as shown in Table 10. In claiming the questionable and
improper overtime, Employee F took advantage of a lack of effective
oversight by his direct supervisor, a lack of communication among
various battalion chiefs with the authority to sign his time sheets,
and inherent control weaknesses during emergency situations.
Although we acknowledge that efficient and effective firefighting
is a critical responsibility of Forestry, the emergency circumstances
do not relieve Forestry of its responsibility to maintain adequate
payroll controls.

Table 10
Questionable and Improper Overtime Hours for Employee F
Questionable
or Improper
Overtime Hours

Questionable or
Improper Payments

Reported excessive hours (improper)

120

$  2,769

Reported incorrect hours (improper)

27

676

Questionable and Improper Actions

Reported hours for covering the shift of
another employee who was scheduled to
work these hours (questionable)

449*

10,443

Reported hours for working the shift of
another employee who was not scheduled
to work (questionable)

92

1,953

8

192

696

$16,033

Other (questionable)
Totals

*	After completing our fieldwork, we were informed by Employee F’s supervisor that
Employee F worked 401 of the 449 hours we identified as questionable and that Employee G
may have falsified his time sheets. The supervisor informed us that Employee G was not
at work and should have charged leave credits for those days. Nonetheless, because the
approved time sheets we reviewed do not indicate that Employee G charged any leave
credits, the hours indicated here are still questionable; however, it is unclear now whether
Employee F or Employee G is responsible for the hours we identified.

As opposed to the air operations officers we discussed previously,
Employee F is a heavy fire equipment operator and is entitled to
around-the-clock compensation when he is assigned to a fire. The
California Government Code, Section 11813, declares that waste
and inefficiency in state government undermine Californians’
confidence in government and reduce the state government’s

California State Auditor Report I2006-1	35

Department of Forestry and Fire Protection

ability to address vital public needs adequately. Further, the
Financial Integrity and State Manager’s Accountability Act of 1983
(integrity and accountability act) contained in the California
Government Code, beginning with Section 13400, requires each
state agency to establish and maintain a system or systems of
internal accounting and administrative controls. Internal controls
are necessary to provide public accountability and are designed
to minimize fraud, abuse, and waste of government funds. In
addition, by maintaining these controls, agencies gain reasonable
assurance that the measures they have adopted protect state
assets, provide reliable accounting data, promote operational
efficiency, and encourage adherence to managerial policies. The
integrity and accountability act also states that the elements of
a satisfactory system of internal accounting and administrative
controls shall include a system of authorization and recordkeeping procedures adequate to provide effective accounting
control over assets, liabilities, revenues, and spending. Further,
the integrity and accountability act requires that state agencies act
promptly to correct weaknesses when they detect them.

Employee F received
$2,769 he was not
entitled to by improperly
reporting 24-hour shifts,
even though his direct
supervisor instructed him
to report 12-hour shifts.

Of the more than $16,000 in questionable and improper overtime
payments, Employee F received $3,445 by claiming hours to which
he was not entitled. The State’s collective bargaining agreement
with the firefighters’ union provides that heavy fire equipment
operators working Employee F’s schedule work a 12-hour day on
the last day of their duty week. Employee F improperly claimed
120 hours of overtime by reporting 24-hour shifts on the last day of
his duty week, despite being counseled by his supervisor regarding
ongoing problems with his time reporting and being specifically told
that he should report only 12 hours on the last workday of his duty
week. By reporting these hours, Employee F received $2,769 to which
he was not entitled. In addition, Employee F improperly claimed
27 hours related to training, receiving $676 for hours he did not
work. As a result, Employee F received a total of $3,445 to which he
was not entitled.
Additionally, Employee F received $10,443 for 449 hours of
overtime that he claimed to have spent covering a coworker’s
shift, even though the other employee’s time sheet indicates
that he did not take leave and was at work for the same hours
Employee F claimed for overtime. According to the employees’
direct supervisor, when Employee F reports that he is covering for a
coworker’s shift, only one of the two employees should report time
worked on the time sheets. If the other employee was scheduled to
work but was not at work, that employee should charge his leave
credits. Employee F also received $1,953 for 92 hours during which

36	

California State Auditor Report I2006-1

Department of Forestry and Fire Protection

he claimed he was covering a coworker’s shifts that the coworker
was not even scheduled to work. When we reviewed these time
sheets with the direct supervisor, he acknowledged that he should
have been more thorough when verifying the authorization and
the hours worked by Employee F.

The employee’s direct
supervisor acknowledged
that he should have
been more diligent when
approving Employee F’s
time sheets.

Although the direct supervisor acknowledged that he was not as
diligent as he could have been when approving these time sheets, he
pointed out that when other battalion chiefs approve Employee F’s
or his coworker’s time sheets, he does not review those sheets for
accuracy, and he is unable to compare the two employees’ time
sheets. Although up to nine people have the authority to approve
these employees’ time sheets, we observed that four individuals
other than the direct supervisor signed Employee F’s time sheets.
Regardless, state law requires that each appointing power keep
complete and accurate time and attendance records for each
employee employed within the agency.
The absence of strong, appropriate administrative controls in his
unit, including the direct supervisor’s lack of diligence in reviewing
time sheets and the lack of communication among battalion
chiefs, enabled Employee F to charge questionable and improper
overtime. Further, allowing as many as nine battalion chiefs to
approve Employee F’s time sheets impaired the ability of his direct
supervisor to monitor the accuracy of those time sheets.

AGENCY RESPONSE
As of the date of this report, Forestry’s review was still ongoing. n

California State Auditor Report I2006-1	37

Blank page inserted for reproduction purposes only.

38	

California State Auditor Report I2006-1

CHAPTER 4
Victim Compensation and
Government Claims Board and
Department of Corrections and
Rehabilitation: Overpayments on an
Employee’s Claims, Mismanagement
ALLEGATIONS I2004-0983 and I2005-1013

W

e received allegations under the California
Whistleblower Protection Act that the Victim
Compensation and Government Claims Board (Board)
improperly awarded payments to a physician at the California
Department of Corrections and Rehabilitation (Corrections).

RESULTS AND METHOD OF INVESTIGATION
We investigated and substantiated the allegations. In January 2000,
pursuant to the terms in a court order, Corrections began paying a
$2,700 per month recruitment and retention bonus to Corrections’
employees in the classification of chief psychiatrist (psychiatrist
bonus). Between October 2000 and May 2002, a physician
employed by Corrections filed claims with the Board and with
Corrections, stating that he was entitled to the bonus because
he claimed he regularly devoted a portion of his work time to
psychiatry. The physician received payments from both the Board
and Corrections for essentially the same claim and ultimately
received at least $25,950 more than he was entitled to because of the
duplicate payments. Further, although Board staff and Corrections
were aware that the physician was about to receive state funds to
which he was not entitled before receiving his final payment, neither
adjusted the physician’s final claim nor recovered the overpayment.
To investigate the allegations, we reviewed relevant state laws and
regulations and case files and database reports maintained by the
Board. We also interviewed representatives from the Department
of Personnel Administration (DPA), Corrections, and the Board.

	For

a more detailed description of the laws and regulations discussed in this chapter, see
Appendix B.

California State Auditor Report I2006-1	39

Victim Compensation and Government Claims Board and
Department of Corrections and Rehabilitation

BACKGROUND
The Board is a three-member panel consisting of the State and
Consumer Services Agency secretary or his or her designee, the
state controller, and one member appointed by the governor.
Its mission is to process and resolve claims for monetary relief
against the State in a prompt and equitable manner. As a general
rule, filing a claim with the Board is a jurisdictional prerequisite
to filing an action in court. Board staff members review claims
to ensure that they are complete and meet legal requirements
and then usually refer them to the involved agencies, which
recommend to the Board that a claim be rejected, approved
in full, or partly approved. The positions of the involved
state agencies, as well as the recommendations of Board staff
members, are presented to the Board, which then rules on
the claim at a public meeting. Approved claims, such as those
awarded to the physician, are included in one of two omnibus
claims bills submitted to the Legislature each year or are paid
out of the budget of the involved department.

THE BOARD AND CORRECTIONS MADE DUPLICATE
PAYMENTS ON THE PHYSICIAN’S CLAIMS

While waiting for his
payment from the
Board, the physician
filed a grievance with
Corrections for virtually
the same claim.

In response to a court order issued January 3, 2000, awarding a
recruitment and retention bonus to Corrections’ psychiatrists, the
physician filed a claim with the Board in October 2000 requesting
a $2,700 monthly bonus, retroactive to January 2000, the effective
date of the bonus program for chief psychiatrists. In May 2001
the Board approved this claim for the period from January 2000
through May 2001, but informed the physician that he would
likely not receive the payment it had awarded until fall 2002,
because the claim would be paid through a subsequent legislative
appropriations bill. In September 2002 the physician received
more than $49,000 from the Board, which represents payment for
the full amount of the bonus for the period from January 2000
through May 2001 plus more than $3,000 in interest.
While payment from the Board was pending, the physician
filed a grievance with Corrections seeking monetary relief for
virtually the same claim. DPA, as the administrative agency
charged with administering the grievance process on behalf
	

40	

At the time the physician filed his claims, the Board was comprised of the director of
the Department of General Services, the state controller, and a governor’s appointee.
The composition of the Board changed in 2004 when the Board began reporting to the
State and Consumer Services Agency.

California State Auditor Report I2006-1

Victim Compensation and Government Claims Board and
Department of Corrections and Rehabilitation
of the employing agency, determined that the physician was
entitled to 50 percent of the monthly bonus for the period from
January 2000 through June 2002, based on the percentage of
time he regularly devoted to psychiatry. In April 2002, based on
DPA’s determination, Corrections paid the physician $43,500,
representing 50 percent of the bonus for the period from
January 2000 through June 2002.

Based on DPA’s
determination, the
physician received $67,397
more than he was entitled
to—the total amount
awarded by the Board.

In May 2002, the physician submitted a second claim with the
Board, and in November 2003 he received more than $18,000
from the Board, which represents payment for the full bonus
for the period from June 2001 through June 2002, plus more
than $700 in interest. Table 11 on the following page lists the
payments made by the Board and Corrections.
Therefore, for the period from January 2000 through June 2002,
the physician received full payment from the Board for the
bonus and also received 50 percent of the bonus amount for that
same time period from Corrections. Assuming that the physician
was entitled to full payment of the bonus during this period,
he received $25,950 more than he was entitled to. However, as
the state agency charged with making determinations related to
salary and wages, DPA’s determinations are generally controlling
in this area. Thus, based on DPA’s determination that the
physician was entitled to only 50 percent of the bonus for the
same time period, he received $67,397 more than he was entitled
to—the total amount awarded by the Board.
Although DPA later determined that effective July 1, 2002, the
physician was entitled to 100 percent of the bonus, it appears
that this decision may have been influenced by the Board’s
involvement in the case. Specifically, in its request to DPA that
it grant the physician the other half of the bonus, Corrections
noted that the Board had approved the full bonus amount since
January 1, 2000, and also noted that Board staff had informed
Corrections that the Board would continue to approve the
physician’s claims as they are submitted.

	This

amount includes $3,947 in interest awarded to the physician.

California State Auditor Report I2006-1	41

Victim Compensation and Government Claims Board and
Department of Corrections and Rehabilitation

Table 11
Payments to the Physician

Period Covered
January 2000 through May 2001
June 2001 through June 2002
  Totals

Amount Paid by
Corrections

Total Amount
Paid by
Both Entities

$45,900

$24,650

$  70,550

17,550

  18,850

36,400

$63,450

$43,500

$106,950

Amount Paid by
the Board*

Maximum bonus amount allowed for the period of
  January 2000 through June 2002

$81,000

Amount paid to the physician in excess of the maximum allowed

$25,950

*	The Board also awarded the physician interest totaling $3,947, which is not reflected in
the amounts shown here.

When we asked about its efforts to recover the overpayment, the
Board responded that it is the employing agency’s responsibility—
Corrections in this case—to recover any overpayment. Nonetheless,
the Board had numerous opportunities to prevent the overpayment
from occurring in the first place by reducing either of the two
claims the physician submitted to the Board. In fact, on three
separate occasions, the physician himself specifically requested
that the Board reduce his claim to account for the payment he had
received from Corrections, but it failed to do so.
In April 2002, five months before he received his first payment
for his initial claim with the Board, the physician received his
payment from Corrections. He subsequently requested that the
Board reduce its award to him by $24,650 (the amount he believed
he was overpaid at that time). Although Board records indicate that
it intended to reduce the physician’s initial claim, it did not, at least
in part because of poor communications among its staff. The Board
also did not reduce the physician’s second claim, even though it
was aware that it had not amended the first claim.
Board records indicate that Board staff notified representatives
from Corrections on several occasions that the physician was
overpaid. Similarly, it appears that Corrections intended to recover
the overpayment, but because of poor communications both
internally and with the Board, it failed to do so until our office
questioned Corrections staff about the overpayment. When a state
department determines that an overpayment has been made to an
employee, it is required to initiate collection within three years of
the date of overpayment, through methods specified in state law.
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Victim Compensation and Government Claims Board and
Department of Corrections and Rehabilitation
Further, in doing so, the department must notify the employee of
the overpayment to give the employee an opportunity to respond
before the agency takes action to recoup the overpayment.

THE BOARD’s EXERCISE OF AUTHORITY
waS QUESTIONABLE

DPA and Board staff
advised the Board that it
lacked legal authority in
this case.

When the Board considered the physician’s claims and made a
determination regarding the amount to which he was entitled,
it relied on legal authority that allows it to hear claims when no
statute or constitutional provision provides for a settlement. It relied
on this legal authority despite the fact that there was a statutory
provision that provided for the settlement of this claim and there
were funds available to otherwise satisfy this claim, as demonstrated
by the fact that DPA directed Corrections to satisfy this claim and
it did so out of its general operating funds. The Board reviewed the
physician’s claims and determined the amount to which he was
entitled in disregard of the advice of its own staff and notices from
DPA that the Board lacked legal authority in this case. Moreover,
the Board’s second decision to grant relief to the physician came a
month after the physician was actually paid by Corrections.
After receiving the physician’s first claim, the Board followed its
standard procedure and requested that Corrections and DPA, as
the involved state departments, provide their recommendations as
to whether the claim should be allowed or rejected. In its response
to the Board’s request, DPA informed the Board that, by law, salary
issues are subject to a specific state law and must be agreed upon
through the collective bargaining process. DPA also informed the
Board that the Board lacked the authority to address the issues in
this case, and Corrections also argued that the Board should reject
the claim. It is well established that DPA is the state agency that
has authority related to the salaries and other entitlements of state
employees, such as the retention bonus at issue here. Further, Board
staff recommended that it reject the claim for lack of authority to
order Corrections to reclassify the physician’s position.
When it reviewed the physician’s second claim, DPA again
recommended that the Board reject the claim, and Corrections
reiterated its position. Board staff also recommended rejecting
the second claim, stating “it has been established that DPA
fully considered the facts and made a decision within its
jurisdiction to authorize a special differential for claimant,
and there appears to be no compelling reason for the Board to
intrude.” Nonetheless, the Board heard the physician’s claims,

California State Auditor Report I2006-1	43

Victim Compensation and Government Claims Board and
Department of Corrections and Rehabilitation

Board members are not
required to follow the
recommendations of the
affected state agencies or
even its own staff.

and it indicated to us that it did so under the legal authority
mentioned earlier. When reviewing and awarding claims
against the State, Board members are not required to follow the
recommendations of the affected state agencies or Board staff.
The Board heard and approved the physician’s claim despite
the fact that statutory relief was available to the physician, as
clearly demonstrated by the fact that he also filed a grievance for
essentially the same claim with Corrections and was awarded
relief for that claim out of the department’s general operating
fund. When we pointed out to the Board that statutory relief was
available and granted to the physician, the Board reiterated its
position that it heard the claim using its “equitable powers” to
hear claims for which no statutory or constitutional relief exists.
The legal authority relied on by the Board allows it to hear
claims against the State for money or damages under various
circumstances including claims for which no appropriation has
been made or for which no fund is available for the settlement
of the claim but the settlement has been provided for by statute
or constitutional provision. In this case, DPA had clear statutory
authority to determine this claim, and did so before the Board
made its payment to the physician. Moreover, when DPA
directed Corrections to pay the claim there were funds available
to settle this claim, and Corrections satisfied this claim out of
its general operating fund. The Board made its determination
to settle this claim before the physician filed his grievance with
DPA and before DPA directed Corrections to pay the claim.
However, a significant window of time elapsed between the
time the Board made its decision and the time the Board made
its payment to the physician. During this time the Board could
have sought a reduction in the amount of the appropriation
it was seeking to settle this claim before that appropriations
bill was signed, but it did not do so. Additionally, even after
the appropriations bill was signed, the Board could have
taken administrative steps to prevent the duplicate payment,
but did not do so. Although a reviewing court would give
great deference to the Board’s interpretation of the statutes
it is charged with administering, in this case it is difficult to
understand how the Board believed that it had equitable power
to grant relief to the physician, particularly when it granted his
second claim and it knew that he had received relief from both
the Board and Corrections for his first claim.

44	

California State Auditor Report I2006-1

Victim Compensation and Government Claims Board and
Department of Corrections and Rehabilitation
A manager at the Board told us that the Board currently hears
claims related to state employees who may be required to
perform duties outside of their classification (out-of-class), but
its current practice requires its staff to consult with the affected
departments and with Board counsel to ensure that it hears
only those portions of the out-of-class claims not under the
jurisdiction of other authorities. The manager acknowledged
that this procedure was not followed for the physician’s claim.

It appears the Board
lacks the controls
necessary to prevent it
from hearing claims over
which it lacks authority.

In response to our report, the Board maintains that in accordance
with the provisions of California Government Code, Section 905.2,
the Board generally hears all claims for monetary damages
against the State, regardless of whether the relief is available
elsewhere as was the case here. However, legislative changes made
in 1980 transferred the authority to review and settle these claims,
within one year of filing, from the former Board of Control (now
the Board) to the State Personnel Board. Subsequent changes made
in 1985 transferred control of these issues from the State Personnel
Board to DPA. Accordingly, the only authority that remains with
the Board is the authority to settle these claims when they are
more than one year old. In addition, as we mentioned earlier,
Board members are not required to adhere to the recommendations
of its staff or affected agencies. Consequently, we are concerned
about what appears to be such a broad interpretation of the Board’s
jurisdiction, given that the Legislature transferred the authority to
hear out-of-class claims for relief in the year preceding the filing of
the claim to DPA in 1985. Although the Board retains authority to
hear out-of-class claims that are over one year old, it appears that
the Board lacks the controls necessary to prevent it from hearing
other claims. Although the focus of this investigation was on the
handling of the physician’s claim, we are concerned that, given the
Board’s very broad interpretation of its authority, the Board may
have lacked jurisdiction on other claims.

AGENCY RESPONSE
The Board reported that it believes it had jurisdiction to hear
the physician’s claims and again stated it did so under state
law that allows the Board to hear claims when no statute or
constitutional provision provides for a settlement. However, as
previously mentioned, the fact that the physician also filed a
grievance for essentially the same claim with Corrections and
was awarded relief for that claim, clearly demonstrates that
statutory relief was available in this case. Moreover, funds were
readily available to pay this claim and the Board was informed
of this fact prior to its payment of the physician’s claim.

California State Auditor Report I2006-1	45

Victim Compensation and Government Claims Board and
Department of Corrections and Rehabilitation
The Board reported that it has undergone significant management
and organizational changes since it began reporting to the State
and Consumer Services Agency in 2004 and has implemented
practices that will prevent it from making overpayments in the
future. Specifically, the Board believes the overpayment was
caused in part by its prior administration’s longstanding practice
of paying state employee claims through bills approved through
the Legislature. Under its current practices, when a state employee
claim is approved, the Board determines whether the involved
department, through an existing appropriation, can pay the claim
or if it must be paid via the Legislature. Additionally, the Board
created an Accounting Division, which is designed to provide a
check and balance on program payouts and facilitate resolution
of any potential duplicate payments. The Board believes that
these changes will improve communications with involved
departments and prevent duplicate payments from being made on
future state employee claims.
After we informed Corrections of the overpayment, it initiated
action to attempt to recover the $25,950 overpayment from the
physician. As of the date of this report, Corrections reported it
has recovered $2,000 from the physician and is in the process of
requiring him to reimburse the State approximately $2,700 per
month—the maximum amount allowed by law—until the total
overpayment is collected. n

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California State Auditor Report I2006-1

CHAPTER 5
Department of Corrections and
Rehabilitation: Time and Attendance
Abuse, Failure to Perform Duties
ALLEGATION I2004-0884

A

n employee at the Department of Corrections and
Rehabilitation (Corrections) engaged in time and
attendance abuse and failed to perform his duties
adequately.

RESULTS AND METHOD OF INVESTIGATION
We asked Corrections to assist us in conducting the investigation,
and we substantiated the allegation as well as other improprieties.
To investigate the allegation, Corrections obtained the employee’s
time sheets and compared these records with departmental
sign‑in logs for his state job as well as time sheets maintained
by the employee’s nonstate employer. Corrections also interviewed
the employee’s supervisor and coworkers at his state job. The
employee refused to be interviewed and resigned from the
State in June 2005. In addition, we reviewed state law related to
incompatible activities, false claims, and causes for discipline.
Corrections identified almost 150 instances in which department
sign-in logs at his state job or timekeeping records maintained
by the employee’s nonstate employer indicated that the
employee falsified his time sheets to inflate the actual number
of hours he worked at his state job. By falsifying his state time
sheets, the employee violated state law and received $2,875 in
wages for hours he did not work. Further, Corrections found at
least 14 instances in which the employee called in sick or simply
did not show up but worked at his second job. This improper
use of 134 hours of leave resulted in payments to the employee
totaling $3,960.
From September 30, 2003, through May 14, 2005, Corrections
identified 92 instances in which the employee inflated his
work hours on his monthly time sheets by more than 34 hours
when compared with his actual arrival and departure times as
reflected on department sign-in logs, resulting in the employee
California State Auditor Report I2006-1	47

Department of Corrections and Rehabilitation

receiving wages of $1,013 for hours he did not work. Corrections
also found 56 instances in which timekeeping records from his
secondary employer demonstrated that the employee claimed
wages for 63 additional hours of state time he did not work
because he was working for his nonstate employer during those
hours. As a result, the employee received an additional $1,862
in state wages for hours he claimed to be working for the State
when he was actually working for his secondary employer.

The employee received
$1,862 in state wages for
hours he claimed to be
working for the State when
he was actually working
for his secondary employer.

Because the employee claimed to be working for the State during
the same hours he was working for his nonstate employer, he
violated state law prohibiting employees from engaging in any
employment, activity, or enterprise that is clearly inconsistent,
incompatible, in conflict with, or inimical to his or her duties
as a state officer or employee.10 One such incompatible activity
is not devoting one’s full time, attention, and efforts to state
employment during hours of duty as a state employee. In
addition, state regulations require departments to keep complete
and accurate time and attendance records for each employee.
Further demonstrating that the employee’s outside employment
was incompatible with his state job, Corrections identified at
least 14 instances in which the employee missed work, using
134 hours of state sick leave or other leave while still working for
his secondary employer either during his missed work hours or
on the evening of the missed workday.
In addition, this public employee intentionally claimed hours that
he did not work, so there is reasonable cause to believe that he
violated state laws prohibiting a person from submitting a false
claim for payment to the State. Under these laws, a person may be
subject to both civil and, in some cases, criminal sanctions.
In addition to reviewing the employee’s timekeeping records,
Corrections interviewed the employee’s coworkers. Several stated
that they witnessed the subject doing the following:
•	 Arrive one to two hours late on several occasions.
•	 List inaccurate arrival and departure times on his state time
sheet and department sign-in sheets.
•	 Sleep during his work hours.
•	 Play video games on a hand-held electronic device during his
work hours.
10	For

a more detailed description of the laws and regulations discussed in this chapter,
see Appendix B.

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California State Auditor Report I2006-1

Department of Corrections and Rehabilitation

•	 Watch movies on a DVD player during work hours.
•	 Fail to carry his share of the workload.
State law outlines causes for discipline of a state employee,
including inefficiency, incompetency, inexcusable neglect of duty,
and dishonesty. Corrections found that the employee’s supervisor
was aware of the employee’s misconduct. The supervisor failed
to correct the employee’s inappropriate behavior despite having
received numerous complaints from several of the employee’s
coworkers. The supervisor retired from the State in May 2005,
before Corrections completed its investigation.

AGENCY RESPONSE
Corrections took no action against the employee or his supervisor
because they no longer are employed by the State. We acknowledge
that the employer cannot take adverse action against an employee
once an employee resigns. However, the agency can include
documentation in an employee’s personnel file that describes and
acknowledges the specific circumstances leading to the employee’s
resignation. That way, a future employer can be aware of the
person’s past conduct. n

California State Auditor Report I2006-1	49

Blank page inserted for reproduction purposes only.

50	

California State Auditor Report I2006-1

CHAPTER 6
Employment Development
Department: Misuse of State
Resources
ALLEGATIONS I2004-1121 and I2004-1137

A

n Employment Development Department (EDD)
employee used her state phone and computer to make
excessive personal calls and send and receive excessive
personal e-mail messages on state time.

RESULTS AND METHODS OF INVESTIGATION
We asked EDD to assist us in the investigation, and it substantiated
the allegations. To conduct the investigation, EDD reviewed the
employee’s personnel file, telephone bills for the employee’s state
telephone, and e-mail messages from the employee’s state computer.
EDD also called each phone number listed on the employee’s phone
log to ascertain whether the calls were of a personal nature and
interviewed staff and management in relation to these allegations.
EDD found that, from July 2004 through October 2004, the
employee made 420 personal telephone calls, or 77 percent
of all her calls, totaling 21 hours and 10 minutes. This is a
violation of state law prohibiting state employees from using
state resources for private gain, for personal advantage, or for an
outside endeavor not related to state business.11 If the use of state
resources is substantial enough to result in a gain or advantage
for which a monetary value may be estimated, or a loss to
the State for which a monetary value may be estimated, the
employee may be liable for a civil penalty not to exceed $1,000
for each day on which a violation occurs, plus three times the
value of the unlawful use of state resources.
In addition, EDD substantiated that the employee inappropriately
used her state computer for personal purposes. It found that of
the 1,229 e-mail messages stored on her state computer, 1,012, or
83 percent, were of a personal nature.
11	For

a more detailed description of the laws and regulations discussed in this chapter,
see Appendix B.

California State Auditor Report I2006-1	51

Employment Development Department

AGENCY RESPONSE
EDD reported that the employee resigned from state service
before the completion of its investigation, so it could not
take any action against her. However, EDD has included
documentation in the employee’s personnel file that describes
and acknowledges the specific circumstances leading to the
employee’s resignation. n

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California State Auditor Report I2006-1

CHAPTER 7
Update of Previously Reported Issues
CHAPTER SUMMARY

T

he California Whistleblower Protection Act requires an
employing agency or appropriate appointing authority
to report to the Bureau of State Audits (bureau) any
corrective action, including disciplinary action, that it takes in
response to an investigative report no later than 30 days after
the bureau issues the report. If it has not completed its corrective
action within 30 days, the agency or authority must report to
the bureau monthly until it completes that action. This chapter
summarizes corrective actions taken on three cases since we last
reported them.

CALIFORNIA MILITARY DEPARTMENT
CASE I2004-0710
We reported the results of this investigation on September 21, 2005.
A supervisor in the California Military Department (Military
Department) used Social Security numbers belonging to former
military personnel and others to initiate payments to individuals
with names corresponding to those of his family members;
he deposited most of these payments into his personal bank
account. The supervisor also failed to stop payments to a retired
service member who was deceased and then stole the individual’s
retirement checks. In total, the supervisor embezzled at
least $132,523 in state funds over an eight-year period,
including $111,507 from emergency state active-duty payroll,
$12,393 from the Military Department’s revolving fund, and $8,620
from the retired state active-duty system.
The Military Department reported that it enacted internal
control measures to prevent further and/or future embezzlement
of state funds and to eliminate the fraudulent manipulation of
its payroll and payment system. After we informed the Military
Department of our findings, it requested that the California
Highway Patrol (Highway Patrol) investigate the allegations. The
supervisor admitted embezzling state funds when questioned by
Highway Patrol investigators, who later issued an arrest warrant
for the supervisor and two of his family members.

California State Auditor Report I2006-1	53

Updated Information
The supervisor was charged with and convicted on two felony
counts, including grand theft and embezzlement, and was
ordered by the Sacramento Superior Court (Court) to pay court
costs and fees of $410 and to make restitution to the State in
the amount of $132,523, the amount we identified that he
embezzled. Finally, the Court sentenced the supervisor to
16 months in state prison.

Department of Health Services
Case I2003-1067
We reported the results of this investigation on March 22, 2005.
An employee with the Department of Health Services (Health
Services), whose duties require her to travel regularly throughout
the State to monitor and provide training to retail businesses,
improperly received $3,068 by submitting false claims for wages
and travel costs. We determined that, by misrepresenting her
departure and return times on her travel and attendance reports,
the employee was paid $1,895 for overtime and regular hours she
did not work. We also found that the employee claimed and was
paid $1,173 for expenses related to her travel that she either did
not incur or was not entitled to receive. Specifically, the employee
claimed $253 for parking expenses that she acknowledged to us
she did not incur. The employee also improperly claimed $151
in mileage reimbursements by routinely overstating the distance
to and from the airport when conducting state business. Because
the employee presented false information on her travel claims,
she also received $259 for meal expenses that she was not entitled
to receive. Finally, the employee improperly received $510 for
travel expenses that she claimed on days she did not work or that
otherwise were not allowed.
Health Services reported that based on its preliminary review, the
employee’s supervisor should have identified and denied many
of the inappropriate charges on the employee’s travel claims.
Health Services also reported that it will provide training to all
its supervisors working in the employee’s branch so that they can
better understand their responsibilities for reviewing travel claims
and overtime requests from those under their supervision.

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California State Auditor Report I2006-1

Updated Information
Health Services reduced the employee’s pay by 5 percent for
three months for inexcusable neglect of duty, dishonesty, and
willful disobedience. Health Services reassigned the employee
into a position with no travel responsibilities and required her
to reimburse Health Services $943 for her improper parking
expenses, excessive mileage claimed, and other improper
expenses the employee claimed.

DEPARTMENT OF CORRECTIONS AND REHABILITATION
CASE I2004-0745
We reported the results of this investigation on March 22, 2005.
Two employees with the Department of Corrections and
Rehabilitation (Corrections) falsified their time sheets to
receive approximately $3,900 in overpayments. In addition, the
employees’ manager failed to monitor the employees adequately.
Corrections found that both employees used their state
computers to shop and make other transactions not related to
their state jobs and both employees falsified their time sheets by
indicating they were at work when surveillance indicated they
were not. Further, the employees’ manager did not confirm the
hours worked by the two employees when approving their time
sheets and failed to implement proper procedures to monitor
employee attendance or investigate the employees’ activities,
despite receiving numerous complaints from other employees.
Corrections reported that it had not yet determined the
appropriate disciplinary or corrective actions.

Updated Information
Corrections reported that it suspended one employee without
pay for 79 workdays and required her to repay $2,160 to the
State for overpayments she improperly received. Corrections
suspended the other employee for 30 workdays and required her
to repay $1,737 to the State for overpayments she improperly
received. In addition, this employee requested and was granted
45 days leave without pay.

California State Auditor Report I2006-1	55

We conducted this review under the authority vested in the California state auditor by
Section 8547 et seq. of the California Government Code and applicable investigative and
auditing standards. We limited our review to those areas specified in the results and method
of investigation sections of this report.
Respectfully submitted,

ELAINE M. HOWLE
State Auditor
Date:	

March 22, 2006

Investigative Staff:	 Ken L. Willis, Manager, CPA
	
Siu-Henh Ung
	
Mike Urso, CFE
Audit Staff:	

56	

Lois Benson, CPA

California State Auditor Report I2006-1

APPENDIX A
Activity Report

T

he Bureau of State Audits (bureau), headed by the state
auditor, has identified improper governmental activities
totaling $23.8 million since July 1993, when it reactivated
the Whistleblower Hotline (hotline), formerly administered
by the Office of the Auditor General. These improper activities
include theft of state property, false claims, conflicts of
interest, and personal use of state resources. The state auditor’s
investigations also have substantiated improper activities that
cannot be quantified in dollars but that have had a negative
social impact. Examples include violations of fiduciary trust,
failure to perform mandated duties, and abuse of authority.
Although the bureau investigates improper governmental
activities, it does not have enforcement powers. When it
substantiates allegations, the bureau reports the details to
the head of the state entity or to the appointing authority
responsible for taking corrective action. The California
Whistleblower Protection Act (Whistleblower Act) also
empowers the state auditor to report these activities to other
authorities, such as law enforcement agencies or other entities
with jurisdiction over the activities, when the state auditor
deems it appropriate.
The individual chapters describe the corrective actions that
agencies took on cases in this report. Table A.1 on the following
page summarizes all the corrective actions that agencies have
taken between the time the bureau reactivated the hotline in
1993 until June 2002. Table A.1 also summarizes departments’
corrective actions since July 2002, when the law changed to
require all state departments to annually notify their employees
about the bureau’s hotline. In addition, dozens of agencies have
modified or reiterated their policies and procedures to prevent
future improper activities.

California State Auditor Report I2006-1	57

Table A.1
Corrective Actions
July 1993 Through December 2005
Type of Corrective Action

Number of Incidents
July 1993 Through June 2002

Referrals for criminal prosecution

Number of Incidents
July 2002 Through December 2005

Totals

73

4

77

7

2

9

46

25

71

8

6

14

Pay reductions

10

38

48

Suspensions without pay

12

4

16

135

126

261

Convictions
Job terminations
Demotions

Reprimands

New Cases Opened Between
July 2005 and December 2005
From July 1, 2005, through December 31, 2005, the bureau
opened 265 new cases.
The bureau receives allegations of improper governmental
activities in several ways. Callers to the hotline at (800) 952-5665
reported 130 of our new cases in this time period.12 The bureau
also opened 100 new cases based on complaints it received in the
mail, 29 through our Web site, and six based on complaints from
individuals who visited the office. Figure A.1 shows the sources of
all the cases opened from July 2005 through December 2005.

12	In

total, the bureau received 2,196 calls on the hotline from July 2005 through
December 2005. See Appendix C for a description of the types of calls we receive and
how we handle them.

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California State Auditor Report I2006-1

Figure A.1
Sources of 265 New Cases Opened
July 2005 Through December 2005

Mail
38% (100)
On-line
11% (29)
Walk-ins
2% (6)
Hotline
49% (130)

Work on Investigative Cases
July 2005 Through December 2005
In addition to the 265 new cases opened during this six-month
period, 69 previous cases awaited review or assignment as of
July 1, 2005; another 12 were still under investigation by this
office or by other state agencies or were awaiting completion of
corrective action. Consequently, 346 cases required some review
during this period.
After examining the information gathered from complainants
and preliminary reviews, the bureau concluded that 228 cases did
not warrant complete investigation because of lack of evidence.
The Whistleblower Act specifies that the state auditor can
request the assistance of any state entity or employee in
conducting an investigation. From July 1, 2005, through
December 31, 2005, state agencies assisted the bureau in
investigating 27 cases and substantiated allegations on three
(20 percent) of the 15 cases completed during the period.
In addition, the bureau independently investigated 10 cases
and substantiated allegations on seven of the 10 completed
during the period. Figure A.2 on the following page shows
the disposition of the 346 cases the bureau worked on from
July 2005 through December 2005. As of December 31, 2005,
the bureau had 93 cases awaiting review or assignment.

California State Auditor Report I2006-1	59

Figure A.2
Disposition of 346 Cases
July 2005 Through December 2005
Investigated by
other agencies (15)

Investigated by
state auditor (10)

Unassigned (93)

Closed (228)

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California State Auditor Report I2006-1

APPENDIX B
State Laws, Regulations, and Policies

T

his appendix provides more detailed descriptions of the
state laws, regulations, and policies that govern employee
conduct and prohibit the types of improper governmental
activities described in this report.

CAUSES FOR DISCIPLINING STATE EMPLOYEES
The California Government Code, Section 19572, lists the various
causes for disciplining state civil service employees. These causes
include incompetence, inefficiency, inexcusable absence without
leave or neglect of duty, insubordination, dishonesty, misuse of
state property, and other failure of good behavior, either during
or outside of duty hours, that is of such a nature that it causes
discredit to the appointing authority or the person’s employment.

CRITERIA COVERING COMPENSATION AND TAXABLE
FRINGE BENEFITS
Chapter 1 reports on compensation and taxable fringe benefits.
The California Government Code, Section 18000, states that the
salary fixed by law for each state officer is compensation in full
for that office and for all services rendered in any official capacity
or employment, and he or she shall not receive for his or her own
use any fee or perquisite for the performance of any official duty.
Section 3111(a) of the California Government Code defines a
volunteer as any person who of his own free will provides goods
or services without any financial gain to any state agency.
The California Code of Regulations, Title 2, Section 599.640,
governs the valuation of employee housing and services. It states
that the following are the only exceptions to the statute:
•	 Employees on travel status.
•	 Employees whose pay and allowances are computed according
to federal military pay regulations, provided such employees
actually do not receive a quarters’ allowance when assigned to
state-owned employee housing.

California State Auditor Report I2006-1	

61

•	 Employees entitled to receive housing as compensation
for services.
•	 Accommodations acquired by the State for eventual disposal
that are rented to employees on the same basis as to private
tenants and are not primarily provided for employee housing.
The California Code of Regulations, Title 2, Section 599.642(c),
states that when essential housing is substandard, the Department
of Personnel Administration (DPA) may reduce the rental rate
to a lower category. The California Code of Regulations,
Title 2, Section 599.644(b) and (c), states that the DPA may
review and adjust the monthly rate of any state-owned housing
unit when there is evidence that the prescribed monthly rate is
inequitable. Further, at the direction of the DPA, and pursuant to
its delegation of such statutory authority, the appointing powers
shall review the monthly rental and utility rates every year and
report the rates to the DPA. Finally, Section 599.646(a)(1) of the
same title states that each state agency that provides housing
accommodations for employees is delegated the authority and
responsibility to apply rental rates in accordance with these
regulations and to adjust rates as required by changes in age and
other factors.
The Code of Federal Regulations, Title 26, Section 1.119(b),
states that the value of lodging furnished to an employee by the
employer shall be excluded from the employee’s gross income if
three tests are met: lodging is furnished for the convenience of
the employer, the employee’s residence is the same place in which
he or she conducts a significant portion of his or her business,
and the employee is required to accept on-site lodgings to perform
their duties because the housing is indispensable to the proper
discharge of their assigned duties. For example, the lodging may
be furnished because the employee is required to be available for
duty at all times or because the employee could not perform the
services required unless he or she is furnished with such lodging.
The State Controller’s Office (SCO) Payroll Procedures Manual,
Section N135, reiterates the Code of Federal Regulations,
Title 26, Section 1.119(b). Specifically, it states that the value
of employer-provided housing is excluded from taxation as a
working condition fringe benefit when the housing is provided:
•	 On the business premises of the employer.
•	 For the convenience of the employer.

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California State Auditor Report I2006-1

•	 As a condition of employment.
A condition of employment means that the employee is required
to accept the housing to properly perform the duties of the
job. It is not sufficient that an employee is compelled by the
employer to live on the premises. He or she must be required to
do so because the on-site housing is indispensable to the proper
discharge of assigned duties.
The SCO Payroll Procedures Manual further states that the value
of housing not meeting all three criteria is regulated by the
Internal Revenue Service (IRS), Code Section 61, which states that
“gross income means all income from whatsoever source derived
including . . . fringe benefits.” IRS Regulations, Section 1.61-21(b),
requires that fair market value, less any amount paid by the
recipient, be included in the employee’s gross income. California
law defines gross income in the same way that the federal law does.
The DPA issued a memo to Personnel Management Liaisons
(94‑18) regarding state-owned housing and taxable fringe benefits
in March 1994. The memo provides guidance to appointing
authorities on housing administration and reporting of any
taxable fringe benefit generated from the difference between
fair market value and rents actually paid. It states that appointing
authorities should:
•	 Timely and aggressively apply the housing/lodging
requirements of Internal Revenue Code (IRC) Section 119‑1(b),
including the “criteria” and the “definitions” contained within.
•	 Document the department’s interpretation and application of
Section 119-1(b), including full justification and explanation
of “business premises,” “convenience of the employer,” and
“condition of employment.”
•	 When taxable, report timely to the state controller regarding
the difference between determined fair market value of rental
properties occupied by employees and actual rents paid.
•	 Consistent with memoranda of understanding and state
regulations, adjust all rents under the jurisdiction of the
appointing authority.
Section 19822(a) of the California Government Code provides
the director of DPA with the authority to determine the fair
and reasonable value of maintenance, living quarters, housing,

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63

lodging, board, meals, food, household supplies, fuel, laundry,
domestic servants, and other services furnished by the State as
an employer to its employees.

CRITERIA FOR EMPLOYEES EXEMPT FROM THE FAIR
LABOR STANDARDS ACT
Chapter 2 reports on improper overtime payment to exempt
employees.
The Fair Labor Standards Act (FLSA), codified in Title 29 of the
United State Code, Section 201 et seq., establishes minimum
wage, overtime pay, record keeping, and child labor standards
affecting full-time and part-time workers in the private
sector and in federal, state, and local governments. Covered
nonexempt workers are entitled to a minimum wage of not less
than $5.15 per hour. Overtime pay at a rate of not less than
one and one-half times their regular rates of pay is required
after 40 hours of work in a workweek. The minimum wage and
overtime compensation provisions of the FLSA apply to most
but not all state employees. For example, those employees in
an executive, administrative, or professional capacity generally
are exempt from FLSA. Employees to whom the minimum wage
and overtime compensation provisions of the FLSA apply are
generally referred to as “nonexempt employees,” and employees
to whom those provisions do not apply are referred to as
“exempt employees.”
Section 6.1(B)(1) of the State’s collective bargaining agreement
with unit 19 states that workweek group E includes classes that are
exempt from coverage under the FLSA because of the “white collar”
(administrative, executive, professional) exemptions. To be eligible
for this exemption, a position must meet both the “salary basis”
and the “duties” test. Consequently, workweek group E applies to
classes and positions with no minimum or maximum number
of hours in an average workweek. Exempt employees are paid on
a salaried basis, and the regular rate of pay is full compensation
for all hours worked to perform assigned duties. However, these
employees receive up to eight hours of holiday credit when ordered
to work on a holiday. Section 6.1(B)(5) states that employees
exempt from the FLSA are expected to work the hours necessary to
accomplish their assignments or fulfill their responsibilities. Their
workload will normally average 40 hours per week over a 12-month
period. However, inherent in their job is the responsibility and
expectation that workweeks of longer duration may be necessary.
Management can require employees exempt from the FLSA to work

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specified hours. However, subject to prior notification and approval,
employees exempt from the FLSA have the flexibility to alter their
daily and weekly work schedules.
Section 6.1(B)(7)(a) of the same agreement states that bargaining
unit 19 employees exempt under the FLSA shall be charged leave
only in minimum and maximum increments of eight hours,
regardless of the actual hours worked per day, when leave credits
are charged. Fractional employees would have minimum and
maximum amounts equal to their fractional status.
Section 6.4(A) of the agreement states that alternate work
schedules include, but are not limited to variable daily work hours,
flex‑time, adjusted weekly work schedules, 9-8-80, and/or 4-10-40.
Subsection C provides that an individual may request an alternate
work schedule and that these requests will be reasonably considered
by the State. The State is not required to grant the alternate work
schedule request of a probationary employee.
Article 7.6 (C)(6) of the State’s collective bargaining agreement
with unit 16 states that unit 16 employees shall not be charged paid
leave or docked for absences in less than whole-day increments.
Less than full-time employees shall be charged time proportionate
to their scheduled hours of work. Record keeping for accounting,
reimbursements, or documentation relative to other applicable
statutes, such as the Family Medical Leave Act, is permitted.
The DPA issued a memo to personnel management liaisons in
April 1995 (PML-95-023) intended to assist state departments
in implementing the work policy for employees exempt under
the FLSA who are either excluded from collective bargaining or
represented by units 1, 3, 7, 11, 20, or 21. Represented exempt
employees in other bargaining units are not affected at this time as
the meet-and-confer process is not yet complete. Specifically, this
memo states that exempt employees shall receive holiday credit for
the holiday according to their time base, up to a maximum of eight
hours for a full-time employee.

CRITERIA FOR OVERTIME PAYMENTS
Chapter 3 reports on improper overtime payments to
Department of Forestry and Fire Protection (Forestry) employees.
Section 8.14 of the State’s collective bargaining agreement with
the CDF Firefighters states that fire protection employees who
are assigned to a fire incident outside the assigned duty location

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65

will be placed on immediate response status (response status).
While on response status, employees will be compensated for
all hours assigned to the incident from the time of dispatch to
the time at which the incident is declared controlled. Section 8.2
of the same agreement covers all classifications in bargaining
unit 8 not covered by Sections 8.1, 8.3, or 8.4. These employees
are referred to as “fire protection employees.” Fire protection
employees are those who (1) have been trained and have the
legal authority and responsibility to engage in the prevention,
control, or extinguishment of a fire of any type; and (2) perform
activities that are required for and are directly concerned with
the prevention, control, or extinguishment of fires, including
dispatch and such incidental nonfirefighting functions as
housekeeping, equipment maintenance, lecturing, attending
training drills, and conducting inspections. Typically, this
includes most Unit 8 employees. Section 8.2.4 identifies the
available duty week schedules for heavy equipment operator,
of which shift schedule 2 defines the schedule as one week
comprising two 24-hour days followed by a 12-hour day, and
the following week consisting of three 24-hour days followed
by a 12-hour day. Section 8.4 of the agreement covers other
employees and identifies those classifications:
•	 Air Operations Officer I, II, and III
•	 Air Operations Officer I, II, and III (maintenance)
•	 Fire Prevention Officer I and II
•	 Forester I (nonsupervisory)
•	 Fire Prevention Assistant
•	 Fire Prevention Specialist I and II
•	 Forestry Logistics Officer I
Finally, Section 8362.7.1 of the Forestry 8300 Procedures Manual,
which defines pilot flight and duty limitations, states that a pilot
of a single-pilot aircraft is limited to seven hours of flight time
in one duty day. Pilots of aircraft with a required copilot are
limited to eight hours of flight time in one duty day. A duty day
is any day on which a flight is made or any work is performed.
Further, a duty day may not be longer than 14 consecutive
hours. Within any 24-hour period, pilots must have a minimum
of 10 consecutive hours off duty.

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The California Government Code, Section 19838, provides
that if the State overpays an employee, the State shall seek
reimbursement by following agreed-upon collection methods
but prohibits the State from taking action unless the action is
initiated within three years from the date of overpayment.

CRITERIA FOR IMPROPER PAYMENTS RESULTING FROM
A CLAIM AGAINST THE STATE
Chapter 4 reports on duplicate and improper payments.
The California Government Code, Section 3512, provides
a reasonable method of resolving disputes regarding wages,
hours, and other terms and conditions of employment between
the State and public employee organizations. Section 19818.6
of the same code provides the director of the DPA with the
authority to administer the Personnel Classification Plan of the
State of California, including the allocation of every position to
the appropriate class in the classification plan. The allocation of
a position to a class shall derive from and be determined by the
ascertainment of the duties and responsibilities of the position
and shall be based on the principle that all positions shall be
included in the same class if:
•	 The positions are sufficiently similar in respect to duties and
responsibilities that the same descriptive title may be used.
•	 Substantially the same requirements as to education, experience,
knowledge, and ability are demanded of incumbents.
•	 Substantially the same tests of fitness may be used in choosing
qualified appointees.
•	 The same schedule of compensation can be made to apply
with equity.
Section 905.2 of the California Government Code applies
to claims against the State filed with the California Victims
Compensation and Government Claims Board (Board). Further,
Subpart b lists the following cases in which claims for money or
damages against the State should be reviewed by the Board:
•	 Ones for which no appropriation has been made or for which
no fund is available but the settlement of which has been
provided for by statute or constitutional provision.

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67

•	 Ones for which the appropriation made or fund designated is
exhausted.
•	 Ones for money or damages on express contract, or for an
injury for which the State is liable.
•	 Ones for which settlement is not otherwise provided for by
statute or constitutional provision.
The California Code of Regulations, Title 2, Section 599.859,
defines a grievance as a dispute of one or more excluded
employees involving the application or interpretation of a statute,
regulation, policy, or practice that falls under the jurisdiction of
the director of the DPA.
The California Government Code, Section 19838, provides
that if the State overpays an employee, the State shall seek
reimbursement by following agreed-upon collection methods,
but prohibits the State from taking action unless the action is
initiated within three years from the date of overpayment.

CRITERIA COVERING FALSE CLAIMS AND ACCURATE
TIME REPORTING
Chapter 5 reports on false claims.
The California Penal Code, Section 72, states that every person
who, with intent to defraud, presents for payment any false or
fraudulent claim, bill, account, voucher, or writing is punishable
by imprisonment in the county jail for a period of not more than
one year, by a fine not exceeding $1,000, or by imprisonment and
a fine, or by imprisonment in state prison, by a fine not exceeding
$10,000, or both imprisonment and a fine.
The California Government Code, Section 12650, defines a
claim as any request or demand for money, property, or service
made to any employee, officer, or agent of the State. Further, it
defines a person knowingly, with respect to information, does
any of the following:
•	 Has actual knowledge of the information.
•	 Acts in deliberate ignorance of the truth or falsity of
the information.
•	 Acts in reckless disregard of the truth or falsity of the information.

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Chapters 3 and 5 report on inaccurate time reporting.
The California Code of Regulations, Title 2, Section 599.665,
requires that each appointing power keep complete and accurate
time and attendance records for each employee and officer
employed within the agency over which it has jurisdiction. Such
records shall be kept in the form and manner prescribed by the
Department of Finance in connection with its powers to devise,
install, and supervise a modern and complete accounting system
for state agencies.

CRITERIA GOVERNING STATE MANAGERS’
RESPONSIBILITIES
Chapters 2 and 3 report on weaknesses in management controls.
The Financial Integrity and State Manager’s Accountability Act
of 1983 (integrity and accountability act) contained in the
California Government Code, beginning with Section 13400,
requires each state agency to establish and maintain a system
or systems of internal accounting and administrative controls.
Internal controls are necessary to provide public accountability
and are designed to minimize fraud, abuse, and waste of
government funds. In addition, by maintaining these controls,
agencies gain reasonable assurance that the measures they
have adopted protect state assets, provide reliable accounting
data, promote operational efficiency, and encourage adherence
to managerial policies. The integrity and accountability
act also states that the elements of a satisfactory system of
internal accounting and administrative controls shall include
a system of authorization and record-keeping procedures
adequate to provide effective accounting control over assets,
liabilities, revenues, and spending. Further, the integrity and
accountability act requires that state agencies act promptly to
correct weaknesses when they detect them.

GIFT OF PUBLIC FUNDS
Chapters 1 and 2 report on gift of public funds.
The California Constitution, Section 6, Article XVI, prohibits the
giving of any gift of public money or thing of any value to any
individual for a private purpose. This constitutional prohibition
is designed to ensure that the resources of the State will be devoted
to public purposes.

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69

INCOMPATIBLE ACTIVITIES DEFINED
Chapter 5 reports on incompatible activities.
Section 19990 of the California Government Code prohibits
a state employee from engaging in any employment, activity,
or enterprise that is clearly inconsistent, incompatible, in
conflict with, or inimical to his or her duties as a state officer or
employee. This law specifically identifies certain incompatible
activities, including using state time, facilities, equipment, or
supplies for private gain or advantage. In addition, Section 19990
requires state employees to devote their full time, attention, and
efforts to their state office or employment during their hours of
duty as state employees.

PROHIBITIONS AGAINST USING STATE RESOURCES
FOR AN OUTSIDE ENDEAVOR NOT RELATED TO
STATE BUSINESS
Chapter 6 reports on personal use of state resources.
The California Government Code, Section 8314, prohibits state
officers and employees from using state resources such as land,
equipment, travel, or time for personal enjoyment, private gain,
or personal advantage or for an outside endeavor not related to
state business. If the use of state resources is substantial enough
to result in a gain or advantage to an officer or employee for
which a monetary value may be estimated, or a loss to the State
for which a monetary value may be estimated, the officer or
employee may be liable for a civil penalty not to exceed $1,000
for each day on which a violation occurs plus three times the
value of the unlawful use of state resources.

WASTE AND INEFFICIENCY
Chapters 2 and 3 report on waste and inefficiency in
state government.
The California Government Code, Section 11813, declares
that waste and inefficiency in state government undermine
Californians’ confidence in government and reduce the state
government’s ability to address vital public needs adequately.

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APPENDIX C
State and Federal Referral Numbers

T

he Bureau of State Audits (bureau), in accordance with
the California Whistleblower Protection Act contained in
the California Government Code, Section 8547 et seq.,
receives and investigates complaints of improper governmental
activities by state departments and state employees. To enable
state employees and the general public to report these activities,
the bureau maintains a toll-free whistleblower hotline at
(800) 952-5665 or (866) 293-8727 (TTY). Between July and
December 2005, we received 2,196 calls, of which 1,165 were
outside of the bureau’s jurisdiction. In these instances, the
bureau refers callers to various local, state, and federal entities.
Listed below are the telephone numbers for state and federal
entities that the bureau generally refers callers to, as well as
the issues that these entities can address.13 In addition, the
Department of Technology Services has state information
officers at (800) 807-6755 who can direct callers to any
state department. The federal government also has a federal
information number that can direct callers to, and provide
information about, all federal agencies at (800) 688-9889.

Telephone Numbers for State Departments
Aging, Department of

Air Resources Board

Attorney General, Office of

California State University

(916) 419-7500

•	 Public information

(800) 231-4024

•	 Long-Term Care Ombudsman—nursing homes, drug
treatment facilities, mental facilities, emergency referrals

(800) 952-5588

•	 Air pollution violations

(800) 363-7664

•	 Legal information and vehicle emissions

(800) 952-5225

•	 Public inquiries and consumer complaints, private sector
retaliation, business opportunity scams

(916) 445-2021

•	 Registry of Charitable Trusts (nonprofit organizations)

(800) 722-0432

•	 Bureau of Medi-Cal Fraud and Elder Abuse

(213) 897-8065

•	 Travel fraud

(562) 951-4425

Complaints regarding university employees
continued on next page

13	In

addition to referring callers to state and federal entities, the bureau also refers callers
to local entities such as local school boards, county controllers, and private businesses
such as the Better Business Bureau.

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71

Telephone Numbers for State Departments
Chancellor’s Office, Community Colleges

(916) 445-8752

Questions and/or issues related to community colleges

Child Support Services, Department of

(866) 249-0773

Questions about individual child support services cases

Consumer Affairs, Department of

(800) 952-5210

•	 The Consumer Information Center takes complaints about:
accountants, appliances, athletics, automobile repairs, barbers,
beauty salons, cemeteries, contractors, cosmetologists,
dentists & dental hygienists, engineers, funeral directors
and embalmers, geologists and geophysicists, hearing aid
dispensers, home furnishings, home improvements, landscape
architects, marriage/family counselors, nurses, optometrists,
pest control operators, pharmacists, private investigators and
private patrol operators, repossessors, veterinarians, and other
consumer issues.

(800) 321-2752

•	 Contractors’ State License Board

(800) 633-2322

•	 Medical Board—complaints about physicians, questions
about licensing or disciplinary actions

(866) 785-9663

•	 Office of Privacy Protection - identity theft

(916) 445-2636

•	 Public information

(800) 952-5661

•	 Senior citizen’s property tax postponement

(800) 992-4647

•	 Unclaimed property

(800) 347-6995

•	 Escrow and title companies, finance lenders, mortgage bankers

(866) 275-2677

•	 Investment counselors

Corrections and Rehabilitation,
Department of

(877) 424-3577

Office of Internal Affairs—to report misconduct by employees

Emergency Services, Office of

(800) 852-7550

Hazardous materials spills

Employment Development Department

(916) 653-0707

•	 Public information

(800) 229-6297

•	 Unemployment and disability insurance fraud

(800) 528-1783

•	 Tax or payroll fraud

Energy Commission

(800) 822-6228

Public information

Equalization, Board of

(800) 400-7115

•	 Customer & Taxpayer Information Center

(888) 334-3300

•	 Tax Evasion Hotline

(916) 324-1874

•	 To report improper conduct by department employees

Controller, Office of the State

Corporations, Department of

Fair Employment and Housing,
Department of

Racial or sexual discrimination in:
(800) 884-1684

•	 Employment

(800) 233-3212

•	 Housing

(916) 322-5660

•	 Public information

(800) 561-1861

•	 Violations of ethics and campaign laws

(916) 445-3878

•	 Public information

(916) 322-2263

•	 Statistical research—economics, finance, transportation, housing

(916) 323-4086

•	 Demographics

Financial Institutions, Department of

(800) 622-0620

State-licensed banks, savings and loans, foreign banks, traveler’s
checks, industrial loans, credit unions

Fish and Game, Department of

(800) 952-5400

Poaching

Food and Agriculture, Department of

(916) 229-3000

Weights and measures enforcement

Fair Political Practices Commission

Finance, Department of

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Telephone Numbers for State Departments
Franchise Tax Board

(800) 852-2753

•	 Public information

(800) 338-0505

•	 Fast Tax (refunds and order forms)

(800) 852-5711

•	 Tax fraud

Governor’s Office

(916) 445-2841

Main number

Health Services, Department of

(916) 445-4171

•	 Hospital licensing

(800) 554-0354

•	 Nursing home complaints

(800) 822-6222

•	 Medi-Cal fraud

(916) 445-2684

•	 Office of Vital Records—birth and death certificates

Housing and Community Development,
Department of

(800) 952-5275

•	 Mobile home complaints

(800) 952-8356

•	 Mobile home registration and title information

Industrial Relations, Department of

(415) 703-4810

•	 Private sector complaints involving discrimination, wages.
overtime, and other workplace issues (Labor Commissioner)

(800) 321-6742

•	 To report accidents, unsafe working conditions, or safety and
health violations (OSHA)

(916) 830-3600

•	 Main number

(800) 700-5952

•	 To report improper activities within the Department of
Corrections and Rehabilitation

Insurance, Department of

(800) 927-4357

Consumer complaints

Judicial Council

(415) 865-4200

•	 Courts

(866) 865-6400

•	 Illegal or improper acts by judicial branch employees

Judicial Performance, Commission on

(415) 557-1200

Judicial misconduct and discipline

Lottery Commission

(800) 568-8379

•	 Public information

(888) 277-3115

•	 Problem Gambling Help Line

Managed Health Care, Department of

(888) 466-2219

Health Maintenance Organization (HMO) complaints

Motor Vehicles, Department of

(800) 777-0133

•	 Public information

(916) 657-8377

•	 Complaints about automobile dealers

Parks and Recreation, Department of

(800) 444-7275

Camping reservations in state parks

Personnel Administration, Department of

(916) 324-0455

Information about state employees’ wages and benefits

Personnel Board, State

(916) 653-1705

•	 Public information

(916) 653-1403

•	 Whistleblower retaliation complaints

(916) 795-1251

•	 Public information

(888) 225-7377

•	 Benefits for retired members

(800) 848-5580

•	 Public information

(800) 649-7570

•	 Complaints about cable, telephone, and utility bills or service

(916) 227-0864

•	 Complaints regarding real estate licensees

(916) 227-0931

•	 Real estate licensing information

(800) 952-5544

•	 Client assistance

(916) 263-8981

•	 Public affairs

Inspector General, Office of

Public Employees’ Retirement System

Public Utilities Commission

Real Estate, Department of

Rehabilitation, Department of

continued on next page

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73

Telephone Numbers for State Departments
Secretary of State

(916) 657-5448

•	 Public information

(916) 653-2318

•	 Corporate filings

(916) 653-3595

•	 Notary public section

(800) 952-5253

•	 Public inquiry and client assistance

(800) 344-8477

•	 Welfare fraud

State Compensation Insurance Fund*

(888) 786-7372

Worker’s Compensation Fraud Hotline

Technology Services, Department of

(800) 807-6755

State information officers provide information about state
agencies, departments, and employees

University of California

(800) 403-4744

University of California whistleblower hotline

Veterans Affairs, Department of

(800) 952-5626

CalVet loans

Victim Compensation and Government
Claims Board

(800) 777-9229

•	 To file a claim as a victim of a crime

(800) 955-0045

•	 To file a claim against the government

Social Services, Department of

Telephone Numbers for Federal Departments
Agriculture, Department of

(800) 424-9121

Temporary Assistance to Needy Families (TANF) and food stamp
fraud

Central Intelligence Agency

(703) 482-0623

Public Affairs Office

Commerce, Department of (Office of the
Inspector General)

(800) 424-5197

To report fraud, waste, abuse, or other violations of law

Defense, Department of (Office of the
Inspector General)

(800) 424-9098

To report violations of ethical standards and/or the law, including
but not limited to fraud, waste, abuse of authority, potential leaks of
classified information, or potential acts of terrorism.

Environmental Protection Agency

(888) 546-8740

•	 General information

(888) 372-9378

•	 Environmental Protection Agency law violations

(800) 368-5888

•	 Ombudsman for small business disputes

Federal Bureau of Investigation

(202) 324-3444

Washington, D.C.

Federal Communications Commission
(Office of the Inspector General)

(888) 863-2244

To report fraud, waste, and abuse

Federal Deposit Insurance Corporation

(877) 275-3342

FDIC banks and credit laws

Federal Election Commission

(800) 424-9530

Campaign financing

Federal Emergency Management Agency

(800) 462-9029

•	 Disaster assistance

(800) 638-6620

•	 Flood insurance information

(877) 382-4357

•	 Charity solicitations, collection agencies, Internet sales,
interstate consumer issues, telemarketing

(877) 438-4338

•	 Identity theft

(877) 987-3728

•	 Consumer Advise Center

(800) 424-5454

Fraud, waste, and abuse involving federal employees
or contractors

Federal Trade Commission

Government Accountability Office

*	 The

State Compensation Insurance Fund is a state-operated entity that exists solely to provide workers’ compensation insurance
on a nonprofit basis. However, it is not a state department.

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Telephone Numbers for Federal Departments
Health and Human Services,
Department of

(800) 633-4227

•	 For Medicare information or Medicare fraud

(800) 786-2929

•	 Runaways can call this number to leave messages for parents

Homeland Security Headquarters

(202) 282-8000

Main number

Internal Revenue Service

(800) 829-1040

•	 Public information

(800) 829-0433

•	 Tax fraud hotline

(800) 829-3676

•	 To order forms and publications

Labor, Department of (Employee Benefits
Security Administration)

Information on retirement plans
(415) 975-4600

•	 San Francisco regional office

(626) 229-1000

•	 Los Angeles regional office

National Aeronautics and Space
Administration (NASA) – (Office of
Inspector General)

(800) 424-9183

To report waste, fraud, and abuse by NASA employees and
contractors

National Fraud Information Center

(800) 876-7060

Postal and telemarketing fraud

National White Collar Crime Center

(800) 221-4424

For information and research on preventing economic and
cyber crime

Securities and Exchange Commission

(800) 732-0330

•	 Fraud hotline

(800) 289-9999

•	 Investor complaint center

Social Security Administration

(800) 269-0271

Identity theft and other fraud

Transportation, Department of

(888) 327-4236

•	 Vehicle safety hotline

(800) 424-8802

•	 National Response Center to report oil and chemical spills

(800) 424-9071

•	 Office of the Inspector General to report waste, fraud, and
abuse

(800) 842-6929

The Office of Thrift Supervision regulates all federally chartered
and many state-chartered thrift institutions, including savings
banks and savings and loan associations

Treasury, Department of

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Blank page inserted for reproduction purposes only.

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INDEX
Department/Agency

Allegation
Number

Allegation

Page Number

California Military Department

I2004-0710

Theft of State Funds

53

Department of Corrections
and Rehabilitation

I2004-0745

Time and Attendance Abuse

55

Department of Corrections
and Rehabilitation

I2004-0884

Time and Attendance Abuse

47

Department of Corrections
and Rehabilitation

I2005-0781

Gift of Public Funds

19

Department of Corrections
and Rehabilitation

I2004-0983
I2005-1013

Duplicate Payments

39

Department of Fish and Game

I2004-1057

Gift of Public Funds

5

Department of Forestry and Fire Protection

I2005-0810

Improper Overtime

31

I2005-0874
I2005-0929
Department of Health Services

I2003-1067

Improper Travel Expenses

54

Employment Development Department

I2004-1121

Misuse of State Resources

51

Improper Employee Payments

39

I2004-1137
Victim Compensation and
Government Claim Board

I2004-0983
I2005-1013

California State Auditor Report I2006-1	

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cc:	 Members of the Legislature
	
Office of the Lieutenant Governor
	
Milton Marks Commission on California State
		 Government Organization and Economy
	
Department of Finance
	
Attorney General
	
State Controller
	
State Treasurer
	
Legislative Analyst
	
Senate Office of Research
	
California Research Bureau
	
Capitol Press

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