Investigations of Improper
Activities by State Employees:
January 2008 Through June 2008
October 2008 Report I2008-2

CALIFORNIA
S TAT E A U D I T O R

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Elaine M. Howle
State Auditor

CALIFORNIA STATE AUDITOR

Doug Cordiner
Chief Deputy

Bureau of State Audits

555 Capitol Mall, Suite 300

S a c r a m e n t o, C A 9 5 8 1 4

October 2, 2008	

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916.327.0019 fax

w w w. b s a . c a . g o v

Investigative Report I2008-2

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 January through June 2008.
This report details nine investigations into improper governmental activities at several state
departments. Through our investigative methods, we found incompatible activities, improper
payments, improper contracting, and misuse of state resources. For example, an employee at the
Department of Housing and Community Development (HCD) worked simultaneously at HCD
and at a nonprofit organization that was receiving grants from HCD. The dual employment
violated state and department prohibitions against engaging in incompatible activities. We
estimate that the employee’s unauthorized absences from HCD while attempting to work at both
jobs—as well as other time and attendance abuses that we identified—cost the State $34,687.
In addition, this report provides an update on previously reported issues and describes any
additional actions taken by state departments to correct the problems we previously identified.
For example, the Department of Corrections and Rehabilitation reported that it canceled its
lease with a private parking facility after we reported it wasted $11,277 during just a three‑month
period on leased parking spaces that it did not need.
Respectfully submitted,

ELAINE M. HOWLE, CPA
State Auditor

California State Auditor Report I2008-2

October 2008

Contents
Summary	

1

Chapter 1
Department of Housing and Community Development:
Incompatible Activities, Time and Attendance Abuse, Dishonesty,
and Inadequate Supervision	

7

Chapter 2
Department of Corrections and Rehabilitation: Improper
Overtime Payments	

17

Chapter 3
Department of Corrections and Rehabilitation: Improper Payments
for Inmate Supervision	

19

Chapter 4
California Environmental Protection Agency: Failure to Accurately
Report Absences, Inadequate Supervision	

23

Chapter 5
State Personnel Board: Improper Contracting for Personal Services	

29

Chapter 6
Department of Fish and Game: Misuse of a State Vehicle and
Employee Time	

33

Chapter 7
Department of Consumer Affairs, Contractors State License Board:
Misuse of State Resources, Dishonesty	

37

Chapter 8
State Water Resources Control Board: Misuse of State Resources	

41

Chapter 9
Department of Transportation: Misuse of State Computers	

43

Chapter 10
Update of Previously Reported Issues
Department of Corrections and Rehabilitation	

45

Department of Fish and Game	

47

Department of Forestry and Fire Protection	

50

Department of Parks and Recreation	

51

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California State Polytechnic University, Pomona	

52

Department of Corrections and Rehabilitation	

53

Department of Social Services	

53

Department of Justice	

55

Employment Development Department	

56

Department of Justice	

56

Appendix
The Investigations Program	

59

Index	

65

California State Auditor Report I2008-2

October 2008

Summary
Results in Brief

Investigative Highlights . . .

The California Whistleblower Protection Act (Whistleblower
Act) empowers the Bureau of State Audits (bureau) to investigate
and report on improper governmental activities by agencies and
employees of the State. Under the Whistleblower Act, an improper
governmental activity is 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.

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

This report details the results of nine investigations completed by
the bureau or undertaken jointly by the bureau and other state
agencies between January 1, 2008, and June 30, 2008. The report
also outlines the actions taken by state agencies in response
to the investigations into improper governmental activities
described here and in previous reports. The following paragraphs
briefly summarize these investigations and the state agencies’
actions, which this report’s chapters discuss more fully. For more
information about the bureau’s investigations program, please refer
to the Appendix.
Department of Housing and Community Development
A full-time employee with the Department of Housing and
Community Development (HCD) worked simultaneously at the
department and at a nonprofit organization (nonprofit) that was
receiving grants from HCD. The dual employment violated state
and HCD prohibitions against engaging in incompatible activities.
We estimate that the employee’s unauthorized absences from
HCD while attempting to work at both jobs—as well as other time
and attendance abuses that we identified—cost the State $34,687.
In addition, in her efforts to conceal her employment with the
nonprofit, the employee was dishonest with HCD on several
occasions. Furthermore, the employee’s managers at HCD did
not sufficiently supervise her attendance and failed to respond
appropriately to numerous indications that the employee was
working simultaneously at the nonprofit.
Department of Corrections and Rehabilitation
From November 2005 through August 2006, the Department of
Corrections and Rehabilitation (Corrections) improperly paid
two physicians $108,072 in overtime compensation that the
physicians were not entitled to receive.

»» Working simultaneously at a state agency
and a nonprofit and committing other
time and attendance abuses at a cost
to the State of $34,687. In addition,
management failed to sufficiently
supervise and respond to indications of
the dual employment.
»» Improperly disbursing more than
$108,000 in overtime pay that the
employees were not entitled to receive.
»» Improperly paying $16,500 to employees
for inmate supervision when the
employees did not fulfill requirements.
»» Failing to promptly submit time sheets
that accurately reported absences over a
23-month period, for which the employee
was paid $23,300, and management’s
neglecting to ensure that absences were
accurately reported and charged against
leave balances.
»» Improperly paying $14,000 to two retired
state employees for personal services.
»» Misusing a state-owned vehicle
and the state-compensated time of
two subordinates.
»» Misusing state time and resources to
conceal private employment during
regular work hours.
continued on next page . . .

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In response to previously reported
investigations, state departments and
agencies have acted in the following ways:
»» The Department of Corrections and
Rehabilitation canceled a lease with a
private parking facility for 29 parking
spaces that it did not need.
»» The Department of Justice continued
to take corrective action regarding
a manager and four subordinates
who failed to properly account for
their absences.
»» The Employment Development
Department disciplined an employee
by suspending him without pay for
two days.

Department of Corrections and Rehabilitation
Corrections improperly granted nine office technicians increased
pay to supervise inmates at its R. J. Donovan Correctional Facility.
The office technicians were not entitled to receive this increased
pay because they did not supervise the required number of inmates
or did not supervise inmates who worked the minimum number
of hours required for the employees to receive the increased pay.
Consequently, between January 1, 2005, and February 29, 2008,
Corrections paid these office technicians a total of $16,530 more
than they should have received.
California Environmental Protection Agency
An employee at the California Environmental Protection Agency
(Cal/EPA) failed to punctually submit time sheets that accurately
reported her absences for the period from August 2006 through
June 2008. In addition, the officials responsible for managing her
daily activities or for monitoring her time and attendance failed
to take sufficient actions to ensure that the employee accurately
reported her absences and that staff properly charged the absences
to her leave balances. Consequently, Cal/EPA did not charge the
employee’s leave balances for the 768 hours that she was absent
from work, and it inappropriately paid her $23,320 for these hours.
State Personnel Board
The State Personnel Board (personnel board) improperly paid a
retired employee $8,999 for work that he performed after he had
reached the maximum number of hours that he was allowed to
work during a year. In addition, the personnel board failed to justify
the amount paid to the retired employee or the $4,999 it paid to
another individual for similar services.
Department of Fish and Game
By regularly transporting her child to school in a state-owned
vehicle, a manager with the Department of Fish and Game misused
that vehicle. The manager also misused the state-compensated time
of two subordinates by directing them to repair and build corrals
for her private use at the state-owned property where she resides.
The manager’s improper use of state property and time resulted in a
total estimated loss to the State of $1,962.

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October 2008

Department of Consumer Affairs, Contractors State License Board
An employee with the Contractors State License Board (board),
which is part of the Department of Consumer Affairs, used a state
vehicle for personal purposes. In addition, the employee falsified
board records to hide her actual activities when she was supposed
to be performing field inspections. The State incurred a loss when
it spent an estimated $1,896 on expenses related to her personal use
of a state vehicle.
State Water Resources Control Board
An employee of a regional water board, which operates under the
supervision of the State Water Resources Control Board, used
a state telephone to make 54 hours of personal long-distance
telephone calls, which cost the State a total of $137.
Department of Transportation
Two employees of the Department of Transportation used
state computers inappropriately by operating them to conduct
personal business.
Update on Previously Reported Issues
In April 2008 we reported that Corrections wasted $11,277 in state
funds over a three-month period when it leased parking spaces
that it did not need from a private parking facility and allowed state
employees to park their personal vehicles free of charge in those
spaces. In July 2008 Corrections informed us that in April 2008 it
canceled its lease with the private parking facility.
We also reported that a manager and four subordinates at a regional
office of the Department of Justice (Justice) failed to properly
report on their time sheets an estimated 727 hours of leave taken
from April 2006 through December 2006, amounting to $17,974 in
compensation that was potentially unearned. In addition, the
manager failed to adequately monitor his subordinates’ absences
or time worked. Moreover, the manager’s supervisor, who worked
at Justice’s headquarters, failed to ensure that the manager
completed his time sheets accurately and that the manager properly
monitored his subordinates’ time reporting. At the time of our
report, Justice stated that it had taken several actions to ensure that
the employees appropriately documented all leave and overtime and
that they complied with state and Justice policies and procedures.
Justice also continued to investigate the amount of unreported leave

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October 2008

taken by the subjects in 2007. Subsequently, Justice completed its
investigation and found that the manager and four subordinates
continued to report their absences inaccurately in 2007, but it did
not quantify the extent of the subjects’ unreported absences. Justice
continued to take corrective action and documented the manager’s
failure to follow its policies and procedures for time reporting
and leave use. Following these actions, the manager left Justice in
July 2008.
We further reported that an employee of the Employment
Development Department (Employment Development) drank
alcoholic beverages during work hours, and his drinking impeded
his ability to perform his duties safely. Moreover, his supervisors
had been aware of the situation for years. At the time of our
report, Employment Development notified us that it had given the
employee a corrective action memorandum to inform him that he
was prohibited from working while intoxicated and from consuming
alcohol during his work hours and unpaid lunch break. Employment
Development also advised the employee that this matter could
become the basis for disciplinary action. Subsequent to our report,
Employment Development disciplined the employee by suspending
him without pay for two workdays. The employee did not appeal the
adverse action.
Table 1 displays the issues and the financial impact of the cases in
this report, the dates we initially reported on the cases, and the
current status of any corrective actions taken.

California State Auditor Report I2008-2

October 2008

Table 1
Issues, Financial Impact, and Status of Corrective Actions for Cases Described in This Report

Previously Reported Issues

New Cases

CHAPTER

DEPARTMENT

DATE OF OUR
INITIAL REPORT

ISSUE

COST TO THE
STATE AS OF
JUNE 30, 2008

STATUS OF
CORRECTIVE
ACTIONS

1

Department of Housing and
Community Development

October 2008

Incompatible activities, time and attendance
abuse, dishonesty, and inadequate supervision

$34,687

Complete

2

Department of Corrections
and Rehabilitation

October 2008

Improper overtime payments

108,072

Complete

3

Department of Corrections
and Rehabilitation

October 2008

Improper payments for inmate supervision

16,530

Pending

4

California Environmental
Protection Agency

October 2008

Failure to accurately report absences,
inadequate supervision

23,320

Partial

5

State Personnel Board

October 2008

Improper contracting for personal services

13,998

Complete

6

Department of Fish and Game

October 2008

Misuse of a state vehicle and employee time

1,962

Complete

7

Department of Consumer
Affairs and Contractors State
License Board

October 2008

Misuse of state resources, dishonesty

1,896

Partial

8

State Water Resources
Control Board

October 2008

Misuse of state resources

9

Department of Transportation

October 2008

Misuse of state computers

10

Department of Corrections
and Rehabilitation

September 2005

10

Multiple state departments*

March 2006

Inappropriate gifts of state resources
and mismanagement

10

Department of Forestry and
Fire Protection

March 2006

Improper overtime payments

77,961

10

Department of Parks and
Recreation

March 2007

Misuse of state resources and failure to perform
duties adequately

NA

Partial

10

California State Polytechnic
University, Pomona

September 2007

Viewing of inappropriate Internet sites and misuse
of state equipment

NA

Partial

10

Department of Corrections
and Rehabilitation

April 2008

Mismanagement and misuse of state resources as
well as waste of state funds

11,277

Complete

14,714

Complete

Failure to account for employees’ use of union leave

137
NA

Complete
Complete

507,541

Partial

8,313,600

Partial
Complete†

10

Department of Social Services

April 2008

Waste of state and federal funds

10

Department of Justice

April 2008

Inefficiency created by entering into side letters
with a bargaining unit without the Department
of Personnel Administration’s oversight or the
Legislature’s ratification

10

Employment Development
Department

April 2008

Management’s failure to take appropriate action
about an employee who drank alcoholic beverages
while on duty

NA

Complete

10

Department of Justice

April 2008

Employees’ disregard for time-reporting
requirements and management’s failure to ensure
that employees reported absences properly

17,974§

Complete

2,370,839‡

Complete

Source:  Bureau of State Audits.
NA = Not applicable because the situation did not involve a dollar amount or because the findings did not allow us to quantify the financial impact.
*	 This case focused on the Department of Fish and Game but also involved the California Highway Patrol, the California Conservation Corps, the
departments of Corrections and Rehabilitation, Developmental Services, Food and Agriculture, Forestry and Fire Protection, Mental Health, Parks and
Recreation, Personnel Administration, Transportation, and Veterans Affairs, and the Santa Monica Mountains Conservancy.
†	 We have designated the status of corrective actions as complete because it is unlikely that this department can or will take further action.
‡	 As we reported in April 2008, the $2,370,839 expenditure was not improper; however, the failure to disclose properly the side letters that led to the
expenditure created an inefficiency in the State’s bargaining process.
§	 As we reported in April 2008, this amount represents compensation that employees may not have earned.

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Blank page inserted for reproduction purposes only.

California State Auditor Report I2008-2

October 2008
Department of Housing and Community Development

Chapter 1
Department of Housing and Community
Development: Incompatible Activities, Time
and Attendance Abuse, Dishonesty, and
Inadequate Supervision
Case I2007-1049
Results in Brief
A full-time employee of the Department of Housing and
Community Development (HCD) violated state and HCD
prohibitions against incompatible activities by simultaneously
working full-time for HCD and for a nonprofit organization
(nonprofit) that was receiving grants from HCD. We estimate
that the employee’s unauthorized absences from HCD while she
attempted to perform both jobs, as well as her other time and
attendance abuses, cost the State approximately $34,687 in salary
for hours that the employee did not work. We also found that in
attempting to hide from HCD her employment with the nonprofit,
the employee engaged in several acts of dishonesty toward HCD.
Meanwhile, HCD managers provided insufficient supervision of
the employee’s attendance and they failed to respond to indications
that the employee was working concurrently at the nonprofit and
at HCD.
Background
HCD’s mission is to provide leadership, policies, and programs
to make safe, affordable housing available to the public. In
administering its programs, HCD awards loan and grant funding
to local public agencies, nonprofit organizations, and for-profit
companies to acquire, build, and preserve reasonably priced
housing throughout the State.
Like all other state employees, HCD employees must follow an
array of statutes intended to ensure that the employees are devoted
to their work and perform their duties in an impartial manner.
Specifically, the California Government Code, Section 19990,
prohibits every 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. Section 19990 lists many pursuits that the State considers
incompatible activities for the employees of every state agency,
regardless of the particular functions of the agency. In particular,
Section 19990(b) lists as an incompatible activity an employee’s
using state‑compensated time for private gain or advantage. In

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Department of Housing and Community Development

addition, Section 19990(g) lists as another incompatible activity
an employee’s failing to devote his or her full time, attention, and
efforts to state employment during hours of duty. Section 19990
goes on, however, to require that every state agency adopt a
more detailed Statement of Incompatible Activities in which the
agency describes any other activities that present incompatibility
problems specific to the work that the agency performs. To fulfill
this mandate, HCD adopted a Statement of Incompatible Activities
that expressly prohibits any employee from engaging in outside
employment with any for-profit or nonprofit entity that does
business with the HCD division for which the employee works.
Section 8314 of the California Government Code further
amplifies the prohibition against using state-compensated time
for purposes unrelated to state employment. This section makes
unlawful any state employee’s use of public resources—including
state‑compensated time—for personal enjoyment, private gain or
advantage, or any outside endeavor not related to state business,
except for incidental or minimal use.
As a means of avoiding conflicts of interest among public officials,
Section 87302 of the California Government Code, which is a
part of the Political Reform Act, requires the employees of a state
agency who are in a position to make or influence governmental
decisions to disclose the income they receive from outside sources
that may be affected by their decisions. The employees must make
this disclosure annually by filing a Statement of Economic Interests.
Under Section 87207(a) of the California Government Code, an
employee’s disclosure that he or she accepted such income must
specify certain information about the amount of the income
received and about what was provided, if anything, in exchange for
the income. The California Government Code, Section 81010(b),
then requires the agency to review the statement to determine
whether on its face it conforms with the requirements of the
Political Reform Act.
Section 19572(f ) of the California Government Code provides
that state employees have a duty to behave honestly with their
state employer, and any acts of dishonesty may be cause for
disciplinary action.
Finally, the California Government Code, Section 13401, mandates
that all levels of management at a state agency must be involved in
assessing and strengthening the agency’s administrative controls to
minimize fraud, errors, abuse, and waste of government funds.

California State Auditor Report I2008-2

October 2008
Department of Housing and Community Development

Facts and Analysis
Our investigation revealed that in December 2006 the employee
was serving in a full-time position with HCD. She had applied for
a similar full-time position at the nonprofit and was successful in
obtaining that position. The nonprofit is a national organization,
with a major business center in California, that acquires and
develops housing for a variety of low-income populations, including
families, seniors, and people with special needs. The nonprofit
receives approximately 40 percent of its funding for California
projects in the form of grants from HCD.
The employee told the manager who hired her at the nonprofit
that she wanted to leave state service to accept the new position.
However, after accepting employment at the nonprofit, the
employee continued to hold her position at HCD. She held both
full-time positions from December 2006 until December 2007,
when the employee’s second-level supervisor at HCD was told
during a meeting with the nonprofit’s manager that the employee
was working for the nonprofit. During that meeting, the nonprofit
manager learned that the employee had not left her position with
HCD as he had understood and, therefore, immediately terminated
her employment with the nonprofit. The employee later resigned
from HCD after it served her with a notice of disciplinary action.
The Employee’s Work at the Nonprofit Was Incompatible With Her
Employment at HCD
As previously explained, HCD’s Statement of Incompatible
Activities expressly prohibits any HCD employee from outside
employment with any for-profit or nonprofit entity that conducts
business with the division of HCD at which the employee works.
Although our investigation did not identify any instances in
which the employee personally performed work on a project that
involved the nonprofit, the division of HCD in which the employee
worked did a significant amount of business with the nonprofit.
The employee’s dual employment therefore constituted an
impermissible incompatible activity.
Shortly after the employee accepted employment with the
nonprofit, HCD’s legal counsel gave a copy of HCD’s Statement
of Incompatible Activities to the employee under circumstances
discussed later in this chapter. Additionally, in May 2007, HCD
provided the employee with a memorandum, also discussed
later in this chapter, which explicitly advised the employee that
she could not perform work for the nonprofit while she was
employed by HCD because doing so would constitute a prohibited
incompatible activity. When we interviewed the employee, she

The employee held full-time
positions at both HCD and the
nonprofit from December 2006
until December 2007.

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Department of Housing and Community Development

assured us that she had understood the memorandum when it was
given to her in May 2007. The employee nonetheless continued
her dual employment for seven additional months, in violation
of HCD’s prohibition against incompatible activities. As a result,
the employee created an appearance, during the period of her
dual employment, that the nonprofit had an unfair advantage in
obtaining funding from HCD, and that the nonprofit might receive
more favorable treatment during HCD’s monitoring and oversight
of the nonprofit’s HCD-funded projects.
The Employee’s Misuse of Her State-Compensated Time Was Also
Incompatible With Her Employment at HCD

The manager at the nonprofit
estimated that the employee was
present at the nonprofit’s office
an average of 30 hours per week
during hours that the employee was
scheduled to work for HCD.

At HCD the employee was required to work Monday through
Friday from 7 a.m. to 4:30 p.m. At the nonprofit during the same
period, the employee was generally expected to be available for
work Monday through Friday from 8 a.m. and 5 p.m., although the
nonprofit allowed her significant flexibility in her work schedule
and work location. Even with this flexibility in her schedule at
the nonprofit, the manager at the nonprofit estimated that the
employee was present at the nonprofit’s office an average of
30 hours per week during hours that the employee was scheduled
to work for HCD. According to witnesses, the employee was
regularly absent from the HCD office for approximately two to
six hours during her scheduled workday. Using witness statements
and estimates from the nonprofit manager about the number
of hours that the employee was present in the nonprofit’s office,
we calculate that during the one-year period that the employee
engaged in dual employment, she was absent at least 800 hours
from her duties at HCD. The employee nonetheless received state
compensation for those hours.1
When we interviewed the employee, she acknowledged that
during her concurrent employment, she occasionally spent
state‑compensated time performing work for the nonprofit, but she
asserted that she always made up the time by staying late at HCD
or taking work home. However, the employee’s direct supervisor
at HCD, Manager A, stated that the employee rarely stayed late,
and HCD’s records for the employee’s computer use support
Manager A’s statement.
In addition to leaving HCD during her scheduled workday to work
at the nonprofit, the employee regularly arrived at HCD late and
left early. We learned about her HCD work patterns after reviewing

1	

We arrived at the estimate of 800 hours based on an assumption that the employee was absent
from HCD for an average of four hours per day.

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October 2008
Department of Housing and Community Development

the employee’s computer records at HCD from September 2006
through January 2008, a period that includes months before and
after the employee took the job at the nonprofit. The computer
records indicate that the employee was absent from HCD at the
beginning and end of her workday for a total of 256 hours during
the period we reviewed.2 When we questioned the employee about
her work schedules at HCD and at the nonprofit, the employee
admitted that she regularly left work at HCD 30 minutes early. The
employee’s late arrivals and early departures did not appear to relate
directly to her employment at the nonprofit.
Further, the computer records indicate that the employee was
absent from HCD for the entire day on 15 separate occasions,
totaling 131 additional hours, without these absences being reported
by the employee on her time sheets and charged against her leave
balances. We were unable to determine whether these absences for
entire days were related to the employee’s dual employment.
The employee’s unauthorized absences from HCD constitute
additional incompatible activities under Section 19990 of the
California Government Code, as they are a reflection of using
state‑compensated time for private gain or advantage and not
devoting one’s full time, attention, and efforts to state employment
during hours of duty. Moreover, the employee misused a state
resource—her state-compensated time—in violation of Section 8314
of the California Government Code.
Table 2 shows the estimated number of hours that the employee
was absent from HCD and the costs associated with the hours that
she was absent:
Table 2
Estimated Number of Hours That the Employee Was Absent From Work
Category

Hours Absent

Cost of Absences

Hours absent during the middle of workdays

800

$23,409

Hours absent at the beginning and end of workdays

256

7,507

Hours absent for full workdays

131

3,771

1,187

$34,687

Totals

Sources:  Bureau of State Audits’ analysis of the Department of Housing and Community
Development time sheets and computer logs, witness statements, and salary data from the State
Controller’s Office.

2	

We calculated these hours by computing the difference between the employee’s scheduled
arrival and departure times and the times she logged in and out of her HCD computer.

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Department of Housing and Community Development

We estimate that the employee failed to account on her time sheets
for 1,187 total hours of absences from HCD, and these absences
cost the State $34,687. In addition, because the employee did not
include her absences on her time sheets, her leave balances were
not charged for the hours she was absent from the workplace.
Consequently, the employee was paid by the State for these
1,187 hours she did not work in addition to receiving compensation
for the leave time she did not use.
The Employee Was Dishonest With HCD Management
In order to hide that she was working at the nonprofit, the
employee was dishonest on several occasions with HCD’s
management and legal counsel about her relationship with the
nonprofit. For example, in mid-December 2006, even though she
was already a full-time employee of the nonprofit, the employee
told Manager A that she wanted to start performing part-time
volunteer work for the nonprofit. Manager A responded by
directing the employee to discuss the issue with HCD’s legal
counsel. The employee subsequently met with an HCD attorney
to discuss her “proposed” work for the nonprofit, which she then
described as paid employment. The employee apparently told
the attorney that her duties at the nonprofit would be unrelated
to her job duties at HCD. She later provided information to the
attorney that appeared to indicate that the nonprofit received no
funding from HCD and has no business interests in California.
Based on the inaccurate information supplied by the employee, the
attorney may have indicated that the employee might be allowed to
engage in the proposed dual employment. However, the attorney
informed us that he never formally responded to the employee’s
inquiry about the proposed employment. The employee asserted
to us that because HCD’s legal counsel did not provide a formal
communication about whether it would be acceptable for her to
work at the nonprofit while working at HCD, she continued to work
for the nonprofit.
The employee made false
and misleading statements in
connection with the disclosures that
she made in her 2006 Statement of
Economic Interests.

As another example of dishonesty, the employee made false and
misleading statements in connection with the disclosures that she
made in her 2006 Statement of Economic Interests. In March 2007
the employee filed an annual Statement of Economic Interests
for the 2006 calendar year. In the statement, she disclosed on a
Schedule C that the nonprofit had been a source of income to her.
However, while the employee correctly identified the name of the
nonprofit and her business position with that entity, she failed to
disclose the amount of income she received. The employee also
failed to disclose that the income was provided as salary, and
indicated that she had been performing consulting work for the
nonprofit instead of serving as an employee. When questioned

California State Auditor Report I2008-2

October 2008
Department of Housing and Community Development

by Manager A about this Statement of Economic Interests,
the employee falsely told Manager A that she completed the
schedule because she had received a one-time gift of travel and
accommodations from the nonprofit so that she could visit its
headquarters outside of California and learn about a prospective
employment opportunity with the nonprofit. She gave this
explanation to Manager A even though the schedule she used to
disclose receiving income from the nonprofit clearly states that it is
to be used to report income other than gifts and travel payments.
Manager A recounted that she subsequently notified HCD’s
legal counsel about the employee telling her that the employee
had received a gift from the nonprofit. In May 2007 HCD’s legal
counsel drafted a memorandum to the employee in response to
the employee’s stated interest in working for the nonprofit and
her claim that the nonprofit had given her a gift of travel. This
memorandum, delivered to the employee by Manager A, advised
the employee that working for the nonprofit while working for
HCD would be a prohibited incompatible activity. In addition, the
memorandum explained that state law prohibited the employee
from receiving a gift from the nonprofit, so she must refrain from
accepting such gifts in the future. By this time, the employee had
already offered yet another story about her relationship with the
nonprofit: She told Manager A in April 2007 that she had been
performing volunteer work for the nonprofit on weekends.
Finally, in December 2007, when HCD management confronted the
employee with information confirmed by the nonprofit that she was
indeed engaged in dual employment, the employee continued to
assert that she had only been working as a volunteer. Section 19572
of the California Government Code strictly prohibits such acts of
dishonesty, which may serve as a basis for disciplinary action.
The Employee’s Supervisors Failed to Provide Adequate Supervision
and to Respond Appropriately When Given Information About the
Employee’s Dual Employment
Not only did the HCD employee pursue activities prohibited by
state law and HCD policies, but HCD’s management also failed
to properly monitor the employee’s work schedule and failed to
respond appropriately to indications that the employee was working
concurrently for the nonprofit. Through their inaction, HCD’s
management permitted the employee’s improper conduct to occur
and continue. HCD management, particularly Manager A and
Manager B, the employee’s first- and second-level supervisors,
should have noticed the employee’s extensive absences. If the
two managers did not notice the absences, they failed to adequately
oversee the employee’s work schedule. If they noticed the absences

Through their inaction, HCD’s
management permitted the
employee’s improper conduct to
occur and continue.

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Department of Housing and Community Development

but did not act to address them, they failed to provide sufficient
supervision. In either case, the managers neglected their duty to
ensure that HCD received work that was commensurate with the
compensation being paid to the employee.
Perhaps even more significantly, the two managers had received
information on several occasions that the employee was engaging
in impermissible dual employment, yet they did not act to confirm
the information. Manager A, in particular, failed to address the
situation promptly even though several of the employee’s coworkers
informed this manager independently that a nonprofit employee
had mentioned that the employee was working for the nonprofit.
Manager A also did not confirm with the nonprofit that the
employee had been working as a consultant for the nonprofit as she
had reported on the 2006 Statement of Economic Interests. The
figure indicates that at various times during the employee’s year of
dual employment, Manager A and Manager B received information
that should have alerted one or both of them that the employee was
working at the nonprofit and at HCD concurrently.
Figure
Timeline Illustrating That Department of Housing and Community Development Managers Did Not Act on
Indications That the Employee Was Working at the Nonprofit
December

April

The employee begins work
at the nonprofit.

An HCD employee shows an e-mail to
Manager A that indicates the
employee is working for the nonprofit.

The employee tells
Manager A that she
wants to volunteer at
the nonprofit.
Two Department of
Housing and Community
Development (HCD)
employees tell Manager A
that the employee is
working at the nonprofit.
The employee outlines for
HCD legal counsel her
proposed paid employment
with the nonprofit.

May
Manager A discusses with the employee the memo
from HCD legal counsel about incompatible activities.

Manager A has a conversation with
the nonprofit manager about the
employee’s job responsibilities.
March

June or July
An HCD employee informs
Manager A that the
employee is still working for
the nonprofit.

The employee submits her
Statement of Economic
Interests to Manager A, which
indicates that she is consulting
for the nonprofit. Manager A
questions the employee, who
states that she received a gift
from the nonprofit.

2006

July

December
The nonprofit
manager attends a
meeting at HCD and
mentions that the
employee works for
the nonprofit.

HCD and the nonprofit
verify the employee’s
dual employment.

The nonprofit
Another HCD employee
terminates the
informs Manager B that the
employee for violating
employee’s name was on
its conflict-of-interest
the employee board at the
policies and for
nonprofit. Manager B does
being dishonest.
not recall being told this.

2007

Sources:  HCD’s records, the nonprofit’s records, and Bureau of State Audits’ interviews.

Even when evidence of the employee’s dual employment
appeared in a document, Manager A overlooked obvious signs of
incompatible activities. In April 2007 a coworker hand-delivered to
this manager a printed copy of an e-mail message that contained a
forwarded e-mail that had originated from the employee’s e-mail
account at the nonprofit and that included a signature block
showing her position at the nonprofit. Manager A stated that the

California State Auditor Report I2008-2

October 2008
Department of Housing and Community Development

e-mail might have indicated that the employee was consulting for
the nonprofit but nothing more, and she insisted that she did not
see the second page of the e-mail, which included the employee’s
signature block. Further, Manager A made a point of stating that
the employee’s title at the nonprofit was very similar to her title at
HCD, implying that Manager A may have seen the signature block
but mistakenly thought it was the employee’s signature block from
her state e-mail account. Shortly after Manager A saw the e-mail,
she had at least one telephone conversation with the nonprofit’s
manager about the employee’s responsibilities at the nonprofit.
In an interview with us, Manager A claimed that during the
telephone call she wanted to determine the employee’s proposed
responsibilities at the nonprofit if she were to work there as the
employee had indicated she wanted to do. Manager A asserted
that she did not ask whether the employee was already working
for the nonprofit. In addition, Manager A did not question the
nonprofit manager about either the employee’s consulting work or
her position at the nonprofit, which were indicated in the e-mail.
In fact, she insisted that based on the conversation, she did not
know that the employee was already working or volunteering at
the nonprofit. However, given that other HCD employees had
previously expressed to her their concern about the employee’s
relationship with the nonprofit and that the employee had reported
a gift from the nonprofit, Manager A should have questioned the
nonprofit’s manager more thoroughly about the specific nature of
the employee’s work.
Moreover, Manager A did not explore the employee’s reported
volunteer work with the nonprofit. In May 2007, when Manager A
delivered to the employee the memorandum from legal counsel
advising the employee that she could not work for the nonprofit,
the employee had already told Manager A that she had volunteered
with the nonprofit on weekends. Manager A told us that she did
not ask the employee whether she was still volunteering, and
the manager did not attempt to determine the true extent of the
employee’s relationship with the nonprofit.
In June or July 2007, HCD staff notified both Manager A and
Manager B that the employee was still working for the nonprofit
even after the employee received the memorandum instructing
her that working for the nonprofit was prohibited. Specifically, an
HCD staff member informed us that she performed a site visit at
the nonprofit in June 2007 and noticed the employee’s name on a
board listing the names of the employees at the nonprofit. Shortly
thereafter, in July 2007, the coworker informed Manager B about
this observation. Manager B told us that she did not recall being
told about this situation; however, she also said that she did not
have any reason to believe that the staff member who reported
her observation was being dishonest. Another of the employee’s

Manager A should have questioned
the nonprofit’s manager more
thoroughly about the specific
nature of the employee’s
work, given the concerns
previously expressed by the
employee’s coworkers.

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Department of Housing and Community Development

HCD coworkers informed us that when she heard that a board
posted at the nonprofit listed the employee’s name on it, she alerted
Manager A. However, Manager A told us that she did not believe
this coworker because of disharmony that existed between the
employee and the coworker. Therefore, Manager A took no action.

The managers clearly had reason to
inquire whether the employee was
a paid employee at the nonprofit
and, in doing so, they would have
discovered her prohibited conduct.

Because the employee was absent from the HCD office for many
work hours, and because Manager A and Manager B received
various types of information and expressions of concern about
the possibility that the HCD employee was working concurrently
at the nonprofit, these managers clearly had reason to inquire
whether the employee was indeed a paid employee at the
nonprofit. In doing so, the two managers would have discovered
the employee’s prohibited conduct. These failures to question the
situation and to act on other employees’ concerns demonstrate a
lack of adequate oversight by these two managers, who have a duty
to assess and strengthen their agency’s administrative controls to
minimize fraud, abuse, and waste of government funds.
Agency Response
HCD informed us that it reduced the employee’s salary by
10 percent for six months effective in April 2008. The disciplinary
action taken against the employee cited many of the improper acts
that the employee committed, but did not address the employee’s
misuse of state-compensated time. The employee subsequently
resigned in May 2008. In addition, HCD stated that it determined
the managers responded adequately and that they were not
negligent of their supervisory duties. Nevertheless, HCD noted
that it would have preferred the managers to take quicker and
more definitive action. Consequently, HCD stated that it informally
counseled the managers regarding the matter.

California State Auditor Report I2008-2

October 2008
Department of Corrections and Rehabilitation

Chapter 2
Department of Corrections and Rehabilitation:
Improper Overtime Payments
Case I2007-0917
Results in Brief
From November 2005 through August 2006, the Department of
Corrections and Rehabilitation (Corrections) improperly paid
two physicians $108,072 in overtime compensation that they should
not have received.
Background
Corrections employs physicians who administer health care to the
State’s institutionalized inmates. A labor agreement between
the State and the physicians’ collective bargaining unit (Unit 16)
governs the terms of the physicians’ employment. Under the labor
agreement, the physicians earn salaries rather than hourly wages,
and they are scheduled to work an average of 40 hours per week.
The salaries that the physicians receive are generally intended to
compensate them fully for all the work that they perform during a
workweek, even if they must work more than 40 hours to complete
their assignments. However, one exception to this general rule is
that a physician who must return to an institution for work hours
in addition to his or her regularly scheduled workweek is entitled
to receive compensation for the additional work hours, known as
call-back hours. According to the labor agreement, a physician
receives compensation for call-back hours on an hour-for-hour or
straight-time basis instead of a time-and-a-half or overtime basis.
In addition, for each return visit by a physician, the agreement
guarantees a minimum of four hours of compensation and one
additional hour of compensation for travel time. Thus, a physician
earns pay for a minimum of five hours of work each time he or she
must return to an institution, but the State does not use a time-anda-half basis when calculating the additional compensation.
Upon receiving an allegation that two Corrections’ physicians
received compensation that they were not entitled to receive, we
asked the California Prison Health Care Receivership (receivership)
to help us investigate the matter. The receivership manages medical
care operations in Corrections’ institutions.

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Department of Corrections and Rehabilitation

Facts and Analysis
Two physicians at San Quentin
State Prison claimed a total
of 3,025 call‑back hours from
November 2005 through
August 2006, for which Corrections
overpaid them $108,072.

The investigation revealed that from November 2005 through
August 2006, two physicians at San Quentin State Prison
(San Quentin) claimed a total of 3,025 call-back hours. Instead of
paying these physicians on an hour-for-hour basis, Corrections
compensated them for the call-back hours on a time-and-a-half
basis. As a result, they received a minimum of 7.5 hours of credit
each time San Quentin called them back to work even though
the labor agreement specified that they were entitled to receive
only five hours of credit. Consequently, Corrections overpaid the
physicians a total of $108,072.
Physician A claimed 1,795 call-back hours from November 2005
through August 2006, and he received $192,293 in call-back pay for
those hours in addition to his base pay of $124,053 for the 10-month
period. However, because he was paid at a time-and-a-half rate for
each hour worked, in violation of the labor agreement, he should
not have received $64,097 of this call-back pay.
Similarly, Physician B claimed 1,229 call-back hours during the same
10-month period, and he received $131,924 in call-back pay for
those hours in addition to his base pay of $122,142 for the period.
Because Corrections also paid Physician B at a time-and-a-half rate
for each hour worked, in violation of the labor agreement, he was
not entitled to $43,975 of this call-back pay.
We found that these physicians received overpayments for call‑back
hours because the clerk at San Quentin who was responsible for
entering information into the computer system for managing
payroll entered the call-back hours erroneously. The clerk entered
the hours as if the physicians were entitled to compensation at a
time-and-a-half rate rather than at the hour-for-hour rate required
by Unit 16’s labor agreement.
Agency Response
The receivership agreed with our findings and reported that
in May 2008 it had established accounts receivable for both
physicians, who agreed to make monthly payments to the State. In
addition, the receivership stated that the overpayments probably
occurred because San Quentin staff lacked proper training. In
July 2008 the receivership transferred responsibility for processing
all personnel transactions for San Quentin medical, mental health,
and dental staff to the human resources staff at the receivership’s
headquarters to ensure better accountability and oversight.

California State Auditor Report I2008-2

October 2008
Department of Corrections and Rehabilitation

Chapter 3
Department of Corrections and Rehabilitation:
Improper Payments for Inmate Supervision
Case I2006-0826
Results in Brief
Between January 1, 2005, and February 29, 2008, the Department
of Corrections and Rehabilitation (Corrections) improperly paid
nine office technicians a total of $16,530 for supervising inmates
when the technicians did not qualify to receive the money.
Corrections also failed to maintain adequate accounting and
administrative controls that would prevent such improper payments.
Background
Corrections regularly assigns prison employees, including office
technicians, to supervise the work of inmates who perform jobs
inside its prisons. Under the collective bargaining agreement
between the State and Bargaining Unit 4, which represents state
office workers, prison employees assigned to supervise inmates
are entitled to earn $190 in additional pay per month if the
employees meet certain requirements. The prerequisites are that
the employees have regular, direct responsibility for supervising the
work of at least two inmates who must collectively work 173 hours
each month, providing the inmates with on-the-job training, and
evaluating the inmates’ work performance.
In providing employees with this additional earned pay,
Corrections, like all other state agencies, has a duty under the
California Government Code, Section 13403(a)(3), to maintain
internal accounting and administrative controls. These controls
must include a system of authorization and record-keeping
procedures that provides effective accounting controls over the
payments to its employees.
Upon receiving information that office technicians at the
R. J. Donovan Correctional Facility (facility) near San Diego had
received improper pay for supervising inmates, we conducted
an investigation at the facility. During our investigation, we
sought evidence to support that the office technicians who had
received pay for supervising inmates were entitled to receive this
compensation. We focused specifically on inmate time sheets,
which are supposed to identify the name and identification number
of each inmate who needed supervision as well as the number of
hours that the inmate worked under the assigned office technician.

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Department of Corrections and Rehabilitation

Each time sheet should also include the supervising office
technician’s signature contemporaneously certifying the inmate’s
hours for each day that the inmate worked.
Facts and Analysis
Our investigation revealed that from January 2005 through
February 2008, Corrections made 239 payments to the nine office
technicians for inmate supervision; however, for 87 of these
payments, Corrections could not demonstrate that the employees
satisfied the requirements for earning this compensation. In some
instances, employees had not supervised any inmates during a given
pay period. In other cases, employees supervised only one inmate
during the pay period, or they had supervised at least two inmates
but the inmates did not collectively work the required number
of hours for the employees to qualify for supervision pay. Thus,
Corrections paid the employees a total of $16,530 that they were
not entitled to receive under the collective bargaining agreement.
This amount constitutes 36 percent of the total spent for inmate
supervision for the period that we reviewed. The results of our
investigation appear in Table 3.
Table 3
Department of Corrections and Rehabilitation’s Improper Payments to Employees for Supervising Inmates
January 2005 Through February 2008
Reasons Employees Did Not Qualify for
Payments to Supervise Inmates

Employees

Number of Months
Employees Received
Payments for
Supervising Inmates

Total
Payments
for Inmate
Supervision

Number of
Months
Employee
Supervised
No Inmates

Number of
Months
Employee
Supervised
One Inmate

Number of
Months Employee
Supervised Two or
More Inmates Fewer
Than 173 Hours

Total
Number of
Improper
Monthly
Payments

Total
Improper
Payments
for Inmate
Supervision

Percentage
of Total
Payments
That Were
Improper

A

32

$6,080

3

6

2

11

$2,090

B

28

5,320

12

0

0

12

2,280

34%
43

C

25

4,750

5

2

0

7

1,330

28

D

23

4,370

3

7

2

12

2,280

52

E

38

7,220

4

4

0

8

1,520

21

F

23

4,370

10

7

0

17

3,230

74

G

23

4,370

5

1

0

6

1,140

26

H

23

4,370

0

1

3

4

760

17

I
Totals

24

4,560

0

9

1

10

1,900

239

$45,410

42

37

8

87

$16,530

Source:  Bureau of State Audits’ analysis of inmates’ time sheets from the R. J. Donovan Correctional Facility.

42
36%

California State Auditor Report I2008-2

October 2008
Department of Corrections and Rehabilitation

Our investigation further determined that Corrections paid the
nine employees incorrectly because the facility lacked proper
controls—including adequate oversight—to ensure that the
employees qualified for the increased pay by supervising at least
two inmates who collectively worked for 173 hours. For example,
according to our examination of inmates’ time sheets—and our
observation that inmates’ time sheets were missing in certain
instances—two of the nine employees who received supervision pay
for August 2006 did not supervise any inmates during the month.
Thus, these employees received the increased pay even in extreme
cases in which inmates submitted no time sheets to support the
employees’ earning supervision pay.
Moreover, the number of improper payments may be even higher
given what we discovered about the facility’s system for recording
inmate supervision. Specifically, we found that employees who
supervised inmates routinely signed inmates’ time sheets regardless
of whether the employees or the inmates were present for work.
Our comparison of the inmates’ time sheets to the employees’
official attendance reports for four months in 2006 identified at
least 34 days when employees signed their approval of the work
hours that inmates recorded even though the employees were
not present at the facility to supervise inmates on those days. For
example, time sheets for August 2006 show that employees A, C,
F, and G certified inmates’ work hours during a total of 16 days
that these employees’ official attendance reports show they did
not work.
Our investigation revealed that the discrepancies between inmate
time sheets and employee attendance reports were particularly
significant in the case of Employee F, who indicated on the
time sheets that she supervised one inmate for 23 days during
August 2006. However, her attendance report shows that for the
23 days the inmate worked, Employee F was absent from work
for 10 full days and two partial days. Because she supervised only
one inmate and she was absent from work for about one-half of the
23 days that she claimed to supervise the inmate, Employee F did
not satisfy the bargaining agreement’s requirement to qualify for the
extra compensation that she supervise two inmates who collectively
worked at least 173 hours during the month. Although the absences
of employees A, C, F, and G during three other months that we
reviewed did not affect their meeting the requirements for earning
the increased pay, we are nevertheless concerned that the facility
lacks sufficient controls to ensure the accuracy of the records that
justify employees receiving extra pay for supervising inmates. In
particular, if these records are inaccurate, we have no assurance that
the employees receiving the increased pay have properly earned it.

Because Employee F supervised
only one inmate and was absent
from work for about one‑half
of the days she claimed to
supervise the inmate, she did not
satisfy the requirement to supervise
two inmates who collectively worked
at least 173 hours during the month.

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Department of Corrections and Rehabilitation

Similarly, we found that for most inmate time sheets that we
reviewed, the employees who supervised inmates signed their
approval of inmates’ work hours for every day of the month
regardless of whether inmates actually worked. Thus, these
employees appear to have routinely signed the inmate time sheets
in advance whether or not the time sheets accurately reflected the
number of hours that the inmates actually worked and whether or
not the employees actually supervised the inmates.
When we asked Corrections about the noted discrepancies between
inmate time sheets and employee attendance reports, an official at
the facility told us that the employees’ supervisors indeed compare
inmate time sheets with employee attendance reports. When
we asked Corrections to identify the conditions under which an
employee could indicate that he or she had supervised an inmate
even though neither the inmate nor the employee had worked that
day, a Corrections representative told us that no such conditions
exist and that doing so would be “illegal.” The representative added
that the facility’s supervisors should have addressed this type of
reporting problem immediately.
Nevertheless, the results of our investigation demonstrate that
for the inmate time sheets we reviewed, the facility’s supervisors
did not compare inmate time sheets with employee attendance
reports, and they have not addressed the problem of employees
granting blanket certification of work hours for every day of
the month, regardless of whether the inmates worked or the
employees supervised.
Consequently, Corrections did not adhere to the collective
bargaining agreement between the State and Bargaining Unit 4
when Corrections made $16,530 in improper payments to office
technicians for supervising inmates. Corrections also failed to
maintain an adequate authorization and record-keeping system, as
required by statute, to prevent it from making improper payments.
Agency Response
Corrections reported that the findings of our investigation
affect several areas of the facility, including personnel, inmate
assignments, labor relations, and business services. As a result, it
has assigned a team to determine the best approach for addressing
our findings. In addition, Corrections stated that it would conduct
a review for any statewide issues, and it would initiate recovery for
any overpayments to its employees. Finally, Corrections reported
that the facility would develop procedures to ensure that it correctly
authorizes duties and pay associated with inmate supervision.

California State Auditor Report I2008-2

October 2008
California Environmental Protection Agency

Chapter 4
California Environmental Protection Agency:
Failure to Accurately Report Absences,
Inadequate Supervision
Case I2008-0678
Results in Brief
An employee of the California Environmental Protection Agency
(Cal/EPA) failed to promptly submit time sheets that accurately
reported her absences from work during the period August 2006
through June 2008. In addition, the officials responsible for
managing her daily activities and for monitoring her time and
attendance did not ensure that the employee documented her
absences correctly and that Cal/EPA charged the absences against
her leave balances. Consequently, Cal/EPA did not charge the
employee’s leave balances for the 768 hours that the employee was
absent from work; instead, it paid her $23,320 for these hours.
Background
Cal/EPA is responsible for restoring, protecting, and enhancing the
environment to ensure public health, environmental quality, and
economic vitality in the State. Like all other state agencies, Cal/EPA
is subject to laws and regulations governing the accurate reporting
of employee time and attendance, and these laws and regulations
mandate that Cal/EPA maintain adequate administrative controls to
safeguard the accuracy of that reporting.
Specifically, in accordance with the California Code of Regulations,
Title 2, Section 599.665, and the State Administrative Manual,
Section 8539, all state agencies have the responsibility to
keep complete and accurate time and attendance records for
each employee. To comply with this mandate, Cal/EPA requires
its employees to submit monthly time sheets at the end of each
pay period to document their attendance and absences. Employees
and their supervisors must sign the monthly time sheets to certify
their accuracy. Once the time sheets receive approval, Cal/EPA
uses them to enter the employees’ absences into a leave accounting
system that charges the employees’ leave balances for the
employees’ absences.
In addition, the California Government Code, Section 13401,
mandates that all levels of management at state agencies must be
involved in assessing and strengthening administrative controls
to minimize fraud, errors, abuse, and waste of government funds.

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California Environmental Protection Agency

As part of these administrative controls, the California Code of
Regulations, Title 2, Section 599.702, and the collective bargaining
agreement between the State and the employee’s bargaining unit
(Unit 1), provide that employees are required to obtain prior
authorization from their supervisors before working compensated
overtime, except in case of an emergency.
Upon receiving an allegation that an employee at Cal/EPA failed
to submit her monthly time sheets accurately and on time, we
began an investigation. During our investigation, we learned that a
high-level administrator, Official A, manages the employee’s daily
activities. However, Official A had directed two lower-level officials,
Official B and Official C, to monitor the employee’s time and
attendance at various times from August 2006 through June 2008,
which was the period we investigated.
Facts and Analysis
Our investigation found that during a 23-month period, the
employee failed to submit accurate time sheets at the end of each
monthly pay period to report the hours that she worked and the
hours that she was absent. In addition, officials at Cal/EPA did not
act promptly and effectively to correct this problem and ensure
that the leave accounting system charged the employee’s absences
against her leave balances.
The Employee Failed to Submit Time Sheets to Accurately Account for
When She Worked and When She Was Absent

For the 23 pay periods we examined,
the employee never submitted
time sheets for five pay periods,
submitted time sheets up to several
months late for 12 pay periods, and
promptly submitted time sheets for
just six pay periods.

From August 2006 through June 2008, the employee did not
submit monthly time sheets at the end of each pay period that
accurately documented the time she spent working and the time
she was absent. For the 23 pay periods we examined during the
investigation, the employee never submitted time sheets for five pay
periods, she submitted time sheets up to several months late for
12 pay periods, and she promptly submitted time sheets for just
six pay periods. However, management declined to approve nearly
all of the time sheets that the employee submitted late or on time
because the time sheets either did not account for all absences
or because the time sheets reported overtime work that had not
received preapproval.
When we interviewed the employee, she admitted that she was
frequently absent from work, and acknowledged that she did
not include all of her absences on her time sheets. However,
the employee claimed that she simply overlooked the absences. The
employee also stated that Official C, who currently reviews her time

California State Auditor Report I2008-2

October 2008
California Environmental Protection Agency

sheets, has helped to identify any absences that she overlooked.
Although she acknowledged her familiarity with Cal/EPA’s
time‑reporting requirements, the employee also admitted that
she went many months without submitting some time sheets for
supervisory approval. The employee explained that she was unable
to complete and submit the time sheets punctually because of her
heavy workload. However, it appears that the employee’s inability
to keep track of her frequent absences contributed to her failure to
submit time sheets accurately and on time.
The employee also acknowledged that she did not receive prior
authorization for the overtime that she claimed to have worked
during the period we examined. She asserted that in practice,
Cal/ EPA does not require preauthorization for overtime. However,
Official A stated that the employee’s overtime must be preapproved,
even though Official A does not go through the formality of
signing a written preauthorization for the employee’s compensated
overtime. Official A stated that her being in the office and needing
the employee to work late constituted sufficient preapproval for
overtime. On the occasions when Official A was away on state
business, officials B and C affirmed that they expected the employee
to request prior authorization for overtime work. However,
Official C stated that when Official A was away the employee
claimed overtime even though Official C had never formally
authorized the employee to work overtime and that she could not
substantiate whether the employee actually worked the overtime.
Furthermore, when Official C questioned the employee about the
general nature of her overtime, the employee responded that she
worked overtime to “catch up” on routine tasks that she could not
complete during her regular work hours.
Because the employee did not regularly submit time sheets
that accurately accounted for her absences and did not obtain
preauthorization for all of her overtime, officials B and C did not
approve the employee’s time sheets. Without the approved time
sheets, Cal/EPA did not record the employee’s absences or overtime
in its leave accounting system. Consequently, Cal/EPA did not
charge the employee’s leave balances for the 768 hours that she was
absent from work during the 23-month period; instead, it paid her
$23,320 for these hours.3

3	

During the same period, the employee claimed to have worked 166 hours of overtime.

The employee acknowledged
that she did not receive prior
authorization for the overtime she
claimed to have worked.

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California Environmental Protection Agency

Cal/EPA Officials Failed to Take Sufficient Actions to Correct the
Employee’s Lax Time Reporting and Because of Their Inaction,
the Employee’s Absences Were Not Charged Against Her Leave Balances
Not only did the employee fail to submit her time sheets accurately
and promptly, but the Cal/EPA officials responsible for managing
her day-to-day activities and monitoring her time and attendance
also failed to ensure that the employee submitted monthly time
sheets that correctly reported her absences and time worked. As
mentioned previously, the employee works for Official A, who
assigned Official B and then Official C to monitor the employee’s
time and attendance and to approve her time sheets.
By October 2006 Official A became aware of the employee’s
neglect in accurately completing and submitting her monthly time
sheets. Official A responded by directing human resources staff to
prepare two memoranda and a list of “talking points” to address
the employee’s attendance problems and the official’s concerns
about the time that the employee reported on her August and
September 2006 time sheets. However, according to Official A,
when she received the two memoranda for review, she found
the documents too personal and harsh, so she did not deliver the
memoranda to the employee and did not discuss the attendance
or time-reporting issues with her. Instead, Official A requested
that human resources staff revise the memoranda. Official A then
took no further action on the attendance or time-reporting issues
in 2006. Official A attributed her inaction to her never receiving
the revised memoranda from the human resources personnel.
However, it is unclear why Official A, once she had taken personal
responsibility for handling the matter, did not follow up with
human resources staff to make sure that she received the revised
memoranda or why she did not use some other means to resolve
the employee’s attendance and time-reporting issues when they
surfaced in 2006. In the absence of timely action by Official A, the
problem of the employee failing to accurately report her absences
and to complete her time sheets continued.
Although Cal/EPA asserted that
Official B had responsibility
for monitoring the employee’s
attendance, we found little
documentation that anyone made
efforts to ensure the employee
submitted her time sheets.

In particular, the employee did not submit any time sheets for the
five months from October 2006 through February 2007. Although
Cal/EPA asserted that Official B had responsibility for monitoring
the employee’s attendance, we found little documentation showing
that anyone made efforts to ensure the employee submitted her
time sheets. Moreover, even though Cal/EPA contended that
Official B declined to approve the time sheets for these months, it
could not produce the time sheets for these five months at the time
of our investigation.

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October 2008
California Environmental Protection Agency

Moreover, the efforts made by Official A and Official C in 2007 and
early 2008 did little to resolve the employee’s failure to accurately
report her absences and overtime, and to promptly complete her
time sheets. Official A assigned Official C around March 2007 to
monitor the employee’s time and attendance and to approve her
time sheets.4 In May 2007 Official A met with the employee to
counsel her about her absenteeism. However, the meeting notes
indicate that Official A did not discuss the employee’s failure to
submit her time sheets promptly and accurately. Furthermore,
Official C told us that she was unable to obtain completed time
sheets from the employee for most of the months from March 2007
through March 2008. Apparently, the employee submitted only
the time sheets for March, July, and November 2007 on time.
Official C offered evidence that she tried to pressure the employee
to comply with the time-reporting requirements through some
oral conversations and numerous e-mails but the employee did
not comply. Yet Official C took no action to enforce her requests
for compliance. As a result, the employee did not submit until
April 2008 the time sheets for March 2007 through March 2008,
and these time sheets were found to be inaccurate.5
When we interviewed Official C in May 2008, she had not
approved any of the employee’s monthly time sheets starting
with the March 2007 time sheet. Official C stated that the time
sheets did not account for all of the employee’s absences and
included overtime that had not been preapproved. That same
month Official C issued the employee an informal counseling
memorandum that required the employee to follow specified
procedures when she is late or absent from work, and Official C
notified the employee that all requests for overtime must receive
prior approval. However, the memorandum did not discuss the
employee’s failure to promptly submit time sheets that accurately
account for each of her absences.
In September 2008 Cal/EPA informed us that it had resolved
the employee’s failure to accurately account for her absences
and overtime and to punctually complete her time sheets for
the 23‑month period. Specifically, that same month—more than
two years after the employee failed to promptly submit the first of
her inaccurate time sheets—Official A approved 10 of the employee’s
23 time sheets and Official C approved the remaining 13 time sheets.

4	

In information Cal/EPA subsequently provided to us, it stated that Official A formally assigned
Official C to monitor the employee’s attendance and to approve time sheets in June 2007.
5	 The employee again submitted time sheets for March, July, and November 2007 that she had
previously completed and submitted to Official C. The employee had not made any changes to
the time sheets.

As of May 2008, Official C had not
approved any of the employee’s
time sheets starting with the
March 2007 time sheet because
the time sheets did not account for
all of the employee’s absences and
included overtime that had not
been preapproved.

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California Environmental Protection Agency

In addition, the officials approved 90 hours of overtime for the
employee, a reduction of 76 hours from the 166 overtime hours the
employee originally claimed, during the period.
Not surprisingly, when we reviewed these 23 approved time sheets,
we identified discrepancies totaling as much as 40 hours between
the hours the employee was reported to be at work and the hours we
determined the employee was probably absent, based on documents
we collected during our investigation. Given the long delays between
the time the absences occurred, the time the employee reported the
absences on her time sheets, and the time the Cal/EPA officials
approved her time sheets, ambiguities have naturally arisen regarding
the employee’s actual attendance. This is why contemporaneous
time reporting is so important. We, therefore, remain concerned
about whether Cal/EPA has sufficient administrative controls
in place to ensure the accuracy of the employee’s time sheets,
particularly if it does not ensure that the employee completes her
time sheets punctually and that the time sheets are reviewed and
approved promptly.
Agency Response
After we provided Cal/EPA with a draft copy of this chapter,
Cal/ EPA reported in September 2008 that it had recalculated,
updated, and corrected the employee’s leave balances to reflect her
actual absences and overtime worked, based on the now‑approved
time sheets, for all pay periods through August 2008. In addition,
Cal/EPA notified us that it plans to establish an accounts receivable
for 24 hours the employee was docked pay in September 2006.
It also informed us that Official A had issued a counseling
memorandum to the employee, which discussed the employee’s
failure to promptly submit time sheets that accurately accounted
for her absences. Moreover, Cal/EPA notified us that Official C had
issued another counseling memorandum to the employee, which
described the implementation of administrative controls to ensure
that the employee correctly accounts for her absences and promptly
completes her time sheets and other time reporting documents.
Furthermore, Cal/EPA reported that, as soon as possible, it plans
to transfer the employee to another position with a different
assignment that does not require significant overtime. It stated that
the new assignment would allow the employee to be more closely
monitored by a different supervisor.

California State Auditor Report I2008-2

October 2008
State Personnel Board

Chapter 5
State Personnel Board: Improper Contracting
for Personal Services
Case I2007-0771
Results in Brief
The State Personnel Board (personnel board) improperly entered
into two personal services contracts with a retired civil service
employee at a total cost of $8,999. In addition, the personnel board
had no records to justify either the price of these two contracts or
the $4,999 cost of a third personal services contract with another
retired employee. Moreover, the cost of each of these contracts fell
just below $5,000, which is the amount at which state law requires
competitive bidding for a contract and the approval of a contract by
the Department of General Services (General Services).
Background
The personnel board was created in 1934 to administer the State’s
civil service system and to ensure that state employment is based
on merit and free of political patronage. As the administrators
of the State’s civil service system, the personnel board and its
employees are subject to the same rules governing contracting and
employment practices as other state agencies and employees.
Specifically, the Public Contract Code, Section 10410, prohibits state
employees from contracting with any state employer to provide
goods or services as an independent contractor. As defined in the
California Government Code, Section 18526, individuals retired
from state employment whom the State has reinstated to perform
work for a limited duration are among those persons considered
state employees. Under Section 21224 of the California Government
Code, these persons—known as retired annuitants—may only
receive pay when they perform work for the State as civil service
employees for up to 960 hours per year.6
Additionally, the Public Contract Code, Section 10335, provides that
even though contracts for services generally must be preapproved
by General Services, such advance approval is not required if the
amount of the contract is less than $5,000. Similarly, although
agencies are generally required to obtain three competitive bids

6	

Before 2006 the 960-hour limit applied to each calendar year. Effective January 1, 2006, the limit
applies to each fiscal year.

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State Personnel Board

when awarding a services contract, Section 10335.5 of the Public
Contract Code states that agencies are not required to obtain
competitive bids for consulting services contracts that are less
than $5,000.
Facts and Analysis

Because the retired annuitant was
considered to be a civil servant, the
law prohibited him from being paid
as a private contractor to provide
additional services to the State.

Our investigation revealed that in both 2003 and 2005, the
personnel board improperly entered into a personal services
contract with a retired annuitant who had already worked for the
board the maximum number of hours permitted by law in each
of those years. In August 2003, within 90 days after the retired
annuitant had worked the maximum number of hours permitted
for the year, a personnel board manager approved the personnel
board’s paying this individual an additional $4,999 as a private
contractor. The justification for the payment stated that the
amount was to compensate the retired annuitant for reviewing and
analyzing 30 appeals cases for the personnel board in July 2003.
He had performed similar work as a state employee. In a similar
instance that occurred in November 2005, within 90 days after
the retired annuitant had worked the maximum number of
hours permitted for the year, a second personnel board manager
approved paying the same retired annuitant another $4,000 as a
private contractor. The justification for this payment also stated
that the amount was to compensate the retired annuitant for
reviewing and analyzing 30 appeals cases for the personnel board
in September 2005. Because the retired annuitant was considered
to be a civil service employee in 2003 and 2005, the law prohibited
him from being paid as a private contractor to provide additional
services to the State. The personnel board paid the retired annuitant
a total of $8,999 under these two impermissible contracts.
We interviewed the manager who approved the second payment to
the retired annuitant in 2005. The manager stated that a personnel
board official, who has since retired, directed her to approve
the payment. The manager stated that she did not question the
payment. Other information we received suggests that the former
personnel board official also prompted the first payment to the
retired annuitant in 2003.
When we tried to determine how the personnel board decided how
much to pay the retired annuitant under each of the contracts, the
personnel board was unable to provide any documents justifying
the amounts. The lack of documentation was particularly troubling
because the second contract was priced $999 lower than the
first contract even though the stated number of cases the retired
annuitant was being paid to review and analyze was the same for

California State Auditor Report I2008-2

October 2008
State Personnel Board

both contracts. In fact, the $999 difference suggests there was not a
solid relationship between the amount of money being paid and the
amount of work being performed under the two contracts.
During our investigation, we also found that in March 2004, the
personnel board paid $4,999 under a contract for the personal
services of another individual who was a retired state employee
but not a retired annuitant during the contract period. The same
manager who approved the August 2003 payment to the retired
annuitant also approved the payment to this second individual.
Evidence suggests that the now-retired official who prompted the
payments to the retired annuitant also orchestrated the payment
to the second individual. The justification for the payment to
this individual stated that the contractor reviewed and analyzed
an unspecified number of appeals cases from November 2003
through February 2004. We tried to find out how the personnel
board determined the amount to pay under this contract, but the
personnel board was unable to provide any documents to support
its decision regarding the amount of the payment.
In the absence of any documentation to justify the amounts paid for
the three personal services contracts, we note that the personnel
board priced all three contracts just below the $5,000 limit that
would have made them subject to General Services’ prior approval
and that would have triggered the requirement that the personnel
board open the contracts to competitive bidding. In fact, two of the
contracts were priced just one dollar below the $5,000 threshold.
Consequently, we are concerned that the now-retired personnel
board official may have intentionally set the cost of the contracts to
fall below the $5,000 limit to avoid the scrutiny of General Services
and the competitive bidding process.
Agency Response
The personnel board agreed with the findings of our investigation. The
personnel board informed us that because the official who initiated
the three contracts retired in 2007, it cannot take action against that
individual. The personnel board also told us that it admonished the
contracts manager who approved the second payment to the retired
annuitant. In addition, it informed the contracts manager that she
must raise concerns regarding the validity of contracts with the
personnel board’s legal counsel if she does not receive satisfactory
responses within her chain of command. Finally, the personnel board
implemented several procedures to ensure that all contracts initiated
by its personnel meet all applicable contracting requirements. These
procedures include additional documentation, increased reviews,
and restricting the authority to approve contracts to selected staff.
The personnel board stated that it plans to explain the enhanced

Two of the contracts were
priced just one dollar below the
$5,000 threshold that would
have made them subject to prior
approval by General Services and
competitive bidding requirements.

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October 2008

procedures to its business services office and fiscal office staff, and it
will require these employees to provide written verification that they
understand all applicable contracting procedures.

California State Auditor Report I2008-2

October 2008
Department of Fish and Game

Chapter 6
Department of Fish and Game: Misuse of a State
Vehicle and Employee Time
Case I2007-0680
Results in Brief
A manager with the Department of Fish and Game (Fish and
Game) regularly misused a state vehicle to transport her child to
school. In addition, she misused the state-compensated time of
two subordinate employees by directing them to repair and build
corrals for her private use on the state-owned property where she
resides. These improper uses of state resources cost the State an
estimated $1,962.
Background
To administer some of the programs under its jurisdiction, Fish
and Game stations certain employees in remote wildlife locations.
Because private housing may be difficult to obtain in the areas
where staff members work, Fish and Game sometimes permits
these employees to live in state-owned housing. Fish and Game
also allows these employees to use state-owned vehicles to perform
their duties.
Various state laws and regulations ban state employees from
using public resources improperly. Specifically, Section 8314
of the California Government Code prohibits state employees
from using public resources, including state-owned vehicles and
state‑compensated time, for the employees’ personal enjoyment,
private gain, or advantage. To help ensure that state employees
do not operate state-owned vehicles for private advantage, the
California Code of Regulations, Title 2, Section 599.802, declares
that an employee is misusing a state-owned vehicle if the employee
carries anyone in the vehicle who is not directly involved with
official state business unless the employee obtains prior approval
from his or her supervisor. Under the California Code of
Regulations, Title 2, Section 599.803, a state employee who uses
a state-owned vehicle improperly is subject to discipline and is
liable to the State for the actual costs attributable to the misuse.
Moreover, the California Government Code, Section 19990, affirms
that a state employee’s use of state time, facilities, or equipment for
private gain or advantage is grounds for discipline.

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Department of Fish and Game

When we received an allegation that an employee of Fish and Game
was misusing both a state-owned vehicle and the compensated
time of subordinates, we asked Fish and Game to assist us in
investigating the matter.
Facts and Analysis
The investigation revealed that from January 2002 through
December 2006, a Fish and Game manager, who was stationed in
a remote location, misused a state-owned vehicle and generated
unnecessary costs to the State.7 The manager drove her child to
school at least once a week even though she had no job‑related
purpose for using the vehicle and had not obtained the prior
approval of her supervisor to do so. Further, the manager could
have sent her child to school on a district bus, which provided
transportation between the manager’s residence and the child’s
school. To calculate the cost to the State of these trips, we applied
the State’s mileage reimbursement rates for the period and
estimated that the manager’s misuse of the state-owned vehicle
cost the State $783 over the nearly five years that she used the
vehicle improperly.8
In 2006 the manager misused the
state-compensated time of two of
her subordinate employees when
she directed them to repair and
build corrals on state time.

The investigation also revealed that in 2006 the manager
misused the state-compensated time of two of her subordinate
employees when she directed them to repair and build corrals
on state time. The manager contended that the employees spent
only one or two days working on these corrals; however, the
investigation determined that the two employees worked on
the project for one week. Although the employees completed the
work on the state property where the manager resides, they
performed the repairs and construction to enclose the manager’s
pets and private livestock and not to accomplish any state purpose.
Thus, the state employees worked solely for the manager’s personal
benefit. Based on the two employees’ pay rates during the time
that they built and repaired the corrals, we determined that the
manager’s misuse of the employees’ time cost the State $1,179.
Taken together, the manager’s improper use of a state vehicle and
her misuse of the two state employees’ time produced an estimated
loss to the State of $1,962.

7	

We used January 2002 as the starting point for the vehicle misuse. Despite our requests for the
information, Fish and Game has been unable to pinpoint the month that the misuse began.
8	 We based our estimate on the local school district’s 37-week school year.

California State Auditor Report I2008-2

October 2008
Department of Fish and Game

Agency Response
Fish and Game reported that it found the manager’s misuse of
state employees to repair and build corrals for her private use
on state time constituted a neglect of duty and a failure to maintain
good behavior that caused a discredit to the State. Consequently,
Fish and Game reduced the manager’s pay by approximately
five percent for three months. In addition, Fish and Game stated
that prior to the investigation, it provided corrective counseling
to the manager about her misuse of a state vehicle to regularly
transport her child to school. It further stated that this counseling
remedied her behavior.

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Blank page inserted for reproduction purposes only.

California State Auditor Report I2008-2

October 2008
Department of Consumer Affairs, Contractors State License Board

Chapter 7
Department of Consumer Affairs, Contractors
State License Board: Misuse of State
Resources, Dishonesty
Case I2007-1046
Results in Brief
An employee with the Contractors State License Board (board)
used a state vehicle for personal reasons and falsified board
records to hide her actual activities when she was supposed to be
performing field inspections for the board. The State incurred an
estimated $1,896 loss due to her personal use of a state vehicle from
April 2007 to August 2007.9
Background
The board operates as part of the Department of Consumer Affairs
(Consumer Affairs). It licenses and regulates contractors in the
construction industry, and it investigates consumer complaints
about licensed and unlicensed contractors. Employees of the board
are subject to state prohibitions against engaging in activities
that are incompatible with their state employment, misusing state
resources, and behaving dishonestly toward their state employer.
Specifically, the California Government Code, Section 19990(b),
mandates that state employees cannot use state time, facilities,
equipment, or supplies for private gain or advantage. Section 19990(g)
prohibits state employees from failing to devote their full time,
attention, and efforts to their state employment during hours of
duty. Additionally, the California Government Code, Section 8314,
directs state employees not to use public resources—including
state‑compensated time, equipment, and vehicles—for personal
enjoyment, private gain or advantage, or for any outside endeavor not
related to state business, except for incidental or minimal use. Finally,
the California Government Code, Section 19572(f), provides that state
employees engaging in dishonesty is grounds for discipline.
Upon receiving an allegation that a board employee was privately
employed during state time, we asked the board to assist us in
conducting this investigation.

9	

Board records used in the investigation were not available for June 2007.

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Department of Consumer Affairs, Contractors State License Board

Facts and Analysis
The investigation showed that a board employee used a state vehicle
for personal purposes and falsified board records to hide her actual
activities while she was being paid to perform work for the board.
The employee’s job required her to conduct field inspections so that
she could gather information in response to consumer complaints.
These inspections necessitated the employee spending a significant
amount of time visiting construction sites, to which she traveled
in a state-owned vehicle. The board also required the employee
to maintain daily activity logs that recorded her physical location,
work activities, and mileage.
The Employee Used a State Vehicle for Purposes Unrelated to Her
State Employment
From April 2007 to August 2007, the board employee drove her
assigned state vehicle 1,922 miles more than her job required,
improperly claimed 29 extra hours of travel time for which she
received compensation from the State, and drove her state vehicle
while she was on medical leave. In her daily activity logs, the
employee reported that she traveled 3,428 miles in her state-owned
vehicle. However, the board found that the employee’s duties
required her to travel only 1,506 miles during this period. Using the
standard mileage reimbursement rate applicable to state employees
at the time, we estimate that this difference of 1,922 unauthorized
miles cost the State $932.
Moreover, the employee consistently reported that—regardless of
the actual time required—travel between locations took one hour.
Using information from the board, we calculated that the employee
claimed 29 hours in excess travel time. Based on the employee’s
salary for that period, we estimate that this travel time, which the
employee had incorrectly reported, cost the State $872.
The employee’s activity logs not only
exaggerated her on-the-job travel
but also indicate that she drove
her state vehicle 189 miles during
three days she was on medical leave.

Not only did the board employee’s activity logs exaggerate her
on‑the-job travel, but they also indicate that she drove her state
vehicle 189 miles during three days that she was on medical leave.
Using the standard mileage reimbursement rate applicable to state
employees at the time, we estimate that this unauthorized use of a
state vehicle cost the State $92. Therefore, this employee’s improper
uses of a state vehicle and incorrect reporting of travel time cost the
State $1,896. Moreover, the employee’s operation of a state vehicle
for purposes other than her state job violated prohibitions included
in sections 19990(b) and 8314 of the California Government Code.

California State Auditor Report I2008-2

October 2008
Department of Consumer Affairs, Contractors State License Board

The Employee Falsified Board Records to Hide Her Engaging in Activities
Unrelated to Her Board Work During State Time
In her daily activity log, the employee regularly misrepresented
her physical location and work activities in order to hide that she
was apparently engaging in activities not related to her job with
the board. In particular, the employee’s daily activity logs show
that the employee claimed to be working on cases that the board
never assigned to her, assigned to her on a later date, or had already
closed. By falsifying entries in her daily activity log, the employee
was dishonest with her employer. Section 19572(f ) of the California
Government Code prohibits such dishonesty.
The evidence suggests that the employee’s misreporting of
her whereabouts and work activities may have been related
to her employment at a restaurant that was open for lunch and
dinner. Although her daily logs showed that she was elsewhere,
the employee’s cell phone records regularly placed her in the
same city as a restaurant where she worked. When interviewed
by her supervisor, the employee admitted that she worked at the
restaurant, but she claimed that she did not work at the restaurant
during the hours that she was supposed to be working for the
State. She said that she only went to the restaurant during work
hours when she performed inspections near it and stopped at
the restaurant to eat lunch and work on reports. However, the
restaurant’s Web site identifies the employee as a restaurant director
and states that she personally selects all ingredients for the items on
the menu. Such responsibilities make it difficult to believe that the
employee did not attend to restaurant business during hours that
she was on duty with the State.
By engaging in non-work activities when she was being paid
by the State to perform field inspections, the employee did not
devote her full time, attention, and efforts to state employment
during her hours of duty, and she misused her state-compensated
time as prohibited by sections 19990(b), 19990(g), and 8314 of the
California Government Code.
Agency Response
The board informed us in August 2008 that it has taken several
corrective measures. In particular, the board stated that it gave the
employee a counseling memorandum and a copy of the current
departmental policy pertaining to incompatible work activities. The
board also counseled the employee’s supervisor to regularly review
daily activity logs and other reports prepared by employees for
accuracy and completeness. Further, the board stated that it intends
to seek reimbursement from the employee for the unauthorized

Although the employee’s daily logs
showed that she was elsewhere, her
cell phone records regularly placed
her in the same city as a restaurant
where she worked.

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Department of Consumer Affairs, Contractors State License Board

miles she drove her state vehicle when she was on medical leave.
Finally, the board terminated the telecommute agreements
of the employee and other board employees, and it instituted
organizational changes to enhance the oversight of employees
engaged in field inspections.

California State Auditor Report I2008-2

October 2008
State Water Resources Control Board

Chapter 8
State Water Resources Control Board: Misuse
of State Resources
Case I2007-0776
Results in Brief
An employee of a regional water board used a telephone belonging
to the State to make 54 hours of personal long‑distance telephone
calls that cost the State a total of $137.
Background
The State Water Resources Control Board (state board) supervises
nine regional water boards. The employees of each regional water
board are state employees and subject to state prohibitions against
either engaging in activities that are incompatible with their state
employment or using state resources for personal advantage.
Specifically, the California Government Code, Section 19990(b),
mandates that state employees cannot use state time, facilities,
equipment, or supplies for private gain or advantage. Additionally,
the California Government Code, Section 8314, prohibits state
employees from using public resources for personal purposes,
except for incidental or minimal use that may include an occasional
telephone call.
Upon receiving an allegation that an employee of a regional water
board misused state resources, we asked the state board to help us
conduct this investigation.
Facts and Analysis
The investigation verified that from December 2006 through
December 2007, the employee of the regional water board used
a state-owned telephone to make 430 personal telephone calls to
two out-of-state locations, and these unauthorized calls totaled
54 hours of call time and $137 in long-distance charges to the State.
When interviewed by the state board, the employee admitted to
making the calls to family members. The state board determined
that the employee’s calls exceeded the minimal and incidental use
allowed by state law.

The employee used a state‑owned
telephone to make 430 unauthorized
personal calls at a cost of $137.

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State Water Resources Control Board

The state board also reported that the regional board’s management
did not fully understand or know where to locate the state board’s
policy implementing the State’s restriction on the personal use of
state telephones. Consequently, the regional board may not have
adequately conveyed the State’s restriction on employees making
no more than minimal or incidental use of state telephones for
personal purposes.
During an interview, the employee’s supervisor stated that the
employee had informed him of the employee’s need to make
personal calls on state time and had promised to make up the work
time sacrificed for the calls. The supervisor asserted that he was
confident that the employee had made up all of the time used for
the personal calls; however, the supervisor did not keep any records
to support this assertion.
Agency Response
In February 2008 the state board issued a corrective memorandum
to the employee’s personnel file, and in March 2008 the employee
repaid the State for the long-distance charges incurred for his
personal calls. Further, the state board reported that it would
monitor the employee’s telephone use. In August 2008 the state
board sent an e-mail to its staff reminding them of its policy on the
use of state resources.

California State Auditor Report I2008-2

October 2008
Department of Transportation

Chapter 9
Department of Transportation: Misuse of
State Computers
Case I2007-0705
Results in Brief
Two employees of the Department of Transportation (Caltrans)
misused state computers by operating them to conduct personal
business.
Background
Caltrans assigns state-owned laptop computers to many of its
employees who use the computers to complete various projects,
including highway design plans. Like all other state employees,
Caltrans employees are subject to Section 8314 of the California
Government Code, which states that they cannot use public
resources, including state-owned computers, for their personal
enjoyment, private gain, or advantage. Moreover, the California
Government Code, Section 19990, declares that a state employee’s
use of state time, facilities, or equipment for private gain or
advantage is grounds for discipline. Likewise, Section 19572 of the
California Government Code affirms that a state employee’s misuse
of state property is grounds for disciplinary action.
When we received an allegation that two Caltrans employees
were misusing state computers, we asked Caltrans to assist us in
investigating the matter.
Facts and Analysis
The investigation found that a Caltrans supervisor and a
subordinate employee misused their state computers to conduct
personal business and to pursue activities unrelated to Caltrans
work. Specifically, from September 2005 through April 2007,
Caltrans identified 170 instances of the supervisor’s computer
misuse, including the creation and storage of numerous
documents and files related to the supervisor’s private business
activities and personal matters, such as plot maps, contracts, and
invoices. The supervisor also frequently used his state computer
to access personal e-mail accounts. The supervisor engaged in this
misuse of his state computer despite being warned by his superior
in July and August 2005 not to use state resources to conduct
personal business.

The investigation identified
170 instances of a supervisor
misusing his state-owned computer.

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Department of Transportation

Likewise, the investigation determined that another Caltrans
employee, a staff member who worked for the supervisor, used his
state computer to visit Web sites unrelated to Caltrans work, access
a personal e-mail account, and store 170 sexually explicit pictures.
Furthermore, the employee’s computer was used to store two plot
maps unrelated to Caltrans projects that were also stored on the
supervisor’s state computer.
Agency Response
Caltrans reported that it demoted the supervisor and transferred
him to another unit, where he works under a different manager.
In addition, Caltrans reported that it suspended the subordinate
employee for 10 working days without pay.

California State Auditor Report I2008-2

October 2008
Update of Previously Reported Issues

Chapter 10
Update of Previously Reported Issues
Chapter Summary
The California Whistleblower Protection Act requires an employing
agency or appropriate appointing authority for the State 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
10 cases described in our previous reports.
Department of Corrections and Rehabilitation
Cases I2004-0649, I2004-0681, and I2004-0789
We reported the results of this investigation on September 21, 2005.
The Department of Corrections and Rehabilitation (Corrections)
did not track the total number of hours available in a rank-and-file
release time bank (time bank) composed of personal leave hours
donated by members of the California Correctional Peace Officers
Association (union) for union representatives to conduct union
business. As a result, Corrections released employees to work
on union-related activities without knowing whether the time
bank had sufficient balances to cover the releases. In addition, the
management reports from the system that Corrections used to
track time-bank charges and donations did not capture a significant
number of leave hours used by union members. Corrections
charged nearly 56,000 hours against the time bank for hours that
union members spent conducting union-related activities between
May 2003 and April 2005. However, we identified 10,980 additional
hours that three union representatives used to conduct union
business but that Corrections failed to charge against the time bank.
Although Corrections asserted that it had reconciled its time-bank
balances, records from the State Controller’s Office (Controller) did
not show that Corrections had charged the 10,980 hours to the time
bank through the State’s leave accounting system. This evidence
indicates that the State unnecessarily paid for those hours through
its regular payroll system at a cost totaling $395,256.

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In a subsequent update, Corrections reported that it had modified
and implemented several changes to its tracking system that
allowed it to track, report, and seek payment for union leave. In
addition, records from the Controller indicate that Corrections
began to charge union leave for some of the hours that the three
union representatives spent working on union activities after we
issued our report.
Rather than improving, however, this situation has gotten worse. In
fact, when we updated this issue in April 2008, we determined that
Corrections had failed to account for 14,808 hours of union leave at
a cost to the State of $544,213.
Updated Information
The Controller’s records indicate that Corrections made retroactive
adjustments totaling 2,720 hours to the three representatives’
leave balances. However, Corrections failed to account for an
additional 1,118 hours of union leave for these representatives from
January 2008 through June 2008. Table 4 shows the adjustments
and the time that Corrections should have charged against the
representatives’ union leave categories. With these changes,
the total cost to the State was $507,541 as of June 30, 2008.
Table 4
Total Hours of Union Leave Time That the Department of Corrections
and Rehabilitation Failed to Charge for Representatives A, B, and C From
May 2003 Through June 2008
Representative A

Representative B

Representative C

Total Hours

Hours previously identified
from May 2003 through
December 2007

5,988

4,784

4,036

14,808

Department of Corrections
and Rehabilitation’s
retroactive adjustments of
hours from January 2003
through December 2007

(2,944)

(128)

352

(2,720)

176

942

0

1,118

3,220

5,598

4,388

13,206

Union leave hours not
charged from January 2008
through June 2008
Totals
Source:  State Controller’s Office.

In addition, since our last update in April 2008, Corrections
completed reviews of union leave used by employees to perform
union-related activities in fiscal years 2005–06 through 2007–08.

California State Auditor Report I2008-2

October 2008
Update of Previously Reported Issues

The reviews included the three representatives. As a result of the
reviews, Corrections issued invoices to the union requesting
reimbursements totaling $546,979—the cost of salaries and
benefits—for the three representatives’ union leave. As of July 2008
Corrections had not received any payments so that it could
reimburse the State for the costs of the three representatives
performing union-related activities.
Department of Fish and Game
Case I2004-1057
We reported the results of this investigation on March 22, 2006.
Between January 1984 and December 2005, 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.
Additionally, Fish and Game deprived tax authorities of as much as
$1.3 million in revenue for tax years 2002 through 2005 because it
did not report to the Controller the taxable fringe benefits that its
employees received when they lived in state-owned housing at rates
below fair market value.
Although Fish and Game was the focus of this investigation, we also
discovered that all state departments that own employee housing
may be underreporting or failing to report to the Controller
housing fringe benefits totaling as much as $7.7 million annually.
Moreover, because these departments charged employees rents 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.
When we updated this issue on April 3, 2008, departments reported
the following:
The Department of Personnel Administration (Personnel
Administration) informed us that it had distributed a Master Service
Agreement User’s Manual (user’s manual) and a Reporting and
Withholdings Requirement Manual to affected state departments.
Personnel Administration also reported that it had developed
a Web page covering state-owned housing, and this Web page
includes resource links and electronic copies of the manuals
mentioned above as well as seven state contracts with appraisal firms
that can assist departments in obtaining fair market appraisals of
their state‑owned housing.

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Fish and Game reported that it entered into a contract with
an appraisal firm, which began conducting appraisals in
December 2007. Expecting that appraisals for all of its state-owned
homes would take approximately six months to complete, Fish
and Game informed us that these appraisals would allow it to
determine the gap between market value for each property and the
rent currently paid by the homes’ occupants. Fish and Game could
then establish the amount of taxable fringe benefits that it needs
to report.
The Department of Parks and Recreation (Parks and Recreation)
stated that it had increased rents in July 2006 for those employees
subject to collective bargaining agreements; however, it failed to
supply this information in February 2007 or August 2007 when
asked to provide us with the status of its state-owned housing.
Corrections told us that it had submitted a contract request package
to secure an appraisal contractor.
The Department of Developmental Services (Developmental
Services) reported that it was awaiting appraisal reports and
anticipated making any needed adjustments to rental rates by
July 2008.
As of March 2008 the Department of Forestry and Fire Protection
(Forestry) had not given us information beyond what it offered for
our September 2007 report.
As of March 2008 the Department of Mental Health (Mental
Health) stated that it had no additional information to report.
The Department of Transportation (Caltrans) reported that it
raised its rates to fair market value for all of its properties except
some units within one of its districts. It also affirmed that it has
continued to raise the rates for properties in the remaining district
in accordance with bargaining unit limitations.
As of March 2008 the California Highway Patrol (CHP) told us that
it had no additional information to report.
The California Conservation Corps (Conservation Corps) informed
us that it had taken steps to report taxable fringe benefits for
employees occupying trailer pads at one of its facilities because it
had charged $50 per month less than the appraised value for each of
the trailer pads.

California State Auditor Report I2008-2

October 2008
Update of Previously Reported Issues

Updated Information
Personnel Administration stated that in July 2008 it updated and
distributed to departments with state-owned housing its annual
State-Owned Housing Survey spreadsheet. In addition, Personnel
Administration developed an instruction guidebook to assist
departments in capturing information—such as tenant names,
rents, and utility rates—for the survey.
Fish and Game reported in August 2008 that appraisals have been
completed for housing at one of its wildlife areas. Fish and Game
also stated that it anticipated receiving appraisals on its remaining
properties by October 2008. Further, Fish and Game informed
us that in an October 2007 meeting with representatives from
the union and Personnel Administration, it agreed to put on hold
any rental rate increases until all appraisals are complete. The
parties will then resume negotiations on increasing rental rates for
state‑owned housing.
Parks and Recreation notified us in August 2008 that it plans to
increase rents in January 2009. It also reported that it has improved
its record keeping and reporting procedures for state-owned
housing. These improvements include developing and maintaining
a database of its housing, reporting taxable income monthly to the
Controller, and providing analyses of the fair market rental value of
its housing.
Corrections reported in August 2008 that pursuant to Executive
Order S-09-08, it had temporarily suspended the appraisal contract
for its state-owned housing program. The executive order prohibits
departments from contracting for services, unless those services are
deemed critical, until a fiscal year 2008–09 budget is adopted and
the Department of Finance director confirms that an adequate cash
balance exists to meet the State’s fiscal obligations.
Developmental Services informed us in August 2008 that it had
received updated appraisals for all of its state-owned housing and
had raised rental rates at all but one of its facilities, which is in the
final months of operation before closure.
In August 2008 Forestry stated that it had raised its total rents from
$197,730 in May 2006 to $237,730 in June 2007; however, due to
increased vacancies in its state-owned housing, rental revenue had
decreased to $192,659 as of August 2008. Forestry also reported
that it recently obtained new appraisals for 35 of its 40 occupied
state-owned homes and was in the process of issuing rent increase
notices to reflect the newly appraised values. It planned to obtain
appraisals for the five remaining homes in late 2008 and in 2009.

Fish and Game reported that
appraisals have been completed
for housing at one of its wildlife
areas and it anticipated receiving
the appraisals on its remaining
properties by October 2008.

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Mental Health notified us that it had updated its guidelines
regarding state-owned housing, which included requirements for
performing fair market value appraisals and timely reporting of
housing fringe benefits. In addition, Mental Health stated that it
thoroughly reviews housing appraisals every year.
Caltrans told us in September 2008 that it had no additional
information to report.
The CHP reported in August 2008 that its employees reside
in state-owned housing as a condition of employment; thus, it
complies with Internal Revenue Service regulations. As a result,
the CHP stated that the difference between the fair market rent
and the amount it charges its employees is not considered a taxable
fringe benefit. In addition, the CHP stated that it received appraisals
for housing at two of its locations and stated that it annually reviews
rents for its state-owned housing.
Conservation Corps informed us in August 2008 that it contracts
to receive appraisals for its state-owned housing and it reports
monthly all taxable fringe benefits to the Controller.
Department of Forestry and Fire Protection
Cases I2005-0810, I2005-0874, and I2005-0929
We reported the results of this investigation on March 22, 2006.
From January 2003 through July 2005, five air operations officers
working as pilots for Forestry received more than $58,000 for
overtime hours charged in violation of both department policy
and their union agreement. In addition, two air operations officers
working in maintenance received nearly $3,907 for overtime hours
that they may not have worked.
Further, between January 2004 and December 2005, Forestry paid
a heavy fire-equipment operator $3,445 for 147 overtime hours
that we identified as improper and $12,588 for 549 overtime
hours that we identified as questionable. After we completed our
investigation, Forestry obtained information to support that the
employee worked for 401 of the 549 questionable hours.
In a subsequent update, Forestry stated that it had started
in February 2007 to process as receivables the $61,907 in
overpayments made to the air operations officers. However, it
reported in March 2008 that its ability to recover the overpayments
was limited given the length of time since our initial report. As we

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Update of Previously Reported Issues

commented in April 2008, we believe Forestry had ample time after
we reported the results of our investigation to recover a portion of
the overpayments that it made between January 2003 and July 2005.
As for the heavy fire-equipment operator, Forestry asserted in
March 2008 that it had justified all but 24 of the overtime hours
that we originally reported in March 2006. Our review of Forestry’s
support for its assertion determined that its methodology had flaws
and contained inconsistencies.
Updated Information
As of July 2008 Forestry informed us that it had no additional
information to report.
Department of Parks and Recreation
Case I2005-1035
We reported the results of this investigation on March 22, 2007.
An employee with Parks and Recreation repeatedly misused state
resources and failed to adequately perform his duties. Over a
13-month period, the employee made more than 3,300 personal
telephone calls on his state-issued cellular telephone. In addition,
the employee made hundreds of telephone calls to phone numbers
that appeared to be assigned to other state employees’ cellular
telephones. However, Parks and Recreation determined that the
State had never issued these phone numbers to state employees,
raising questions about the appropriateness of the employee’s calls
and about the assignment of the wireless phones.
At the time of our report, Parks and Recreation stated that it
had conducted and documented a corrective interview with
the employee, and it had submitted a draft departmental notice
updating its policy about the use of personal communications
devices by its staff. As of March 2008 Parks and Recreation
reported that it had not finalized this policy because it needed to
determine the standard for its personal communications devices.
Updated Information
Parks and Recreation informed us in August 2008 that its
draft departmental policy notice about the use of personal
communications devices contained some information that it could
more appropriately present in a Parks and Recreation handbook for
its employees. As a result, Parks and Recreation stated that it plans

Parks and Recreation intends to
finalize its policy about personal
communications devices after
its handbook is published in
February 2009.

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Update of Previously Reported Issues

to incorporate the procedures and instructions about personal
communications devices in the handbook it intends to publish by
February 2009. Parks and Recreation intends to finalize its personal
communications device policy after its handbook is published.
Although we acknowledge Park and Recreation’s efforts to notify its
employees, we are concerned about the length of time it has taken
to finalize its policy.
California State Polytechnic University, Pomona
Case I2007-0671
We reported the results of this investigation on September 20, 2007.
An official at California State Polytechnic University, Pomona
(Pomona), repeatedly used university computers to view Web sites
containing pornographic material. Specifically, Pomona found that
the official viewed approximately 1,400 pornographic images on
two university computers during several weeks in 2006 and from
February 2007 to May 2007.
When we issued our report, Pomona indicated that the official was
no longer working on campus. Pomona stated that it had negotiated
a resignation that permitted the official to exhaust all earned leave
credits and other paid leave before resigning. We later confirmed
the official’s separation from Pomona. Pomona also indicated
at the time that it had an Appropriate Use Policy for Information
Technology. However, Pomona did not indicate whether it had
implemented any new controls or software filters to prevent any
future access to pornographic Web sites by its employees.
Moreover, in January 2008, Pomona stated that its academic senate
approved an Interim Appropriate Use Policy (interim policy), which
states that administrators, faculty, and staff must not use computers
for personal purposes. The policy further states that inappropriate
use of computers includes using computing facilities for purposes
other than those for which they were intended or authorized.
Pomona reported that to become official, the interim policy must
go through a meet-and-confer process with the unions for staff
and faculty.
Updated Information
In August 2008 Pomona reported that it met with the two
employee unions in July 2008 to start the meet-and-confer process.
Pomona stated that the unions requested changes to Pomona’s
interim policy and that all parties must agree to the changes before
the policy becomes official. We are concerned about the length

California State Auditor Report I2008-2

October 2008
Update of Previously Reported Issues

of time Pomona has taken to institute a policy in response to an
official accessing pornographic Web sites because one year after we
issued our report, Pomona has not yet finalized its policy on the
appropriate use of university equipment.
Department of Corrections and Rehabilitation
Case I2006-0665
We reported the results of this investigation on April 3, 2008.
Corrections mismanaged 27 state-owned and 29 privately
owned parking spaces that it used for one of its regional
headquarters. Specifically, between at least October 1, 2007,
and December 31, 2007, Corrections leased 26 more parking
spaces than it needed at a privately owned facility. Consequently,
Corrections wasted at least $11,277 in state funds during the period.
In addition, it misused state resources when it allowed at least
five state employees to park their personal vehicles at no charge in
parking spaces not authorized for that purpose.
When we reported on our investigation, Corrections stated that
it would notify the Department of General Services (General
Services) that it needed only five spaces at the private parking
facility and that it would ask General Services to renegotiate
Corrections’ lease. Corrections also reported that it would
reassign parking spaces at the private and state-owned facilities
to accommodate only state vehicles and that it would notify all
employees who were parking their privately owned vehicles at
either facility to make alternative parking arrangements.
Updated Information
Although Corrections initially reported that it needed to lease
five spaces at the private parking facility, it subsequently informed
us that it canceled its lease with the private parking facility in
April 2008. As a result, Corrections is no longer paying for the
29 parking spaces it had leased in the private facility.
Department of Social Services
Case I2006-1040
We reported the results of this investigation on April 3, 2008.
From 2004 through 2007, the Department of Social Services
(Social Services) entered into seven contracts with one entity for
conference‑planning services that contained overhead charges that

One year after we issued our
report about an official accessing
pornographic Web sites,
Pomona has yet to finalize its
policy on the appropriate use of
university equipment.

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violated a state policy. The state policy requires state agencies to
ensure that overhead fees are reasonable; thus, agencies may pay
overhead charges only on the first $25,000 for each subcontract.
However, for these seven contracts, Social Services did not limit
payments for overhead costs to the first $25,000 of subcontracts.
Instead, it paid overhead costs on the entire subcontract amounts
when the subcontracts exceeded $25,000. As a result, Social
Services made $14,714 in improper payments, resulting in a waste of
state and federal funds.
In addition, our review of four additional contracts that Social
Services had in place or was completing for upcoming conferences
also improperly included overhead costs applied to the portion of
subcontracts in excess of $25,000. If Social Services were to pay
for the improper overhead costs included in the four contracts, it
would waste an additional $13,000 in state and federal funds.
At the time of our report, Social Services stated that it had revised
its standard contract language to cite the state policy that limits the
application of overhead charges on subcontracts. Social Services
also reported that it planned to similarly amend the contracts for
its upcoming conferences. In addition, Social Services told us that it
had requested more detailed budgets from its contractor to better
distinguish the services provided by subcontractors. Further, Social
Services stated that it planned to develop guidelines that would
assist staff in the appropriate application of indirect cost rates and
identify subcontracts during contract development. However,
Social Services did not indicate whether it would recover any of the
improper overhead costs that it had paid for subcontracts.
Updated Information

Social Services reported that it
recouped $13,171 in overpayments.

Social Services informed us in May 2008 that the exclusion from its
standard contract language of a provision implementing the state
policy that limits charges for overhead costs to the first $25,000 of
subcontracts was an administrative oversight and that it did not
intend to take any disciplinary action against any of its employees.
In September 2008 Social Services reported that it had recouped
$13,171 in overpayments from the contractor. In addition, Social
Services indicated that the remaining $1,543 was not improper
because it determined that one of the subcontract line items greater
than $25,000 contained in the contractor’s invoice was for multiple
subcontracts, which were each less than $25,000. Finally, Social
Services told us that the contractor had revised its budget detail to
facilitate the identification of subcontractors.

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October 2008
Update of Previously Reported Issues

Department of Justice
Case I2007-0728
We reported the results of this investigation on April 3, 2008.
The Department of Justice (Justice) created an inefficiency in the
collective bargaining process when it entered into a series of side
letters negotiated directly with a bargaining unit. Justice never
formally submitted these letters to Personnel Administration,
the agency designated by the governor to oversee the collective
bargaining process, and as a consequence, the Legislature did
not ratify the side letters as required by the Ralph C. Dills Act
(Dills Act). The Dills Act’s purpose is to promote communication
between the State and its employees by providing a reasonable
method of resolving disputes about wages, hours, and other terms
and conditions of employment.
Bargaining units and Personnel Administration have sometimes
supplemented the formal bargaining process with side letters to
amend the terms of collective bargaining agreements. However,
Personnel Administration had no formal record of Justice’s
side letters. Consequently, Justice created an inefficiency in the
bargaining process by entering into the independent side letters. It
also absorbed the salaries and benefits of four employees who were
released from their normal work duties to engage in full-time union
activities at various times over a 12-year span from 1995 to 2007 at a
cost of $2.4 million. Justice is unlikely to recover these costs because
the bargaining unit relied on the side letters throughout the period.
At the time of our report, Justice reported that it disagreed with
our finding that the release-time agreements for the four employees
constituted an inefficiency in the collective bargaining process.
Nevertheless, Justice indicated that when the release-time
agreements expire in April 2008, it would refrain from entering
into similar agreements. Justice further stated that it would seek
reimbursement for future salary and benefit costs associated with
employee release time for union-related activities.
Updated Information
Justice reported that two of the employees returned to their
assigned full-time duties in May 2008, following the expiration of
their release-time agreements. The remaining two employees no
longer worked for Justice or the State at the time of our report.

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Employment Development Department
Case I2007-0739
We reported the results of this investigation on April 3, 2008.
An employee of the Employment Development Department
(Employment Development) drank alcoholic beverages during work
hours, and his drinking impeded his ability to perform his duties
safely. Moreover, his supervisors had been aware of the situation
for years.
At the time of our report, Employment Development reported
that it had given the employee a corrective action memorandum in
February 2008 to inform him that he is prohibited from working
while intoxicated and from consuming alcohol during his work
hours and unpaid lunch break. Employment Development also
stated that the employee’s supervisor would closely monitor his
activities, and it advised the employee that this matter could
become the basis for disciplinary action.
Updated Information
In May 2008 Employment
Development suspended the
employee without pay for
two workdays.

In May 2008 Employment Development disciplined the employee
by suspending him without pay for two workdays. The employee did
not appeal the adverse action.
Department of Justice
Case I2007-0958
We reported the results of this investigation on April 3, 2008.
A manager and four of his subordinates at one of Justice’s regional
offices failed to follow state regulations and policy when they
did not properly report hours on their time sheets. Based on our
investigative methodology, we estimate that from April 2006
through December 2006, these individuals took 727 hours of
unaccounted leave, for which the State paid $17,974 in compensation
that the five employees may not have earned. Although the scope of
our investigation was limited to the nine-month period in 2006 for
which we received documentary evidence of unreported absences,
the manager and four subordinates also continued to inaccurately
report their time worked and their absences taken in 2007.
We also found that the manager knowingly failed to monitor
his subordinates’ absences or time worked. Moreover, we
determined that the manager’s supervisor, who worked at Justice’s

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October 2008
Update of Previously Reported Issues

headquarters, failed to ensure that the manager completed his time
sheets accurately and that the manager properly monitored his
subordinates’ time reporting.
At the time we issued our report, Justice indicated that it had
taken several actions, including instructing the manager and his
supervisor to ensure that employees documented appropriately
all leave and overtime and that they complied with state and
Justice policies and procedures. Further, Justice distributed a
memorandum in January 2008 to its division chiefs reminding
them of their time-reporting obligations and policies. Finally, Justice
continued to investigate the amount of unreported leave taken by
the five employees in 2007.
Updated Information
Justice informed us that it completed its investigation of the
five employees’ time reporting and found that the manager and
four subordinates continued to inaccurately report their absences
in 2007. Although it concluded that as in 2006, the employees failed
to follow proper state policy and state regulations, Justice did not
quantify the extent of the subjects’ unreported absences because it
had already proceeded to take corrective action for the employees’
failure to observe the proper time-reporting requirements. Justice
officials counseled the employees—including the manager and
his supervisor—about the importance of following its policies
for time reporting and leave use. It also documented in the
manager’s probation report and in a counseling memorandum
the manager’s failure to follow Justice’s policies and procedures for
time reporting and leave use.
Following this disciplinary action, the manager left Justice
in July 2008. Justice subsequently promoted one of the
four subordinates to replace him, and in August 2008 it provided
the manager’s supervisor and the subordinates with training
specifically covering Justice’s policies and procedures about leave
use and time reporting.

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We conducted this review under the authority vested in the California State Auditor by Section 8547
et seq. of the California Government Code and pursuant to applicable investigative standards.
Respectfully submitted,

ELAINE M. HOWLE, CPA
State Auditor
Date:			

October 2, 2008

Investigative Staff:	
			
			
			
			
			
			
Legal Counsel:		

Russ Hayden, CGFM
Siu-Henh Canimo
Gene Castillo
Lane Hendricks, CFE
Justin McDaid
Kerri Spano, CPA
Michael A. Urso, CFE
Steven Benito Russo, JD

For questions regarding the contents of this report, please contact
Margarita Fernández, Chief of Public Affairs, at 916.445.0255.

California State Auditor Report I2008-2

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Appendix

Appendix
The Investigations Program
The California Whistleblower Protection Act (Whistleblower
Act) contained in the California Government Code, beginning
with Section 8547, authorizes the Bureau of State Audits (bureau),
headed by the state auditor, to investigate allegations of improper
governmental activities by agencies and employees of the State. 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.
To enable state employees and the public to report suspected
improper governmental activities, the bureau maintains a toll-free
Whistleblower Hotline (hotline): (800) 952-5665 or (866) 293-8729
(TTY). The bureau also accepts reports of improper governmental
activities by mail and over the Internet at www.bsa.ca.gov.
The bureau has identified improper governmental activities totaling
$27.7 million since July 1993, when it reactivated the hotline. These
improper activities include theft of state property, conflicts of
interest, and personal use of state resources. The investigations have
also substantiated improper activities that cannot be quantified in
dollars but that have had negative social impacts. Examples include
violations of fiduciary trust, failure to perform mandated duties,
and abuse of authority.
Although the bureau conducts investigations, it does not
have enforcement powers. When it substantiates an improper
governmental activity, the bureau reports confidentially the details
to the head of the state agency or to the appointing authority
responsible for taking corrective action. The Whistleblower Act
requires the agency 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.
The Whistleblower Act authorizes the state auditor to report
publicly on substantiated allegations of improper governmental
activities as necessary to serve the State’s interests. The state
auditor may also report improper governmental activities to other
authorities, such as law enforcement agencies, when appropriate.

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Corrective Actions Taken in Response to Investigations
The chapters of this report describe the corrective actions that
departments implemented on individual cases. Table A summarizes
all of the corrective actions that departments took between the
time that the bureau reactivated the hotline in 1993 until June 2002.
Table A also summarizes departments’ corrective actions since
July 2002, when the law changed to require all state departments
to notify their employees annually about the bureau’s hotline. In
addition, dozens of departments have modified or reiterated their
policies and procedures to prevent future improper activities.
Table A
Corrective Actions
July 1993 Through June 2008
Type of Corrective Action

Convictions
Demotions

Number of Incidents From
July 1993 Through June 2002

Number of Incidents From
July 2002 Through June 2008

7

2

Totals

9

8

8

16

46

30

76

Pay reductions

10

44

54

Referrals for criminal prosecution

73

5

78

135

137

272

12

12

24

291

238

529

Job terminations

Reprimands
Suspensions without pay
Totals
Source:  Bureau of State Audits.

New Cases Opened From January 2008 Through June 2008
The bureau receives allegations of improper governmental activities
in several ways. From January 1, 2008, through June 30, 2008,
the bureau received 2,331 calls or inquiries. Of these, 1,936 came
from the hotline, 212 arrived in the mail, 181 went to the bureau’s
Web site, and two came from individuals who visited the office. Of
these 2,331 calls or inquiries, the bureau opened 302 cases, as shown
in Figure A.1. After careful review, the bureau determined that the
remaining 2,029 allegations were outside its jurisdiction. When
possible, it referred those remaining complaints to the appropriate
federal, state, or local agencies.

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Figure A.1
Disposition of 2,331 Allegations Received From January 2008 Through June 2008
Allegations within the bureau’s
jurisdiction—302 (13%)

Cases pending
assignment—25 (8%)
Cases investigated by the bureau
or other state agency—31 (10%)

Cases opened
Cases closed—246 (82%)
Allegations outside the bureau’s
jurisdiction—2,029 (87%)

Source:  Bureau of State Audits.

During the six-month period covered by the figure above, callers
to the hotline reported 93 of the new cases.10 The bureau also
opened new cases based on 101 complaints that arrived in the mail,
106 complaints that came through its Web site, and two complaints
delivered by individuals who visited the office. Figure A.2 shows the
sources of all the cases opened from January 2008 through June 2008.
Figure A.2
Sources of the 302 New Cases Opened From January 2008 Through June 2008
Walk-in sources—2 (1%)

Online sources—
106 (35%)

Hotline sources—
93 (31%)

Mail sources—
101 (33%)

Source:  Bureau of State Audits.

10	

The bureau received a total of 1,936 calls on the hotline from January 2008 through June 2008.

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Work on Investigative Cases From January 2008 Through June 2008
In addition to the 302 new cases opened during this six-month
period, 68 cases awaited review or assignment as of June 30, 2008.
Another 31 were still under investigation by this office or by other
state agencies, or they were awaiting completion of corrective
action. Consequently, 401 cases required some review during
this period.
After conducting a preliminary review of these cases, which
includes analyzing evidence and other corroborating information
and calling witnesses, the bureau determined that 240 cases lacked
sufficient information for an investigation. Figure A.3 shows the
disposition of the 401 cases that the bureau worked on from
January 2008 through June 2008.
Figure A.3
Disposition of 401 Cases Worked on From January 2008 Through June 2008
Independently investigated by state auditor—18 (4%)
Investigated with assistance of
another state agency—66 (17%)

Closed—240 (60%)
Unassigned—77 (19%)

Source:  Bureau of State Audits.

The Whistleblower Act specifies that the state auditor can
request the assistance of any state entity or employee in conducting
an investigation. From January 1, 2008, through June 30, 2008,
the bureau independently investigated 18 cases and substantiated
allegations on five of the 11 completed during the period. In
addition, the bureau conducted investigative analyses of 66 cases
that state agencies investigated under the bureau’s direction, and we
substantiated allegations in four of the 31 cases completed during
the period. After a state agency completes its investigation and
reports its results to the bureau, the bureau analyzes the agency’s
investigative report and supporting evidence and determines

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Appendix

whether it agrees with the agency’s conclusions or whether
additional work must take place. The bureau confirmed the results
of the four investigations that state agencies substantiated. The
results of those investigations appear in this summary report.

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Blank page inserted for reproduction purposes only.

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Index

Index
DEPARTMENT/AGENCY

California Environmental Protection Agency

CASE NUMBER

I2008-0678

California State Polytechnic University, Pomona I2007-0671

ALLEGATION

PAGE NUMBER

Failure to accurately report absences, inadequate supervision

23

Viewing of inappropriate Web sites and misuse of
state equipment

52

Consumer Affairs, Department of,
Contractors State License Board

I2007-1046

Misuse of state resources, dishonesty

Corrections and Rehabilitation, Department of

I2004-0649,
I2004-0681,
I2004-0789

Failure to account for employees’ use of union leave

Corrections and Rehabilitation, Department of

I2006-0665

Mismanagement and misuse of state resources as well as waste
of state funds

53

Corrections and Rehabilitation, Department of

I2006-0826

Improper payments for inmate supervision

19

Corrections and Rehabilitation, Department of

I2007-0917

Improper overtime payments

17

Employment Development Department

I2007-0739

Management’s failure to take appropriate action about an
employee who drank alcoholic beverages while on duty

56

Fish and Game, Department of

I2004-1057

Inappropriate gifts of state resources and mismanagement

47

Fish and Game, Department of

I2007-0680

Misuse of a state vehicle and employee time

33

Forestry and Fire Protection, Department of

I2005-0810,
I2005-0874,
I2005-0929

Improper overtime payments

Housing and Community Development,
Department of

I2007-1049

Incompatible activities, time and attendance abuse, dishonesty,
and inadequate supervision

7

Justice, Department of

I2007-0728

Inefficiency created by entering into side letters with a
bargaining unit without the Department of Personnel
Administration’s oversight or the Legislature’s ratification

55

Justice, Department of

I2007-0958

Employees’ disregard for time-reporting requirements and
management’s failure to ensure that employees reported
absences properly

56

37

45

50

Parks and Recreation, Department of

I2005-1035

Misuse of state resources and failure to perform duties adequately

51

Social Services, Department of

I2006-1040

Waste of state and federal funds

53

State Personnel Board

I2007-0771

Improper contracting for personal services

29

State Water Resources Control Board

I2007-0776

Misuse of state resources

41

Transportation, Department of

I2007-0705

Misuse of state computers

43

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