The California Department of Corrections and Rehabilitation lacks adequate financial controls and repeatedly failed to recoup overpayments of salary and travel advances from its employees, an audit released yesterday by the state controller's office found.
The report concluded that the department's effort to collect those overpayments was "grossly inadequate," and as a result of the deficiencies, there was "high potential for fraud and misappropriation of public funds." The review included records from the 2009-10 fiscal year.
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“This is the latest in a series of agency audits conducted by my staff that point to the waste and abuse of state funds due to the lack of attention to collecting overpayments," Controller John Chiang said in a statement. "Gov. Brown and I are working together to identify the causes of these problems and to protect public funds.”
As of July 30, 2010, the corrections department had more than $6 million in outstanding salary and travel advances owed to the state, including $465,000 that was more than three years overdue, according to the audit. The report also found a discrepancy of more than $4 million between the department's own records and bank reconciliation documents.
In addition, the department used its revolving fund – money that is not constrained by the fiscal year – to spend about $3.5 million more than was appropriated in the state budget. Other findings include a failure by the department to correctly authorize payments of more than $15,000, which under state accounting procedures require two signatures of approval, as well as numerous accounting errors in check payments.
"There is a lack of coordination between the personnel offices and the respective RAOs (regional accounting offices)," the report says. "We observed that, in general, the entities lack a cohesive process, significantly delaying their ability to collect and clear outstanding advances in a timely manner."
Hallye Jordan, spokeswoman for Chiang's office, said Brown and Chiang have been working together to remedy the problems in the corrections department.
"This is something that he (Brown) has been interested in for some time," Jordan said, reaffirming what Brown has said repeatedly since taking office in January.
In April, Brown issued an executive order calling for all state agencies to improve their internal accounting and made it no secret that he believed the corrections department overspent its budget. Brown later announced he would slash 400 administrative positions from the department, a move he said would save the state $30 million, and authorized further cuts to the prison system when he signed the state budget June 30.
In a written response to the audit earlier this month, corrections department Undersecretary Martin Hoshino told Chiang's office that he agreed with its findings. In addition to implementing nearly two-thirds of the recommendations in the report, Hoshino said the department collected $2.2 million owed to the state since November. Improvements include technological upgrades to keep tabs on the collection process, as well as a computer system that tracks the progression of outstanding debts.
"We will continue in our efforts until we have surmounted the issues identified in this audit," Hoshino wrote in the letter.
Brown's spokesman Gil Duran said Brown was pleased with the efforts to address the problem so far, adding that Brown remains committed to ensuring there is stricter oversight of the millions of dollars in revolving fund accounts in the future. The controller's office will conduct a follow-up review of the corrections department's accounting next year.
"We thank Controller Chiang for his work on this issue, and (corrections department) has made significant advances in addressing the problem," Duran wrote in an e-mail. "We will continue to monitor this situation until it is cleaned up."