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State High Risk
The California State Auditor’s Updated Assessment of High-Risk Issues Faced by the State and Select State Agencies

Report Number: 2019-601

Figure 1
Late or Inaccurate Financial Statements Create the Risk of Additional Borrowing Costs

A flow chart showing how agencies using FI$Cal struggling to submit accurate and timely financial statements could eventually lead to an increase in borrowing costs. In fiscal year 2017-18, late and estimated financial reports from state agencies affected the State Controller’s ability to produce timely annual financial statements. The State’s audited financial statements were not ready by the bond disclosure deadline of April 1 and the State released unaudited statements instead; it could not produce audited statements until two months later. For fiscal year 2018-19 reports, more agencies are submitting late reports and may continue to rely on estimates. The State may once again fail to produce audited statements by April 1, which could negatively affect the State’s credibility among investors and increase the likelihood of a lower credit rating. Additionally, departments could submit reports that rely extensively on estimates, which could increase the risk of significant errors. If this occurs, our office may not be able to confirm the statements’ accuracy and thus issue a modify audit opinion. Delays related to FI$Cal’s implementation and reliance on estimates may impair the State’s ability to attract investors or increase its borrowing costs.

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Figure 2
Despite Increasing Costs, the FI$Cal Project Will Not Implement Certain Key Features Until After the Official Project End Date

A chart that shows how project plan updates removed key features from the prior project scope, even as the cost of the project grew during those updates. The chart highlights six key features—one of which was the full transition to FI$Cal for annual reporting—for which the governing entities deferred development until after the official project end date in a January 2018 project plan update. The chart identifies five more features, including loan accounting that an August 2019 project plan update also deferred. Meanwhile, departmental accounting systems, budgeting, and procurement are anticipated to be complete by the official project end in June 2020.

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Figure 3
FI$Cal Implementation May Ultimately Cost Taxpayers Over $42 Million More Than Its Reported Project Costs

A bar graph showing potential costs agencies anticipate to incur due to implementing FI$Cal. We identified $32 million in anticipated costs related to FI$Cal during our December 2019 FI$Cal assessment and this high risk assessment: More than $4 million in fiscal year 2017-18 and before, and between $8 million and $11 million each year in fiscal years 2018-19, 2019-20, and 2020-21. Additionally, agencies expect future annual costs beyond that of $6.8 million per year. When added to the $10.5 million in anticipated costs identified in our August 2018 FI$Cal Status Letter, these total to more than $42 million in potential costs for agencies implementing FI$Cal that are not reported in the FI$Cal project’s financial documentation.

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Figure 4
The Vast Majority of High-Risk Dams Still Do Not Have Approved Emergency Plans

A flow chart showing how Water Resources approves inundation maps and Emergency services approves emergency plans for high risk dams. State law requires the owners of the about 650 dams that are classified as high or extremely high downstream hazard risk to develop emergency plans that include inundation maps. Dam owners submit maps to Water Resources, of which Water Resources has returned 181 maps to owners for changes. Water Resources has approved maps for 310 dams and an additional 285 dams have maps that are pending review. Meanwhile, Emergency Services, which reviews emergency plans, has received 400 such plans from dam owners and has returned 150 of the plans to owners for changes. Emergency Services has only approved 22 of the emergency plans it has received.

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Figure 5
The Receiver Has Overseen CDCR’s Inmate Health Care for More Than a Decade

A timeline showing how the federal receiver has overseen CDCR’s inmate health care for more than a decade. In 2006, a federal court appointed a receiver to take control of CDCR’s inmate health care. In 2015, the receiver delegated the first institution back to CDCR. By October 2016, CDCR had regained authority over nine institutions in total. The receiver delegated an additional six institutions back to CDCR by November 2017. By July 2019, CDCR was delegated an additional four institutions for a total of 19 out of 35.

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Figure 6
As of April 2014, Public Health Had More Than 9,000 Open Complaints or Incidents With Potential to Harm Individuals

A chart showing the amount and type of open complaints and incidents which we found in Report 2014-11 that Public Health had. Of these, 368 were immediate jeopardy complaints or incidents, representing situations that have caused or were likely to cause serious injury, harm, impairment, or death to a resident. Four thousand and four hundred were non-immediate jeopardy complaints or incidents, representing situations that may have caused harm and negatively affected the individual’s well-being. Four thousand, two hundred and thirty-nine where non-immediate jeopardy complaints or incidents, representing situations that caused or may have caused limited harm with no significant impairment to an individual’s well-being. These totaled to 9,007 open complaints or incidents with potential to cause harm to individuals. Additionally, 551 cases were non-immediate jeopardy (low) complaints or incidents, which may have caused an individual discomfort without injury or damage. Finally, 419 complaints or incidents were categorized as “other,” representing situations that might not have necessitated an on-site review, or a situation in which Public Health determined that no further action was necessary.

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Figure 7
Six Public Health District Offices Continue to Have High Office-Wide Staff Vacancy Rates

A map showing which Public Health District Offices have staff vacancy rates of greater than 10 percent, which we define as high vacancy rates. The Santa Rosa office—covering the coastal region north of the San Francisco Bay—has a 21.4 vacancy rate. The San Francisco district office has an 18.8 percent vacancy rate. The East Bay office has a 25.9 percent vacancy rate. The Ventura office—covering the coastal area north of Los Angeles—has an 11.6 percent vacancy rate. The San Bernardino office—covering much of the southeast part of California bordering Nevada—has a 14.1 percent vacancy rate. Finally, the San Diego office—which covers the entire southern border of the State—has a 23.7 percent vacancy rate. The vacancy rates are based on data from Public Health current as of June 2019.

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Figure 8
Although CalSTRS Expects to Reach Full Funding for Its Benefit Program, Its Funding Plan Will Take Many Years to Achieve This Goal

A line graph showing CalSTRS’ projected funded and unfunded portions of its liability. CalSTRS projects the total liability to steadily increase from about $300 billion in 2018 to over $750 billion by 2046. Meanwhile, the projected funding level will also increase, and by approximately 2030 it will start to increase at a sufficient pace to begin reducing the unfunded liability. CalSTRS projects the unfunded liability to shrink until the projected funding virtually covers the entire total liability in 2046.

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