Report 2012-110 All Recommendation Responses

Report 2012-110: Special Interest License Plate Funds: The State Has Foregone Certain Revenues Related to Special Interest License Plates and Some Expenditures Were Unallowable or Unsupported (Release Date: April 2013)

Recommendation #1 To: Motor Vehicles, Department of

To ensure that programs supported by special plates receive appropriate amounts of revenues due to them, Motor Vehicles should annually collect all fees for special plates that are no longer on a vehicle but are retained by the plate owner.

Annual Follow-Up Agency Response From October 2019

The DMV completed a purge of Special Interest License Plates and Environmental License Plates with unpaid retention fees on September 4, 2015. The purged plates are now available for new purchasers and this alternative action achieves the intent of the recommendation.

Corrective action is completed.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

Annual Follow-Up Agency Response From September 2015

The DMV completed a purge of Special Interest License Plates and Environmental License Plates with unpaid retention fees on September 4, 2015. The purged plates are now available for new purchasers and this alternative action achieves the intent of the recommendation.

Corrective action is completed.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

Annual Follow-Up Agency Response From October 2014

The Information Services Division (ISD) within DMV is planning and completing the computer programming for the cancelation and purge of special license plates with unpaid retention fees. This will ensure these plates become available for new purchasers.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

1-Year Agency Response

DMV has stated it would be cost prohibitive to create a system for retention fee collections. DMV is moving forward on the cancelation and purges of special licence plates with unpaid retention fees to make these plates available to the public.

California State Auditor's Assessment of 1-Year Status: Will Not Implement

In its initial response to the audit report, Motor Vehicles had stated that it will conduct a cost/benefit analysis to determine whether recommended changes would result in a positive return on the investment. Although Motor Vehicles now states that creating a system for retention fee collections would be cost prohibitive, it did not provide any documentation to support its claim.

6-Month Agency Response

A data extract was performed of the entire vehicle registration population to find records for special plates that were removed from a vehicle or with expired registration. The data showed 185,410 special license plate vehicles with expired registration and after eliminating those with certain conditions it was determined 87.5% are inappropriate for collection. Retention fees for the remaining 23,107 special plates have a maximum potential value of $2.3M. It is unknown how much of this money would have been collected if DMV had more aggressive billing practices. A cost-benefit analysis was performed to determine the best method to collect retention fees that are not paid as part of the annual vehicle registration process. It was determined there were no more than 6,064 license plates with retention fees worth approximately $244,752 that were unpaid annually. It is likely that revenue will be lower than the maximum possible because few plate owners would respond with a payment. DMV contacted the owners of expired personalized plate configuration that were ordered by Pet Lover applicants. Approximately 32% of the owners with expired plates responded; 4% of the owners submitted a payment and the remaining owners released their interest in the plate. Based on this response, DMV could expect 243 payments annually and a maximum of $8,720 in retention fees. In addition, development costs of nearly $1M for a standalone retention fee collection program would bring little new revenue while increasing the cost and complexity of the special plate program. DMV can implement a more aggressive position by canceling special plates when retention fees are not paid. Planning is underway for purges of special plates where retention fees have not been paid for 4 years making these configurations available to new purchasers. DMV will consider cancelling license plates when more than 1 year of retention fees is due.

California State Auditor's Assessment of 6-Month Status: Pending

Motor Vehicles did not provide any documentation for its anlaysis. Therefore, we have assessed it as "Pending" until we receive the analysis that Motor Vehicles completed and review and assess it.

60-Day Agency Response

DMV continues to analyze the database limitations and the cost/benefit to making the recommended changes.

California State Auditor's Assessment of 60-Day Status: No Action Taken

Recommendation #2 To: Motor Vehicles, Department of

Motor Vehicles should ensure that the fees it lists in its application for special plates, as well as any other publications, are supported by the appropriate statutes.

Annual Follow-Up Agency Response From October 2016

Computer programming to correct the $1 fee discrepancy was completed on December 31, 2014. In addition, the DMV updated its website and publications to accurately reflect the correct fees. However, during an audit follow-up in 2015, the State Auditor identified a publication discrepancy due to a DMV staff error. The DMV addressed the issue and corrected the error.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Annual Follow-Up Agency Response From September 2015

Computer programming to correct the $1 fee discrepancy was completed on December 31, 2014. In addition, the DMV updated its website and publications to accurately reflect the correct fees. However, during an audit follow-up in 2015, the State Auditor identified a publication discrepancy due to a DMV staff error. The DMV addressed the issue and corrected the error.

Corrective action is completed.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

Motor Vehicles did not provide evidence that it has corrected its publication errors. We will reevaluate Motor Vehicles' response pending its submission of evidence.

Annual Follow-Up Agency Response From October 2014

The DMV updated its website and forms to ensure consistent and correct information is provided to the public. In addition, the ISD is completing the computer programming to ensure the $1 fee discrepancy is corrected.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

1-Year Agency Response

DMV is making plans on correcting the $1 fee discrepancy and has ensured that clear and correct information regarding fees associated with special plates has been provided to customers.

California State Auditor's Assessment of 1-Year Status: No Action Taken

6-Month Agency Response

DMV has taken steps to update its website and forms to ensure clear and correct information regarding fees associated with special plates. In addition, DMV is currently correcting the computer program to fix a $1 discrepancy in the fees charged for some Environmental License Plates (see response to Recommendation #3).

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

DMV will continue to perform analyses of the applicable statutes dealing with special license plates to ensure DMV rates are consistent with the applicable statutes.

California State Auditor's Assessment of 60-Day Status: No Action Taken

Recommendation #3 To: Motor Vehicles, Department of

Motor Vehicles should assess the extent to which it has charged fees for special plates that are not consistent with those prescribed in statutes and take appropriate action.

Annual Follow-Up Agency Response From October 2019

DMV completed a review of special plates fees to verify consistency with statute and identified the need to modify programming for the $1.00 reflectorized fee. The programming was completed on December 31, 2014. Limited resources and required level of effort do not make it cost efficient to retroactively assess the extent of the former inconsistencies.

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

Although Motor Vehicles will not implement part of recommendation to assess the extent to which it has charged fees for special plates that were not consistent with those prescribed in statutes, it has ensured consistency of fees, going forward, with those prescribed in statutes.

Annual Follow-Up Agency Response From November 2018

DMV completed a review of special plates fees to verify consistency with statute and identified the need to modify programming for the $1.00 reflectorized fee. The programming was completed on December 31, 2014. Limited resources and required level of effort do not make it cost efficient to retroactively assess the extent of the former inconsistencies.

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

Although Motor Vehicles will not implement part of recommendation to assess the extent to which it has charged fees for special plates that were not consistent with those prescribed in statutes, it has ensured consistency of fees, going forward, with those prescribed in statutes.

Annual Follow-Up Agency Response From October 2016

Computer programming for the $1 reflectorized fee was completed on December 31, 2014.

Corrective action is completed.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

Although Motor Vehicles' response and the documentation it provided in support of that response address the action it took to assure that the fees it charged for special plates were consistent with those in statute, its response does not address whether it assessed the extent to which it charged fees that were not consistent with law and the results of that assessment.

Annual Follow-Up Agency Response From September 2015

Computer programming for the $1 reflectorized fee was completed on December 31, 2014.

Corrective action is completed.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

As we stated on page 6 of our follow-up audit (Report #2015-506, July 2015), we reviewed 25 special plate fees charged by Motor Vehicles as of June 2015 and identified two instances in which the charged fees did not match the corresponding fees required by state law. We further stated that Motor Vehicles initially did not believe that fees we identified were the correct fees for these transactions. Subsequently, however, Motor Vehicles reexamined its position and now agrees that the fees we identified are the correct fees and indicated that it will begin charging the correct fees by March 31, 2016.

Annual Follow-Up Agency Response From October 2014

The changes being made for the $1 reflectorized fee will be put into place by December 2014 once all system programming by ISD has been completed.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

1-Year Agency Response

The Senate Bill 788, Chapter 523, clarified the requirement of the additional specified charge for personalization of license plates. The bill was signed on October 3, 2013, and the effective date was January 1, 2014. The changes being made for the $1 reflectorized fee will be put into place by the estimated completion date.

California State Auditor's Assessment of 1-Year Status: Partially Implemented

Motor Vehicles did not fully address our recommendation and did not identify its progress in assessing the extent to which it has charged fees for special plates that are not consistent with those prescribed in statutes and taking appropriate action.

6-Month Agency Response

DMV Six-Month Status Update:

A thorough review was performed regarding the applicable statutes and legislative records and their application to the Special License Plate Program. It was determined that the $1 reflectorized plate fee may only be assessed upon registering a vehicle. The special interest and personalized license plates are not issued upon registering a vehicle, but rather through a separate transaction and is not subject to the $1 fee. DMV has planned future programming to be implemented to remove the $1 reflectorized plate fee by July 2014. In addition, the Veterans and Kids license plates are not to be charged the personalization fee. The Senate Committee on Housing and Transportation has incorporated language into Senate Bill 788 making its intent here clearer:

"(8) Existing law also authorizes the Department of Motor Vehicles to issue specialized license plates for veterans' associations and to fund child health and safety programs. Existing law requires payment of an additional specified charge for personalization of these plates. This bill would provide that these specialized license plates are not subject to the payment of another charge generally applicable to personalization of license plates."

The above language changes the requirements as stated in Vehicle Code Sections 5068 and 5072 for both the Veterans and Child Health and Safety Fund plates.

California State Auditor's Assessment of 6-Month Status: Pending

Although Motor Vehicles did not specifically address changes to the fees for the Olympic Training Center license plate in its response above, we note that the implementation of SB 788 also addresses our concerns with these fees. However, Motor Vehicles did not fully address our recommendation and did not identify its progress in assessing the extent to which it has charged fees for special plates that are not consistent with those prescribed in statutes.

60-Day Agency Response

DMV continues to reconcile fees for specialized license plates with applicable statutes and rates to correct any fees incorrectly stated in DMV issued publications.

California State Auditor's Assessment of 60-Day Status: No Action Taken

Recommendation #4 To: Motor Vehicles, Department of

To ensure that it accurately recovers its administrative costs related to special plates, Motor Vehicles should continue to annually calculate the administrative costs for the plates when recovering these costs for the personalized plates through the State's budget process.

1-Year Agency Response

DMV updated the costs in the January 2013 Governer's Budget prior to the audit. DMV will continue to annually update the transfer amount for each budget year.

California State Auditor's Assessment of 1-Year Status: Fully Implemented

In order to determine whether Motor Vehicles continues to annually calculate the administrative costs, we reviewed the documentation that Motor Vehicles provided that show the calculation of the administrative costs for fiscal year 2014-15. Based on these documents, Motor Vehicles appears to have fully implemented this recommendation.

6-Month Agency Response

DMV concurs with this recommendation and had updated the costs in the January 2013 Governor's Budget prior to the audit. DMV will continue to annually update the transfer amount for each budget year.

California State Auditor's Assessment of 6-Month Status: Pending

Our recommendation is that Motor Vehicles continue to annually calculate the administrative costs for the plates when recovering administrative costs for the personalized plates through the State's budget process. As such, we have assessed this recommendation as "Pending" until we review Motor Vehicles' administrative costs calculation for fiscal year 2014-15.

60-Day Agency Response

DMV concurs with this recommendation and had updated the costs in the January 2013 Governor's Budget prior to the audit. DMV will continue to annually update the transfer amount for each budget year.

California State Auditor's Assessment of 60-Day Status: Pending

Our recommendation is that Motor Vehicles continue to annually calculate the administrative costs for the plates when recovering administrative costs for the personalized plates through the State's budget process. As such, we have assessed this recommendation as "Pending" until we review Motor Vehicles' administrative costs calculation for fiscal year 2014-15.

Recommendation #5 To: Motor Vehicles, Department of

Motor Vehicles should periodically assess the cost and benefits of updating its automated systems to reflect current per-plate administrative costs. If Motor Vehicles determines that doing so is cost-effective, it should update its automated systems to reflect the up-to-date administrative costs for all these plates.

Annual Follow-Up Agency Response From September 2015

Computer programming for the revised administrative service fee for all plate programs was completed on December 31, 2014.

Corrective action is completed.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

We confirmed that Motor Vehicles has updated its automated service fees to reflect current per-plate administrative service fees on page 8 of our follow-up audit (Report #2015-506, July 2015).

Annual Follow-Up Agency Response From October 2014

The computer programming of the revised changes for the ASF for all plate programs is still in progress.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

1-Year Agency Response

DMV is making the changes to revise the ASF for all plate programs and this should be completed by December 31,2014. Periodic cost and benefit assessments will be ongoing.

California State Auditor's Assessment of 1-Year Status: Pending

6-Month Agency Response

The State Auditor recommended DMV periodically assess the cost and benefit of updating its automated system to reflect current per-plate administrative costs. The DMV examined actual transaction volumes and Administrative Service Fee (ASF) revenues collected during the twelve-month period. The ASF revenue for the same period was calculated using updated ASF costs. The findings show that had the costs been updated the total collection would have resulted in a collection of an additional $30,743. DMV estimates that changing the ASF of all special plate programs would require 722 hours of staff or contractor programming and cost approximately $52,085 which would be applied to all plate programs equally.

The impact of these fees for special plate programs would be disparate from one program to another. For example, during the twelve month examination period, there were only 274 transactions involving ASF for the UCLA plate and 20,703 transactions for the KIDS plate, yet both would bear the same financial burden in supporting the change.

DMV will revise the ASF for all plate programs this coming year and will continue to monitor the special plate activities and revenue to determine when or if future adjustments are appropriate and represent a responsible investment of special plate funds.

California State Auditor's Assessment of 6-Month Status: Pending

Motor Vehicles provided no documentation to support its assertions. As such, we have assessed this recommendation as "Pending" until Motor Vehicles provides its cost-benefit analysis and we review and assess it.

60-Day Agency Response

The Department continues to review the cost/benefit analysis associated with updating the automated systems to ensure current per-plate administrative costs are appropriately charged.

California State Auditor's Assessment of 60-Day Status: No Action Taken

Recommendation #6 To: Emergency Management Agency

To the extent that it continues to expend money from the antiterrorism fund through contracts, Cal EMA should properly monitor its contracts to ensure compliance with their terms.

60-Day Agency Response

Any future awards funded with Antiterrorism funds, will now be issued as grants instead of contracts. This will ensure any future awards funded with Antiterrorism funds will be monitored appropriately, as all grants administered by Cal EMA are subject to desk and/or field monitoring from our agency's Monitoring Division.

California State Auditor's Assessment of 60-Day Status: Fully Implemented

Recommendation #7 To: Emergency Management Agency

To the extent that it continues to expend money from the antiterrorism funds through contracts, Cal EMA should ensure that the expenses contractors claim comply with the contracts' terms, including the allowability of the expenses. For example, it should obtain adequate support for invoices contractors submit before issuing payment to ensure that the contractor has performed the work as expected and that the amount claimed is sufficiently supported.

60-Day Agency Response

Any future awards funded with Antiterrorism Funds will now be issued as "grants" as opposed to "contracts". This will ensure any future awards will be monitored appropriately, as all "grants" administered by Cal EMA are subject to desk and/or field monitoring from our agency's Monitoring Division. The monitoring includes reviewing supporting documentation to ensure allowability for expenses charged to the grant.

California State Auditor's Assessment of 60-Day Status: Fully Implemented

Recommendation #8 To: Food and Agriculture, Department of

To ensure that it properly administers its contract services paid from the antiterrorism fund, Food and Agriculture should verify that it has an executed contract in place before obtaining services under the contract and should monitor its contractors for compliance with provisions of the contracts and with state contracting laws.

1-Year Agency Response

The contract manager is aware and confirmed that services will not begin until an executed contract is in place, ensuring compliance with CDFA policy and provisions of the contract and state contracting laws.

California State Auditor's Assessment of 1-Year Status: Fully Implemented

6-Month Agency Response

The FY 2013-14 is fully executed. The contract manager has been reminded and has confirmed that services will not begin until the executed contract is in place, ensuring compliance with CDFA policy and provisions of the contract(s) and state contracting laws.

California State Auditor's Assessment of 6-Month Status: Pending

The Department of Food and Agriculture did not provide evidence of its communication with its contract managers.

60-Day Agency Response

CDFA has addressed with the contract manager of the two contracts noted in the audit and is continuing to remind all contract managers of the importance of adherence to the state law which provides that a contract be fully executed and approved before services begin. With the current year contract that is pending approval, the contract manager has been reminded and has confirmed that services will not begin until the executed contract is in place, ensuring compliance with CDFA policy and provisions of the contract(s) and state contracting laws.

California State Auditor's Assessment of 60-Day Status: Pending

The Department of Food and Agriculture was not able to provide evidence of its communication with its contract managers.

Recommendation #9 To: Emergency Management Agency

To make certain that money from the special plate funds pay only for allowable and supportable activities, Cal EMA should monitor the administrative expenses it charges to the antiterrorism fund and work with Finance to ensure that these expenses, coupled with additional administrative costs Finance charges, do not exceed 5 percent of the money from the antiterrorism fund appropriated to it during each fiscal year.

6-Month Agency Response

The California Vehicle Code Section 5066 (c) (1) (A), has changed since the California State Auditor Report 2012-110, was published. The law was revised on June 27, 2013, and now states, "The office (Office of Emergency Services) shall not use more than 5 percent of the money appropriated for local antiterrorism efforts for administrative purposes." Based on this new law, there is no limit for administrative costs for the funds appropriated to Cal OES except for funds appropriated for local antiterrorism efforts.

Funds appropriated for local antiterrorism efforts will be monitored to ensure the administrative expenses charged to the antiterrorism fund do not exceed 5 percent of the funds appropriated. The remaining funds appropriated to Cal OES for antiterrorism efforts will be used for the purposes the Legislature appropriated the funds.

California State Auditor's Assessment of 6-Month Status: Resolved

60-Day Agency Response

The Legislature initially appropriated funds (Budget Act of 2005 and Budget Act of 2006) for administrative purposes on an on-going basis. Applying the Legislature's appropriations in subsequent years for administrative purposes was in compliance with the law, as articulated by the Bureau of State Audits in Report 2012-105 (authorizing the Department of Social Services to spend funds appropriated by the Legislature, in excess of an administrative cap.) In so spending the funds, Cal EMA proceeded in good faith.

The Cal EMA has also shared this audit report with the Department of Finance for their review and determination of any changes needed to comply with special fund statutes while also complying with the requirements of Government Code Section 11274 (e.g. pro rata charges).

California State Auditor's Assessment of 60-Day Status: Will Not Implement

Cal EMA reiterates the response it made in our report. As we stated in the rebuttal in our report, Cal EMA was unable to demonstrate that the Legislature made appropriations from the antiterrorism fund, specifically for administration, in excess of the 5 percent cap. While it provided information for a single appropriation for administration of a grant in a fiscal year outside the scope of this audit, it could not provide support that, outside of the 5 percent cap, the Legislature made appropriations specifically for administration during the years of our review.

Recommendation #10 To: Emergency Management Agency

To make certain that money from the special plate funds pay only for allowable and supportable activities, Cal EMA should ensure that it only allows grantees to claim expenses for activities directly related to fighting terrorism and not for ancillary services.

1-Year Agency Response

On October 10, 2013, the California Governor's Office of Emergency Services (Cal OES) sent an electronic mail (email) message to the state's five (5) fusion centers that received antiterrorism funding. The correspondence listed eligible activities per Vehicle Code Section 5066(e) governing antiterrorism funding. Should the Cal OES receive additional antiterrorism funding in the future for the state's fusion centers, the Cal OES shall include language regarding eligible activities and the legal requirement that those funds may only be used for activities that directly relate to fighting terrorism.

California State Auditor's Assessment of 1-Year Status: Resolved

6-Month Agency Response

The California Governor's Office of Emergency Services (Cal OES) shall ensure all subgrantee expenses are eligible under Vehicle Code Section 5066 (e) by reviewing and approving application materials and documents submitted by the fusion centers that meet the aforementioned criteria and only allow subgrantees to claim expenses for activities directly related to fighting terrorism and not for ancillary services.

California State Auditor's Assessment of 6-Month Status: Partially Implemented

As we stated on page 31 of our report, $98,000 of the $115,000 in payments to fusion centers that we reviewed were not for activities directly related to fighting terrorism. Although Cal OES provided evidence of its communication to the fusion centers to remind them of those activities for which antiterrorism funds may be used under law, this communication was silent on the legal requirement that those funds may be used only for activities that directly relate to fighting terrorism.

60-Day Agency Response

Cal EMA shall ensure all subgrantee expenses are eligible under Vehicle Code Section 5066 (e) by reviewing and approving application materials and documents submitted by the fusion centers that meet the aforementioned criteria and only allow subgrantees to claim expenses for activities directly related to fighting terrorism and not for ancillary services.

California State Auditor's Assessment of 60-Day Status: Pending

Cal EMA was not able to provide evidence of any communication or notice it shared with its grantees describing allowable expenses as defined in law, or evidence that it reviewed and approved documents from the fusion centers that met that criteria.

Recommendation #11 To: Emergency Management Agency

To make certain that money from the special plate funds pay only for allowable and supportable activities, Cal EMA should maintain documentation to support its charges to the antiterrorism fund. For example, it should ensure that employees submit signed time reports to support the time they spend on antiterrorism-related activities.

Annual Follow-Up Agency Response From November 2017

We have provided information to substantiate the costs in numerous responses and do not agree with the State Auditor's interpretation of the information. Therefore, we cannot implement the recommendation, as the process used to capture and document costs complies with law and policy.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

We stated on page 31 and 32 of the report that Cal OES (formerly Cal EMA) did not adequately support expenditures for salaries and indirect cost distributions we reviewed. While Cal OES has demonstrated how it allocates its overhead expenses, it has not demonstrated that those overhead expenses it paid using the Antiterrorism Fund money are directly related to antiterrorism activities, as required by law. As such, we disagree with Cal OES' assertion that it has substantiated the costs.

Annual Follow-Up Agency Response From October 2016

We have provided information to substantiate the costs in numerous responses and do not agree with the State Auditor's interpretation of the information. Therefore, we will not implement the recommendation, as the processes used to capture and document costs complies with law and policy.

Cal OES uses Program Cost Account (PCA) codes to charge specific positions and hours to different funding sources. Support staff performing administrative functions bill their hours to the PCA code for distributed administration. A portion of distributed administration costs are billed to the antiterrorism fund in accordance with California Vehicle Code Section 5066(e).

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

Annual Follow-Up Agency Response From October 2015

The State Auditor found that while Cal OES has demonstrated how it allocates its overhead expenses, Cal OES has not demonstrated that those overhead expenses paid using antiterrorism fund money are, as required by California Vehicle Code Section 5066(e), exclusively for purposes directly related to fighting terrorism.

Cal OES maintains documentation on charges to the antiterrorism fund. California Vehicle Code Section 5066(e) states that within the definition of "exclusively for purposes directly related to fighting terrorism," "[e]ligible activities include, but are not limited to, hiring support staff to perform administrative tasks...and hazardous materials and other equipment expenditures." The overhead expenses in question are the support staff performing administrative tasks. The law explicitly allows those costs to be paid from the antiterrorism fund. In addition, trailer bill language effective 7/1/13 eliminated the 5 percent administrative cap. Therefore, unless Cal OES administers funds passed onto grantees, there is no limit to administrative costs related to antiterrorism funds. Cal OES uses Program Cost Account (PCA) codes to charge specific positions and hours to different funding sources. Support staff performing administrative functions bill their hours to the PCA code for distributed administration. A portion of distributed administration costs are billed to the antiterrorism fund in accordance with California Vehicle Code Section 5066(e).

It should also be noted, in the Governor's Budget for 2013-14, the Governor proposed the replacement of $500,000 General Fund appropriated to Cal OES and used by the California Specialized Training Institute with $500,000 antiterrorism funds to provide courses within the Criminal Justice Section that are related to Terrorism training. The Legislature approved that budget change proposal.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

We stated on page 31 and 32 of the report that Cal OES (formerly Cal EMA) did not adequately support expenditures for salaries and indirect cost distributions we reviewed. Notwithstanding its response above, Cal OES has not demonstrated that the activities captured by the administrative overhead PCA that it allocated to accounts paid for from the Antiterrorism Fund are directly related to antiterrorism activities. While the Antiterrorism Fund may pay for an indirect allocation of time spent, for example, by executive or administrative office staff participation in an antiterrorism training exercise, which is directly related to antiterrorism, it may not pay for an indirect allocation of those same individuals' activities in coordinating an emergency response to mudslides, which is not directly related to antiterrorism.

Annual Follow-Up Agency Response From October 2014

The State Auditor found that Cal OES did not adequately support expenditures for salaries and indirect cost distributions paid for through fees generated from Vehicle Code section 5066 which must be used for antiterrorism activities.

The Vehicle Code section 5066 (e) defines antiterrorism activities. It specifically states, "Eligible activities include, but are not limited to, hiring support staff to perform administrative tasks. . . and other equipment expenditures." Therefore, pursuant to this statute, Cal OES is entitled to use Antiterrorism Funds to pay for support staff to perform administrative tasks. By statutory definition, these costs are directly related to antiterrorism activities.

There is nothing in the statute that prohibits charging a portion of the administrative costs that Cal OES incurs for antiterrorism activities. The five (5) percent limitation only applies to efforts supporting local antiterrorism. (Vehicle Code Section 5066(c)(1)(A).) Cal OES is focused on statewide antiterrorism activities.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

We stated on page 32 and 33 of the report that Cal OES (formerly Cal EMA) did not adequately support expenditures for salaries and indirect cost distributions we reviewed. While Cal OES has demonstrated how it allocates its overhead expenses, it has not demonstrated that those overhead expenses it paid using antiterrorism fund money are, as required by Vehicle Code Section 5066 (e), exclusively for purposes directly related to fighting terrorism.

1-Year Agency Response

The State Auditor would like documentation on how Cal OES distributes indirect costs. Cal OES uses the California State Accounting and Reporting System (CalSTARS), an automated organization and program cost accounting system. The attached documents show the three Program Cost Accounts (PCA) Cal OES uses in 2013-14 fiscal year (Exhibits A, B, and C). Exhibit D shows the distribution of the Cal OES Administrative charges and identifies the three PCAs (02340, 02341, 04034) used for the antiterrorism fund within the cost distribution ranges. Exhibit D shows those costs will be documented in CalSTARS reports under the object code 427- Indirect Distributed Administration Costs.

Exhibit D also shows the administrative costs (PCA 99650), which are all costs associated with the PCA 99650. Those costs are distributed to the various benefiting Cal OES programs, including the antiterrorism fund, in proportion to the salaries and wages of the benefiting programs (e.g. OD/AO ranges 00300-09900, Permanent Salaries, Temporary Help, and Overtime).

Exhibits E and F show the State Administrative Manual sections relating to the allocation of indirect costs including the method of distributing the costs based on salaries and wages of the benefited programs is acceptable.

California State Auditor's Assessment of 1-Year Status: Partially Implemented

We stated on page 31 and 32 of the report that Cal OES (formerly Cal EMA) did not adequately support expenditures for salaries and indirect cost distributions we reviewed. While Cal OES has demonstrated how it allocates its overhead expenses, it has not demonstrated that those overhead expenses it paid using the Antiterrorism Fund money are directly related to antiterrorism activities, as required by law. Specifically, Cal OES did not demonstrate that those expenses within PCA 99650 that it distributed to PCAs 02340, 02341, and 04034 were directly related to antiterrorism activities, and thus were eligible for payment from Antiterrorism Fund money. As such, we rate Cal OES' status for this recommendation as partially implemented.

6-Month Agency Response

The California Office of Emergency Services (Cal OES) has implemented procedures to assure it retains signed time reports for staff working on antiterrorism activities. Cal OES now uses an electronic process in our Lotus Notes database to submit and authorize time reports for staff. This new process ensures all time reports are maintained, accessible and authorized through electronic signatures. The time reports also document and support employees' time spent on specific project activities, including antiterrorism activities, if applicable. The internal procedures for the electronic process have been provided to the State Auditor.

California State Auditor's Assessment of 6-Month Status: Partially Implemented

We stated on page 31 and 32 of the report that Cal OES (formerly Cal EMA) did not adequately support expenditures for salaries and indirect cost distributions we tested. While Cal OES provided us documentation of its processes to assure it has signed time sheets, it did not address how Cal OES would document the fund's share of indirect cost distributions.

60-Day Agency Response

Cal EMA has implemented procedures to assure it retains signed time sheets for staff working on antiterrorism related activities.

California State Auditor's Assessment of 60-Day Status: Pending

Cal EMA was not able to provide the documents to support its implementation of the procedures to assure it maintains documentation supporting charges it makes to the antiterrorism fund.

Recommendation #12 To: Food and Agriculture, Department of

To make certain that money from the special plate funds pay only for allowable and supportable activities, Food and Agriculture should ensure that employees submit signed time reports to support the time they spend on antiterrorism-related activities.

1-Year Agency Response

An electronic time tracker to support time spent on antiterrorism-related activivites is implemented and staff submit signed time reports to support this activity.

California State Auditor's Assessment of 1-Year Status: Fully Implemented

6-Month Agency Response

An electronic time tracker to support staff time spend on antiterrorism-related activities is implemented and staff submit signed time reports to support this activity.

California State Auditor's Assessment of 6-Month Status: Pending

Food and Agriculture did not provide evidence of the implementation of its electronic time tracking system.

60-Day Agency Response

Effective May 1, 2013, CDFA has implmented a new electronic time tracking system to track employee time spent on antiterrorism fund realted activities.

California State Auditor's Assessment of 60-Day Status: Pending

The California Department of Food and Agriculture was not able to provide evidence of its electronic time tracking system's implementation.

Recommendation #13 To: Food and Agriculture, Department of

To make certain that money from the special plate funds pay only for allowable and supportable activities, Food and Agriculture should use all appropriate funding sources to pay for any expenses that benefit multiple programs in proportion to the benefits those programs actually receive.

1-Year Agency Response

This has been implemented by way of tracking antiterrorism fund and non-antiterrorism fund activity.

California State Auditor's Assessment of 1-Year Status: Fully Implemented

6-Month Agency Response

Implemented by way of discerning antiterrorism fund and non antiterrorism fund activity.

California State Auditor's Assessment of 6-Month Status: Pending

Food and Agriculture claims that it has implemented a time tracking system to identify activities related to antiterrorism fund. However, it did not provide evidence of the implementation of its time tracking system for this purpose.

60-Day Agency Response

Effective May 1, 2013, CDFA has implemented a new electronic time tracking system to track employee time spent on antiterrorism fund and non- antiterrorism fund related activities.

California State Auditor's Assessment of 60-Day Status: Pending

The Department of Food and Agriculture was not able to provide evidence of the implementation of its time tracking system.

Recommendation #14 To: Parks and Recreation, Department of

To make certain that money from the special plate funds pay only for allowable and supportable activities, Parks and Recreation should ensure that environmental fund money budgeted to its offices is supported by the proportion of the offices' activities that state law allows.

Annual Follow-Up Agency Response From October 2016

In 2015 and 2016 the Budget Act did not include ELPF. There is virtually no possibility we will receive these funds in the future. We have included the BCP from the Natural Resources Agency as a supporting document to detail the long-term plan for these special funds.

California State Auditor's Assessment of Annual Follow-Up Status: Resolved

Annual Follow-Up Agency Response From September 2015

The Budget Act 2015-16 didn't appropriate any special plate funds to the Department of Parks and Recreation. Should a future Budget Bill appropriate special plate funds to the Department, the Department would analyze the appropriate uses of the funds, and if appropriate, utilize internal controls to distribute specialized funds to a separate PCA (program cost account) to ensure only appropriate expenditures are made with the funds within the Natural Resources Division.

No Attachment

California State Auditor's Assessment of Annual Follow-Up Status: Pending

The Budget Act of 2015 shows that the Legislature did not allocate money from the Environmental License Plate Fund to Parks and Recreation for fiscal year 2015-16. Because Parks and Recreation's response indicates a possibility that it might receive Environmental License Plate Fund money in future, we will reassess department's response next year after the passage of the fiscal year 2016-17 budget.

Annual Follow-Up Agency Response From September 2014

In 2012 the California Legislature passed both the California State Parks Stewardship Act of 2012 (AB 1589) and AB 1478. This legislation called for the formation of a multidisciplinary advisory council to conduct an independent assessment of the current State Parks System and make recommendations to the California Legislature and Governor on future management, planning, and funding proposals that will ensure the long-term sustainability of the State Parks System. The Parks Forward Commission is designed to fulfill these directives. The Department is currently working with the Parks Forward Commission staff on Park Unit Costing. Part of the Park Unit Costing is to figure out what type of funds each park should be allocated. During this process a methodology for allocating the Environmental License Plate Fund will be created. We will update you as soon as this is finalized. The Parks Forward report is due out November 2014.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

1-Year Agency Response

In 2012 the California Legislature passed both the California State Parks Stewardship Act of 2012 (AB 1589) and AB 1478. This legislation called for the formation of a multidisciplinary advisory council to conduct an independent assessment of the current State Parks System and make recommendations to the California Legislature and Governor on future management, planning, and funding proposals that will ensure the long-term sustainability of the State Parks System. The Parks Forward Commission is designed to fulfill these directives. The Department is currently working with the Parks Forward Commission staff on Park Unit Costing. Part of the Park Unit Costing is to figure out what type of funds each park should be allocated. During this process a methodology for allocating the Environmental License Plate Fund will be created. We will update you as soon as this is finalized. The Parks Forward report is due out fall 2014.

California State Auditor's Assessment of 1-Year Status: Pending

6-Month Agency Response

Parks and Recreation has developed and implemented budget allocations to ensure that the funds are distributed only for activities allowed under state law. Additionally, we will track expenditures against these funds to ensure they are only used for purposes allowable under the law.

California State Auditor's Assessment of 6-Month Status: Pending

Although Parks and Recreation provided support showing the environmental funds it allocated to various units within the department for fiscal year 2013-14, it did not provide the methodology it used to determine the allocation amounts among the various units. We, therefore, assess the status of this recommendation as Pending.

60-Day Agency Response

Parks and Recreation will develop budget allocations to ensure that the funds are distributed for activities allowed under state law. The budget allocations are currently being developed and it is expected that the budget allocations will be completed by August 30, 2013.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #15 To: Natural Resources Agency, California

To make certain that money from the special plate funds pay only for allowable and supportable activities, Resources should use all appropriate funding sources to pay for any expenses that benefit multiple programs in proportion to the benefits these programs actually receive. Further, it should ensure that its allocation of such expenses to different funds is equitable and supported.

Annual Follow-Up Agency Response From October 2019

Will not implement. The statute does not require allocation of administrative costs in the manner described by the report. Expenditures will continue to be used in a manner consistent with the statute and as specified in the budget appropriated by the Legislature and in the annual report submitted to the Legislature as part of the budget process.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

As we stated in our report, Resources could not provide a rationale supporting the proportion of costs it charged to the Environmental License Plate Fund. We believe that it is a good government practice for a state agency to have support to justify the costs it allocates to various funding sources.

Annual Follow-Up Agency Response From October 2018

Will not implement. The statute does not require allocation of administrative costs in the manner described by the report. Expenditures will continue to be used in a manner consistent with the statute and as specified in the budget appropriated by the Legislature and in the annual report submitted to the Legislature as part of the budget process.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

As we stated in our report, Resources could not provide a rationale supporting the proportion of costs it charged to the Environmental License Plate Fund. We believe that it is a good government practice for a state agency to have support to justify the costs it allocates to various funding sources.

Annual Follow-Up Agency Response From October 2016

Will not implement. The statute does not require allocation of administrative costs in the manner described by the report. Expenditures will continue to be used in a manner consistent with the statute and as specified in the budget appropriated by the Legislature

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

Annual Follow-Up Agency Response From September 2015

Will not implement. The statute does not require allocation of administrative costs in the manner described by the report. Expenditures will continue to be used in a manner consistent with the statute and as specified in the budget appropriated by the Legislature

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

1-Year Agency Response

Will not implement. The statute does not require allocation of administrative costs in the manner described by the report. Expenditures will continue to be used in a manner consistent with the statute and as specified in the budget appropriated by the Legislature.

California State Auditor's Assessment of 1-Year Status: Will Not Implement

As we stated in our report, Resources could not provide a rationale supporting the proportion of costs it charged to the Environmental License Plate Fund. We believe that it is a good government practice for a state agency to have support to justify the costs it allocates to various funding sources.

6-Month Agency Response

Will not implement. The statute does not require allocation of administrative costs in the manner described by the report. Expenditures will continue to be used in a manner consistent with the statute and as specified in the budget appropriated by the Legislature.

California State Auditor's Assessment of 6-Month Status: Will Not Implement

As we stated in our report, Resources could not provide a rationale supporting the proportion of costs it charged to the Environmental License Plate Fund. We believe that it is a good government practice for a state agency to have support to justify the costs it allocates to various funding sources.

60-Day Agency Response

Will not implement. The statute does not require allocation of administrative costs in the manner described by the report. Expenditures will continue to be used in a manner consistent with the statute and as specified in the budget appropriated by the Legislature.

California State Auditor's Assessment of 60-Day Status: Will Not Implement

As we stated in our report, Resources could not provide a rantionale supporting the proportion of costs it charged to the Environmental License Plate Fund. We believe that it is a good government practice for a state agency to have support to justify the costs it allocates to various funding sources.

Recommendation #16 To: Natural Resources Agency, California

To ensure that the governor and Legislature have sufficient and appropriate information with which to make decisions on the most effective use of environmental fund money, Resources should submit to the governor and Legislature the annual and triennial reports containing the information that state law requires.

Annual Follow-Up Agency Response From October 2016

This recommendation has been fully implemented. The reports have been published and provided to the Legislature for both fiscal years 2012-13, 2013-14 and 2014-15.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Natural Resources Agency provided its annual report (dated January 2016) and evidence that it submitted that report to the Legislature. That report contains the information required both of the annual report and of the triennial report.

Annual Follow-Up Agency Response From September 2015

This recommendation has been fully implemented. The reports have been published and provided to the Legislature for both fiscal years 2012-13 and 2013-14.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

Resources failed to provide any documentation to support that it is meeting the requirements of the triennial report. As such, we have assessed the status of this recommendation as pending.

Annual Follow-Up Agency Response From October 2014

The information was provided to the legislature with the Governor's Budget January 10, 2014

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

Resources did not provide evidence supporting its assertion. Resources provided a draft document that generally meets the criteria required of the annual report. Resources did not provide any evidence that the final version of this document was submitted to the governor for inclusion in the Governor's Budget. Further, it provided no evidence that it has provided triennial reports to the Legislature and the governor.

1-Year Agency Response

The information was provided to the legislature with the Governor's Budget January 10, 2014

California State Auditor's Assessment of 1-Year Status: Pending

Although Resources has indicated it has fully implemented this recommendation, it did not provide evidence supporting its assertion. Resources provided a draft document that generally meets the criteria required of the annual report. Resources did not provide any evidence that the final version of this document was submitted to the governor for inclusion in the Governor's Budget.

Further, Resources failed to provide any documentation to support that it is meeting the requirements of the triennial report. As such, we have assessed the status of this recommendation as pending.

6-Month Agency Response

This recommendation will be fully implemented as a component of the Governor's Budget process. The Budget will be completed and the report published January 10, 2014

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

This recommendation will be fully implemented as a component of the Governor's Budget process. The Budget will be completed and the report published January 10, 2014.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #17 To: Victim Compensation and Government Claims Board, California

To demonstrate that all participants in the scholarship program are eligible to participate, Victim Compensation should establish and document the eligibility of the three participants for whom it currently lacks such documentation.

6-Month Agency Response

The VCGCB sent a certified letter to the three participants in question asking them to provide the requested documentation to verify their eligibility or to sign release forms which were included with the letter. The participants were given a deadline of September 13, 2013 to reply. To date, they have not responded to the request.

Without the requested documentation or signed release forms, the VCGCB is unable to obtain or provide additional information to verify eligibility for the three applicants in question.

California State Auditor's Assessment of 6-Month Status: Resolved

The Victim Compensation and Government Claims Board has made a good faith effort to remedy the issues identified in this finding. Because it has exhausted all possible avenues for addresing this recommendation, we consider this issue resolved.

60-Day Agency Response

The three applicants discussed in the report cannot be verified as eligible as a dependent of the victim. Most of the scholarship applicants for the September 11th Memorial License Plate Program submitted claims to the Victim Compensation Program (CalVCP). Because they had claims on file with CalVCP, legal documentation such as a tax return was on file and was used to verify dependency. In the case of the dependents in question, they did not file claims for victim compensation. Therefore, their files did not contain legal documentation although the Board did have other documentation indicating dependency.

In April 2013, VCGCB staff reached out to the father of the three September 11th victims in question to seek permission to obtain needed information for verification. The father again indicated that he would not sign any releases for VCGCB to obtain any information, nor would he provide any tax returns or other legal documentation. He verbalized his displeasure with being contacted and indicated that if he was contacted again regarding this issue he would refer them to his attorney among other things.

Without a signed release form, VCGCB is unable to obtain copies of tax returns from the Franchise Tax Board (FTB) to verify dependency. In an effort to ensure the applicant is made aware of the scholarship funds available, VCGCB will coordinate with Scholarshare and Treasurer's Office to prepare and send a registered letter from the Scholarshare Program to the applicant explaining opportunities and processes for utilizing scholarship funds.

California State Auditor's Assessment of 60-Day Status: Partially Implemented

All Recommendations in 2012-110

Agency responses received after June 2013 are posted verbatim.