Report 2013-107 All Recommendation Responses

Report 2013-107: Accounts Outside the State's Centralized Treasury System: Processes Exist to Safeguard Money, but Controls for These Accounts Need Strengthening (Release Date: October 2013)

Recommendation #1 To: Controller's Office, State

Within the next 60 days, the state controller should implement the policies and procedures it developed to ensure the receipt of outside account reports in each reporting period and to enhance monitoring efforts.

60-Day Agency Response

In July 2013, the SCO issued additional reporting instructions to state agencies, and in conjunction with those reporting insructions, finalized the development more detailed and formalized instructions and procedures for SCO staff. Staff began using these more formalized procedures as reports started coming into the SCO in late August 2013. The formal procudures include a checklist and formal step-by-step instructions that been made available to all staff in the State Government Reporting bureau.

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

Recommendation #2 To: Controller's Office, State

Within the next six months, the state controller should develop policies and procedures to maintain a list of all outside accounts and reconcile its list annually with the state treasurer's list.

60-Day Agency Response

The SCO, STO, and DOF began working together to strengthen all procedures and reconciliation processes in March 2013, and the SCO and the STO performed a reconcilliation in June 2013. The more formalized procedures developed by the SCO include reconciliation components and instruct staff to make weekly contact with the STO for reconcilation purpuses beginning on Spetemebr 15th of each year in order to complete the reconciliation before financial reports are issued.

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

Recommendation #3 To: Treasurer, State

Within the next 60 days, the state treasurer should implement the policies and procedures it developed to ensure the receipt of outside account reports in each reporting period and to enhance monitoring efforts.

60-Day Agency Response

The state treasurer has developed and implemented policies and procedures as recommended.

Specifically, and to provide greater oversight and to safeguard public funds, the state treasurer has:

- Received all known outside account reports through direct follow up with state departments.

- Ensured collateralization with all depository banks holding funds in accounts required to be collateralized.

- Updated the State Administrative Manual (SAM) requiring departments to provide month-end bank statements semiannually for outside accounts that must be collateralized.

- Updated SAM and the annual Report 14 requiring departments to provide all Tax Identification Numbers (TINs) used or that could be used to open outside bank accounts. The TINs will be used to confirm with depository and non-depository banks the existence of all outside accounts and associated balances and to ensure that all accounts held by non-depository banks are adequately collateralized.

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

Recommendation #4 To: Treasurer, State

Within the next six months, the state treasurer should develop policies and procedures to maintain a list of all outside accounts and reconcile its list annually with the state controller's list.

60-Day Agency Response

We have updated our policies and procedures to reflect the new requirements recommended by the State Auditor relative to developing a list of all outside accounts and to reconcile annually with the State Controller's Office.

We have developed a list of all report 14 recieved from state agencies even those that do not have a bank account outside the Centralized Treasury. We have also reconciled our list with that of the State Controller's and we will continue to do so on an annual basis.

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

Recommendation #5 To: Finance, Department of

Within the next 60 days, the Department of Finance should implement the policies and procedures it developed to ensure the receipt of outside account reports in each reporting period and to enhance monitoring efforts.

60-Day Agency Response

Policies and procedures have been implemented to ensure receipt of outside account reports and to enhance monitoring efforts. For 2012-13 fiscal year-end outside account reports, Finance continues to verify the authorities of accounts authorized by Finance, ensure accounts are consistent with approved purposes, track closed accounts and follow-up with departments on discrepancies as reports are received. To further enhance monitoring efforts, Finance recently collaborated with the State Controller and State Treasurer to update state policy to require tax identification numbers and bank statements from departments. This information will assist the State Treasurer ensure that all outside accounts requiring collateralization are adequately collateralized.

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

Recommendation #6 To: Finance, Department of

To ensure that all outside accounts have proper authority, over the next six months, Finance should continue to pursue and resolve the 35 identified unresolved cases in which adequate authority could not be confirmed.

6-Month Agency Response

Finance has resolved the 35 cases in which adequate authority could not be confirmed during the audit. Documentation of the review was provided to CSA on 1/17/2014.

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

60-Day Agency Response

Finance has reviewed all 35 identified unresolved cases. For 27 of the 35 accounts, Finance has resolved and identified the required authorities. For the remaining 8 accounts, Finance has directed departments to provide or obtain authority for the account (or the account must be closed).

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

Finance is still working to resolve the status of 8 accounts.

Recommendation #7 To: University, California State

To ensure accurate reporting on its outside accounts in the future, within the next six months, CSU should develop procedures for excluding investments held by the treasury system from reported outside account balances.

60-Day Agency Response

The CSU has developed procedures for excluding investments held by the treasury system from reported outside account balances.

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

Recommendation #8 To: Forestry and Fire Protection, Department of

To safeguard cost recovery program revenue, Cal Fire should, within the next six months, implement adequate segregation of duties for its cost recovery program revenues. For example, it should require that cost recovery payments be mailed to its accounting office, as are other payments.

6-Month Agency Response

The California Department of Forestry and Fire Protection (CAL FIRE) continues to strengthen its internal controls regarding the Civil Cost Recovery (CCR) Program including, but not limited to, ongoing training and policy improvements.

On or about October 18, 2013, the CCR Program created a centralized mailbox for remittance of CCR payments to its Sacramento Headquarters Departmental Accounting Office (DAO). The CCR Program also standardized its Letter of Demand template providing for remittance information and payment coupons to assist with reconciliation of payments. This phase was initially implemented on a limited basis to test and monitor for program improvements. Effectively evaluated in early December 2013, the centralized remittance process went into full effect on January 1, 2014.

In addition to the receipt of CCR payments, the DAO is also the centralized point of contact for all payment deposits.

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

60-Day Agency Response

The California Department of Forestry and Fire Protection (CAL FIRE) continues to strengthen its internal controls regarding the Civil Cost Recovery (CCR) Program including, but not limited to, ongoing training and policy improvements.

On or about October 18, 2013, the CCR Program created a centralized mailbox for remittance of CCR payments to its Sacramento Headquarters Departmental Accounting Office (DAO). The CCR Program also standardized its "Letter of Demand" template providing for remittance information and payment coupons to assist with reconciliation of payments. This phase was initially implemented on a limited basis to test and monitor for program improvements. Effectively evaluated in early December 2013, the centralized remittance process will go into full effect on or about January 1, 2014.

In addition to the receipt of CCR payments, the DAO will also be the centralized point of contact for all payment deposits.

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

Recommendation #9 To: Forestry and Fire Protection, Department of

To safeguard cost recovery program revenue, Cal Fire should, within the next six months, develop policies and procedures requiring personnel not affiliated with the cost recovery program to reconcile expected cost recovery payments to deposits.

6-Month Agency Response

The California Department of Forestry and Fire Protection (CAL FIRE) has finalized Civil Cost Recovery (CCR) Program policy improvements and had issued temporary directives in the interim.

Financial reconciliation of CCR payments against deposits is conducted by CAL FIREs Departmental Accounting Office.

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

60-Day Agency Response

CAL FIRE is in the process of finalizing CCR Program policy improvements and has issued temporary directives in the interim.

Financial reconciliation of CCR payments against deposits will be conducted by CAL FIRE's DAO.

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

Recommendation #10 To: Forestry and Fire Protection, Department of

To safeguard cost recovery program revenue, Cal Fire should, within the next six months, develop a process to track civil cost recovery cases statewide to monitor compliance with policies as well as monitor collection status.

Annual Follow-Up Agency Response From September 2015

The California Department of Forestry and Fire Protection (CAL FIRE) Civil Cost Recovery Database was completed on or about January 2015 and is fully implemented.

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

CalFire implemented the Civil Cost Recovery Case Management System (aka CLAR) to track the status of cost recovery cases. CalFire management can query CLAR for both open and closed cases, and by case manager, unit, or region. Open cases include those for which CalFire is pursuing cost recovery or those that it believes are suitable for cost recovery. The important dates for each case are displayed in the case summary tab for the fire. In addition, a receivables tab shows the amount and form of payment, date received and the person receiving the payment. Cases are not marked closed until payment in full is received.

1-Year Agency Response

CAL FIRE has already completed data gathering on all Civil Cost Recovery (CCR) Program active cases.

On or about October 18, 2013, direction was issued from CAL FIRE's executive management requiring a complete listing of all active CCR Program cases on a statewide basis be complied and provided to CCR Program staff in Sacramento Headquarters. Direction was also given requiring, at minimum, monthly reporting of any change in case number or status to the CCR Program in Sacramento Headquarters.

Furthermore, in November 2013, CAL FIRE's Information Technology Services developed a project charter and strategic objectives for the development of a CCR Program database. The CCR Program database, once completed, will integrate with existing labor accounting systems. Work on this project remains in progress with an estimated completion date of December 31, 2014.

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

6-Month Agency Response

The California Department of Forestry and Fire Protection (CAL FIRE) has already completed data gathering on all Civil Cost Recovery (CCR) Program active cases.

On or about October 18, 2013, direction was issued from CAL FIREs executive management requiring a complete listing of all active CCR Program cases on a statewide basis be complied and provided to CCR Program staff in Sacramento Headquarters. Direction was also given requiring, at minimum, monthly reporting of any change in case number or status to the CCR Program in Sacramento Headquarters.

Furthermore, in November 2013, CAL FIREs Information Technology Services developed a project charter and strategic objectives for the development of a CCR Program database. The CCR Program database, once completed, will integrate with existing labor accounting systems. Work on this project remains in progress with an estimated completion date of December 31, 2014.

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

60-Day Agency Response

CAL FIRE has already completed data gathering on all CCR Program active cases.

On or about October 18, 2013, direction was issued from CAL FIRE's executive management requiring a complete listing of all active CCR Program cases on a statewide basis be complied and provided to CCR Program staff in Sacramento Headquarters. Direction was also given requiring, at minimum, monthly reporting of any change in case number or status to the CCR Program in Sacramento Headquarters.

Furthermore, in November 2013, CAL FIRE's Information Technology Services developed a project charter and strategic objectives for the development of a CCR Program database. The CCR Program database, once completed, will integrate with existing labor accounting systems. Work on this project remains in progress with an estimated completion date of December 31, 2014.

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

Recommendation #11 To: Forestry and Fire Protection, Department of

Cal Fire should continue its efforts to determine what happened to the $13,470 check that was not deposited in the Wildland Fire Fund.

Annual Follow-Up Agency Response From September 2015

The California Department of Forestry and Fire Protection (CAL FIRE) requested the assistance of the California Department of Justice (DOJ) to investigate the missing check. In September 2015, CAL FIRE was notified that the DOJ was unable to determine the whereabouts of the missing check and was unaware of any additional investigative leads; accordingly, the investigation was closed. At this time CAL FIRE has exhausted all possible avenues to determine what occurred with the check and is unable to take any further action on this item.

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

1-Year Agency Response

The California Department of Justice investigation remains in progress.

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

6-Month Agency Response

The California Department of Justice is currently investigating.

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

60-Day Agency Response

The investigation remains active.

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

Recommendation #12 To: Forestry and Fire Protection, Department of

To ensure that it possesses all equipment purchased with Wildland Fire Fund money, Cal Fire should compile a complete list of equipment purchased with these funds and reconcile it to the attorneys association's accounting records.

6-Month Agency Response

The California Department of Forestry and Fire Protection (CAL FIRE) has compiled a listing of equipment purchased through the Wildland Fire Investigation and Training Fund utilizing the California District Attorneys Association accounting records. This listing was used as a basis for the inventory.

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

Cal Fire used the attorneys association's accounting records to compile a detailed listing of equipment purchased with Wild Fire Fund money. The total cost of the equipment Cal Fire identified amounted to about $1.54 million, or approximately 94 percent of the total cost of purchased equipment per the attorneys association's general ledger.

60-Day Agency Response

CAL FIRE has compiled a listing of equipment purchased through the Wildland Fire Investigation and Training Fund and will reconcile it against the California District Attorneys Association accounting records.

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

Recommendation #13 To: Forestry and Fire Protection, Department of

To ensure that it possesses all equipment purchased with Wildland Fire Fund money, Cal Fire should tag all equipment purchased through the Wildland Fire Fund.

6-Month Agency Response

In October 2013, the California Department of Forestry and Fire Protection's (CAL FIREs) Business Services Office completed physical inventories of equipment funded through the Wildland Fire Investigation and Training Fund along with asset tagging in accordance with State Administrative Manual requirements.

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

Cal Fire provided evidence indicating that it tagged the overwhelming majority of items it identified during its physical inventory of equipment.

60-Day Agency Response

In October 2013, CAL FIRE's Business Services Office (BSO) was tasked with conducting physical inventories of equipment funded through the Wildland Fire Investigation and Training Fund along with asset tagging in accordance with State Administrative Manual requirements.

BSO concluded its fieldwork on or about December 5, 2013. Report finalization is currently in progress.

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

Recommendation #14 To: Forestry and Fire Protection, Department of

To ensure that it possesses all equipment purchased with Wildland Fire Fund money, Cal Fire should perform a periodic inventory of equipment.

6-Month Agency Response

The California Department of Forestry and Fire Protection (CAL FIRE) has performed an inventory of equipment and will perform periodic inventories in accordance with State Administrative Manual requirements.

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

CalFire provided documentation indicating that it performed a complete inventory of WiFiter-related equipment and found items with a total cost of about $1.1 million. This documentation also indicates that CalFire could not find about $115,000 in additional WiFIter-related equipment purchased with WiFiter funds according to CDAA documentation.

60-Day Agency Response

CAL FIRE will perform periodic inventories in accordance with State Administrative Manual requirements.

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

According to Cal Fire's response to recommendation 13, it concluded fieldwork related to conducting physical inventories on December 5, 2013 and is in the process of completing an inventory report.

Recommendation for Legislative Action

For the State to better monitor outside accounts, the Legislature should consider requiring the state controller to expand its reporting on outside accounts to include information on accounts opened during the last fiscal year. Reported details should include the authority, name, and balance of the new outside accounts.

Description of Legislative Action

Assembly Bill 1583 (Chapter 230, Statutes of 2014) requires the state controller to include the following information on bank accounts and savings and loan association accounts outside the treasury system in the budgetary-legal basis annual report, submitted pursuant to existing statute: 1) the name of the account, 2) the source of authorization for establishing the account, and 3) the account balance. This statute also requires a state agency that receives revenues for state costs under a cost recovery statute to account for those revenues to the state controller for deposit into the State Treasury.

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

Description of Legislative Action

Legislation has not been introduced to address this specific recommendation.

California State Auditor's Assessment of Annual Follow-Up Status: No Action Taken

Description of Legislative Action

Assembly Bill 1583 (Allen, Chapter 230, Statutes of 2014) requires the Controller to include the following information on bank accounts and savings and loan association accounts outside the treasury system in the budgetary-legal basis annual report, submitted pursuant to existing statute: (1) the name of the account; (2) the source of authorization for establishing the account; and (3) the account balance. The bill also requires a state agency that receives revenues for state costs under a cost recovery statute to account for those revenues to the Controller for deposit into the State Treasury.

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

Assembly Bill 1583 (Chapter 230, Statues of 2014)

Recommendation for Legislative Action

To ensure that state agencies do not misdirect cost recovery revenues in the future, the Legislature should specify that these revenues include any money received as a result of cost recovery efforts, and should require that these revenues be deposited in the state treasury.

Description of Legislative Action

Senate Bill 1075 (Chapter 250, Statutes of 2014) requires any moneys recovered by the California Department of Forestry and Fire Protection (Cal Fire) for fire suppression costs incurred in fighting a fire to be deposited by Cal Fire into the Treasury. The bill also requires Cal Fire to make an annual report to the Legislature regarding any fire suppression moneys recovered in a civil action, and requires all moneys in the Civil Cost Recovery Investigation Support Account to be immediately transferred to the State's General Fund.

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

Description of Legislative Action

Legislation has not been introduced to address this specific recommendation.

California State Auditor's Assessment of Annual Follow-Up Status: No Action Taken

Description of Legislative Action

Senate Bill 1075 (Knight, Chapter 250, Statutes of 2014) requires any moneys recovered by the Department of Forestry and Fire Protection for fire suppression costs incurred in fighting a fire to be deposited by the department into the Treasury. The bill also requires the department to make an annual report to the Legislature regarding any fire suppression moneys recovered in a civil action, and requires all moneys in the Civil Cost Recovery Investigation Support Account to be immediately transferred to the General Fund.

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

Senate Bill 1075 only applies to "fire suppression costs" incurred by Cal Fire. In order to fully implement this recommendation, the Legislature should consider legislation directing all state agencies to deposit cost recovery revenue in the state treasury.

All Recommendations in 2013-107

Agency responses received are posted verbatim.