Report 2016-132 Recommendation 3 Responses

Report 2016-132: Department of Water Resources: The Unexpected Complexity of the California WaterFix Project Has Resulted in Significant Cost Increases and Delays (Release Date: October 2017)

Recommendation #3 To: Water Resources, Department of

To ensure it makes appropriate use of its growing surplus revenue balance, DWR should develop a detailed plan describing how it intends to use these funds.

1-Year Agency Response

DWR has developed and implemented its new Water Resources Engineering Memorandum 74 (WREM 74). WREM 74 is a detailed policy that ensures the continued appropriate use and reporting of Water Code section 12937(b)(4) funds ("(b)(4) funds") as recommended by the State Auditor. The Director implemented this new procedure with her memo to all users on April 4, 2018. A copy of WREM 74 is attached to these responses.

WREM 74 requires proposals for use of (b)(4) funds to follow the same process used to initiate, authorize, administer, and manage programs, projects or tasks funded by the State Water Project. The DWR Director must approve requests for use of these funds prior to the commencement of work.

DWR's standardized process for decision making on State Water Project activities requires substantial justifying documentation. The scope, schedule, objective, assumptions, constraints and many other details of a proposal for use of (b)(4) funds must follow this process, described in a separate DWR procedure, WREM 65a, which is also attached to these responses.

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

We reviewed WREM 74 and found that it requires staff to report the surplus revenue balance to executive management on a monthly basis, and it outlines a process for deciding how DWR will use its surplus revenue balance.

6-Month Agency Response

The Department has prepared Water Resources Engineering Memorandum (WREM) 74 which describes the fund's intended use and approval processes to be followed for a proposed new activity supported by Water Code section 12937(b)(4) funds. The proponent of a new activity proposed to be funded by (b)(4) prepares a charter explaining the objective of the new project, the project purpose and background, project scope, and other details required as shown in the attached "DWR SWP Project Initiation and Management, Project Charter (DWR 9670) Instructions" document. This proposed charter will be routed through the project proponent's chain of command for approval, and will also require the approval of DWR Executive Managers including the State Water Project Deputy Director and DWR's Director.

Once approved, the State Water Project Analysis Office will provide monthly reporting on all (b)(4) projects, including the new project, in the Projected Priority 4 Balance Report. This report will be provided to the Director, Chief Deputy Director and SWP Deputy Director at least quarterly. DWR plans that this process will be effective during April, 2018.

Will Implement.

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

60-Day Agency Response

DWR has already defined a process for use of expenditure of (b)(4) funds in December 2016. DWR is working on developing and implementing a business process to formalize comprehensive procedures for proposing, approving, and tracking projected Priority 4 revenues and associated uses with implementation to start by the end of the first quarter of 2018. We will have an outline for the detailed business process in place by the end of December 2017.

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

All Recommendations in 2016-132

Agency responses received are posted verbatim.