Report 2018-132 All Recommendation Responses
Report 2018-132: Bureau of Gambling Control and California Gambling Control Commission: Their Licensing Processes Are Inefficient and Foster Unequal Treatment of Applicants (Release Date: May 2019)
Recommendation for Legislative Action
Given that the bureau has not achieved the expected benefits from adding 32 additional positions, the Legislature should not approve any requests to make funding for these positions permanent. Instead, the Legislature should extend funding for an additional two years, during which time the bureau should be able to clear its existing number of pending applications. At that point, the Legislature should reevaluate the bureau's long-term staffing needs, taking into consideration the extent to which it has implemented the recommendations in this report.
Description of Legislative Action
The Budget Act of 2019 includes $4.4 million from the Gambling Control Fund in 2019-20 and 2020-21 to continue funding 32 positions that process license applications, renewals, and background investigations for cardrooms and third-party providers to reduce the current backlog of license applications. Further, the Supplemental Report of the 2019-20 Budget Act requires Justice to submit separate reports to the budget committees of the Legislature and the Legislative Analyst's Office on how it has addressed specific recommendations identified by the California State Auditor in a May 2019 report evaluating the revenues and expenditures from the Gambling Control Fund. No later than January 10, 2020, Justice must submit a report providing its formal plan for completing its review of its remaining backlogged applications, as well as an update on its progress on executing the plan. No later than August 2019, Justice must submit a report on its new policies to ensure that it fairly charges applicants for the cost of licensing activities.
- Legislative Action Current As-of: November 2019
California State Auditor's Assessment of 6-Month Status: Legislation Enacted
Description of Legislative Action
The Budget Act of 2020 includes $4.4 million from the Gambling Control Fund in 2019-20 and 2020-21 to continue funding 32 positions that process license applications, renewals, and background investigations for cardrooms and third-party providers to reduce the current backlog of license applications. Further, the Supplemental Report of the 2019-20 Budget Act requires Justice to submit separate reports to the budget committees of the Legislature and the Legislative Analyst's Office on how it has addressed specific recommendations identified by the California State Auditor in a May 2019 report evaluating the revenues and expenditures from the Gambling Control Fund. No later than January 10, 2020, Justice must submit a report providing its formal plan for completing its review of its remaining backlogged applications, as well as an update on its progress on executing the plan. No later than August 2019 Justice must submit a report on its new policies to ensure that it fairly charges applicants for the cost of licensing activities.
- Legislative Action Current As-of: July 2019
California State Auditor's Assessment of 60-Day Status: Legislation Enacted
Recommendation for Legislative Action
To prevent delays and the unnecessary use of resources from requiring the commission to hold evidentiary hearings in all cases in order to deny applicants, the Legislature should amend the Gambling Act to allow the commission to take action at its regular licensing meetings rather than require it to hold evidentiary hearings.
Description of Legislative Action
AB 120 (Chapter 45, Statutes of 2021) allows the commission to take action to grant or deny a license at a regular meeting and requires an evidentiary hearing only if requested by an applicant; upon denial of an application; or if the application is approved with limits, restrictions, or conditions. This bill allows an applicant to request a withdrawal of an application at any time prior to a final action by the commission.
- Legislative Action Current As-of: September 2022
California State Auditor's Assessment of Annual Follow-Up Status: Legislation Enacted
Description of Legislative Action
AB 120 (Salas) would allow the commission to take action to grant or deny a license at a regular meeting and requires an evidentiary hearing only if requested by an applicant, upon denial of an application or if the application is approved with limits, restrictions, or conditions. This bill allows an applicant to request a withdrawal of their application at any time prior to a final action by the commission.
- Legislative Action Current As-of: May 2021
California State Auditor's Assessment of Annual Follow-Up Status: Legislation Introduced
Description of Legislative Action
As of May 16, 2020, the Legislature has not taken action to address this specific recommendation.
- Legislative Action Current As-of: May 2020
California State Auditor's Assessment of 1-Year Status: No Action Taken
Description of Legislative Action
As of November 2019, the Legislature has not taken action to address this specific recommendation.
- Legislative Action Current As-of: November 2019
California State Auditor's Assessment of 6-Month Status: No Action Taken
Description of Legislative Action
The Legislature has not taken any action to address this specific recommendation.
- Legislative Action Current As-of: July 2019
California State Auditor's Assessment of 60-Day Status: No Action Taken
Recommendation #3 To: Justice, Department of
To avoid unnecessary delays in its licensing process, the bureau should, by November 2019, begin reviewing applications for completeness upon receiving them. If it determines that an application is incomplete, it should notify the applicant immediately.
60-Day Agency Response
BGC has updated and implemented procedures requiring staff in its Intake Unit to review initial applications for completeness and notify applicants if their applications are complete or incomplete within the required time frames provided in regulations. Additionally, it has updated and implemented procedures requiring analysts assigned to individual cases to determine if the supplemental information forms are complete and to send the subsequent notifications within the mandated time frames. Template letters have been created for each notification required for each license type.
- Completion Date: April 2019
- Response Date: July 2019
California State Auditor's Assessment of 60-Day Status: Fully Implemented
The bureau provided revised intake procedures for card room and third party license types. These procedures direct the bureau's licensing intake unit to assess the completeness of incoming applications and notify applicants about the status of their applications within five working days of receiving them. The bureau also provided templates of letters intake staff are to use to inform the applicants about whether or not their applications are complete.
Recommendation #4 To: Justice, Department of
To help it identify which portions of the background investigation process most contribute to lengthy delays, the bureau should conduct an analysis of its investigation processes by November 2019 and should implement procedural changes to improve its timeliness in processing applications.
6-Month Agency Response
In the 60-day response, BGC identified several delays:
(1) Delays in legal review of transactions.
- The Indian and Gaming Law Section completed all of its pending legal reviews of transactions for BGC. BGC's in-house Deputy Attorney General (DAG) reviews all new transactions in a timely manner. As of October 24, 2019, there were four transactions pending review, the oldest received on September 23, 2019.
(2) Delays resulting from granting extensions to requests for information from applicants.
- BGC now requires manager approval prior to granting extensions to applicants requesting additional time to respond to information requests.
(3) Delays resulting from inefficient assignment of cases.
- BGC management assessed the organizational structure and the distribution of assignments. To capitalize on variations in workload and staff availability in different licensing units, the BCG now redistributes and assigns pending licensing investigations to analysts across all units who are not actively working on a case. Management meets on a bi-weekly basis to discuss the needs of specific units and redistribute assignments as necessary.
(4) Delays resulting from assignment of renewal investigations.
- BGC management identified initial application delays due to the prioritization of renewal investigations. Analysts working initial investigations are often redirected to complete renewal investigations that must be completed within a short timeframe. BGC is determining whether designating a team specifically assigned to work on renewal investigations could eliminate these delays.
Additionally, BGC identified and eliminated unnecessary procedures in the background investigation process that were contributing to delays.
- Completion Date: November 2019
- Response Date: November 2019
California State Auditor's Assessment of 6-Month Status: Fully Implemented
The bureau's updated analysis has expanded on the issues it identified in its 60-day response. At our request, the bureau also provided additional details about the unnecessary procedures it has eliminated from the background investigation process. If followed, these changes would help address some issues we noted during our review as likely contributing to delays.
60-Day Agency Response
CSA's recommendation was to complete the analysis of delays in the background investigation process by November 2019. BGC has begun the process of conducting a thorough review of its investigation processes and immediately identified several delays that it is currently addressing:
(1) delays in legal review of transactions,
-BGC has identified the outstanding cases and is working with the Indian and Gaming Law Section to complete all legal reviews within the next two months.
-Additionally, all new transactions are reviewed by BGC's in-house Deputy Attorney General (DAG).
(2) delays resulting from granting extensions to responses for information from applicants, and
-BGC has been denying requests for extensions to provide information from applicants unless approved by a manager.
(3) delays resulting from inefficient assignment of cases.
-BGC management also receives each analyst's time on a weekly basis and meets on a bi-weekly basis to discuss how best to utilize resources to address cases exceeding the 180-day time frame. Analysts are being utilized across all cardroom and third party provider licensing units to address the pending workload. A more thorough analysis will be completed within the time frame recommended.
- Estimated Completion Date: November 2019
- Response Date: July 2019
California State Auditor's Assessment of 60-Day Status: Pending
As the bureau indicates in its response, its analysis is not yet complete. The bureau did not provide any documentation related to the initial determinations it listed in its response. Our audit report identified inefficiencies with legal review and with the bureau's use of its staffing resources, which are consistent with the bureau's response. The bureau clarified for us that it is still providing extensions to applicants who provide reasonable explanations for why they require extensions. Given the inefficiencies we identified in the bureau's current processes, and as we explained in our comments on the bureau's response to our audit report, we believe it is premature for the bureau to begin denying applicants' requests for extensions on a default or comprehensive basis.
Recommendation #5 To: Justice, Department of
To ensure that it approaches its remaining backlog strategically and that it establishes accountability for its use of resources, the bureau should develop and initiate a formal plan by November 2019 for completing the remaining backlogged applications. The plan should identify the license types the bureau will target and the order in which it will target them, along with its rationale for the planned approach. The plan should also include clear goals that identify the numbers of applications it will complete and its time frames for doing so.
6-Month Agency Response
On October 30, 2019, BGC completed its strategic plan for addressing its backlogged applications. As of June 30, 2019, there were 1,785 pending applications, 940 of which were backlogged; regulations define the backlog as applications that have been at BGC for over 180 days. Based on a review of current active cases and average hours spent per case, the BGC is set to eliminate the backlog of cardroom owners, cardroom key employees, work permits, and Third-Party Providers of Proposition Player Services (TPPPPS) license types by December 31, 2021. BGC will work to shift staff assignments from the cardroom to the TPPPPS program and eliminate the remaining TPPPPS owner and supervisor license types backlog by 2022. BGC will continue to improve coordination and cooperation between program units and prioritize cases by application date, assigning older cases first. Analysts periodically have downtime due to pending information requests on current active cases; the BGC will optimize analysts' time by redirecting efforts in the interim to other program's pending cases as needed.
BGC will continue to monitor the number of assigned and completed cases in each of the program areas and adjust the assignment as necessary.
- Completion Date: October 2019
- Response Date: November 2019
California State Auditor's Assessment of 6-Month Status: Fully Implemented
The bureau submitted its backlog strategic plan document which includes a timeline for completing its backlogged applications. The plan indicates that the bureau will clear all backlogged cases other than third party supervisors and owners by December 31, 2021. The plan states that it will clear any remaining backlogged applications in those categories during the following year. Upon our request, the bureau provided a rationale for its prioritization of applications. Although not in the document, this rationale focuses primarily on where it has assigned its staffing resources.
To support its timeline to clear the backlog, the plan includes updated data regarding the amount of time it takes staff to complete application reviews. Some, but not all, of these numbers are smaller than those we identified during our audit and in the bureau's 2019 budget request. Although this may indicate progress in some areas, the bureau's projected dates for completing the backlog are later than those we estimated during our audit. On page 26 of our report, we estimated that the bureau should be able to clear its backlog by June 2021. The interventions the bureau has taken in response to our other recommendations, which it reports in its 6-month response, are still very recent. For example, the bureau finalized its new time reporting policy—which sets thresholds designed to ensure staff devote sufficient time to their caseloads—as well as its new card room and third party owner procedures, in October 2019. If the bureau adheres to the changes it has made, we would expect it to continually improve its efficiency. As such, we urge the bureau to periodically update this strategic plan to identify efficiency gains and shorten its timeline for clearing its backlog; in doing so, it should also update and include its rationale based on its staffing resources.
60-Day Agency Response
CSA's recommendation was to develop and initiate a formal strategic plan for completing the remaining backlogged applications by November 2019. BGC has reviewed its current data to determine the appropriate staffing levels in the cardroom and Third Party Providers of Proposition Player Services (TPPPPS) units within the Licensing Section and has preliminarily determined that resources should be moved from the cardroom owner unit to the TPPPPS player unit. Additionally, analysts are being cross-trained to review different licensure types to assist other units as directed by management to address the pending workload. BGC is working to establish a comprehensive plan to address all the current and future pending workload and in the interim has set goals for the TPPPPS and cardroom owner units to complete certain cases by July 2019.
- Estimated Completion Date: November 2019
- Response Date: July 2019
California State Auditor's Assessment of 60-Day Status: Pending
The activities the bureau describes in its response are consistent with assessing and addressing the needs that motivated our recommendation. Once the bureau provides us documentation of its analysis and formal strategic plan, we will assess the completeness of its efforts.
Recommendation #6 To: Justice, Department of
To ensure that its licensing process is transparent and consistent, the bureau should implement formal procedures for prioritizing its completion of legal reviews of ownership applications. The procedures should specify any circumstances that justify reviewing applications out of the order in which the bureau received them.
60-Day Agency Response
BGC has established a formal policy for prioritizing legal review of transactions, which directs that legal review of transactions must be conducted on a first-in and first-out basis with certain delineated exceptions. BGC's in-house DAG has been completing transactions pursuant to this policy.
- Completion Date: April 2019
- Response Date: July 2019
California State Auditor's Assessment of 60-Day Status: Fully Implemented
The bureau's new policy is consistent with its description and delineates some exceptions to the first-in, first-out basis, such as issues with the health of a card room owner. The policy also identifies "other exigencies as applicable as determined" as possible deviations from the policy. Given the breadth of potential exceptions to the first-in-first-out approach, the bureau should clearly document its specific rationale for individual applications so it can justify those decisions to the applicants.
Recommendation #7 To: Justice, Department of
To minimize the degree to which its process to change its regulations may result in the disparate treatment of card room owners, the bureau should temporarily approve or deny its backlogged games applications by July 2019.
Annual Follow-Up Agency Response From May 2023
The BGC continues to review and determine the appropriate course of action.
- Estimated Completion Date: Fall 2023
California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented
The bureau's response indicates that it has not taken further action since the time of its 6-month response. As such, the recommendation remains partially implemented.
Annual Follow-Up Agency Response From May 2022
The BGC continues to review and determine the appropriate course of action.
- Estimated Completion Date: Fall 2023
California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented
Annual Follow-Up Agency Response From May 2021
The BGC provided draft regulatory language to the public in December 2020 to address the remaining applications. The BGC continues to review and determine the appropriate course of action.
- Estimated Completion Date: Fall 2021
California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented
The bureau's response indicates that is has taken no further action on game approvals since the time of its six-month response in November 2019, and that it will not do so at least until it formalizes its proposed regulatory language. As such, the recommendation remains partially implemented.
Annual Follow-Up Agency Response From October 2020
In July 2019, the BGC approved pending game applications for specified games currently approved for play in other cardrooms and continues to review the appropriate course of action it should take, including the promulgation of regulations, to address the remaining applications.
- Estimated Completion Date: Fall 2021
California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented
The bureau's response indicates that it has not taken further action since the time of its one-year response. As such, the recommendation remains partially implemented.
1-Year Agency Response
In July 2019, the BGC approved pending game applications for specified games currently approved for play in other cardrooms and continues to review the legality of certain Blackjack-type games and the appropriate course of action it should take to address the remaining applications.
- Estimated Completion Date: Fall 2021
- Response Date: April 2020
California State Auditor's Assessment of 1-Year Status: Partially Implemented
The bureau's response indicates that it has not taken further action since the time of its 6-month response. As such, the recommendation remains partially implemented.
6-Month Agency Response
In July 2019, BGC approved 82 pending game applications for specified games currently approved for play in other cardrooms and subsequently approved an additional seven applications. BGC continues to review the legality of certain Blackjack-type games and the appropriate course of action it should take to address the remaining applications.
- Estimated Completion Date: Soon
- Response Date: November 2019
California State Auditor's Assessment of 6-Month Status: Partially Implemented
The bureau provided examples of instances in which it granted two-year authorization for games applicants following our recommendation.
60-Day Agency Response
BGC plans to temporarily approve or deny some of its pending game applications soon.
- Estimated Completion Date: Soon
- Response Date: July 2019
California State Auditor's Assessment of 60-Day Status: Pending
We will reassess the status of this recommendation at the point the bureau reports having taken action on the backlogged games applications.
Recommendation #8 To: Gambling Control Commission, California
To ensure that it has comprehensive licensing information to determine its ongoing workload and staffing needs, the commission should implement procedures for tracking the number of license applications it receives from the bureau each fiscal year and the outcomes of those applications, such as approvals and denials.
60-Day Agency Response
The Commission has implemented procedures to track the number of license applications received by fiscal year and the outcome of those applications. The Commission has modified the Licensing Information System with the fields necessary to capture the additional data by application, established and implemented procedures on how to capture the necessary data, and has redirected staff to populate the new data fields with current and historical data.
Please see Attachment A for supporting documentation.
- Completion Date: June 2019
- Response Date: July 2019
California State Auditor's Assessment of 60-Day Status: Fully Implemented
The commission provided procedures from July 2019 directing staff to begin using its licensing database to track information on incoming applications and the action the commission takes on each. The commission also provided documentation of its directive to staff to begin entering historical data using these same procedures.
Recommendation #9 To: Gambling Control Commission, California
To prevent unnecessary delays and use of resources and to ensure its compliance with state law, the commission should, following the Legislature's amendment of the Gambling Act that we recommend, revise its regulations and policies for conducting evidentiary hearings. These revisions should specify that the commission may vote at regular meetings on a final basis to approve or deny licenses, registrations, permits, findings of suitability, or other matters and that it is not required to conduct evidentiary hearings unless applicants request that it do so.
Annual Follow-Up Agency Response From October 2022
Assembly Bill 120 (Salas, Chapter 45, Statutes of 2021) provided the necessary statutory change required for the California Gambling Control Commission (Commission) to implement the changes formally recommended by the State Auditor. AB 120 provided the Commission the authority to amends its regulations to approved or deny licenses at regular meetings. Once AB 120 became effective on January 1, 2022, the Commission immediately began the Office of Administrative Law (OAL) process to amend its regulations to incorporate the changes outlined in the Auditor's formal recommendation.
The Commission's AB 120 Hearing Update regulatory package was formally submitted to the OAL, and subsequently approved by the OAL and filed with the Secretary of State on February 8, 2022. With OAL's approval, the Commission's regulations went into effect April 1, 2022, at which time the Commission began providing the Commissioners the ability to approved or deny licenses at the regular Commission meetings.
This Recommendation is fully implemented.
- Completion Date: April 2022
California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented
Annual Follow-Up Agency Response From October 2021
The ability to fully implement this recommendation has been outside of the Commission's control as statutory amendments were necessary in order for the Commission to begin work on its part of the recommendation. Notwithstanding, the Commission submitted proposed legislation outlining the necessary statutory changes during the 2020 and 2021 legislative sessions. AB 2771, as introduced by Assemblyman Salas during the 2020 legislative session, was held in the Assembly Committee on Governmental Organizations and did not pass. During the 2021 legislative session, Assemblyman Salas introduced AB 120, which was chaptered on July 9, 2021, with an effective date of January 1, 2022.
In anticipation of the January 1, 2022 effective date of AB 120, the Commission has formally noticed the necessary corresponding proposed regulatory changes titled AB 120 Hearings Update. The formal rulemaking notice beginning the required 45-day public comment period was released to all stakeholders on September 17, 2021. The public comment period will end on November 2, 2021. Once Commission staff has reviewed all public comments received and made any necessary changes to the proposed regulations, the Commission will schedule a public meeting for the Commissioners to consider approval and submission of the proposed regulations to the Office of Administrative Law (OAL). Once approved by the Commission, the regulations package will be submitted to the Department of Finance (DOF) for their 30-day review period and then onto the OAL to complete their review within the 30 working day period they are provided to either issue an approval or denial of the regulations submitted.
- Estimated Completion Date: 7/1/2022
California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented
Annual Follow-Up Agency Response From May 2021
As it had in 2020, the California Gambling Control Commission (Commission) resubmitted its legislative proposal requesting the necessary statutory changes to implement Recommendation #9 for the 2021 legislative session. The legislative proposal was approved by the Governor's Office.
On December 18, 2020, AB 120 was introduced to address the CSA's Recommendation #9. Assemblymember Salas is the author, and recently Assemblymember Gibson joined as co-author. In summary, the bill authorizes the Commission to take action to deny or approve an application for a state gambling license in its regular meetings rather than requiring the commission to hold evidentiary hearings, unless the commission is requested to do so by a denied applicant or if the application is approved with limits, restrictions or conditions. The bill passed through the first house without opposition and is pending in the second. The Commission does not anticipate any opposition on this bill.
The Commission has been working with Assemblymember Salas' office on AB 120 since early 2020. In addition, the Commission submitted a formal Letter of Support (attached) for AB 120.
Following any statutory changes via signed legislation and resulting effective date, the Commission will immediately submit a Section 100 regulatory package to the Office of Administrative Law to conform to the updated law.
- Estimated Completion Date: Unknown and dependent on legislative action.
California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented
Annual Follow-Up Agency Response From October 2020
The Commission has prepared statutory proposals and are pursuing legislative solutions for consideration during the 2021 legislative session, as it did during the 2020 legislative session.
The Commission will continue to pursue implementation of this recommendation; however, implementing this recommendation is completely dependent on legislative action.
Following any statutory changes via signed legislation and resulting effective date, the Commission will immediately submit a Section 100 regulatory package to the Office of Administrative Law to conform to the updated law.
- Estimated Completion Date: Unknown and dependent on legislative action.
California State Auditor's Assessment of Annual Follow-Up Status: Not Currently Feasible
As the commission points out in its response, its implementation of this recommendation is dependent on legislative action. We made a separate recommendation to the Legislature to amend the Gambling Act to allow the commission to take action at its regular licensing meetings. However, the Legislature has not yet implemented that recommendation. As such, there is no action the commission can take at this time.
1-Year Agency Response
The Commission has prepared statutory proposals and are pursuing legislative solutions. We are assessing the ability to achieve these goals in the 2020 session due to the COVID-19 pandemic.
In addition, Assemblyman Rudy Salas, Jr., who is also the Chair of the Joint Legislative Audit Committee, introduced AB 2771 on February 20, 2020. AB 2771, if signed, would provide the necessary amendments to existing statute to allow the Commission to take an action of denial at regular meetings. The Commission has been working, and will continue to work, with Assemblyman Salas' office to provide technical assistance on this bill.
Following any statutory changes via signed legislation, the Commission will immediately submit a Section 100 regulatory package to the Office of Administrative Law (OAL) to conform to the updated law.
- Estimated Completion Date: Unknown and dependent on legislative action.
- Response Date: May 2020
California State Auditor's Assessment of 1-Year Status: Pending
6-Month Agency Response
The Commission is reviewing potential changes to the applicable existing statutes for consideration during the Proposed Legislation process.
Following any statutory changes via signed legislation, the Commission will immediately submit a Section 100 regulatory package to the Office of Administrative Law (OAL) to conform to the updated law.
- Estimated Completion Date: Unknown - Dependent on Legislative Action
- Response Date: November 2019
California State Auditor's Assessment of 6-Month Status: Pending
60-Day Agency Response
The Commission is reviewing potential changes to the applicable existing statutes for consideration during the Proposed Legislation process.
Following any statutory changes via signed legislation, the Commission will immediately submit a Section 100 regulatory package to the Office of Administrative Law (OAL) to conform to the updated law.
- Estimated Completion Date: Unknown - Dependent on Legislative Action
- Response Date: July 2019
California State Auditor's Assessment of 60-Day Status: Pending
Recommendation for Legislative Action
To ensure that all fees that generate revenue for the Gambling Fund have clear, stated purposes limiting their use, the Legislature should require that when updating fee amounts, the commission and the bureau must also update their regulations to include clear statements about the need for and appropriate use of each fee type.
Description of Legislative Action
As of September 2, 2022, the Legislature has not taken action to address this specific recommendation.
AB 1268 (Patterson) would have required the gambling commission and Justice, when increasing a fee amount, to include a clear statement justifying the need for the fee increase and explain in the regulation updating the fee how the funds will be used. This bill died on February 1, 2022.
- Legislative Action Current As-of: September 2022
California State Auditor's Assessment of Annual Follow-Up Status: Legislation Proposed But Not Enacted
As of September 2, 2022, the Legislature has not taken action to address this specific recommendation.
Description of Legislative Action
AB 1268 (Patterson) would require the gambling commission and Justice, when increasing a fee amount, to include a clear statement justifying the need for the fee increase and explaining how the funds will be used in the regulation updating the fee.
- Legislative Action Current As-of: May 2021
California State Auditor's Assessment of Annual Follow-Up Status: Legislation Introduced
Description of Legislative Action
AB 2911 (Patterson) would require the Gambling Control Commission and the Bureau of Gambling Control, when increasing the amount of a fee, to include in the regulation a clear statement justifying the need for the fee increase and explaining how the funds will be used.
- Legislative Action Current As-of: May 2020
California State Auditor's Assessment of 1-Year Status: Legislation Introduced
Description of Legislative Action
As of November 2019, the Legislature has not taken action to address this specific recommendation.
- Legislative Action Current As-of: November 2019
California State Auditor's Assessment of 6-Month Status: No Action Taken
Description of Legislative Action
The Legislature has not taken any action to address this specific recommendation.
- Legislative Action Current As-of: July 2019
California State Auditor's Assessment of 60-Day Status: No Action Taken
Recommendation #11 To: Justice, Department of
To ensure that it fairly charges applicants for the cost of its licensing activities, the bureau should establish and implement policies by July 2019 requiring staff to properly and equitably report and bill time and restricting which activities staff may charge to nonbillable and noncase hours. It should also establish clear thresholds for the proportions of time staff may charge to the various categories and require the bureau's management to review compliance with the pertinent restrictions.
6-Month Agency Response
April 23, 2019:
- BGC implemented a policy on time tracking and billing that provides criteria for billable, non-billable, and non-case related work, all of which must be pre-approved by a manager.
June 18, 2019:
- BGC revised its policy to clarify when staff may use non-billable time without management's approval.
- BGC created separate non-billable codes for matters for which applicants are not required to submit a deposit for background investigation costs.
July 1, 2019:
- BGC implemented a policy establishing thresholds for the proportion of time staff may charge to billable, non-billable, and non-case time.
October 24, 2019:
- BGC revised its policy on time tracking and billing, with the aim that staff spend a daily average of 6.5 hours on case-related work. The policy also stipulates additional threshold guidelines, thereby superseding the July 1, 2019 policy on thresholds. The new thresholds are as follows:
o For case-related time on a weekly basis: 87% for case-related and 13% for non-case related.
o For each billable case: 90% billable and 10% non-billable.
BGC management currently reviews all time for analysts in the Licensing Section on a bi-weekly basis. Management reviews non-billable time based on each analyst's total hours and all approved non-case time that exceeds the 13% threshold to determine if the activities comply with policy. The new policy requires a review of all non-billable time for individual cases that exceed the 10% threshold for non-billable time to ensure activities comply with policy.
- Completion Date: October 2019
- Response Date: November 2019
California State Auditor's Assessment of 6-Month Status: Fully Implemented
The bureau provided its revised policy, which includes the thresholds in the bureau's response and directs management to assist staff in meeting them. The policy also directs management to provide explanations when staff exceed the limits on non-billable and non-case hours.
60-Day Agency Response
On April 23, 2019, BGC implemented a policy on time-tracking and billing that provides criteria for billable, non-billable, and non-case related work, all of which must be pre-approved by a manager. On June 18, 2019, BGC revised its policy to clarify when staff may utilize non-billable time without management's approval. Additionally, separate non-billable codes were created for cardroom work permits, Third Party Providers of Proposition Player Services (TPPPPS) players, tribal key employees, local ordinance review, and other matters for which applicants are not required to submit a deposit for background investigation costs. In order to determine compliance with the policy, BGC management receives each analyst's time on a weekly basis and meets on a bi-weekly basis to review all analysts' time and determine compliance with the policy.
On July 1, 2019, BGC established thresholds for the proportions of time staff may charge to billable, non-billable, and non-case time: 50% billable, 35% non-billable, and 15% non-case. Non-billable time includes time spent by analysts on matters for which background deposits are not required and cannot be billed to applicants. Over the course of the past two months since the LIS Time Tracking and Billing Policy change, there were marked increases in the billable hours and decreases in the non-case time hours. BGC believes that it will be able to consistently meet these thresholds once staff has acclimated to the changes. If, after additional data is collected, BGC believes that the aforementioned thresholds should be modified, we will provide updated information supported by data metrics in the six-month response.
- Completion Date: July 2019
- Response Date: July 2019
California State Auditor's Assessment of 60-Day Status: Partially Implemented
We reviewed the documents the bureau cites in its response. Although the policy directs staff to strive to bill seven hours per day, the thresholds for billable and nonbillable hours do not reflect that directive. When we asked about the thresholds, the bureau explained that some staff work on applications that do not require a background deposit--and for which staff must use nonbillable hours--factor into the overall thresholds. After discussion, the bureau agreed that it will revisit its thresholds to better account for this issue and ensure staff are held to an appropriate amount of billable time. The bureau also indicated it is still in the process of determining the appropriate threshold for noncase time.
- Auditee did not substantiate its claim of full implementation
- Auditee did not address all aspects of the recommendation
Recommendation #12 To: Justice, Department of
To better align the revenue in the Gambling Fund with the costs of the activities that the fund supports, the bureau and the commission should conduct cost analyses of those activities by July 2020. At a minimum, these cost analyses should include the following:
-The entities' personnel costs, operating costs, and any program overhead costs.
-Updated time estimates for their core and support activities, such as background investigations.
-The cost of their enforcement activities.
Using this information, the bureau and commission should reset their regulatory fees to reflect their actual costs. Before conducting its fee study, the bureau should implement our recommendations to improve its processes for assigning applications, ensuring the completeness of applications, and developing time-reporting protocols.
Annual Follow-Up Agency Response From May 2023
The Bureau is in the process of amending its regulations to adjust the fees.
- Estimated Completion Date: Spring 2024
California State Auditor's Assessment of Annual Follow-Up Status: Pending
Annual Follow-Up Agency Response From May 2022
The cost analysis and report are complete. The report was released to the public in September 2021. The Bureau is beginning the process to adjust the fees charged for background investigations.
- Estimated Completion Date: Fall 2023
California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented
Annual Follow-Up Agency Response From May 2021
The BGC has provided the information necessary for the CGCC's consultant to conduct the cost analysis. The consultant is in the final stages of preparing the report. By mid-year, we expect a completed cost analysis and a report recommending any necessary adjustments to fees from the consultant. Once the analysis has been reviewed and finalized, the BGC will work to make any appropriate adjustments to fees charged for background investigations and assist the CGCC in its efforts to make any necessary adjustments to other fees via legislation or regulations.
- Estimated Completion Date: June 2021
California State Auditor's Assessment of Annual Follow-Up Status: Pending
Annual Follow-Up Agency Response From October 2020
The BGC continues to work with the CGCC and its consultant to assist the BGC and the CGCC with the development of cost analyses for activities supported by the Gambling Control Fund. By year-end, we expect a completed cost analysis and a report recommending any necessary adjustments to fees from the consultant. Once the analysis has been reviewed and finalized, the BGC will work to make any appropriate adjustments to fees charged for background investigations and assist the CGCC in its efforts to make any necessary adjustments to other fees via legislation or regulations.
- Estimated Completion Date: July 2020
California State Auditor's Assessment of Annual Follow-Up Status: Pending
1-Year Agency Response
The BGC continues to work with the California Gambling Control Commission and its consultant to assist the BGC and the Commission with the development of cost analyses for activities supported by the Gambling Control Fund. Once information from the consultant is received and the analyses reviewed and finalized, BGC will begin the process to update its regulation addressing fees, as appropriate.
- Estimated Completion Date: July 2020
- Response Date: April 2020
California State Auditor's Assessment of 1-Year Status: Pending
6-Month Agency Response
BGC is working with a consultant hired by the California Gambling Control Commission to assist with the cost analyses of activities supported by the Gambling Control Fund. BGC has provided documentation to the consultant and met to discuss BGC's costs associated with staff, operations, and overhead in all of its sections. Once the cost analyses are completed, BGC will review its regulatory fees and begin the process to reset its fees where appropriate.
- Estimated Completion Date: July 2020
- Response Date: November 2019
California State Auditor's Assessment of 6-Month Status: Pending
60-Day Agency Response
CSA's recommendation was to complete cost analyses of activities that the Gambling Control Fund supports by July 2020. BGC is reviewing the costs currently associated with staff, operations, and overhead in all of its sections, including the appropriate allocation of costs between BGC's two funding sources. As recommended, before a complete analysis is initiated, BGC is implementing processes for assigning applications, ensuring the completeness of applications, and developing time-reporting protocols to ensure it is basing its analysis on the most current information.
- Estimated Completion Date: July 2020
- Response Date: July 2019
California State Auditor's Assessment of 60-Day Status: Pending
The sequence of events the bureau describes is consistent with our recommendations. Once the bureau reports that it completed its cost analyses, we will review supporting documentation to evaluate implementation of this recommendation.
Recommendation #13 To: Gambling Control Commission, California
To better align the revenue in the Gambling Fund with the costs of the activities that the fund supports, the bureau and the commission should conduct cost analyses of those activities by July 2020. At a minimum, these cost analyses should include the following:
The entities' personnel costs, operating costs, and any program overhead costs.
Updated time estimates for their core and support activities, such as background investigations.
The cost of their enforcement activities.
Using this information, the bureau and commission should reset their regulatory fees to reflect their actual costs. Before conducting its fee study, the bureau should implement our recommendations to improve its processes for assigning applications, ensuring the completeness of applications, and developing time-reporting protocols.
Annual Follow-Up Agency Response From October 2022
As previously reported, with DOF's approval of the fee restructuring, the CGCC noticed to all stakeholders its proposed emergency regulations, Fees Modernization Project Emergency Regulations, to reduce fees identified for reduction per the cost and fee analysis on September 17, 2021, which were subsequently approved by the OAL. Those regulations were made permanent, along with modifications to fees set to increase, via the CGCC's Certification of Compliance regulatory package approved by the OAL and filed with the Secretary of State on September 1, 2022. The regulations became effective on the same day. However, the OAL requested that the portion of the package that established the Third-Party Providers of Proposition Player Services' (TPPPS) Annual Fee be withdrawn, modified, and resubmitted. Per OAL's instructions, the CGCC resubmitted the regulatory package pertaining to the TPPPS Annual Fees, which were subsequently approved by the OAL via a 15-day change regulatory package on September 30, 2022. Following the filing of the package, the regulations became effective on that same day. SB 189, Chapter 48, Statutes of 2022, a Budget Trailer Bill, was signed by Governor Newsom and became immediately effective on June 30, 2022.
SB 189 made the statutory change necessary for the CGCC to revise the Cardroom Annual Fee. Immediately upon SB 189 becoming effective, the CGCC submitted regulations modifying the Cardroom Annual Fee structure to be in alignment with regulatory costs. The CGCC's initial OAL approval of these regulatory changes was issued on August 1, 2022. A readoption was filed and subsequently approved by the OAL on September 30, 2022. Based on an updated cost and fee analysis performed for the 2022-23 fiscal year, all TPPPS and Cardroom entities were invoiced their 2023 Annual Fee invoices on September 30, 2022.
- Completion Date: October 2022
California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented
As noted in our last assessment of this recommendation, the commission previously provided evidence of the fee study and initial regulatory actions. During this assessment, we confirmed that the commission updated its fee amounts as its describes.
Annual Follow-Up Agency Response From October 2021
The CGCC and Bureau completed the cost and fee analysis in June 2021. The independent consultant, MGT Consulting, working with the CGCC and Bureau finalized its report (Report) in June 2021 summarizing the process utilized and the findings of the cost and fee analysis. In June 2021, the Report was submitted to the DOF and the CSA for review and approval of the proposed fee restructuring. The DOF issued approval on September 16, 2021. With DOF's approval, the CGCC noticed to all stakeholders its proposed emergency regulations, CGCC Fees Modernization Project Emergency Regulations (ERegs), to reduce fees identified for reduction per the cost and fee analysis on September 17, 2021 and approved it for OAL submission at its public meeting on September 27, 2021, which were submitted to OAL that same day. The OAL has 10 calendar days to issue a decision. If approved, those fees identified will be reduced immediately. In addition, the CGCC released the Report to the public on September 22, 2021. With the release of the Report, the CGCC provided a Notice to stakeholders that several steps, in addition to the ERegs, were still necessary to fully implement the fee restructuring plan, such as:
1) Regular Rulemaking Package: The CGCC is working on a regular permanent rulemaking package to incorporate all proposed fee changes, outlined in the Report, that the CGCC has regulatory authority to adjust. 2) Statutory Changes: The Cardroom Annual Fee is set in statute and, therefore, the CGCC does not have the authority to adjust this fee solely through regulations without legislative action. The CGCC has submitted a request for the necessary statutory changes to be considered during the 2022 legislative session. 3) Additional Regular Rulemaking Changes: If the Cardroom Annual Fee statutory changes are made, the CGCC will need to submit a regular rulemaking file outlining the necessary corresponding regulations to the Cardroom Annual Fee structure.
- Estimated Completion Date: Unknown. This recommendation will not be fully implemented without the necessary statutory amendments through legislative action to adjust those fees set in statute.
California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented
The commission provided documentation that it completed reassessment of its various licensing fees to better reflect the costs that the fee supports, as well as to provide evidence documenting the administrative and regulatory actions it describes in its response. We will continue to review documentation as it is provided by the commission for any changes to the statutorily defined fees and subsequent regulatory changes.
Annual Follow-Up Agency Response From May 2021
Since July 2019, the Commission has contracted and been working with a vendor that specializes in cost and fee analyses.
The Commission has met and/or communicated with the vendor on a weekly basis in order to complete this recommendation as early as possible.
As of April 2021, the Commission and Bureau have completed the draft workload analysis and fee restructuring proposal. The Commission and Bureau are currently working with MGT, the consultant, to finalize the report and industry survey that will be released to the stakeholders.
The report, once finalized and prior to releasing it to the stakeholders, will be provided to the CSA to ensure it meets the expectations as outlined in Recommendation #13.
Once the report is finalized, it will be sent out to the stakeholders for their review and completion of an industry feedback survey. Once stakeholder feedback is received and any necessary adjustments are made, the Commission will work with the Legislature to amend any fees currently set in statute requiring change and will initiate corresponding regulatory changes to implement the new fees.
Completion of this recommendation is dependent upon legislative action to make the necessary statutory changes that impact the fees.
- Estimated Completion Date: The Commission anticipates the workload and fee analyses to be completed in June 2021; however, this recommendation will not be fully implemented without the necessary statutory amendments through legislative action to adjust the fee structure.
California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented
Annual Follow-Up Agency Response From October 2020
The Commission is currently conducting workload and cost analyses in conjunction with the Bureau of Gambling Control (Bureau).
In addition, since July 2019, the Commission has contracted and been working with a vendor that specializes in cost and fee analyses.
The Commission meets and/or communicates with the vendor on a weekly basis in order to complete this recommendation as early as possible.
As of October 2020, the Commission and Bureau are actively working with the vendor to make necessary adjustments and finalize a draft fee structure.
Once a finalized draft of the proposed fee structure is completed it will be provided to the stakeholders for an industry impact and feedback survey. Once stakeholder feedback is received and any necessary adjustments are made, the Commission will finalize the proposed fee structure and will work with the Legislature to amend any fees currently set in statute requiring change, and propose the corresponding regulatory changes to implement the new fees. Completion of this recommendation is dependent upon legislative action to make the necessary statutory changes.
- Estimated Completion Date: The Commission anticipates the workload and fee analyses to be completed in December 2020; however, this recommendation will not be fully implemented without the necessary statutory amendments through legislative action to adjust the fee structure.
California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented
1-Year Agency Response
The Commission is currently conducting workload and cost analyses in conjunction with the Bureau of Gambling Control (Bureau).
In addition, since July 2019, the Commission has contracted and been working with a vendor that specializes in cost and fee analyses.
The Commission meets and/or communicates with the vendor on a weekly basis in order to complete this recommendation as early as possible.
On April 19, 2020, the vendor presented a draft fee schedule. The Commission and Bureau are currently working with the vendor to make necessary adjustments.
Once a finalized draft of the proposed fee structure is completed it will be provided to the stakeholders for an industry impact and feedback survey. Once stakeholder feedback is received and any necessary adjustments are made, the Commission will finalize the proposed fee structure and will work with the Legislature to amend any fees currently set in statute requiring change, and propose the corresponding regulatory changes to implement the new fees.
- Estimated Completion Date: December 2020
- Response Date: May 2020
California State Auditor's Assessment of 1-Year Status: Partially Implemented
The commission provided documentation to support that it is working with its vendor as described in its update. As such, the recommendation will remain partially implemented until that work is complete and the commission and bureau reset their fees to reflect the actual costs of their activities.
6-Month Agency Response
The Commission is currently conducting workload and cost analyses in conjunction with the Bureau of Gambling Control (Bureau).
In addition, since July 2019, the Commission has contracted and has been working with a vendor that specializes in cost and fee analyses. The vendor is working with both the Commission and the Bureau and is facilitating the efforts to complete the analysis and draft a proposed fee structure, which would be provided to the stakeholders for an industry impact and feedback survey.
When a finalized proposed fee structure is completed, the Commission will work with the Legislature to amend any fees currently set in statute requiring change, and propose the corresponding regulatory changes to implement the new fees.
- Estimated Completion Date: December 2020
- Response Date: November 2019
California State Auditor's Assessment of 6-Month Status: Partially Implemented
The commission provided us with its executed contract with its vendor, as well as information about meetings with the vendor that have taken place thus far.
60-Day Agency Response
The Commission is currently conducting workload and cost analyses and has requested the same information from the Bureau of Gambling Control (Bureau), with a due date of September 23, 2019.
In addition, the Commission has publicly posted a "Notice of Intent to Award" to secure a contractor to assist with the completion of this recommendation. The Commission anticipates a contract will be awarded by the end of July 2019.
Once the workload and cost analyses are submitted, reviewed, and finalized, the Commission will work with the Bureau and Contractor to draft a proposed fee structure, which would be provided to the stakeholders for an industry impact and feedback survey.
When a finalized proposed fee structure is completed, the Commission will work with the Legislature to amend any fees currently set in statute requiring change, and propose the corresponding regulatory changes to implement the new fees.
Please see Attachment B for supporting documentation.
- Estimated Completion Date: December 2020
- Response Date: July 2019
California State Auditor's Assessment of 60-Day Status: Pending
Recommendation #14 To: Justice, Department of
To ensure that its level of review is commensurate to license type, the bureau should review and revise each of its background investigation procedures as needed by November 2019.
6-Month Agency Response
April 24, 2019:
- BGC reviewed its policies for each license type and created a new set of procedures that are utilized for work permits, TPPPPS players and supervisors, and key employees. While the tasks are consistent, the level of review is commensurate to license type. Accordingly, additional tasks are required for TPPPPS supervisors and cardroom key employees.
October 24, 2019:
- BGC established a single set of procedures for cardroom and TPPPPS owner license reviews.
- BGC established a policy outlining the steps required for management review of background investigations reports. At a minimum, first-line managers or their lead analysts must:
o Review applicable checklists to ensure compliance with all background investigation procedures
o Review case notes to ensure pertinent information is included in the investigation report.
- Completion Date: October 2019
- Response Date: November 2019
California State Auditor's Assessment of 6-Month Status: Fully Implemented
The bureau provided revised background investigation procedures that apply across license types to card room and third party staff, as well as procedures that apply across owner types. If bureau staff follow these procedures and managers enforce them consistently, these consolidated procedures will address inconsistencies we identified during our audit that subjected applicants with similar responsibilities to different levels of scrutiny during the application process.
60-Day Agency Response
CSA's recommendation was to review and revise each of its background investigation policies by November 2019. As of April 24, 2019, BGC reviewed its policies for each license type and created a new set of procedures that is utilized for work permits, Third Party Providers of Proposition Player Services (TPPPPS) players and supervisors, and key employees. While the tasks are consistent, the level of review is commensurate to license type. Accordingly, additional tasks are required for TPPPPS supervisors and cardroom key employees. BGC is currently developing a single set of procedures for cardroom and TPPPPS owner license reviews with an anticipated completion date of September 30, 2019. Additionally, BGC will establish a procedure for conducting periodic reviews to determine staff's compliance with the procedures.
- Estimated Completion Date: November 2019
- Response Date: July 2019
California State Auditor's Assessment of 60-Day Status: Partially Implemented
The bureau provided the revised procedures it references in its response. Once it has revised the remaining procedures, we will review them for consistency as well as to ensure that any differences are reasonable and commensurate with licence holders' level of responsibility.
Recommendation #15 To: Justice, Department of
To ensure that it treats applicants consistently, the bureau should begin conducting periodic reviews by November 2019 to determine whether staff are following procedures when conducting background investigations for applicants for all license types.
1-Year Agency Response
To ensure that staff and managers from different units apply procedures consistently, the BGC created a policy that outlines the processes for upper management review. The policy specifies which reports should be elevated to the BGC Staff Services Manager II and the Assistant Director level for review and approval. The policy also establishes a weekly meeting for staff to discuss unique files to ensure consistency of review.
- Completion Date: March 2020
- Response Date: April 2020
California State Auditor's Assessment of 1-Year Status: Fully Implemented
The bureau provided a memoranda outlining the review and elevation process it describes in its response. Upon our requests, the bureau also provided evidence of weekly meetings it has conducted and directives to licensing staff regarding consistency issues those reviews have identified. If the bureau conducts these reviews regularly and thoroughly, it should be able to prevent the types of inconsistent handling of background investigations we identified during our audit.
6-Month Agency Response
April 24, 2019:
- BGC reviewed its policies for each license type and created a new set of procedures that are utilized for work permits, TPPPPS players and supervisors, and key employees. While the tasks are consistent, the level of review is commensurate to license type. Accordingly, additional tasks are required for TPPPPS supervisors and cardroom key employees.
October 24, 2019:
- BGC established a single set of procedures for cardroom and TPPPPS owner license reviews.
- BGC established a policy outlining the steps required for management review of background investigations reports. At a minimum, first-line managers or their lead analysts must:
o Review applicable checklists to ensure compliance with all background investigation procedures
o Review case notes to ensure pertinent information is included in the investigation report.
- Completion Date: October 2019
- Response Date: November 2019
California State Auditor's Assessment of 6-Month Status: Partially Implemented
As the bureau notes in its response, its updated background investigation policy requires first-line managers to review staff work to ensure compliance with required procedures. However, our recommendation is focused on ensuring consistency of treatment across all applications the bureau reviews, which necessitates a higher level of review to ensure that staff and managers from different units apply procedures consistently. When we followed up with bureau managers, they provided a description of upper management review of different application types, but not any additional protocols or examples of these efforts ensuring consistent treatment of applicants across license types.
- Auditee did not substantiate its claim of full implementation
- Auditee did not address all aspects of the recommendation
60-Day Agency Response
CSA's recommendation was to review and revise each of its background investigation policies by November 2019. As of April 24, 2019, BGC reviewed its policies for each license type and created a new set of procedures that is utilized for work permits, Third Party Providers of Proposition Player Services (TPPPPS) players and supervisors, and key employees. While the tasks are consistent, the level of review is commensurate to license type. Accordingly, additional tasks are required for TPPPPS supervisors and cardroom key employees. BGC is currently developing a single set of procedures for cardroom and TPPPPS owner license reviews with an anticipated completion date of September 30, 2019. Additionally, BGC will establish a procedure for conducting periodic reviews to determine staff's compliance with the procedures.
- Estimated Completion Date: November 2019
- Response Date: July 2019
California State Auditor's Assessment of 60-Day Status: Pending
Recommendation #16 To: Justice, Department of
To ensure that it has the ability to justify the results of its background investigations, the bureau should develop a formal record retention policy for application documentation by November 2019. This policy should include rationales for retaining types of documents and should establish a process for ensuring staff compliance.
60-Day Agency Response
As of April 22, 2019, BGC revised its imaging procedures (Image Guide) by combining multiple procedures for different license types into one set of procedures. On April 23, 2019, staff was retrained on imaging procedures for files. On June 21, 2019, BGC updated its procedures to include rationales for retaining different types of documents. On June 24, 2019, BGC established a policy on imaging/retention of documents associated with background investigations and distributed to staff. Additionally, BGC developed Imaging/Purging Checklists to ensure staff compliance.
- Completion Date: June 2019
- Response Date: July 2019
California State Auditor's Assessment of 60-Day Status: Fully Implemented
The bureau provided an updated version of its retention procedures, along with a formal policy directing all staff to comply with those procedures. The policy also establishes quarterly review of staff's compliance with the new retention requirements.
Recommendation #17 To: Gambling Control Commission, California
To increase uniformity in the licensing process, the commission should revise its current regulations and submit them to the Office of Administrative Law for public review by May 2020 to address the following areas of inconsistency:
Application processes and time frames.
The ability to work during the application process.
The ability to reapply after denial.
In revising its regulations, the commission should increase consistency across application types while minimizing risk to the public.
1-Year Agency Response
As stated previously, the Commission presented its proposed regulatory package that would provide uniformity in the licensing process at a public workshop on August 12, 2019. At the August workshop, the Commissioners approved the proposed changes and to start the formal rulemaking process. Since then, the Commission has been finalizing the proposed regulatory package and documentation required to begin the formal rulemaking process. All required documentation has been completed as was submitted to the Department of Finance on March 27, 2020. In addition, the complete proposed regulatory package was submitted to the Office of Administrative Law (OAL), satisfying the Auditor's recommendation, on April 14, 2020.
In normal circumstances, the OAL has a 10-day review period and, absent any requested changes, would publicly post the proposed regulatory changes on its website the Friday following their 10-day review period. The OAL publication date triggers the start of the 45-day comment period for the public.
Given the current declared State of Emergency for COVID-19 and the devastating impact it has had on everyone, including the Commission's stakeholders, the Commission has requested the OAL to publish the proposed regulatory changes at a later date, on June 19, 2020. The later publication date allows the public comment period to occur at a later time that is, hopefully, outside of the current State of Emergency.
The Commission understands it has met the requirements of this recommendation with its April 14, 2020 submission to the OAL. Although the Commission has requested a later OAL publication date to assist the public and/or stakeholders, the Commission has posted the proposed regulatory changes on its website as of April 27, 2020, and provided email notification to those that subscribe to the Commission's website that same day, making the proposed changes public and essentially providing a significantly longer review and comment period for the public.
- Completion Date: April 2020
- Response Date: May 2020
California State Auditor's Assessment of 1-Year Status: Fully Implemented
The commission provided us with the proposed revisions to its regulations, which are responsive to our concerns about the major areas of inconsistencies we identified during our audit. The commission also provided evidence that it has submitted the revisions to the Office of Administrative Law for public review and comment. As such, the commission has implemented the letter of our recommendation.
6-Month Agency Response
The Commission has drafted a proposed regulatory action that would provide uniformity in the licensing process and held a public workshop on the proposed text on August 12, 2019. At the August workshop, the Commissioners approved the proposed changes to start the formal rulemaking process.
The Commission is currently developing the final documents required prior to submitting the initial rulemaking package to the OAL for notice. The required documents include the initial statement of reasons, notice of proposed action, and fiscal impact. The fiscal impact necessitates seeking input from the stakeholders, Bureau, as well as identifying the Commission impact, and must be submitted to Department of Finance for a 30-day review prior to noticing the package with OAL.
- Estimated Completion Date: June 2020
- Response Date: November 2019
California State Auditor's Assessment of 6-Month Status: Partially Implemented
We verified that the commission held a public workshop in August 2019 concerning its proposed revisions to existing regulations.
60-Day Agency Response
The Commission has drafted proposed regulatory changes that would provide uniformity in the licensing process. These proposed regulations are scheduled for a public workshop on August 12 and 13, 2019. The Commission's proposed regulatory package is currently open for stakeholder comments until July 29, 2019.
Depending on the outcome of the August workshop, the Commissioners may provide the approval to enter the formal rulemaking process, or the Commissioners may require further work on the regulatory package for another workshop.
Prior to entering the formal rulemaking process, the Commission will develop final documents and submit the initial rulemaking package to the OAL for notice. Documents include the initial statement of reasons, notice of proposed action, and fiscal impact. The fiscal impact necessitates seeking input from the stakeholders, Bureau, as well as identifying the Commission impact, and must be submitted to Department of Finance for a 30-day review prior to noticing the package with OAL.
Please see ATTACHMENT C for supporting documentation.
- Estimated Completion Date: June 2020
- Response Date: July 2019
California State Auditor's Assessment of 60-Day Status: Pending
Recommendation #18 To: Gambling Control Commission, California
To ensure that it does not hold hearings that may cause applicants unnecessary harm, the commission should, following the Legislature's amendment to state law that we previously recommend, establish and implement formal protocols for informing applicants how to withdraw their requests for hearings and for guiding commission staff when discontinuing the hearing process at the request of applicants.
60-Day Agency Response
The Commission strengthened and formalized its existing protocols associated with informing applicants how to withdraw their request for a hearing and how to process and discontinue a hearing once a request to withdraw from the hearing process is made.
The formalized protocols ensure that the applicant is formally advised of the option to withdraw their request for a hearing twice, in two separate written notices, provided to all parties well in advance of and at different stages prior to the hearing date.
Please see ATTACHMENT D for supporting documentation.
- Completion Date: April 2019
- Response Date: July 2019
California State Auditor's Assessment of 60-Day Status: Fully Implemented
The commission provided revised and new procedures that direct staff how to inform applicants about what is required to withdraw from the evidentiary hearing process, as well as revised letters to applicants that provide specific guidance on how to submit a withdrawal request. The procedures also set forth steps to discontinue the hearing process upon receipt of such a request from the applicant. In order to avoid any ongoing or future tension with state law, however, we reiterate our recommendation that the Legislature amend the Gambling Act to allow the commission to take action at its regular licensing meetings rather than require it to hold evidentiary hearings.
Recommendation #19 To: Justice, Department of
To ensure that it compensates the Special Distribution Fund for the card room-related enforcement activities for which that fund has paid, the bureau should reconcile the hours due to the Special Distribution Fund for at least the last three fiscal years by November 2019. Moving forward, the bureau should ensure that it provides prompt reimbursement when employees in positions that are funded by one source perform activities that should have been funded by another source.
60-Day Agency Response
BGC has developed and implemented policies and procedures to ensure accurate time reporting and corrected the allocation of expenditures between the SDF and GCF on a quarterly basis.
BGC has corrected expenditures for Fiscal Years 2016-17, 2017-18, and 2018-19.
- Completion Date: April 2019
- Response Date: July 2019
California State Auditor's Assessment of 60-Day Status: Fully Implemented
The bureau provided a new policy stating that it will review staff's reported hours quarterly and make any necessary fund corrections. It also provided confirmation that the Department of Justice had performed retroactive reconciliations for three fiscal years.
Recommendation #20 To: Justice, Department of
To ensure that its employees allocate their activities to the correct funding sources, the bureau should by July 2019 formalize policies and procedures that provide clear guidelines to employees when reporting time spent on activities that relate to funding sources other than the funding sources for their positions.
60-Day Agency Response
BGC has developed and implemented policies and procedures to ensure accurate time reporting and corrected the allocation of expenditures between the SDF and GCF on a quarterly basis.
BGC has corrected expenditures for Fiscal Years 2016-17, 2017-18, and 2018-19.
- Completion Date: April 2019
- Response Date: July 2019
California State Auditor's Assessment of 60-Day Status: Fully Implemented
As reported in our assessment of recommendation #19, the bureau provided a new policy stating that it will review staff's reported hours quarterly and make any necessary fund corrections.
Recommendation #21 To: Justice, Department of
To ensure that it can provide useful and accurate data on the locations where enforcement employees spend their time, the bureau should equip its time-reporting system by November 2019 with the capacity to track all hours employees spend at each card room and casino
Annual Follow-Up Agency Response From May 2023
The Bureau has submitted Budget Change Proposals for Fiscal Year 2020-21 (Replacement of License 2000 System FY 2020-21), Fiscal Year 2022-23 (Replacement of the License 2000 System FY 2022-23) and Fiscal Year 2023-24 (License 2000 System Replacement) to replace its licensing system. The project is in Stage 2 of the project approval lifecycle process.
- Estimated Completion Date: Dependent of Funding
California State Auditor's Assessment of Annual Follow-Up Status: Pending
Annual Follow-Up Agency Response From May 2022
The Bureau has submitted Budget Change Proposals for Fiscal Year 2020-21 (Replacement of License 2000 System FY 2020-21) and Fiscal Year 2022-23 (Replacement of the License 2000 System FY 2022-23) to begin the process of replacing its licensing system. The project is in the beginning stages.
- Estimated Completion Date: Dependent on Funding
California State Auditor's Assessment of Annual Follow-Up Status: Pending
Annual Follow-Up Agency Response From May 2021
The DOJ is in the process of hiring and onboarding the staff needed to plan and analyze the project. The BGC will require additional funding to purchase a new licensing system that will accommodate time-tracking.
- Estimated Completion Date: Dependent on Funding
California State Auditor's Assessment of Annual Follow-Up Status: Pending
Annual Follow-Up Agency Response From October 2020
The BGC continues to work through the Fiscal Year 2021-22 Budget Process to replace its Licensing Information System with a system that can efficiently track all time reporting and case specific information that is currently used by Licensing Analysts. Additionally, the new system will track hours spent in cardrooms and tribal casinos by the BGC staff in the Compliance and Enforcement and Audits and Compact Compliance sections. The BGC requires a system that can track all time reporting with case specific information. However, due to technical limitations, the BGC cannot modify the current time-reporting system. Until the new time-reporting system is in place, staff will continue to include the name of the cardroom or casino in the narrative portion of the time-reporting system for manual tracking of all hours spent in those establishments. In Fiscal Year 2020-21 funding was approved to plan and analyze the necessary efforts to replace the current licensing system.
- Estimated Completion Date: Dependent on Funding
California State Auditor's Assessment of Annual Follow-Up Status: Pending
The bureau previously reported working on this recommendation as part of the Fiscal Year 2020-21 budget process. It now references the Fiscal Year 2021-22 process. We believe the bureau's ability to track this information in a reliable way is an important tool to ensure efficient and appropriate use of enforcement resources.
1-Year Agency Response
The BGC continues to work through the Fiscal Year 2020-21 Budget Process to begin replacing the Licensing Information System with a system that can track all time reporting and case specific information that is currently used by Licensing Analysts. The new system will track hours spent in cardrooms and casinos by BGC staff in the Compliance and Enforcement and Audits and Compact Compliance Sections. The BGC requires a system that can track all time reporting with case specific information. However, due to technical limitations, the BGC cannot modify the current time-reporting system. Until the new time-reporting system is in place, staff must continue to include the name of the cardroom or casino in the narrative portion of the time-reporting system for manual tracking of all hours spent in those establishments.
- Estimated Completion Date: Dependent on funding
- Response Date: April 2020
California State Auditor's Assessment of 1-Year Status: Pending
6-Month Agency Response
BGC is currently working through the Fiscal Year 2020-21 Budget Process to begin the process of replacing its Licensing Information System with a system that can track all time reporting and case specific information by Licensing analysts, as well as staff in BGC's Compliance and Enforcement Section (CES) and Audits and Compact Compliance Section. Due to technical limitations, BGC cannot modify the current time-reporting system. Until the new time-reporting system is in place CES staff is instructed to include the name of the cardroom or casino in the narrative portion of the time-reporting system to enable manual tracking of all hours spent in those establishments.
- Estimated Completion Date: To be determined
- Response Date: November 2019
California State Auditor's Assessment of 6-Month Status: Pending
60-Day Agency Response
BGC is seeking funding in the next fiscal year to replace its Licensing Information System with a system that can track all time reporting and case specific information by Licensing analysts, as well as staff in BGC's Compliance and Enforcement Section (CES) and Audits and Compact Compliance Section. Because BGC cannot modify the current time-reporting system due to technical limitations, it has instructed CES staff to include the name of the cardroom or casino in the narrative portion of the time-reporting system to enable manual tracking of all hours spent in those establishments until a new time-reporting system is in place.
- Estimated Completion Date: November 2019
- Response Date: July 2019
California State Auditor's Assessment of 60-Day Status: Pending
All Recommendations in 2018-132
Agency responses received are posted verbatim.