Cash below estimates, Payroll report raises questions

by Brian Leubitz

The Controller’s office doesn’t typically make a lot of news, but their normal cash updates weren’t the only news today. The July monthly report covering California’s cash balance, receipts and disbursements in July 2013, the first month of the State’s fiscal year was released. Revenues for the month totaled $4.8 billion, coming in below estimates contained in the state budget by 6 percent.

“Reflective of the State’s improving fiscal health, California’s upcoming cash flow borrowing is shaping up to be the smallest in four years,” said Controller John Chiang. “While this month’s numbers disappoint, reaction must be tempered by the fact that July is often the State’s least significant revenue collection month.”

6 Percent isn’t exactly chump change, as it represents hundreds of millions of dollars. However, expect to really get the important data in a few months as more delayed tax returns come in.

But, speaking of hundreds of millions of dollars, the Controller’s office is now facing a bit of heat after the Senate Oversight Committee released a report (PDF) sharply criticizing the office’s handling of the new payroll computer that was supposed to be released years ago.

A $373 million state payroll system, suspended in February amid recurring errors, suffered from a failure to resolve core issues raised early and often, chronic leadership turnover and lapses in due diligence, according to a report by the Senate Office of Oversight and Outcomes.

In addition, the Senate Oversight Office found the system’s sponsor, the State Controller’s Office, was not always candid about the difficulties facing the 21st Century Project, also known as MyCalPAYS. The Controller’s Office delivered upbeat reports to the Legislature and others that often only hinted at the turmoil churning within the project. …

“The expensive misadventure has once again left many wondering why – in a state that has given the world Google, Apple, Facebook and Twitter – California consistently struggles to modernize its own public computer systems,” the report states.

Let’s call a spade a spade, the payroll system has been something of a debacle. The preparation didn’t go well, and once the checks started going out, it was a mess. California, despite being the home of Silicon Valley, has been plagued by data management issues. (See also Cal-Access) Sure, this is a huge system, but clearly we can do better. Nobody expects John Chiang or Debra Bowen to be coding, but we could do better on managing outsourced efforts. SAP, the vendor for this system, is a big name, and we should have expected more from a company like that. However, they clearly owe some big explanation for a lot of wasted time and money.

According to an audit by Controller Wendy Greuel, the City Department of Transportation (LADOT) “wasted at least $855,000 of taxpayer dollars” on GPS devices for parking enforcement vehicles. (The devices are known as Automated Vehicle Locator Systems, or AVLS.)

The details of the report are here, and they're pretty scary. Some highlights:

• LADOT had the option in May 2006, to purchase the devices for $1, but inexplicably decided to continue leasing the equipment – at an additional cost of $577,584 to taxpayers over the past four years.

• LADOT has continued to pay for the monthly equipment lease and air service for 178 AVLS units which have been in storage since 2008. At a monthly cost of $7,462, this is a total of $141,773 in wasted City funds.

• LADOT lacks an adequate inventory control to properly account for AVLS equipment and cannot account for 44 units.

• When LADOT was notified that its existing AVLS air carrier was leaving the industry and that it would need to change providers, it amended its contract requesting $213,110 in new hardware and software to accommodate the change in service. Yet the contract's warranty explicitly stated that ISR would cover these costs.

• The department's original contract for $1.57 million has been amended seven times, which has resulted in the City spending more than $4 million to date. This last point illustrates a severe problem with the City's contracting policies. Often, rather than submit expiring contracts for bids, City departments simply amend and extend the original contracts, in essence extending their lives without bothering to check if someone else–including City departments–could do the work for less or more efficiently.

As Azar Nejad, an engineer with the LADOT explains, “Extending contracts without putting them out for re-bidding flies in the face of the very notion of accountability. Public sector departments should review contracts with the utmost care before renewing or extending them.”

We here at Accountable California are curious: do you know of other contracts that have been extended rather than submitted for re-bidding? Go to our tipline and tell us about them. After all, it was an anonymous tipster that led the Controller to perform her valuable audit. Let's see what else we can discover together.

—Lowell Goodman Lowell Goodman is the Communications Specialist for the Center for Public Accountability.

The California Democratic Party (CDP) Convention will be in Sacramento, April 24 – 26. Delegates will elect new Party Officers. With all the wrangling and agony we’re having regarding the California budget, it amazes me that the CDP, as the home base for Democrats, has had very little visibility and is letting the media paint the budget problem as a ‘spending problem’ rather than what it is, a revenue problem. The fault, we are told, lies with the “legislature” not the Republican legislators, which we all know is the true case.

We need a State Party on the forefront of this and other issues. California has arguably the strongest grassroots activist and donor base in the nation (maybe the world) yet the CDP has little relationship with the thousands of volunteers and small dollar donors who will be needed to power a Democrat to win the Governorship and other offices in 2010. Hilary Crosby, seeking election as the Party’s Controller, has the right finance skills and relationship to the Democratic grassroots to help bring the CDP to the 21st Century. Here is some information from her website (http://hilary4controller.org/):

Our Seat at the Table for Critical Party Decisions

As Party Controller, Hilary Crosby will be our seat at the table to make sure our grassroots voices are heard and our knowledge and experience are factored into critical decisions. Successful Party fundraising and implementation of the 58-County Plan will depend on both sound financial management and on a strong partnership between the Party and its grassroots. Hilary is the candidate with the right finance skills and perspective to strengthen and build the California Democratic Party.

     Individual Donor Plan

Expand CDP fundraising base with aggressive Individual Donor Program. The CDP currently raises less than 8% of revenues from individual donors, yet California Democrats donate millions for political aims. The CDP needs to make the case to its voters as potential donors. Tie fundraising to specific goals: 58 County Plan, help Democratic office holders fight back against Republican dirty tricks, support Democrats running to unseat Republicans, support Democrats running for non-partisan office. Fill the pipeline. Form a training/collaborative network for DCC and Dem Club treasures to manage ramped up local fundraising.

THE BEST QUALIFIED CANDIDATE

    Grassroots Activist

President, El Cerrito Democratic Club

Member, Contra Costa County Democratic Party Central Committee

Treasurer, West Contra Costa County United Democratic Campaign

Assistant Treasurer, Take Back Red California

    Professional Financial Skills

Bookkeeper for the ACLU of Northern California

Controller for HERE Union Local #2

Treasurer and auditor of local PTA

Professor of nonprofit management for the University of San Francisco Nonprofit Management Masters degree program

CPA, Partner in woman and minority owned accounting firm for 15 years for nonprofit organizations: education, health policy, environmental justice, media, the arts, social justice, access for all and law

Served on fundraising committees for organizations and political campaigns. Meaningful financial information bolsters fundraising.  

In his bid to replace Steve Westly as the State Controller, John Chiang picked up a little national attention in the form of an endorsement from the Campaign for a National Majority.  They only endorse a handful of candidates each year, so this is quite an honor for Chiang.  A little from their press release:

While this race is marked by decidedly different perspectives on the role of government and fairness in taxation, it is ultimately about the financial challenges facing California. Both candidates are deeply concerned about the state’s annual multi-billion dollar deficits, but only Chiang emphasizes the importance of pursuing policies that ensure the support necessary to sustain high-quality public schools, health care for the disadvantaged and top-notch police and fire protection services. Chiang argues that state not only can, but that it also must meet those twin challenges with innovative financial leadership.(CNM)

Listen, this race isn’t on the radar of most Californians, but we really have a stark choice.  John Chiang will bring sensible ideas to the office.  Tony Strickland, former Assemblywoman, husband of current Assemblywoman Strickland, is the president of the California Club for Growth!  You know, the guy that extracts all those “No Tax Hikes Ever” pledges from every candidate, even if there is a serious reason why we need them. 

Strickland supports the Bush plan on economic reform, including his ridiculous tax cuts in a time of war.  Never in our history have we reduced taxes in a time of war, until GWB.  We are building massive deficits with no plan to conquer them.  Similarly we are building deficits in California, and Arnold has no plan to reign those in.  Strickland is cool with that.  In fact, he pushes for that in his role with the Club for Growth.  That’s just plain ridiculous; why would we trust him to watch our money?

It’s not a race that has been talked about much.  However, both the GOP and the Dems have competitive primaries.  It’s true, check out how much money the 2 Dems, Joe Dunn and John Chiang, have raised. The 2 GOP candidates, Strickland and Maldanado, should also be up there.  However, for some reason, Strickland isn’t up.  Maldanado, however, is trailing both Dems in fundraising…by a lot.

But the news today is from the GOP primary race, and it’s funny!  From the SacBee’s Buzz:

In a heated GOP primary battle for state controller, former Assemblyman Tony Strickland last week claimed his opponent, state Sen. Abel Maldonado, can’t keep track of his own money.

Strickland’s staff plugged Maldonado’s name into the controller’s database of unclaimed private property and found Maldonado has about $2,000 he hasn’t collected. Or, as Strickland put it in a news release, Maldonado is on “the list of people who have carelessly lost track of their money.”

On the contrary, said Maldonado’s staff. They said the senator has known “for over a year” that he has unclaimed property. …Maldonado has been teaching people how to find their property in the controller’s database and has left his own money in the pool so he can type in his name and show them how it comes up, Kise said.(SacBee 4/17/06)

I suppose if I was really interested in this race I could follow this up by trying to find an instance of Maldanado actually “teaching” people.  Personally though, even if I were a Republican, I wouldn’t be that concerned about this.  Mostly because the Controller’s job isn’t to actually do the accounting work himself, but rather to set priorities for the staff (some of whom, you would hope, are competent CPAs).  But if the Republicans really want to bash each other over this, I’m all for it.  I’m all for negative attacks amongst GOP candidates, not so supportive when it’s Dems attacking Dems…got that Angelides and Westly?

That being said, there is a lot for the GOP candidates to fight about.  Strickland has been paying himself, and his wife (who took his seat after term limits struck).  (Thanks CarlsbadDem and SDPolitics…see comment below)

Over a little more than five years, Tony Strickland and his wife, Audra, who replaced him as a member of the state Assembly, paid more than $138,000 raised by their supporters to businesses owned by them and a staffer living in their Moorpark home. An additional $20,000 in campaign money was deposited into a nonprofit organization run by Tony Strickland.
The Ventura County couple say they did nothing improper and that investigators have cleared them of wrongdoing.

Strickland, who as controller would manage and audit the state’s finances, produced a June 2004 letter from Ventura County prosecutors saying they looked at the transfers and found no evidence of criminal activity. The district attorney’s office review was set in motion by a citizen complaint.
***
The Stricklands’ political opponents say a dependence on donors not only to win the campaign, but also to increase their income, is a clear conflict of interest, even if not illegal.

“How could people be so arrogant to blatantly transfer money like this?” asked Jere Robings, a Republican activist from Thousand Oaks. “It is obvious they are trying to circumvent the law,” he said.(LA Times 4/13/06)

And perhaps that’s what those GOP candidates should be concerned about, not some $2,000 left unclaimed.