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California State Audit Report Highlights Mismanagement Under Gavin Newsom

A report released by the California State Auditor last week highlights glaring problems of mismanagement in key state agencies under the control of Gov. Gavin Newsom (D), providing a grim assessment as he faces a recall election Sep. 14.

The report, required by law, warns of agencies that pose a “high risk to the state.” Auditor Elaine M. Howle summarized:

We describe in this report seven high-risk statewide issues that include aspects of water infrastructure, information security, and state management of COVID‑19 federal funds. We also conclude that five state agencies meet our criteria for posing a high risk: the California Department of Corrections and Rehabilitation, the California Department of Technology, the California Department of Health Care Services, the California Department of Public Health, and the California State Teachers’ Retirement System. Finally, we have removed state oversight of K-12 education funding from our state high-risk list because the State has made sufficient progress toward controlling risk factors.

Two timely areas of primary concern are the Employment Development Department (EDD) and water infrastructure. The EDD is the agency through which Californians are supposed to obtain unemployment payments and compensation for maternity leave. However, fraud and mismanagement have led to billions of dollars in losses. The EDD system has sent unemployment checks to prison inmates, while truly deserving Californians wait months for money that they need.


Dan Walters of notes: “The report’s most damning critique declares that ‘the state’s management of COVID-19 federal funds has led to inefficiency and may have resulted in substantial fraud.’”

The report itself adds: “EDD did not take substantive action to bolster its fraud detection efforts for its unemployment insurance program until months into the pandemic, resulting in payments of about $10.4 billion for claims that it has since determined may be fraudulent.”

In water infrastructure, the auditor warned: “The condition of some of the State’s potentially most hazardous dams and the related emergency planning remains a concern.” Many dams still do not have approved plans for an emergency. Moreover, in the midst of an extreme drought, with plans delayed for a tunnel to bring more water from the Sacramento River into the state’s aqueduct system, there are lingering concerns about California’s “ability to maintain reliable access to water.”

The report also notes “weaknesses” in the state’s information security, which Walters says is a particular problem for Newsom, “because Newsom has long portrayed himself as a high-tech maven, even writing a book suggesting that technology could expand efficiency and accountability in public services.” He says the audit provides “ammunition” in the recall.

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