California SBOE Audit Leads to Senior Staff Changes

November 18, 2015 09:17PM ET | Bloomberg BNA

Nov. 18 (BNA) -- The executive director of the California State Board of Equalization is no longer handling day-to-day operations, partly due to a new audit finding that the tax agency has been mishandling millions of dollars for at least two years.

Cynthia Bridges, who came to the SBOE in August 2012 from the Louisiana Department of Revenue, is focusing on correcting problems raised in the audit performed by the State Controller's Office, board members told Bloomberg BNA Nov. 18. Chief Deputy Director David Gau is now in charge of daily operations.

The audit from State Controller Betty T. Yee (D), covering the period from July 1, 2013, through April 30, 2015, found widespread deficiencies and lack of oversight in the sales tax fund, as well as the revolving fund used for salaries, travel and vendor payments, and several other funds.

Yee, who sits on the agency's five-member board, told Bloomberg BNA Nov. 18 that the sales tax fund is a “feeder fund” that holds sales tax revenue temporarily and allocates it to the correct state or local fund. Instead, the fund has carried a large balance and has either failed to allocate the money, or has sent too much to some funds and too little to others.

“It's a sad day,” Yee said. “I'm deeply disappointed.”

Lack of Communication

The problems are due to a combination of factors, including lack of communication between agency staff, inadequate training and an increasingly complex state budget with specific requirements for use of funds the board oversees, she said.

As a board member from 2003 through 2012, Yee said her job was to focus on SBOE policy and not be involved in day-to-day management at issue in the audit. As controller, she now oversees the state's cash management functions. Her office launched the audit after an internal SBOE review found some of the issues.

Yee said the board must fix each specific misallocation and the underlying problems that caused the deficiencies in the first place. She urged the board to enlist outside expertise to do so.

Members Speak Out

SBOE Chair Jerome Horton (D) and members Fiona Ma (D) and George Runner (R) each said Nov. 18 that their first priority is to correct the deficiencies outlined in the audit. Ma called for a new Auditing and Oversight Committee to be created at the board's next meeting.

Ma and Yee confirmed that Gau is now handling day-to-day operations while Bridges focuses on correcting problems outlined in the audit.

Ma said the audit is consistent with the difficulties she has had in getting answers to her questions about the agency's fiscal condition and operations since she was elected to the board in November 2014. “I've been very, very frustrated for the past 11 months,” she said.

“The Board takes the audit results very seriously and sees this as an opportunity to continue strengthening its existing internal processes,” Horton said in a news release.

“This is the board's highest priority right now,” Runner said in a news release. “California taxpayers should always have confidence that the state is managing their taxes efficiently.”

To contact the reporter on this story: Laura Mahoney in Sacramento, Calif., at lmahoney@bna.com

To contact the editor responsible for this story: Ryan Tuck at rtuck@bna.com