SACRAMENTO, Calif. (CN) – California state employees seeking to influence the outcome of audits through deception and obstruction will now face stiff penalties following Gov. Jerry Brown’s signing of a bill to make doing so a crime.
Assembly Bill 562, by Assemblyman Al Muratsuchi, D-Torrance, stems from the state auditor’s allegations of meddling during a highly critical audit of the University of California and the UC Office of the President earlier in the year.
Existing law penalizes state agencies and organizations that fail or refuse to provide required documents with a misdemeanor charge. But AB 562 closes a loophole identified by State Auditor Elaine Howle to address intentional and deliberate deception and fraud committed by state employees.
Under the bill signed by Brown on Monday, state employees could face a $5,000 fine for willful acts of deception. The bill initially sought to add a misdemeanor charge, but the Senate Public Safety Committee ultimately decided that charges were not necessary.
“AB 562 is a modest but important step forward in giving the state auditor some additional enforcement authority to ensure that audits are complied with,” Muratsuchi said by phone following the signing of his legislation.
“Taxpayers deserve fair and independent oversight of California’s state agencies,” said Assemblyman Kevin McCarty, D- Sacramento, who co-wrote the bill. “Interfering with state audits hurts the public’s trust and undermines the authority of the state auditor to examine our public agencies impartially.”
The state auditor’s office accused the UC Office of the President of intentional interference and obstruction during an audit that uncovered a $175 million slush fund UC President Janet Napolitano’s office hid from the Legislature, the UC regents and the public. The money was largely collected from assessments charged to the 10 UC campuses.
“The Office of the President received more funds than it needed each year, and it amassed millions of dollars in reserves that it spent with little or no oversight from the regents or the public,” Howle wrote in the audit report.
Howle’s report found the funds collected could have been better used by the campuses they were collected from. The UC Regents raised tuition by 2.5 percent in January under the assumption the $88 million per year increase was necessary for the survival of the UC system, apparently unaware of the the reserve.
Napolitano’s staff wasted weeks of the auditor’s time by delaying production of documents and accurate figures, Howle said. When auditors finally got the documentation they had requested, Howle said the work was inaccurate and that UC accountants did not even know how much money was reserved. It was through investigation of these errors that the slush fund was discovered.
The misstep that brought one California legislator to call for Napolitano’s resignation and led to several pieces of legislation – including AB 562 – dealing with obstruction of audits, since Napolitano’s staff was also accused of doctoring surveys sent to the UC campuses requesting feedback about the efficacy of the president’s office.
While the campuses were directed to send responses to the auditor, Napolitano’s office instead collected them. Some campuses followed the auditor’s request, but final versions of the surveys sent by the Napolitano’s office contained altered responses – including changes of responses from “dissatisfied” to “satisfied”.
“I've been the auditor for 17 years,” Howle said at a May hearing before members of the Legislature, “and in all that time I've never had a situation like this occur.”
Lawmakers wasted no time in drafting legislation to address the issue following Howle’s audit, with about a dozen bills entering the legislative calendar. A bill signed by Brown last month strips the UC president’s office from determining its own budget, instead giving the crucial role to elected legislators.
“It’s outrageous that anyone would willingly and knowingly tamper with an audit,” Assemblyman Phil Ting, D-San Francisco, said in a statement. Ting is one of the lawmakers behind AB 562 and initially requested the audit.
“Anyone who does should pay the price. Without good information we cannot ensure we are meeting the needs of Californians.”
Subscribe to Closing Arguments
Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.
