Caltrans investigations find waste and wrongdoing in state transportation programs

A new inspector general at Caltrans has found millions of dollars in misspending on transportation improvement projects in the last year as the state has seen its coffers swell from increases to the state’s gas taxes and vehicle fees.

Rhonda L. Craft, who was appointed five months ago, said in a report to the governor this week that in the fiscal year that ended June 30, her auditors found more than $13 million in “disallowed” expenditures reported by state and local government agencies. They include $7.4 million in questioned costs for programs covered by Proposition 1B, a $19.9-billion transportation bond measure approved by California voters in 2006.

Craft’s office separately received 256 complaints of misconduct by state and local transportation workers in the last year and substantiated wrongdoing in 28 cases, including some involving misuse of state resources and falsification of documents.

Most of the $7.4 million in questioned bond funds was not allowed by the state’s contracts, Craft said.

“It’s money that we identified that should not have been spent,” Craft said in an interview Thursday.

Caltrans said none of the misspent money involved funds from Senate Bill 1, which increased the state’s gas tax and vehicle fees, but the findings sparked concern at the Capitol, where officials including Assemblyman Vince Fong (R-Bakersfield) have long complained of the misuse of resources.

Fong said Caltrans misspending doesn’t appear to be a significant concern to bureaucrats because much more money is flooding in to the agency’s accounts from higher gas taxes.

“The public does not trust Sacramento because [state agencies] continue to waste the hard-earned dollars of taxpayers with no accountability or transparency,” Fong said.

Craft’s report is an annual requirement under SB 1, the 2017 legislation that boosted taxes on gasoline by 17.6-cents per gallon and increased vehicle fees to pay for road and bridge repairs and improvements to mass transit in California.

The legislation created the independent inspector general position at Caltrans filled by Craft, who has the power to investigate transportation projects and ensure gas tax revenue and funds from other sources is properly spent. An Office of Audits and Investigations was also opened at the agency as part of new scrutiny promised under SB 1.

Caltrans officials said they are aware of Craft’s findings and are taking steps to improve processes and recover money overbilled by contractors and local governments.

“So far this year, Caltrans has recouped $1.3 million and will continue to work with local agencies to ensure spending is permitted as per the terms and conditions of the contract,” said Matt Rocco, a Caltrans spokesman.

Rocco said costs can become disallowed if work is done “outside the scope of the contract or work specified in the contract wasn’t completed.”

Craft said the massive amounts of transportation spending and contracting makes it challenging for Caltrans and local transportation agencies to track every dollar and project. She noted the amount of disallowed costs was a small portion of Caltrans’ $14.2-billion budget.

“It’s concerning from the standpoint that we do business with contractors and we are not paying attention to what they are charging us for,” Craft said. “But given the dollar amount that Caltrans deals with and the numerous contracts that they enter into on a regular basis, it’s difficult to comb through all of that stuff and make sure they are not being charged for things that seem to not be consistent with what the original contractual agreement was.”

Assembly Republican leader Marie Waldron of Escondido called the misspending “terrible” and said it is a sign of larger problems with California’s transportation projects.

“This agency must be held accountable,” she said, arguing that the amount of spending questioned in Craft’s report pales in comparison to funds she says have been wasted by the high-speed rail project, which Republicans see as a boondoggle.

The inspector general’s report includes the findings of some 70 audits and 400 reviews conducted by Craft’s office during the last year. In some cases, auditors said contractors overcharged state and local agencies for labor and overhead costs and consulting work. In others, auditors said spending on construction work was not supported by documentation.

Craft said Caltrans should seek reimbursement from agencies including the city of Tracy, the San Joaquin Council of Governments and the Southern California Assn. of Governments, which had $627,000 in disallowed information technology contractor billings, as well as other charges that were made after a contract expired.

In one case, auditors found that Caltrans employees purchased and accepted mulch valued at $2.5 million that did not meet Caltrans’ standard specifications.

“Contract management and safety policies and procedures were not consistently followed,” Craft’s report said.

Investigations also substantiated complaints in employee misconduct cases involving misuse of computers and state vehicles, conflicts of interest, falsification of documents, neglect of duty, and misconduct involving harassment and drug or alcohol use, according to the report. Many of the complaints were received by an ethics hotline set up by Craft’s office.

Though the findings have been turned over to Caltrans disciplinary officials, the report does not disclose details of each case and whether employees involved were reprimanded, suspended or fired.

Craft presented her report at this week’s meeting of the California Transportation Commission, which was attended by officials including David Kim, secretary of the California State Transportation Agency, which includes Caltrans.

“The role you play, the audit and investigation function, is so critically important to making sure that you hold all of us accountable and that we are conducting business in a legal and ethical way,” Kim said.

Commissioner Yvonne Burke said Caltrans management needs to take Craft’s findings seriously.

“We think that if there are issues that have to be addressed they should be addressed,” she told Caltrans officials.

Fong, who is vice chairman of the Assembly Transportation Committee, said taxpayers have lost patience with mismanagement and high taxes as “fundamental problems persist.”

“The status quo is not acceptable, and every Californian should be rightfully upset,” he said.