California tax board mishandled money, state controller’s audit finds

The California Board of Equalization is failing to properly handle the money it collects, leading to funds being deposited in the wrong accounts and the failure to collect debts owed to the state, according to a review released Wednesday by state Controller Betty T. Yee.

Yee, who serves on the tax board, said her controller staff found lax accounting and administrative controls in the handling of retail sales tax and use tax receipts, among other problems.

“The board is entrusted with making sure tax dollars get to the right places,” Yee said in a statement. “I am deeply concerned that the board is falling short in this crucial mission.”

The board brought in $48.5 billion in revenue from retail sales and use taxes in the fiscal year that ended in June 2014, representing more than 24% of state revenue, Yee said.

Her review found that inadequate controls over the sales tax fund resulted in the state general fund receiving an excess $47.8 million, while other funds were shorted that amount.

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Yee also faulted the board for failing to collect $1.5 million in debts, including 12 salary advances for $201,451 that were granted without employees signing forms requesting the money and without evidence that they were approved by supervisors.

Auditors found 99 improperly handled travel advances, including 67 totaling $133,045 that had not been repaid by employees within 60 days and for which the board did not send overpayment notifications or collection letters.

At the same time, mishandled payments due to vendors “opened the door to” potential “misuse of state funds.” However, there was no evidence that state employees illegally used state funds for their personal benefit, according to John Hill, a spokesman for Yee.

The tax board’s executive director, Cynthia Bridges, told Yee’s office that the board was committed to strengthening fiscal controls and communication. Board Vice Chairman George Runner said the issues addressed in the audit were the board’s highest priority.

“We are developing a strategy with the executive director and management team to resolve these issues rapidly,” Runner said in a statement. “California taxpayers should always have confidence that the state is managing their taxes efficiently.”

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