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‘High Risk’ of Waste, Fraud in California COVID Spending, Auditor Warns.



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SACRAMENTO — California is getting so much money from the federal government because of the coronavirus — more than $71 billion — that the state’s auditor on Tuesday warned Gov. Gavin Newsom’s administration it is at high risk of waste, fraud and abuse.

In a letter to Newsom and legislative leaders, Elaine Howle said she was invoking a state law giving her authority to keep a close watch on 18 government agencies in charge of overseeing the spending.

“The swift appropriation of federal COVID-19 funds, along with the prior audit findings, raise the possibility that responsible state agencies do not have adequate processes in place to address these risks,” Howle wrote.

Howle’s office identified more than $71 billion in federal coronavirus aid that the state has either received or is expected to receive to operate 35 federal programs. More than half of that money. or $40 billion, is how much the state expects to borrow from the federal government to help pay unemployment benefits for millions of people who have lost their jobs because of the pandemic.

More than $10 billion is for the state’s Medicaid program, the low-income health insurance service that has seen its enrollment grow during the pandemic. The rest is divided up among a myriad of programs, including education, public health and housing.

History of Past Money Management Problems

California has had trouble managing federal money in the past. Howle noted nine programs that have received or are expected to receive coronavirus funding were recently audited, and six of them had issues with how they manage federal money, including the Department of Education and the Department of Social Services.

“These past audit findings highlight issues with departments’ abilities to manage federal funds appropriately even before the significant influx of federal COVID-19 funding,” Howle wrote.

The Department of Finance, which has received $9.5 billion in federal coronavirus aid and oversees spending at most state agencies, told Howle the extra monitoring is unnecessary. The agency noted its Office of State Audits and Evaluations has been helping state agencies and departments, including local governments, on how to use and track the federal money.

The agency has already assisted the six state programs that were cited in recent audits, Department of Finance spokesman H.D. Palmer said. Since April, the agency has been gathering spending data on a weekly basis from state departments.

“Since the onset of this pandemic, Finance has made oversight and transparency a priority in reporting how these funds are spent, which is why we’ve established processes to safeguard the expenditure of these funds and comply with all of the related federal requirements,” Palmer said.

Howle wrote that she appreciates the agency’s perspective, but she said a “substantial risk” still exists.