California Tax Board Faces Audit Into Hiring Practices

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By Laura Mahoney

California’s personnel board is auditing the State Board of Equalization’s hiring practices, adding to two audits already underway into the board’s procurement practices, enforcement, audits and taxpayer outreach activities.

SBOE Chair Fiona Ma (D) asked the State Personnel Board (SPB) to conduct the audit after receiving complaints from the tax agency staff about nepotism. A spokesman for the SPB declined to confirm it has begun the audit, but Ma said the agency began the routine audit ahead of schedule because of the complaints.

"Audits are an important tool to improve agency performance," she said in written statement to Bloomberg BNA Oct. 27. “I asked the State Auditor and the State Personnel Board for their assistance based on complaints I received and what I’ve witnessed. I hope their recommendations will make the BOE a more effective and transparent agency.”

Hiring, Exams, Contracts

The SPB has asked for information about all hiring, examinations offered for jobs and contracts for personal services at the tax board between April 1 and Oct. 1, 2016, according to an Oct. 17 e-mail from the SPB to tax board officials. The personnel board investigates and adjudicates alleged violations of civil service law that it receives from employees, applicants and members of the public, and regularly audits state departments for compliance with hiring rules.

Among the complaints Ma has received are anonymous e-mails from SBOE employees about multiple family members working together.

“Sometimes I am the only person not related to each other in the elevator,” one person wrote in a July e-mail to Ma.

Member George Runner (R) told Bloomberg BNA Oct. 28 he is also aware of complaints about nepotism, and board members have asked for a review of the board’s nepotism policy. He said he welcomes the audit.

Legislature Requested Audit

The review of the elected tax board’s hiring practices comes on top of an audit requested by the Legislature into the board’s enforcement, auditing and taxpayer outreach activities.

Lawmakers included $750,000 in the state budget for an auditing arm of the Department of Finance (DOF) to examine the SBOE in response to controversies and news reports about the board’s spending on office leases and outreach, and out of frustration with its lack of accountability about the large number ongoing staff vacancies.

The DOF audit is due to be completed in March 2017.

Procurement Audit

In addition, the Department of General Services (DGS) launched a routine audit of the SBOE’s procurement practices in July. DGS spokesman Brian Ferguson told Bloomberg BNA Oct. 27 the department is aware of recent controversy over office lease expenses for the four elected board members, including $130,000 for custom office furniture in former Chair Jerome Horton’s (D) Sacramento office, but the audit is routine.

“We are not investigating Mr. Horton per se,” Ferguson said.

The DGS audit began in late July and will take eight to 10 months, he said. In its audits, the DGS focuses on ensuring that state departments follow best business practices for contracting, procurement, insurance and risk, and other management functions.

Controller’s Audit

In addition to the three active audits, the SBOE is continuing to respond to an earlier audit by the State Controller’s Office finding inadequate handling of funds in various SBOE accounts. State Controller Betty Yee (D), who is also a member of the SBOE, issued her office’s audit in November 2015 showing the board has been mishandling millions of dollars in various funds including sales tax revenue, staff salaries, travel and vendor payments.

The DOF is also reviewing the tax agency’s response to the controller’s audit in its examination.

Ma took over as chair of the SBOE in February, following Horton’s tenure as chair from 2011 to 2016. The SBOE administers the state sales and use tax and about 30 other special taxes and fees, and adjudicates disputes between taxpayers and the state regarding sales and use tax, income tax and special taxes.

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 C. Tuck at rtuck@bna.com