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CDCR - Poor Internal Controls Allowed Facilities to Overpay Employees, CA State Auditor, 2009

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Department of Corrections
and Rehabilitation:
Its Poor Internal Controls Allowed Facilities to
Overpay Employees for Inmate Supervision
November 2009 Report I2009-0702

CALIFORNIA
S TAT E A U D I T O R

The first five copies of each California State Auditor report are free. Additional copies are $3 each, payable by
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California State Auditor
Bureau of State Audits
555 Capitol Mall, Suite 300
Sacramento, California 95814
916.445.0255 or TTY 916.445.0033
OR
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For questions regarding the contents of this report,
please contact Margarita Fernández, Chief of Public Affairs, at 916.445.0255.

Elaine M. Howle
State Auditor

CALIFORNIA STATE AUDITOR

Doug Cordiner
Chief Deputy

Bureau of State Audits

555 Capitol Mall, Suite 300

S a c r a m e n t o, C A 9 5 8 1 4

November 17, 2009	

916.445.0255

916.327.0019 fax

w w w. b s a . c a . g o v

Investigative Report I2009-0702

The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
State Capitol
Sacramento, California  95814
Dear Governor and Legislative Leaders:
Pursuant to the California Whistleblower Protection Act, the State Auditor’s Office presents
its investigative report concerning overpayments the Department of Corrections and
Rehabilitation (Corrections) made to its employees for inmate supervision. After an earlier
investigation we released in October 2008 revealed improper payments Corrections made to
employees at one correctional facility, we initiated an investigation to determine if it had made
such payments to employees at other correctional facilities.
This report concludes that from March 2008 through February 2009, Corrections improperly
granted $34,512 in payments for inmate supervision to 23 of the 153 employees whose records
we reviewed. These 23 employees worked at five of the six facilities we visited. In addition, we
estimated that Corrections may have improperly paid as much as $588,376 to its employees
throughout the State for inmate supervision during this 12-month period. We believe that these
improper payments were directly attributable to Corrections lacking the controls necessary to
ensure that employees supervising inmates satisfied all of the requirements for receiving the
payments. In addition, we found that for the most part Corrections had not initiated collection
efforts to recover the improper payments it had identified after our October 2008 investigation.
Respectfully submitted,

ELAINE M. HOWLE, CPA
State Auditor

California State Auditor Report I2009-0702

November 2009

Contents
Investigative Results
Results in Brief	

1

Investigative Approach	

3

Facts and Analysis	

5

Recommendations	

12

Appendix
The Investigations Program	

15

Summary of Agency Response and State Auditor’s Comments	

17

vii

California State Auditor Report I2009-0702

November 2009

Investigative Results
Results in Brief

Investigative Highlights…

The California Whistleblower Protection Act (Whistleblower
Act) empowers the Bureau of State Audits (bureau) to investigate
and report on improper governmental activities by agencies and
employees of the State.1 Under the Whistleblower Act, an improper
governmental activity is any action by a state agency or employee
during the performance of official duties that violates any state
or federal law or regulation; that is economically wasteful; or that
involves gross misconduct, incompetence, or inefficiency.

Our investigation of inmate supervision
payments made by the Department of
Corrections and Rehabilitation (Corrections)
revealed the following:

After an earlier investigation by the bureau revealed that the
Department of Corrections and Rehabilitation (Corrections) had
made improper payments to a particular class of employees for
supervising inmates at one correctional facility, we launched an
investigation to determine whether it also made such payments
to additional classes of employees at other correctional facilities.
We found that over the 12 months from March 2008 through
February 2009, Corrections overpaid employees for inmate
supervision at five of the six correctional facilities we visited. These
improper payments, which 23 of the 153 employees we examined
received, totaled $34,512. We identified these employees by sampling
inmate supervision payments during our visits. Based on our sample,
we estimated that Corrections may have improperly paid as much
as $588,376 to its employees statewide during the 12‑month period
we reviewed. These improper payments resulted from Corrections
having insufficient controls to ensure that its employees satisfied all
of the requirements for receiving extra pay for inmate supervision.
We also found that, except in a few instances, Corrections had not
initiated collection efforts to recover the improper payments it
identified during its follow up to our previous investigation.
Background
The mission of Corrections is to enhance public safety through
safe and secure incarceration of offenders, effective parole
supervision, and rehabilitative strategies that help offenders
successfully reintegrate into communities upon their release. As
part of its rehabilitation process, Corrections employs inmates
in a variety of positions inside its correctional facilities. The
California Code of Regulations, Title 15, Section 3040, states
that every able‑bodied inmate in custody is subject to a work
obligation. According to Corrections, inmates can benefit from
1	

For more information about the bureau’s investigative authority, please refer to the Appendix.

»» Corrections overpaid 23 employees a
total of $34,512 over a 12‑month period
at five of the six correctional facilities
we visited.
»» Based on our sample, Corrections
may have improperly paid as much as
$588,376 to its employees statewide
during the same 12‑month period.
»» Corrections failed to implement sufficient
controls to ensure that employees who
received inmate supervision pay met
the requirements.
»» Except in a few instances, Corrections
had not initiated collection efforts to
recover improper payments it identified
subsequent to our initial investigation.

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California State Auditor Report I2009-0702

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employment by earning work credits that reduce the amount of
time they must serve in custody and by earning an hourly wage.
Inmate employment benefits correctional facilities by enabling
them to operate more self‑sufficiently, by reducing violence, and by
providing productive activities for inmates.
Corrections and a limited number of other state departments
regularly assign non‑custody staff to supervise inmates when
those inmates are performing their work obligations. For example,
office technicians at Centinela State Prison act as supervisors
for two to four inmate clerks, providing guidance and delegating
responsibilities to them. State employees in certain classifications
who are assigned to supervise inmates in addition to performing
their regular responsibilities are entitled to a pay differential
ranging from $190 to $400 per month, provided they meet specific
requirements. The amount of additional pay an employee receives
is dependent on the employee’s classification. Table 1 provides
examples of job classifications that are eligible to qualify for the pay
differential and the amounts individuals in each classification are
allowed to receive.
Table 1
Examples of Job Classifications and the Corresponding Pay Differentials for
Inmate Supervision
JOB CLASSIFICATION

Chaplain

Monthly
PAY DIFFERENTIAL

$325

Chief psychologist

360

Clinical staff psychologist

325

Cook specialist I

190

Correctional case records manager

360

Office technician

190

Supervising registered nurse

400

Source:  Department of Personnel Administration’s Pay Differential 67.

The collective bargaining agreements between the State and
employee bargaining units 1, 4, 15, and 19 set forth the primary
requirements for receiving the pay differential for supervising
inmates. The text box on the following page outlines these
requirements, which apply to all applicable bargaining units.
The Department of Personnel Administration (Personnel
Administration) has determined that the pay differential may also
apply to employees having direct supervisory responsibility over
other employees who meet the conditions outlined in the text box.

California State Auditor Report I2009-0702

November 2009

In other words, a supervisor whose subordinate
employees receive the pay differential may also
qualify to receive it, even if that supervisor does not
directly supervise inmates.

Requirements for receiving the pay differential
for inmate supervision:
•	 An employee must have regular, direct responsibility for
supervising the work of at least two inmates who jointly
(or collectively) work at least 173 hours each month. The
employee must provide the inmates with on-the-job
training, and evaluate the inmates’ work performance.

In providing employees with this additional earned
pay, Corrections has a duty under the California
Government Code, Section 13403(a)(3), to maintain
a system of authorization and record‑keeping
•	 Supervised inmates must perform work that would
procedures that provide effective accounting
otherwise be performed by civil service employees.
controls over these payments. However, in
Source:  Department of Personnel Administration’s Pay
October 2008, when we conducted an investigation
Differential 67.
at the R. J. Donovan Correctional Facility near
San Diego, we found that Corrections improperly
paid nine office technicians a total of $16,530 for
supervising inmates over a three‑year period. Following our report’s
release, the director of adult institutions for Corrections instructed
its facilities to conduct a review of employees receiving the pay
differential to ensure that the additional pay was appropriate. We
initiated our current investigation based on indications that the
improper inmate supervision payments that Corrections made to
its employees were not limited to a certain staff classification at
the R. J. Donovan Correctional Facility, but rather were a symptom
of a general failure of internal controls that affected numerous job
classifications across all facilities administered by Corrections.
Investigative Approach
To determine the extent of the improper payments, we conducted
site visits at six correctional facilities and reviewed a sample of
payments at each site. The six facilities we selected were California
State Prison, Sacramento (CSP Sacramento); California State
Prison, San Quentin (CSP San Quentin); California State Prison,
Corcoran (CSP Corcoran); the California Men’s Colony (Men’s
Colony); the California Rehabilitation Center (Rehabilitation
Center); and Centinela State Prison. Figure 1 on the following page
shows the geographic locations of these facilities. Table 2 on page 5
displays the number of inmates and also the number of employees
who received the pay differential for inmate supervision at each of
these six facilities.
At these six facilities, 371 employees received a total of
3,737 monthly differential payments for supervising inmates for
the 12‑month period from March 2008 through February 2009.
We reviewed a random sample of 200 of these payments to
ensure that the employees met the requirements for receiving the
pay differential. The random sample of 200 payments included
payments to a total of 153 employees (some employees received

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California State Auditor Report I2009-0702

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more than one of the payments in our sample). Our primary goal
in selecting this sample was to obtain data that would allow us to
accurately estimate the extent to which Corrections may have made
improper payments at its facilities throughout the State.
Figure 1
Map of Selected Facilities
Adult facilities selected for investigation
Other adult facilities

California State Prison (CSP), Sacramento
CSP San Quentin

CSP Corcoran

California Men’s Colony

California Rehabilitation Center

Centinela State Prison

Source:  California Department of Corrections and Rehabilitation’s Web site.

We also wanted to determine how frequently employees
received improper payments and identify employees who received
multiple improper payments. Therefore, in addition to examining
the payments in our sample, we further examined all payments
made from March 2008 through February 2009 to each of the
153 employees. This expanded examination allowed us to identify
improper payments outside our original sample.

California State Auditor Report I2009-0702

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Table 2
Number of Inmates and Number of Employees Receiving the Pay Differential
at Selected Facilities
NUMBER
OF INMATES

NUMBER OF
EMPLOYEES RECEIVING
the Pay DIFFERENTIAL

California Men’s Colony

6,484

113

California Rehabilitation Center

4,344

50

California State Prison, Corcoran

5,631

57

California State Prison, Sacramento

2,959

39

California State Prison, San Quentin

5,239

56

Centinela State Prison

4,826

56

FACILITY

Sources:  California Department of Corrections and Rehabilitation’s Web site and Bureau of State
Audits’ analysis of State Controller’s Office payment records.

To assist us in determining whether payments were appropriate,
we obtained inmate time sheets and pay sheets from each of
the six correctional facilities. If we were unable to locate both the
inmate time sheet and the pay sheet related to a particular payment,
we used whichever document we had to provide support for the
pay differential. If we were unable to locate either document, we
assumed that the pay differential had not been warranted.
In our review, we determined that employees in the kitchens oversee
teams of inmates who work to prepare food for the facilities. Thus,
we felt confident that kitchen staff supervised at least the minimum
number of inmates who worked the required number of hours and
did not classify any payments made to kitchen staff as improper.
Facts and Analysis
From March 2008 through February 2009, Corrections improperly
granted $34,512 in pay differentials for inmate supervision to 23 of
the 153 employees whose records we reviewed. These 23 employees
worked at five of the six facilities we visited. In addition, based on
the improper payments identified in our sample, we estimated that
Corrections may have improperly paid as much as $588,376 to its
employees throughout the State for inmate supervision during this
12‑month period. We believe that these improper payments were
directly attributable to Corrections lacking the controls necessary
to ensure that employees supervising inmates satisfied all of the
requirements for receiving the pay differential. In addition, we
found that for the most part Corrections had not initiated collection
efforts to recover the improper payments it identified after our
October 2008 investigation.

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California State Auditor Report I2009-0702

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Corrections Overpaid 23 Employees for Inmate Supervision
As previously discussed, we examined Corrections’ payments for
inmate supervision to 153 employees whom we selected based on
their inclusion in our random sample of 200 payments made from
March 2008 through February 2009. We found that Corrections
had overpaid 23 of these employees by a total of $34,512. The
overpayments to the individual employees ranged from $380 to
$3,900. Table 3 shows that the Rehabilitation Center improperly
paid its employees $10,715, the largest amount among the facilities
we visited. We found no improper payments at CSP Sacramento.
Table 3
Number and Amount of Improper Payments by Facility From March 2008
Through February 2009

Facility

NUMBER OF EMPLOYEES
WHO RECEIVED
NUMBER OF
IMPROPER PAYMENTS IMPROPER PAYMENTS AMOUNT overpaid

California Men’s Colony

5

24

$4,780

California Rehabilitation Center

6

50

10,715

California State Prison, Corcoran

5

33

6,143

California State Prison, Sacramento

0

0

0

California State Prison, San Quentin

3

19

3,524

Centinela State Prison

4

35

9,350

23

161

Totals

$34,512*

Sources:  Bureau of State Audits’ analysis of documents provided by the six facilities and of records
obtained from the State Controller’s Office.
*	 The Department of Corrections and Rehabilitation has already collected $2,293 of this amount
after initially issuing the improper payments.

In our preliminary review, we identified payments for a particular
month as potentially improper when (1) the documentation
indicated that the employee had not supervised two inmates; (2) the
documentation indicated that, although the employee supervised
at least two inmates, the inmates did not work for at least 173 hours
collectively; or (3) we could not find any documentation indicating
that the employee supervised inmates.2
Before categorizing these payments as improper, we further
considered whether they were isolated occurrences and whether the
employees still engaged in “regular” supervision as stated in the pay
differential requirements. Because neither the employees’ bargaining
2	

When examining payments Corrections made to employees who qualified because they had
direct supervisory responsibility over other employees who supervised inmates, we reviewed
documentation to ensure their subordinates met the requirements.

California State Auditor Report I2009-0702

November 2009

unit agreements nor Personnel Administration had defined what
“regular” supervision means, we established what we believe are
reasonable criteria for engaging in regular supervision. Specifically,
we categorized potentially improper payments as improper when an
employee failed to meet the number‑of‑inmates/ number‑of‑hours
requirements for either two or more consecutive months or for more
than four months overall during the 12‑month period. We categorized
all other potentially improper payments as appropriate because we
believed the employees had engaged in “regular” supervision.
An example of payments we categorized as improper involved a
chaplain at one of the facilities who failed to meet the requirements
for the pay differential for nine of the 12 months we tested. For
eight of the months, the chaplain did not supervise two inmates.
The documentation we reviewed for the ninth month indicated
that, although he supervised two inmates, collectively they worked
fewer than the 173 hours required. In total, the chaplain received
$2,925 in improper payments for these nine months.
During a One‑Year Period, Corrections May Have Overpaid Its Employees
by as Much as $588,376
One goal of our investigation was to estimate the total amount
Corrections might have overpaid its employees statewide for inmate
supervision over the period of our review. To arrive at this estimate,
we performed a statistical analysis of the findings from our sample
of 200 payments, which are summarized in Table 4 and Figure 2 on
the following page.
As shown in Figure 2, 9.8 percent of the total dollar amount
represented by the differential payments in our sample consisted of
improper payments.3 Based on this percentage, we estimated that
overall, the improper payments made to Corrections’ employees
at these six facilities totaled between $43,552 and $107,864 from
March 2008 through February 2009.4 If the percentage of improper
payments at Corrections’ remaining facilities is consistent with the
percentage found at the facilities we visited, we project that in total
Corrections may have overpaid its employees between $237,711 and
$588,376 in pay differentials during this 12‑month period.

3	

Although the 19 improper payments identified in our sample represent 9.5 percent of the
200 sampled payments, the dollar amount of the improper payments ($4,035) represents
9.8 percent of the total amount of the 200 payments ($41,160). This difference results from the
fact that employees who receive the pay differential are paid varying amounts depending on
their classifications.
4	 We have confirmed this estimate with a statistician and are 95 percent confident that the actual
improper amount falls within this range.

A chaplain at one facility failed
to meet the requirements for
nine months and received $2,925 in
improper payments.

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Table 4
Number of Proper and Improper Differential Payments in Our Sample
FACILITY

SAMPLE SIZE

NUMBER OF
PROPER PAYMENTS

NUMBER OF
IMPROPER PAYMENTS

California Men’s Colony

61

57

4

California Rehabilitation Center

27

21

6*

California State Prison, Corcoran

30

27

3

California State Prison, Sacramento

21

21

0

California State Prison, San Quentin

31

30

1

Centinela State Prison
Totals

30

25

5

200

181

19

Source:  Bureau of State Audits’ analysis of documents provided by the six facilities.
*	 The Department of Corrections and Rehabilitation collected one of these payments from an
employee five months after issuing the improper payment.

Figure 2
Percentages of Proper and Improper Differential Payment Amounts in
Our Sample
Improper payments—$4,035 (9.8%)

Proper payments—$37,125 (90.2%)

Sources:  Bureau of State Audits’ analysis of documents provided by the facilities and of data
obtained from the State Controller’s Office.

Corrections Lacked Sufficient Controls to Ensure That Only
Employees Satisfying Inmate Supervision Requirements Received the
Pay Differential
Five of the six facilities we visited had few or no policies in place
during the period we reviewed to ensure that employees receiving
the pay differential for supervising inmates met the necessary
requirements each month. Specifically, the Rehabilitation Center,
the Men’s Colony, CSP Sacramento, CSP Corcoran, and Centinela

California State Auditor Report I2009-0702

November 2009

State Prison confirmed that they did not conduct regular reviews or
have other similar controls in place. The Rehabilitation Center and
CSP Corcoran asserted that they relied on an employee’s supervisor
to notify personnel if the employee was no longer meeting the
requirements. However, because supervisors also qualify to receive
the pay differential based solely on their subordinate employees
qualifying, the supervisors may have had little incentive to report
to the personnel office when their subordinates did not meet the
requirements. The 83 improper payments we identified at the
Rehabilitation Center and CSP Corcoran during the 12‑month
period we reviewed strongly suggest that this control is inadequate.
The remaining facility we visited, CSP San Quentin, responded
to our investigation of the R. J. Donovan Correctional Facility
by implementing a policy requiring the employees in bargaining
unit 4 (which includes office technicians, the classification we
investigated at R. J. Donovan Correctional Facility) to submit
inmate time sheets along with their own time sheets each month.
According to the personnel officer at CSP San Quentin, personnel
staff are responsible for reviewing the two sets of time sheets to
ensure that the employees qualify for the extra pay. The policy also
required the employees to resubmit the forms that authorized them
to supervise inmates, which are kept in the employees’ personnel
files. Even though this policy took effect in October 2008, our
expanded review found that among the 19 improper payments
made to three employees over the 12‑month period at this
facility, two were made to an office assistant after the date CSP
San Quentin put the policy into effect. This suggests that the facility
is not following the controls it established. Moreover, the policy
applies only to employees in one bargaining unit rather than to all
employees who receive the pay differential. The facility’s personnel
officer stated that the policy applies only to bargaining unit 4
because our investigation of the R. J. Donovan Correctional Facility
included only employees from that bargaining unit.
We also noted weaknesses in document retention at the facilities in
our review. Staff at most of the facilities did not consistently retain
inmate time sheets, and consequently a significant number of these
were missing or misplaced. Problems with document retention may
have been exacerbated by the fact that at least three of the facilities
we visited failed to clearly communicate their retention policies
to their employees. For example, an official at CSP San Quentin
stated that an internal review of inmate pay records found little
uniformity throughout the facility in the completion and retention
of inmate time sheets. The official stated that the review found that
employees charged with supervising inmates had not received any
training on how to supervise the inmates and how to complete time
sheets. We found similar weaknesses in the record retention policy
at the Men’s Colony. An official stated that the policy required

Five of the six facilities we visited
had few or no policies in place to
ensure that employees receiving
the pay differential for supervising
inmates met the necessary
requirements each month.

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employees to maintain inmate time sheets for one year but did not
instruct staff to store the documents at their respective work sites.
According to the official, an internal review found that many of the
employees forwarded all inmate time sheets to records storage and
were unable to provide copies when requested. When we attempted
to review the documents in records storage, we found them stored
in an unorganized, haphazard fashion, making it difficult to locate
supporting documentation for the payments made.5
Finally, we found that many employees’ personnel files did not
contain certain required documents related to inmate supervision.
Before an employee receives the inmate supervision pay differential,
Personnel Administration requires that he or she provide a
completed medical clearance form. All six facilities we visited
confirmed that they require that this form—along with inmate duty
statements and an authorization form approving the supervision
of inmates—be maintained in the employees’ personnel files.
However, we found that 46 (30 percent) of the 153 employees
identified by our sample did not have the required forms in
their personnel files. Although we did not categorize payments
to these employees as improper based solely on the absence of
these forms, Corrections has less assurance that the employees
whose forms were missing met the initial requirements necessary to
receive the pay differential.
Corrections Has Yet to Collect Most of the Overpayments It Identified
Subsequent to Our Initial Investigation

Because Corrections failed to
give its facilities specific, written
instructions, the reviews conducted
by the facilities we examined
lacked uniformity.

After our October 2008 investigation of the R. J. Donovan
Correctional Facility, Corrections instructed its facilities to review
the records of employees receiving the pay differential to ensure
that the extra pay was appropriate. However, because Corrections
failed to give its facilities specific, written instructions, the reviews
conducted by the facilities we examined lacked uniformity.
Moreover, as of August 2009, Corrections was unable to produce
any type of report or written summary of the reviews completed
by its facilities. Consequently, we compiled our own list (as shown
in Table 5) of the individuals whom the six facilities in our sample
identified as overpaid, as well as any subsequent actions the
facilities took to collect those funds.

5	

The Men’s Colony has since clarified its documentation retention policies. However, the revised
policy took effect in March 2009, after the 12‑month period we reviewed.

California State Auditor Report I2009-0702

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Table 5
Corrections’ Efforts to Collect Improper Payments by Facility
NUMBER OF
EMPLOYEES identified
in INTERNAL REVIEWS
as paid improperly

TOTAL AMOUNT
OF overPAYMENTS

ACCOUNTS
RECEIVABLE ESTABLISHED?

COLLECTION
EFFORT STARTED
ON OR BEFORE
AUGUST 2009?

California Men’s Colony

6

$4,189

No

No

California Rehabilitation Center

2

3,040

Yes

Yes

California State Prison, Corcoran

4

2,495

Yes

No

FACILITY

California State Prison, Sacramento

1

190

No

No

California State Prison, San Quentin

3

2,470

Yes

No

Centinela State Prison

4

12,330

No

No

Source: Documentation obtained from officials at the six facilities.

As shown, all six facilities we investigated found one or more
employees who received the pay differential despite failing to meet
the necessary requirements. However, only three of the facilities
set up accounts receivable to recover the overpayments. As of
August 2009, only the Rehabilitation Center had begun collecting
funds from the identified employees. In addition, as of May 2009
Corrections had recovered only $2,090 of the $16,530 in improper
payments that we identified during our previous investigation of
the R. J. Donovan Correctional Facility. A directive by Corrections
is largely responsible for the failure of the facilities to start and/ or
complete the recovery process. In August 2009 Corrections
informed us that it had instructed its facilities to suspend further
action against employees who had not met the requirements for
the pay differential. It further informed us that in July 2009 it
sent correspondence to Personnel Administration requesting a
legal opinion on a number of issues related to the pay differential
requirements. These issues include whether an employee is required
to supervise two inmates for the full 173 hours even if one of the
inmates is unavailable for a portion of the month and whether
the pay differential is affected by an employee’s absence because of
vacation, sick leave, or worker’s compensation.6
As instructed, CSP Sacramento, CSP San Quentin, CSP Corcoran,
Men’s Colony, and Centinela State Prison suspended their
collection efforts. Although CSP San Quentin and CSP Corcoran
had previously established accounts receivable for their identified
employees, they had not proceeded with the recovery process as

6	

We based our findings on the number of hours the inmates worked and did not penalize
employees for absences such as vacation or sick leave.

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of August 2009. Corrections allowed the Rehabilitation Center
to continue its collection of overpayments because it had begun
collecting them prior to the announcement of the suspension.
Recommendations
To ensure that employees who receive the pay differential supervise
the required number of inmates for the required number of hours,
Corrections should take the following agency‑wide actions:
•	 Require employees at all of its facilities to submit copies of the
supervised inmates’ time sheets to their personnel offices each
month along with their own time sheets. Supervisors who qualify
for the pay differential because their subordinates supervise
inmates should submit their own time sheets and the names of
those they supervise. Personnel staff should use these documents
to verify each employee’s eligibility to receive the pay differential.
•	 Take steps to develop clearer requirements for receiving the pay
differential that specifically define what constitutes the “regular”
supervision of inmates.
•	 Instruct employees who supervise inmates on how to qualify and
remain qualified for the pay differential. The instruction should
include what documentation the employees need to complete,
the length of time they should retain this documentation, the
location where they should store the documentation, and
the actions they should take when they no longer meet the pay
differential requirements.
•	 Conduct training for its personnel office staff to ensure that they
are familiar with the requirements and policies associated with
the inmate supervision pay differential.
To ensure that all overpayments are returned to the State,
Corrections should initiate accounts receivable for the employees
identified as receiving improper payments and should begin
collection efforts for these accounts.

California State Auditor Report I2009-0702

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We conducted this review under the authority vested in the California State Auditor by Section 8547
et seq. of the California Government Code and pursuant to applicable investigative standards.
Respectfully submitted,

ELAINE M. HOWLE, CPA
State Auditor
Date:	

November 17, 2009

Legal Counsel:	

Steven Benito Russo, JD, Chief of Investigations

Investigative Staff:	

Russ Hayden, CGFM, Manager of Investigations
Lane Hendricks, MPA, CFE
Christina Animo
Beka Clement, MPA
Aaron Fellner, MPP
Richard Fry, MPA

For questions regarding the contents of this report, please contact
Margarita Fernández, Chief of Public Affairs, at 916.445.0255.

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Blank page inserted for reproduction purposes only.

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Appendix
THE INVESTIGATIONS PROGRAM
The California Whistleblower Protection Act (Whistleblower
Act) contained in the California Government Code, beginning
with Section 8547, authorizes the Bureau of State Audits (bureau),
headed by the state auditor, to investigate allegations of improper
governmental activities by agencies and employees of the State. The
Whistleblower Act defines an improper governmental activity as
any action by a state agency or employee during the performance
of official duties that violates any state or federal law or regulation;
that is economically wasteful; or that involves gross misconduct,
incompetence, or inefficiency.
To enable state employees and the public to report suspected
improper governmental activities, the bureau maintains a toll‑free
Whistleblower Hotline: (800) 952‑5665 or (866) 293‑8729 (TTY).
The bureau also accepts reports of improper governmental activities
by mail and over the Internet at www.bsa.ca.gov.
Although the bureau conducts investigations, it does not
have enforcement powers. When it substantiates an improper
governmental activity, the bureau reports confidentially the details
to the head of the state agency or to the appointing authority
responsible for taking corrective action. The Whistleblower Act
requires the agency or appointing authority to notify the bureau of
any corrective action taken, including disciplinary action, no later
than 30 days after transmittal of the confidential investigative report
and monthly thereafter until the corrective action concludes.
The Whistleblower Act authorizes the state auditor to report
publicly on substantiated allegations of improper governmental
activities as necessary to serve the State’s interests. The state
auditor may also report improper governmental activities to other
authorities, such as law enforcement agencies, when appropriate.

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November 2009

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California State Auditor Report I2009-0702

November 2009

Summary of Agency Response and
State Auditor’s Comments
The Department of Corrections and Rehabilitation (Corrections)
agreed with some of our findings but disagreed with others. In
particular, it agreed that some of its facilities have inadequate
internal controls for the inmate supervision pay authorization
process and document retention. However, Corrections believes
that our estimate that it may have overpaid its employees as much
as $588,376 is overstated and not substantiated.
We disagree with Corrections’ assertion and are confident
that our estimate is accurate and fully substantiated. We based
our projection on a sound statistical analysis that included an
acceptable confidence level and a small margin of error. Further, the
evidence we obtained fully supported the findings that we used to
create the projection.
Corrections also provided us with a copy of the Department of
Personnel Administration’s (Personnel Administration) response
to its questions regarding the pay differential and inferred that we
applied the requirements for receiving the differential too strictly.
However, most of Personnel Administration’s response did not
impinge on our investigation. Specifically, Personnel Administration
stated that employees are probably not barred from receiving the
differential if they are absent from work for a portion of the pay
period. It also stated that in determining if employees meet the
requirements for receiving the pay differential, Corrections should
count the inmates’ work hours rather than the employees’ work
hours. We based our findings on the number of hours the inmates
worked and did not penalize employees for absences from work.
However, we disagree with Personnel Administration’s opinion that
employees are probably not barred from receiving the differential
if an inmate they supervise is temporarily unable to work the
entire 173 hours in a pay period. It argued that an inmate must
only “substantially replace” a civil service employee for 173 hours
but not necessarily work for those 173 hours. First, Personnel
Administration failed to take into account that employees should
supervise at least two inmates who collectively work the 173 hours.
Second, we fail to see how inmates can substantially replace
civil service employees while they are doing anything other than
work that civil service employees would normally do. Therefore,
we based our findings strictly on the number of hours inmates
worked in a capacity that substantially replaced civil service
employees. Nevertheless, as discussed in our report, we did not
categorize isolated failures to meet the 173‑hour requirement as
improper because in these instances, the employees regularly

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November 2009

met the requirements. Only when employees failed to meet the
requirements in more than four months during the 12‑month
period or in two or more consecutive months did we identify the
payments as improper.
Corrections reported that it is establishing a task force of key staff
to fully review Personnel Administration’s opinion and to establish
necessary guidelines and internal controls. It also reported that
once the task force completes its assigned responsibilities, it will
recover the funds it improperly paid to its staff.

California State Auditor Report I2009-0702

November 2009

cc:	

Members of the Legislature
Office of the Lieutenant Governor
Milton Marks Commission on California State
Government Organization and Economy
Department of Finance
Attorney General
State Controller
State Treasurer
Legislative Analyst
Senate Office of Research
California Research Bureau
Capitol Press

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