California State Tax Board Misallocates Tens of Millions of Dollars: Audit

An audit of California's Board of Equalization found that the agency misallocated tens of millions of dollars that it can't explain, and made unusual moves like using well-paid tax auditors for "parking lot duty" at a promotional event.

The soon-to-be released audit obtained by the Sacramento Bee and detailed in a story Friday found that one of the board's elected leaders redirected civil servants to his own projects and that the board provided misleading information to lawmakers.

It also said the board had seen a serious rise in spending on activities that appear unrelated to its role, which is administering state taxes.

"Certain board member practices have intervened in administrative activities and created inconsistencies in operations, breakdowns in centralized processes and in certain instances result in activities contrary to state law and budgetary and legislative directives," the audit says.

The audit by the state Department of Finance that is scheduled to be made public Thursday focused especially on board member Jerome Horton. It says that he has reassigned public employees to work for him, effectively swelling his political staff. He also held outreach events that strayed from the board's mission and opened a call center in his district without the consent of other board members.

The audit also found that 113 employees of the board helped with parking and registering guests at an event called Connecting Women to Power in Escondido that was sponsored by board member Diane Harkey.

Harkey said the audit was inaccurate, and the event was perfectly justified.

"The audit narrative is really wrong," Harkey told the Bee. "I am merely appearing at this agency event. To the extent that there's something spent or diverted that should not be, that will be addressed."

Horton's office did not immediately respond to requests for comment from either the Bee or The Associated Press. But he has previously publicly defended his outreach efforts as a way to reach a large number of taxpayers.

The board won't release its official response until the audit is made public.

It is the first of several audits to be released in coming months of the agency, which administers sales and other state taxes and handles appeals of state income tax issues.

The audits were prompted by an initial 2015 audit by state Controller Betty Yee that found the board had misallocated $47.8 million in sales tax revenue.

Contact Us