Report 2018-112 Recommendation 14 Responses

Report 2018-112: California Department of Veterans Affairs and Department of General Services: The Departments' Mismanagement of the Veterans Home Properties Has Not Served the Veterans' Best Interests and Has Been Detrimental to the State (Release Date: January 2019)

Recommendation #14 To: General Services, Department of

To comply with state law, DGS should begin depositing lease payments from leases of veterans home property into the General Fund so that those funds may be used to augment the appropriation of the veterans homes, and it should reimburse the General Fund for the amounts it inappropriately deposited into the property acquisition law money account. DGS should also annually notify the Department of Finance and the Legislature of the amount of lease payments it collects to ensure that those proceeds are appropriately directed to the veterans homes.

1-Year Agency Response

DGS agrees that the lease payments deposited into the property acquisition law money account should be returned to the General Fund (GF). As such, CalVet recently invoiced DGS for the past 3 fiscal years. DGS has processed those invoices and remitted a check to CalVet for $118,000. DGS accounting also invoiced and remitted a check to CalVet for FY 2018-19. Moving forward to facilitate the funds getting to the GF more quickly, DGS accounting has initiated an agreed upon process between DGS and CalVet accounting where DGS will send checks to CalVet quarterly.

California State Auditor's Assessment of 1-Year Status: Fully Implemented

DGS provided records showing that it remitted checks totaling $118,000 to CalVet for the lease payment proceeds that it collected from fiscal year 2015-16 through fiscal year 2017-18. It also provided records showing that it remitted a check to CalVet for the lease proceeds it collected in fiscal year 2018-19. Because the Legislature recently amended state law to require that proceeds from veterans home leases are to be deposited into the general fund rather than directed to the veterans homes, we do not expect DGS to notify the Department of Finance or the Legislature of the amount of lease payments it collects for the purpose of directing those payments to the veterans homes.

6-Month Agency Response

DGS agrees that the lease payments deposited into the property acquisition law money account should be returned to the General Fund. As such, CalVet recently invoiced DGS for the past 3 fiscal years. DGS is processing those invoices to move those funds in the amount of over $118,000 to the General Fund. DGS and CalVet accounting are working on the best process for resolving the Current Year 2018-19 and future lease payment funds to ensure the payments are deposited into the General Fund moving forward.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

DGS agrees that the lease payments deposited into the property acquisition law money account should be returned to the General Fund. As such, DGS is working to correct the past years' funds and transfer those funds to the General Fund. While the recommendation suggests that deposited lease payments should go to augment appropriations of the veterans homes, it is CalVet's position that this statutory requirement is an artifact of an outdated budget methodology that is no longer in use, and therefore, they recommend removal of the statutory requirement that deposited lease payments go to augment the current appropriations of the veterans homes.

California State Auditor's Assessment of 60-Day Status: Pending

Current state law requires that the veterans homes receive the proceeds from leases of veterans home property as an augmentation to their appropriation. Therefore, notwithstanding CalVet's position that this statutory requirement is outdated, unless and until the law changes, DGS should deposit the lease payments it collects to the General Fund and notify the Legislature and the Department of Finance that those amounts should be directed to the veterans homes.

All Recommendations in 2018-112

Agency responses received are posted verbatim.