Audit Finds Calif. Correctional Health Care Services Wasted $3.2M

The California Correctional Health Care Services wasted more than $3.2 million in state funds by failing to seek competitive bids for electrical upgrades at state prisons, according to a report released Thursday by the California State Auditor, the AP/Sacramento Bee reports (AP/Sacramento Bee, 8/27).

CHCS focuses on improving health care for California inmates.

Details of CHCS Findings

In 2011, CHCS awarded the contract for electrical upgrades using a master service agreement, rather than a competitive bidding process, which is required under state law. Under a master service agreement, state agencies can select approved contractors from a list and avoid the bidding process (Young, Sacramento Business Journal, 8/27).

Of the total $17 million that CHCS paid for the project:

• More than $3.2 million was paid to a contractor "to do nothing more than process invoices of the subcontractor, who performed all of the work"; and
• $1.6 million was paid in advance for services that were not delivered until a year later, in violation of state rules that prohibit advance payments.

In addition, the agency failed to ensure that goods and services under the contract were delivered in an effective manner.

The audit recommends that CHCS:

• Determine whether disciplinary action is necessary as a result of the procurement mistake;
• Develop a process to make sure master service agreements are only used when appropriate;
• Ensure that contractors submit projects to the state Department of Technology for review when necessary;
• Make sure that all goods and services that have been paid for are received; and
• Offer counseling and training to staff involved in project procurement.

CHCS' Response

CHCS said it "acted in good faith" during the procurement procedure (California State Audit Report, August 2015).

A CHCS spokesperson said the agency mistakenly believed the master service agreement was the appropriate method of awarding the contract.

In addition, Joyce Hayhoe, CHCS director for legislation and communications, said the bidding process would have been different for each of the state's 35 prisons, which would have made the process "extremely cumbersome and time consuming."

Hayhoe also said the agency did not review whether goods and services under the contract were effectively delivered because it was waiting for permits from a fire marshal.

In response to the audit, Hayhoe said the agency has begun reforming its practices and is providing additional training to its staff (Sacramento Business Journal, 8/27).

CHCS determined that additional training for the agency's staff was more appropriate than disciplinary action.

Other Audit Findings

Meanwhile, the audit also found that the California Department of Corrections and Rehabilitation and CHCS improperly paid a total of $96,245 over nearly two years to three psychologists.

The compensation was provided for "being on call for returning to work after their shifts ended to perform additional duties," according to the audit.

In addition, it found that the Department of Veterans Affairs' Chula Vista Veterans Home wasted $49,937 by purchasing a piece of equipment that rarely was used. The report found that renting the equipment would have been "much less" costly (California State Audit Report, August 2015).