California’s recent audit findings reveal a troubling landscape of noncompliance with federal program requirements, casting a shadow over the state’s administrative efficacy. Out of 22 federal programs evaluated by the state auditor, it appears that California failed to meet the basic compliance standards for seven, with the unemployment benefits program being particularly egregious in its “pervasive” shortcomings. This raises serious concerns about the potential jeopardization of crucial federal funding.
Deputy State Auditor Linus Li commented, “This report concludes that the State did not materially comply with certain requirements for seven of the 22 federal programs or clusters of programs (federal programs) MGO audited, including one program for which the noncompliance was pervasive.” He further noted that while some programs showed material compliance, ongoing deficiencies in accounting and administrative practices continue to undermine California’s internal controls over compliance with federal regulations.
The audit also uncovered that even in 2023, several years following California’s $55 billion misallocation of COVID-related benefits, the state may have issued “potentially ineligible payments” totaling nearly $200 million. Alarmingly, among 138 pandemic unemployment assistance claimants assessed, a staggering 66%—91 individuals—exhibited verification issues.
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California State Assembly Minority Leader James Gallagher expressed his frustration, stating, “While Gavin Newsom chases the national spotlight, Californians are left with an administration that can’t accomplish the basic functions of government. The federal government is right to take a look at this spending and decide if it’s appropriate to keep throwing resources at an administration that treats it like Monopoly money.”
Adding to the fiscal woes, last year, the state’s Legislative Analyst’s Office reported a structural deficit in the unemployment fund amounting to $2 billion annually. This comes on top of a $20 billion debt and $1 billion in yearly interest payments owed to the federal government. With the unemployment fund primarily financed through payroll taxes levied on employers and employees, the LAO warned that payroll taxes would need to skyrocket from the current $42 per employee earning $46,800 or more to an astronomical $889.20—over 21 times the existing rate.
