By Kevin Kiley and Mark Gutglueck
The California State Auditor earlier this month released a report that offered an assessment of the expenditures by what are categorized as the state’s high risk agencies which indicates the state government is potentially squandering in the neighborhood of $76.5 billion.
The nonpartisan audit, released December 11, 2025, went beyond being outright gloomy to alarming in spotlighting California’s use and distribution of pandemic relief funds, its spending on social-welfare programs, homelessness programs and major infrastructure projects in a way that underscore misgivings long expressed by Governor Gavin Newsom’s critics about the way he is managing the most populous state in the Union.
Of immense fiscal consequence, according to the report, is the way in which $32 billion in COVID-19 relief funds was misspent or in some measure fraudulently applied through various emergency aid programs overseen by the Department of Finance; $2.5 billion was improper spent or utilized within CalFresh, the state’s food-stamp program; $18 billion was thrown into the state’s high-speed rail project without any scheduled spans of track actually being laid down; and a completely unaccounted-for amount of money of at least $24 billion and as much as $37 billion having been utilized to eradicate or otherwise address homelessness without any significant inroads against the problem being realized, while the incidence of homelessness throughout the state has risen some 20 percent.
In contrast, Governor Newsom, who has insisted in the past that California sets the standard for efficient, responsive and accountable government throughout the country, continues to maintain that he and the Democrat Party-controlled apparatus in Sacrament are apply sound fiscal management tools California’s operations.
In this year’s report pertaining to what the auditor’s office identifies as high-risk state agencies, State Auditor Grant Parks said he was broadening the number of agencies he defines as “posing a high-risk of serious detriment to the state or its residents. To be considered high risk, an agency must not only exhibit serious waste, fraud, abuse or mismanagement, but must also have failed to take adequate, corrective action.”
Though the auditor’s office is considered to be nonpartisan, Parks, who was appointed to the post by Governor Newsom in 2023, is a Democrat by party affiliation. For that reason, his scathing analysis of fiscal misdirection under the supervision of Newsom is considered to be telling.
Park identified eight separate state agencies as high risk, four of which were moved into the at-risk category during the Newsom Administration, which came into being on January 7, 2019, following his first election as governor in November 2018. One of those agencies is the Department of Social Services.
Among the findings of why the eight agencies are considered high risk is that massive payment errors in the Cal-Fresh Program could cost the state $2.5 billion in federal funds. Another ongoing problems is determining the eligibility of recipients for Medi-Cal benefits. Medi-Cal is California’s version of the federal Medi-Care program. According to Park, there are persisting problems in determining who is eligible, which extends to Medi-Cal continuing to make payments to people who do not meet the income threshold or who have left the state entirely. This has put over $2 billion in federal money that would otherwise come to the state at risk. Continued fraud and overpayment with unemployment insurance benefits are continuing to cost the state as much as $13 billion per year. This is in addition to $32 billion in fraud during the COVID years. The state has missed six straight deadlines for its annual comprehensive financial report, which puts the state’s credit rating as well as federal funding in jeopardy. The auditor’s report documents IT projects that languished for months or for years as antiquated systems beleaguer the state’s bureaucracy, despite Silicon Valley being a stone’s throw away. There are state entities that continue to “fall short of minimum standards for information security,” putting state government’s and private citizens’ data at risk to exposure, as well as leaving data relating to the state’s physical infrastructure vulnerable to hacking. The auditor found that there are 49 dams throughout the state that pose “an extremely high risk to life and property.” This risk is increasing, according to the auditor’s office. In the last two years the number of dams rated poor or unsatisfactory has increased by 73 percent.
Of the state’s 1,472 dams which play crucial roles in flood management, water storage and hydropower generation, 39 of them are in San Bernardino County.
According to the audit, the quality of government service is unacceptably low. With the California Department of Employment Development and Disability there is ongoing, continuing and mounting fraud and overpayments, while some of those entitled to legitimate payments have difficulty accessing the payments they are entitled to. The auditor found that a typical legitimate claimant had to call the Department of Employment Development and Disability two to five times per week to get assistance. The Department of Employment Development and Disability has failed to meet federal benchmarks for timely benefits for payments to those deserving benefits while there are thousands of examples of those who are defrauding the system who seem to have no trouble obtaining money to which they have no real claim.
According to the auditor’s report, “The Employment Development Department continues to struggle with improper payments, claimant service, and eligibility decision appeals. The Employment Development Department’s efforts to reduce unacceptably high levels of improper payments including fraudulent payments in its unemployment insurance program are not yet adequate. The Employment Development Department has not provided state residents with sufficient customer service, resulting in significant challenges to claimants obtaining unemployment benefits. The Employment Development Department has consistently failed to meet the federal standard for first payment timeliness. Many of the Employment Development Department’s unemplyment eligibility decisions are not upheld on appeal. The Employment Development Department’s eligibility decisions continue to be frequently overturned on appeal to the appeals board, which contributes to some unemployment insurance claimants waiting much longer for decisions than federal standards consider acceptable. In 2023 and 2024, the appeals board overturned or modified in favor of the claimant more than 43 percent of the issues claimants appealed.”
During the COVID years, the Department of Employment Development and Disability ordered 7,224 mobile devices consisting of hot spots and cell phones for employees who were not reporting to state offices so they could could continue to work. The state continued to pay for the mobile devices after the end of the pandemic while they were no longer being used costing the state millions of dollars.
According to the auditor’s office, one California Air Resources Board employee in particular was paid $171,446 in salary for 15 months after he or she was no longer working.
The auditor founded rampant nepotism within the Department of General Services and the California Department of Transportation relating to hiring practices. There were instances where managers gave interviewees answers to interview questions in advance of the oral phase of the hiring process to assist them in getting the jobs they had applied for.
With regard to California’s High Speed Rail project, accoring the California Auditor’s Office, the anticipated cost of the project has escalated to $128 billion, several more times than the original anticipated cost. No track has been laid for the project despite the state having spent $18 billion of the $128 billion thus far.
In highlighting the “systemic issues” plaguing the state, the report states “The state’s management of federal COVID-19 funds continues to be a high-risk issue. Late financial reporting remains a high-risk issue. The Department of Health Care Services has not adequately demonstrated progress to resolve problems with Medi-Cal eligibility determinations. The state’s information security remains a high-risk issue. The California Department of Technology has not made sufficient progress in its oversight of state information technology projects. California’s deteriorating water infrastructure and climate change may threaten the lives and property of its residents and the reliability of the state’s water supply.”
According to the report, the California Department of Social Services evinced “a high rate of errors in calculating CalFresh benefits” at a cost of up to $2.5 billion annually if not corrected and the issues with dams and water project delivery could become critical by 2043 if infrastructure needs are not addressed. e issues to avoid further financial and infrastructure challenges.
While Republicans cite the audit as a confirmation of “dysfunction” in the Newsom Administration, in which the state budget has grown by 50 percent, or $124 billion, in the last five years with a regression in the quality of government service, Newsom’s office, while acknowledging ongoing challenges in the Department of Social Services, asserted that with regard the auditor’s issues of concern, reforms are already under way and patience is required to train staff and finalize strategies for improvement.
Kevin Kiley is a member of the U.S. House of Representatives from California’s 3rd Congressional District. Mark Gutglueck is the publisher of the Sentinel.