California Department of Food and Agriculture
March 9, 2020
Elaine M. Howle
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, California 95814
Re: California Department of Food and Agriculture Response to Draft Audit Report 2019‑121
Dear Ms. Howle:
The California Department of Food and Agriculture (CDFA) appreciates the California State Auditor’s (CSA) examination of the Pet Lover’s Specialized License Plate Program (Pet Lover’s Program) and acknowledges that opportunities exist to improve the program and facilitate no-cost and low-cost spay and neuter services. CDFA offers the following responses to the CSA audit which focused on CDFA’s processes and plans for awarding grants and promoting the Pet Lover’s Program.
The audit confirmed that CDFA’s practice for receiving input from the nonprofit organization that contributed to the advancement of the Pet Lover’s Program by securing plate registrations was reasonable. It also confirmed that administrative costs were within 25 percent of funds collected as state law requires. The audit also found that CDFA paid invoices for project activities by subrecipients within a reasonable timeframe.
Audit findings that address ways to strengthen the grant award process by documenting that grant applicants are eligible for funding from the Pet Lover’s Program have largely been adopted already. CDFA has provided written explanations to CSA of such efforts and offered to provide documentation in support of the augmented process.
Similarly, CDFA has undertaken substantial efforts to increase participation in its volunteer technical review process for Pet Lover’s grant applications since Spring, 2019, the first year CDFA administered the program. As a result of those efforts, the number of technical reviewers has substantially increased from 4 the inaugural year of the program to 10 the second year. While the technical review process for the 2020 Pet Lover’s Program has just begun, each Pet Lover’s Program application will be evaluated by multiple reviewers.
Finally, CDFA will formalize and document the process for selection of Pet Lover’s Program applications that will receive grant awards. On page 33 of the draft report one full paragraph of the recommendations section was redacted and CDFA cannot respond to an unknown recommendation. Nonetheless, CDFA will adopt all recommended practices where appropriate and consistent with CDFA’s mission and the purpose of the Pet Lover’s Program.
CDFA is concerned by certain characterizations contained in the report that result in an incomplete narrative of the Pet Lover’s Program to date; unfairly depict the efforts of the volunteer technical reviewers in the first year of the program; and, understate both the impacts of the timeframe for budgetary authority and CDFA’s efforts to expedite implementation of the Pet Lover’s Program to ensure funds actually support their intended purpose.
Grant Selection Process
CDFA acknowledges that the process and documentation for verification of eligibility of Pet Lover’s Program grant applicants was not adequate and steps have already been taken to remedy these weaknesses. It is stated on page 14 of the draft report that CDFA only verified one of the four requirements of the program that are highlighted in the text box on that page. This statement is incorrect. In interviews with CSA, CDFA staff described efforts to meet all four eligibility requirements. However, CDFA acknowledges that documentation of those efforts, particularly related to the first and second requirements, was not complete.
The report states that CDFA did not contact the Veterinary Medical Board (VMB) to verify eligibility. Such effort is unnecessary when verification can be obtained by utilizing the Department of Consumer Affairs License Search website: https://search.dca.ca.gov/. The process of documenting search results from the license search is one of the steps now being undertaken by CDFA to enhance its administrative review. To address the yearly rabies reporting requirements, CSA has been collecting documentation to verify current reporting of applicants to CDFA’s 2019 spay and neuter grant programs since October 7, 2019.
CDFA acknowledges that two Pet Lover’s Program awards were made to ineligible applicants. While funding was awarded to ineligible applicants, additional context relevant to this circumstance is not included in the draft report. Both applicants that were incorrectly selected to receive funding are city animal control agencies. Neither operates a veterinary medical facility; however, both agencies contracted 100 percent of their award to licensed veterinary medical facilities overseen by a manager licensed and in good standing with VMB. Additionally, all grant funds invoiced to CDFA to date have supported eligible costs to provide no-cost or low-cost animal sterilization services in communities of need. Finally, page 15 of the draft report describes in general terms the timeframe between CDFA being made aware of the eligibility concerns with these recipients and the time that the projects were suspended. It should be noted no payment was made by CDFA to either recipient during the timeframe in question.
Throughout the draft report, beginning on page 15 there are references to “questionable scores” as it relates to the technical review process. CDFA acknowledges that the technical review process was not optimal. The program utilizes volunteer reviewers and the number of volunteers was inadequate to ensure a robust process given the number of applications received. The draft report indicates that a longer technical review period would be sufficient to overcome this lack of volunteer interest. The CDFA does not agree with this assessment and has expressed to CSA its concern that excessive time or effort demand on volunteer reviewers might lessen the likelihood of continued volunteer support. Repeated use of the phrase “questionable scores” suggests either a flaw in the scoring methodology or a concern with the efforts of the volunteer technical reviewers that is not supported by the draft report.
Marketing Efforts, Timeline for Program Implementation, and the Impacts of Budget Authority and Available Funding
While the draft report notes on page 3 that beginning in fiscal year 2018-19, expenditures for the Pet Lover’s Program exceeded revenue for the first time, it lacks additional context to support the narrative of inadequate action on the part of CDFA to oversee the program. While expenditures exceeded revenues, it is not a result of inadequate management by CDFA. Expenditures exceeded revenues in fiscal year 2018-19 because this was the very first fiscal year that funds were awarded and distributed to achieve the mission of the Pet Lover’s Program to provide no-cost and low-cost spay and neuter services.
CDFA’s approved budget authority for the Pet Lover’s Program is $440,000 per year for a period of three years beginning in fiscal year 2018-19, as approved by the Legislature through the Budget Act of 2017 (AB 97, Ting). As table 2 on page 10 of the draft report illustrates, revenue from license plate sales to fund this program has been less than $440,000 every year since fiscal year 2013-14. Had CDFA declined to administer the program in fiscal year 2018-2019, revenues would certainly have exceeded expenses; however, the result would be another year where Pet Lover’s Program funds did not support no-cost and low-cost spay and neuter services.
It is stated in multiple sections of the draft report that CDFA prioritized awarding Pet Lover’s Program grants. This is presented as having occurred in lieu of marketing efforts for the program and supposes that only direct marketing activities through the Department of Motor Vehicles (DVM) flyer or in partnership with an eligible nonprofit will sustain renewal or new registration of Pet Lover’s specialized plates. The draft report does not consider the positive benefit on the renewal or new registration of Pet Lover’s specialized plates that could result from the actual implementation of a program that had been unrealized for the preceding five years when the program was housed elsewhere in state government.
The draft report observes that responsibility for administration of Pet Lover’s was transferred from VMB to CDFA effective January 1, 2018 as authorized by Senate Bill 673 (Newman). The draft report also acknowledges that CDFA did not have budget authority to expend Pet Lover’s Program funds until July 1, 2018. However, the report does not adequately represent the impact that a lack of budget authority had on CDFA’s ability to administer the program between January 1, 2018 and July 1, 2018.
This is especially the case in the section beginning on page 28 which describes CDFA’s outreach and marketing activities to support the Pet Lover’s Program. Much of the draft report’s observations are based on the supposition that CDFA could and should have participated in the 2018 DMV flyer. This supposition disregards the timing for participation in the DMV flyer and the timing of CDFA’s budget authority. Participation in the DMV flyer occurs in the Spring of each calendar year. In the spring of 2018, CDFA did not have budget authority to enter into agreements or expend Pet Lover’s funds and could not have participated in the DVM flyer 2018. CDFA’s participation in the 2019 DMV flyer was finalized in March 2019. CDFA took advantage of this marketing method at its very first opportunity to do so after budget authority had been established.
Comparison to the California Agricultural License Plate Program
Figure 5 on page 31 of the draft report provides a comparison of the Pet Lover’s Program and the California Agricultural License Plate Program (CalAgPlate) along with other specialized plate programs which are redacted. In this comparison, the first column is titled “DMV flyer” and indicates that CDFA does not utilize the DMV flyer for either program. As described in the preceding section of this response, it was not possible for CDFA to participate in the 2018 DMV flyer. In addition, column four of the figure is titled “Require grantees to promote the program” in this column the CalAgPlate has a check mark, to indicate that grantees are required to promote the program. This is incorrect. Neither the CalAgPlate Request for Proposals, nor any of the executed agreements under this program include a requirement or funding to promote the program. The CSA was advised that promotion of the CalAgPlate is not a requirement of that program on January 22, 2020. The result of these errors on figure 5 amount to an inaccurate comparison of CDFA’s specialized license plate programs.
Thank you for this opportunity to respond to the draft report. Should you have any questions, do not hesitate to contact me.
Yours truly,
Karen Ross
Secretary
Comments
CALIFORNIA STATE AUDITOR’S COMMENTS ON THE RESPONSE FROM THE CALIFORNIA DEPARTMENT OF FOOD AND AGRICULTURE
To provide clarity and perspective, we are commenting on the response to our audit from Food and Agriculture. The numbers below correspond with the numbers we have placed in the margin of Food and Agriculture’s response.
Food and Agriculture incorrectly implies that we do not acknowledge its efforts to improve its grant award process. To the contrary, our report acknowledges Food and Agriculture’s efforts in February 2020 to improve its grant award process for the Pet Lover’s program for fiscal year 2019–20. For example, we note that it broadened its outreach to recruit volunteer application reviewers. We also acknowledge that it stated in February 2020 that it expects to have 10 reviewers split into three teams of at least three reviewers each, with each team reviewing about 12 applications, to ensure multiple reviews of each grant application. However, we also point out here that Food and Agriculture has not yet adopted written policies and procedures for its grant making process, risking that it will repeat some of the mistakes of the past.
During the publication process for the audit report, page numbers shifted. Therefore, the page numbers cited by Food and Agriculture in its response will not correspond to the page numbers in the final published audit report.
As we informed Food and Agriculture prior to sending it the draft report, we must redact report text describing audit work related to other entities to maintain the confidentiality of the ongoing audit process. Consequently, the redacted text to which Food and Agriculture refers was not related to Food and Agriculture, and therefore, state law prohibited us from sharing it. Further, we do not expect Food and Agriculture to respond to recommendations not directed to it.
We disagree with Food and Agriculture’s concern; our narrative is complete for the purposes of our audit. This report provides a timeline of the Pet Lover’s program in Figure 1, describes the process used by Food and Agriculture to evaluate and select grant applications beginning here, and describes the timing constraints Food and Agriculture faced beginning here.
As we note here, Food and Agriculture was unable to provide evidence it attempted to verify two of four eligibility requirements, and made an incomplete attempt to verify a third. Moreover, in its response, Food and Agriculture acknowledges that it contracted with two ineligible entities.
Food and Agriculture implies that it did verify eligibility with the Veterinary Board, but that was not the case. As Food and Agriculture notes, it is possible to use the Veterinary Board website to verify eligibility related to certain requirements. When we verified eligibility, as we describe here, we determined that Food and Agriculture made grants to two ineligible entities. This fact, and the lack of any other documentation demonstrating that Food and Agriculture sufficiently verified the eligibility of applicants or grantees, provides appropriate evidence for us to conclude that Food and Agriculture did not do so.
To clarify, when we reviewed Food and Agriculture’s grant awards for the Pet Lover’s program, we noted that it did not verify the rabies reporting requirement for all of its grantees before making its grant award decisions. The information Food and Agriculture sent us on October 7, 2019, claiming that it had verified the rabies reporting requirement for its grantees, was for a different spay and neuter grant program, but it did include some of the Pet Lover’s program grantees. Nonetheless, the fact remains that Food and Agriculture did not check the rabies reporting requirement for all Pet Lover’s program grantees before awarding grants.
Food and Agriculture is correct that it selected two ineligible entities for Pet Lover’s program grants, but the justification it provides in its response—that the entities pass through 100 percent of their grants to other entities that meet the eligibility criteria—is incorrect. Although its grant agreement with one of these entities indicates the ineligible entity will pass through 100 percent of its Pet Lover’s grant, Food and Agriculture still should not have awarded this entity Pet Lover’s funds because it is ineligible. Further, the scope of work in its grant agreement for the other ineligible entity indicates that the grantee may seek reimbursement for activities it performs, including promoting the program, developing related educational materials, and managing and analyzing data for reporting and program evaluation.
Although Food and Agriculture asserts that it suspended payment to the two ineligible entities after we brought this problem to its attention, the fact remains that it had reimbursed those two entities a total of nearly $17,000 in Pet Lover’s program funds as of December 2019.
We consider the scores questionable because of the flawed process that Food and Agriculture used as we describe beginning here. Further, Food and Agriculture’s response is at odds with information it provided to us during our review. As noted here, Food and Agriculture indicated that one reason it took a single reviewer approach is because it faced a compressed time frame. If it now believes this was not an issue, it should have ensured multiple reviews of each grant application during its first year of overseeing the program. Also, nowhere in our report do we express concern with Food and Agriculture’s use of volunteer reviewers. Rather, as we note here, Food and Agriculture’s process, which relied on only a single review of each application, “is less robust than one where multiple reviewers evaluate each application, because a single reviewer approach is susceptible to inconsistency among reviewers.” As our report clearly states, Food and Agriculture must improve its grant selection process to ensure it selects the most qualified grant applicants.
We disagree with Food and Agriculture’s implication that our report lacks sufficient context to support our conclusion that Food and Agriculture has taken minimal actions to improve the Pet Lover’s program’s deteriorating financial condition since it began overseeing the program in 2018. Specifically, Figure 5 shows that Food and Agriculture did not use four of the five marketing and promotional methods that we identified other specialized license plate programs use. Further, we state here that if Food and Agriculture does not do more to market the Pet Lover’s program and increase revenue, it may need to decrease grant funding for free or low cost spay or neuter services.
Our report in no way suggests that Food and Agriculture should have declined to administer the Pet Lover’s program.
Food and Agriculture seems to take issue with our report including its perspective related to why it has not done more to promote the Pet Lover’s program, even though Food and Agriculture provided this perspective to us on multiple occasions. If Food and Agriculture had additional reasons for not marketing the Pet Lover’s plate, it did not provide those reasons at any point during the audit, despite having multiple opportunities to do so. Food and Agriculture also incorrectly states that our report only suggests using the DMV renewal flyer and partnering with a nonprofit as marketing strategies. In Figure 5, we list two additional methods for promotion—social media and requiring grantees to promote the plate program—that Food and Agriculture does not use to promote the program.
Contrary to Food and Agriculture’s assertion, we acknowledge that the fiscal year 2019–20 grants for the Pet Lover’s program could provide the benefit of spaying and neutering about 6,000 animals. However, our concern is that absent Food and Agriculture conducting appropriate marketing activities, revenue for the Pet Lover’s program will continue to decline and thus, decrease Food and Agriculture’s ability to fund spay and neuter services. Therefore, implementing the grant program without marketing is not sufficient to increase renewals or new plate sales.
We acknowledge that Food and Agriculture did not receive budget authority until July 2018. However, lack of budget authority does not preclude Food and Agriculture from developing plans for administering the program including the process for soliciting and awarding grants.
Food and Agriculture’s response related to the timing of DMV flyers is inconsistent with input we received from the agency that coordinates the DMV flyer process. Here we quote the Coastal Commission, which stated it is able to work with programs to bill for the flyers in the current or next fiscal year.
We disagree with Food and Agriculture’s contention that much of our report’s observations concerning its outreach and marketing activities for the Pet Lover’s program “are based on the supposition that [Food and Agriculture] could and should have participated in the 2018 flyer.” Specifically, we discuss other promotional activities that Food and Agriculture did not implement that could have benefited the Pet Lover’s program. Further, Figure 5 lists three additional marketing strategies apart from the DMV flyer that it did not use. Even if Food and Agriculture had ensured that the Pet Lover’s plate appeared on the 2018 DMV flyer, we would still report that Food and Agriculture did not utilize other marketing strategies available to it.
We based the information related to the CalAg Plate in Figure 5 on Food and Agriculture’s own requirements. Specifically, its procedures manual for the CalAg Plate states: “Recipients must acknowledge Food and Agriculture’s CalAg Plate support whenever projects funded, in whole or in part, are publicized in any news media, brochures, publications, audiovisuals, or other types of promotional materials.” However, Food and Agriculture’s response states that it does not require CalAg Plate grantees to promote the CalAg Plate. Therefore, we changed Figure 5 to reflect that it does not require grantees to promote the CalAg Plate. Moreover, Food and Agriculture mischaracterizes the feedback provided to us on January 22, 2020. The perspective it provided on this date stated that Food and Agriculture did not contract with a specific organization to promote the CalAg Plate, not that it does not require its grantees to promote the CalAg Plate.