Report 2011-504 Recommendation 13 Responses

Report 2011-504: High-Speed Rail Authority Follow-Up: Although the Authority Addressed Some of Our Prior Concerns, Its Funding Situation Has Become Increasingly Risky and the Authority's Weak Oversight Persists (Release Date: January 2012)

Recommendation #13 To: High-Speed Rail Authority, California

To increase transparency and to ensure that it is aware of any financial interest that a subcontractor may have in the program, the Authority should require subcontractors to file statements of economic interest.

Agency Response*

The Authority's existing policies are designed to identify financial and other possible conflicts to the fullest extent as defined by applicable state and federal laws while recognizing that not every financial interest will trigger the statement of economic interest reporting requirement. The Authority's existing procedures comply with government code and Fair Political Practice Commission (FPPC)regulations.

Currently, the Authority collects Statements of Economic Interest (Form 700) from the key personnel of the prime contractors designated under the Authority's Code. Additionally, the Authority has designated certain individuals, who are employed by subcontractors, to file Form 700s.

To ensure the broadest compliance the Authority has developed two methods for addressing possible conflicts of interest. The Authority's standard contract requires that the contractor, its employees, and all its subcontractors and employees shall comply with the Authority's conflict of interest code. Additionally, the consultant or contractor shall disclose any financial, business or other relationship with the Authority that may have an impact upon the outcome of the agreement. This includes a listing of current and future clients when retained who may have a financial interest in the outcome of the contract or any ensuing construction project which will follow and supply that information to the Authority in the monthly progress report.

The second requirement is adherence to the Authority's organizational conflict of interest policy which includes,... [response truncated due to system limitations on response length]

  • Response Type†: Annual Follow Up
  • Completion Date: April 2014
  • Response Date: October 2014

California State Auditor's Assessment of Status: Fully Implemented


Agency Response*

As reported in our one-year response, the Authority's existing policies are designed to identify financial and other possible conflicts to the fullest extent as defined by applicable state and federal laws while recognizing that not every financial interest will trigger the statement of economic interest reporting requirement. The Authority's existing procedures comply with government code and Fair Political Practice Commission regulations (legal opinion attached).

Currently, the Authority collects Statements of Economic Interest (Form 700) from key personnel of the prime contractors and applicable subcontractors designated under the Authority's Code.

Under the direction of the Authority, prime contractors collect, archive and transmit subcontractors' Form 700 based on the criteria provided. Submittal of Form 700 will take place on an annual basis on or before April of each calendar year. It will be collected and reviewed by the Authority once a year for the Annual Work Program and Task Order negotiations.

To ensure the broadest compliance the Authority has developed two methods for addressing possible conflicts of interest. The Authority's standard contract requires that the contractor, its employees, and all its subcontractors and employees shall comply with the Authority's conflict of interest code.

The second requirement is adherence to the Authority's organizational conflict of interest policy which includes, among other requirements, full disclosure of any circumstance arising out of a contractor or subcontractor's existing or past activities, business or financial interests, familial relationships, contractual relationships, and/or organizational structure that results in a conflict of interest. Contractors are required to promptly disclose in detail, any actual or potential organizational conflict of interest in writing to the Authority's chief counsel for review and assessment.

  • Response Type†: Annual Follow Up
  • Completion Date: April 2013
  • Response Date: October 2013

California State Auditor's Assessment of Status: Not Fully Implemented

  • Auditee did not substantiate its claim of full implementation

Agency Response*

The Authority asserts that it has put a process in place for determining which contractors and subcontractors should file statements of economic interest.

  • Response Type†: 1-Year
  • Response Date: January 2013

California State Auditor's Assessment of Status: Partially Implemented

Not all subcontractors will be required to file statements of economic interest. In addition, the Authority's policies state that prime contractors, not Authority staff, are responsible for determining which subcontractors are subject to the conflict-of-interest policy.

  • Auditee did not address all aspects of the recommendation

Agency Response*

The Authority asserts that it has put a process in place for determining which contractors and subcontractors should file statements of economic interest. However, not all subcontractors will be required to file. In addition, the Authority's policies state that prime contractors, not Authority staff, are responsible for determining which subcontractors are subject to the conflict-of-interest policy. (See 2013-406, p. 245)

  • Response Type†: 6-Month
  • Response Date: August 2012

California State Auditor's Assessment of Status: Partially Implemented


All Recommendations in 2011-504

†Response Type refers to the interval in which the auditee is providing the State Auditor with their status in implementing recommendations made in an audit report. Auditees must submit a response regarding their progress in implementing recommendations from our reports at three intervals from the release of the report: 60 days, six months, and one year or subsequent to one year.

*Agency responses received after June 2013 are posted verbatim.


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