Report 97500 Summary - November 1997

California Community Colleges:

While the Chancellor's Office Has Improved Its Administration of the Economic Development Program, It Has Failed To Fully Address All State Auditor Recommendations

Results in Brief

In January 1996, the Bureau of State Audits (bureau) issued an audit report on the Economic Development Program, which is administered by the Board of Governors of the California Community Colleges (board) through the Chancellor's Office. Because of the significance of the recommendations made to the Chancellor's Office and the Department of Education (department) in that report, the bureau determined a follow-up audit was warranted.

Our follow-up audit found that the Chancellor's Office has implemented several of our recommendations. It has significantly improved in awarding new grants competitively, has improved its monitoring to ensure that community colleges submit all required reports, and is reviewing the reports it receives. In addition, the Chancellor's Office imposed stricter subcontracting requirements. Finally, we did not see any evidence indicating that the Chancellor's Office is using fiscal agents as contract intermediaries.

The Chancellor's Office has improved some aspects of its administration of the Economic Development Program; nevertheless, potential problems remain. According to its current plan, the Chancellor's Office will have delayed the use of a competitive process to award seven grants for continuing program initiatives by one year and will have awarded nine grants noncompetitively for periods up to nine years. In addition, according to the Chancellor's Office, because of limited staffing, it cannot implement our recommendation to perform periodic site visits to monitor grantees. As a result, the Chancellor's Office cannot ensure that community colleges report accurate expenditures supported by their accounting records, provide sufficient matching funds as required, or comply with other grant requirements.

Further, while the department has improved its controls over contracts and grants, we found two instances where it used California state universities as fiscal agents. Additionally, because it disagreed with our recommendation to determine the reasonableness of the payments made to a contractor to prepare a Needs Assessment and State Plan for Vocational Education, the department has not taken the action we requested.

Finally, the Chancellor's Office has not implemented the remainder of our recommendations from the original audit, including the recommendation to reduce the grant funds it awards to community colleges by the amount of funds they have remaining from prior grant awards.


We believe the recommendations made in our January 1996 report are critical to the Chancellor's Office's administration of the Economic Development Program and its control of program funds, as well as to the department's contracting practices. Based on previous and current findings, we recommend that the Chancellor's Office do the following:

· Continue its efforts to award new grants on a competitive basis to community colleges with the highest scoring applications.

· Re-examine its plan for competitively awarding renewal grants and review the delays in using a competitive process for some grants.

· Seek avenues to ensure that community colleges report accurate expenditures, provide sufficient matching funds as required, and comply with grant requirements.

· Include in its audit guidelines a requirement for district auditors to determine each district's compliance with the local competitive bidding process regarding subcontracts.

· Consider reducing the grant funds awarded to community colleges by the amount of unspent funds remaining from prior grants.

· Establish limits on travel expenditures and require community colleges to comply with those limits.

· Ensure proper use of grants and contracts.

· Reimburse the State for costs incurred from its inappropriate use of an interjursidictional exchange contract.

We also recommend that both the Chancellor's Office and the department review the appropriateness of payments made to the contractor for the Needs Assessment and State Plan for Vocational Education.

Finally, we recommend that the department continue its efforts to eliminate the use of fiscal agents.

Agency Comments

The Chancellor's Office agrees with most of our recommendations. However, it does not agree that it should set limits on travel expenditures for community colleges, or reimburse the State for the unnecessary costs incurred from improper use of an interjurisdictional exchange contract. Finally, the Chancellor's Office stated that it believes the amount paid for the Needs Assessment and the State Plan were appropriate; therefore, it does not intend to review payments made to the contractor. The Department of Education stated that it will continue its efforts to improve contract procedures.