September 20, 2011
Energy, Environmental, Litigation Alerts

State Auditor Releases Highly Critical Review of the State Lands Commission and Its Management of Leases and Grantees—Including Ports
by Barry R. Ogilby

The California State Auditor released a highly critical audit of the State Lands Commission entitled "Because It Has Not Managed Public Lands Effectively, the State Has Lost Millions in Revenue for the General Fund."  In a relevant part, the Audit concludes:

The commission has not developed an audit plan designed to ensure that the revenues generated on these granted lands are used properly.  Instead, according to the chief of administrative services, one individual in land management responds to grantee questions and requests regarding appropriate activities on granted lands.  This individual also receives financial statements of granted land revenues from the grantees.  However, the chief indicated that the commission lacks the expertise to conduct a review of these financial statements.  The chief also stated that the commission cannot regularly conduct audits of granted lands because of staffing constraints.  According to him, the commission does not have the staff to ensure that grantees are expending funds appropriately and does not direct its limited resources toward auditing granted lands because these audits do not generate revenue for the State.  However, without oversight of granted lands, the commission is neglecting its responsibility to protect the public trust and risks having to address additional ongoing abuses of funds dedicated for public trust uses.

As part of its final recommendations, the State Auditor recommended that "[t]he commission should establish a monitoring program to ensure that the funds generated from granted lands are expended in accordance with the public trust."  In response to this recommendation, the Commission staff responded by saying:  "Commission staff agrees with this recommendation, however, Commission staff currently lacks the staff resources necessary to establish and implement such a program."  These statutory trust grants include some of the State's most important major contributors to the local, state and national economies, including the Ports of Long Beach, Los Angeles, Oakland, San Francisco, and San Diego.  The Commission currently has one staff position assigned to overseeing the management of these state lands and revenues by these local entities.

In light of the harsh criticism, one should not be surprised if the State doesn't find a way to ensure that these funds are properly collected and used. 

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