State of California Board of Equalization Executive Office CONFIDENTIAL Memorandum To: From: Subject: Dist uted Electronically Honorable Fiona Ma, CPA, Chairwoman Date : June 14, 2016 Honorable Diane L. Harkey, Vice Chair Honorable George Runner, First District Honorable Jerome E. Horton, 7hird District Honorable Betty T. Yee, Stal Controller David J. Gau Executive Director Procurement Process — Allegations of Improprieties ‘As we have been researching the acquisition of the office furniture being called into question, and the recent Public Records Act requests related to that acquisition, | have become increasingly concerned this past week with information and documents that have been discovered that possibly suggest irregularities in the agency's procurement process. ‘My concem also extends beyond this particular acquisition and suggests that it might not be an isolated incident. In addition, the management inquiry has been complicated by the fact that several of the employees identified in the furnishings acquisition no longer work for the Board of Equalization. As such, at this point | have concems, but have not made any findings. Additionally, an internal audit of the Procurement Process was published in January 2015 (copy attached), which covered the period July 1, 2010 to June 30, 2012; however, the report did not disclose any material weaknesses in the procurement process to the extent of the recent allegations. With respect to the leadership and management of the Internal ‘Audit Division (IAD), | have assigned Ms. Lynne Bowling, Administrator in the Business Taxes and Fees Department, to oversee the daily operations of the IAD, while we begin recruitment for a new division Chief. Earlier last week | also scheduled a ‘meet and greet’ with the State Auditor, Ms. Elaine Howle, for June 17th, during which | plan to discuss my concems around our procurement processes, and solicit her recommendations regarding who and how best to perform a comprehensive investigation | will continue to address this matter with the highest priority and vow to get it resolved, as the integrity of this agency is at question, which gravely concerns me, as well as | know each of you. DUG: cc: Ms. Genevieve Jopanda Mr. Russell Lowery Mr. Sean Wallentine Ms. Kari Hammond Ms. Yvette Stowers Mr. Randy Ferris, Ms, Edna Murphy