A California State Auditor image of cellphones, some unused for years, that auditors found in a state Employment Development Department office.
California State Auditor
The state’s Employment Development Department wasted at least $4.6 million buying more than 6,200 cellphones amid the COVID-19 pandemic that the department didn’t use for months, the California State Auditor reported Friday.
The findings were part of an annual report published by the auditor that highlights alleged improper activities by agencies and state workers. Among other issues identified:
- The California Air Resources Board overpaid a former employee $170,000.
- The California Department of Veterans Affairs failed to report taxable housing benefits for some employees, which could have created unpaid tax liabilities.
“Our findings include more than $5 million that state agencies have either wasted, misused, or failed to report,” State Auditor Grant Parks wrote in a letter to state leaders.
Behind the cellphone finding
The COVID-19 pandemic resulted in a massive surge in unemployment claims. Between March and November 2020, the Employment Development Department’s unemployment insurance branch reported that it processed more than 17 million unemployment insurance and pandemic unemployment assistance claims, which was eight times the amount filed in 2019, according to a 2021 report.
To respond to those claims, EDD hired nearly 3,900 more call representatives between March and September 2020, according to the audit. The UI branch procured over 7,000 mobile devices and hot spots to enable those representatives to work remotely.
Auditors found that 72% of those devices went unused for a year — and 7% went unused for four years. The report estimated that the total sum of monthly payments for unused devices exceeded $4.6 million, though auditors acknowledged this number was likely an underestimate.
As part of the investigation, state auditors found a storage room with 420 cell phones in the EDD branch office that had gone unused. Photos shared by the state auditor appear to show that some of the devices were basic flip phones.
After state auditors asked department leaders about the unused cellphones, EDD managers reportedly said that they had been unaware that the state was paying the monthly fees for them.
Auditors reported that this explanation was unlikely because EDD officials also said they had received “nonusage” reports on other cellphones from service provider Verizon dating back to at least 2017. Verizon provides monthly receipts that include the usage of each cellphone, the report states, yet UI branch officials said they didn’t check to see whether staff were using the devices.
“Upon leadership being alerted to the issue, we took action immediately. We adopted all auditor recommendations, applied phone shutdown efforts right away and formalized a policy for automatic phone disconnection controls moving forward,” Lawson said.
CARB overpaid former employee $170,000
In another instance of improper spending, auditors detailed how an unnamed Air Resources Board employee planned to retire in 2022 but decided to use his unused vacation hours before officially leaving state service, a common practice of those who retire from civil service.
The employee began his leave of absence in July 2022 and continued receiving his full salary until June 2023, when his leave balance ran out. But CARB continued paying the employee until September 2024, which resulted in an overpayment over $170,000, state auditors found.
The report indicates that the overpayment stemmed from an error in the state’s personnel records, but the employee’s indefinite leave of absence was approved by his supervisor. That supervisor’s manager and human resources offices told auditors that they were unaware of the leave approval that allowed the worker to continue receiving his full salary.
In response to the audit’s findings, CARB said it was in the process of collecting the overpayment from its former employee and a review of the department’s personnel records indicated that no other workers were similarly receiving erroneous payments.
“We take this matter very seriously, are actively pursuing recovery of the funds while also implementing the auditor’s recommendations to ensure this does not happen again,” department spokesperson Lindsay Buckley said in a statement.
CalVet failed to report $400,000 in tax benefits
CalVet employees who work at the Yountville Veterans Home have the opportunity to rent state housing at the facility, which serves as an employee benefit.
If the state provides housing for less than the market rate, then California law requires that the difference between the rent and market value should be considered “a reportable and taxable fringe benefit for the employee-tenant,” auditors wrote.
Between 2023 and 2025, CalVet leased 12 units to its employees below market value. For those individuals, the department did not accurately report the taxable benefit from that cheaper rent to the State Controller’s Office.
CalVet reported only $56,137 in taxable fringe housing benefits for those 12 employees, but auditors estimated that the department should have reported nearly $460,000.
Because of this oversight, auditors warned that employees living in the Yountville facilities might face unpaid tax liabilities.
CalVet spokesperson Kate Hoit said in a statement that the department agreed with auditors’ recommendations and will report the accurate amount for the tax benefit to the controller’s office. Additionally, Hoit said the department will notify the employees of the potential tax liabilities.
This story was originally published December 12, 2025 at 5:37 PM.
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William Melhado
The Sacramento Bee
William Melhado is the State Worker reporter for The Sacramento Bee’s Capitol Bureau. Previously, he reported from Texas and New Mexico. Before that, he taught high school chemistry in New York and Tanzania.
