Judicial Branch
Procurement
Courts Generally Met Procurement
Requirements, but Some Need to
Improve Their Payment Practices
January 2021

REPORT 2020‑301

CALIFORNIA STATE AUDITOR
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This report is also available online at www.auditor.ca.gov | Alternative format reports available upon request | Permission is granted to reproduce reports

Elaine M. Howle State Auditor

January 14, 2021
2020-301
The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
State Capitol
Sacramento, California 95814
Dear Governor and Legislative Leaders:
As required by state law, my office conducted an audit of certain judicial branch entities’ compliance
with the requirements of the California Judicial Branch Contract Law (judicial contract law),
Public Contract Code sections 19201 through 19210. The judicial contract law requires the Judicial
Council of California (Judicial Council) to adopt and publish a Judicial Branch Contracting
Manual (judicial contracting manual) that is consistent with the Public Contract Code and
establishes the policies and procedures for procurement and contracting that all judicial branch
entities, including superior courts, must follow.
This report concludes that the five courts we reviewed for this audit—the superior courts in
Alameda, Contra Costa, Lake, Orange, and San Bernardino counties—adhered to most of the
required and recommended procurement and contracting practices that we evaluated, but
they could improve in certain areas. Specifically, three courts did not always follow required or
recommended payment practices that help to safeguard public funds. For example, the Alameda
court made $16,000 in questionable payments because it did not match invoices to appropriate
supporting documentation for two payments we reviewed. In addition, four courts have failed
to consistently comply with state law requiring them to notify my office when they enter into
high-value contracts, which limits my office’s ability to identify in a timely and accurate manner
contracts that may warrant review. Finally, two courts could improve their local contracting
manuals by including certain information, such as a policy on legal review of contracts, that the
judicial contracting manual recommends and the courts had no compelling reason to exclude.

Respectfully submitted,

ELAINE M. HOWLE, CPA
California State Auditor

621 Capitol Mall, Suite 1200

|

Sacramento, CA 95814

|

916.445.0255

|

916.327.0019 fax

|

w w w. a u d i t o r. c a . g o v

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Contents
Summary

1

Introduction

5

Three Courts Did Not Always Adhere to
Payment Requirements or Recommendations

9

Four Courts Failed to Consistently Report High-Value Contracts

15

Two Courts Lack Recommended Information in Their Local
Contracting Manuals

19

Other Area We Reviewed

23

Appendix
Scope and Methodology

25

Responses to the Audit
Superior Court of California, County of Alameda

27

California State Auditor’s Comment on the Response From the
Superior Court of California, County of Alameda

29

Superior Court of California, County of Contra Costa

31

Superior Court of California, County of Lake

33

California State Auditor’s Comment on the Response From the
Superior Court of California, County of Lake
Superior Court of California, County of Orange
California State Auditor’s Comments on the Response From the
Superior Court of California, County of Orange
Superior Court of California, County of San Bernardino
California State Auditor’s Comments on the Response From the
Superior Court of California, County of San Bernardino

35
37
41
43
45

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January 2021

SUMMARY
For this fifth biennial audit of the procurement and contracting practices of California
superior courts, we reviewed the superior courts in Alameda, Contra Costa, Lake,
Orange, and San Bernardino counties. We determined that these five courts adhered
to most of the required and recommended procurement and contracting practices that
we reviewed; however, they could make certain improvements to better ensure the
responsible stewardship of public funds. We reviewed the selected courts’ practices
related to contracts, payments, and purchase card transactions for fiscal year 2019–20.
This report concludes the following:

Three Courts Did Not Always Adhere to Payment Requirements or
Recommendations

Page 9

I

Page 15

I

We found that three courts did not always follow established payment
procedures, increasing the risk of misusing public funds. The Alameda
court made questionable payments totaling $16,000 because it did
not match invoices to appropriate supporting documentation for
two of 18 payments we reviewed, and it routinely did not adhere
to authorization limits for approving invoices. The Orange court
also exceeded its authorization limit for one of 10 payments we
reviewed, and the Lake court did not fully separate payment duties
as recommended so that no one person is in a position to initiate or
conceal errors or irregularities for six of 10 payments we reviewed. The
courts whose purchase card transactions met our threshold for review
(Contra Costa, Orange, and San Bernardino) generally used purchase
cards appropriately. Many of the purchase card transactions we reviewed
were emergency purchases related to the 2019 coronavirus disease
pandemic and were exempt from competitive bidding requirements.
The processes courts followed for these emergency transactions and the
goods and services they purchased were reasonable.

Four Courts Failed to Consistently Report High-Value Contracts
Some courts have not fully complied with state law that generally
requires them to notify the California State Auditor’s Office (State
Auditor) within 10 business days of entering into contracts estimated
to cost more than $1 million. The Alameda court had four such
contracts in fiscal year 2019–20 but did not notify us of any because
it did not have sufficient policies and procedures in place for doing
so. The Contra Costa, Orange, and San Bernardino courts did notify
us about some high-value contracts they had in fiscal year 2019–20
but failed to notify us about others for various reasons, including

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staff error, a gap in their notification procedures, or incorrect
interpretation of the notification requirement. By not fully complying
with the notification requirement, these courts have limited our
ability to identify in a timely and accurate manner contracts that may
warrant review.

I

Page 19

Two Courts Lack Recommended Information in Their Local
Contracting Manuals
Two courts do not have information in their local contracting
manuals that would help ensure that their staff members follow
appropriate contracting processes. The Alameda and Lake courts
each omitted from their local contracting manuals certain provisions
that the Judicial Branch Contracting Manual (judicial contracting
manual) recommends courts include. Specifically, the Alameda
court did not identify requirements for legal review of contracts, and
both the Alameda and Lake courts lacked a plan for administering
contracts. Neither court had a compelling reason for not including
the recommended information.
In addition, we reviewed a selection of contracts from each of the
five courts to determine whether the courts followed required
procurement and contracting practices. We found no reportable
issues in this area.
Summary of Recommendations
Alameda, Lake, and Orange County Superior Courts
To ensure appropriate expenditures of public funds, the courts should follow
required and recommended practices for approving invoices and separating
payment duties.
Alameda, Contra Costa, Orange, and San Bernardino County Superior Courts
To comply with the requirements of state law, the courts should implement
procedures to notify the State Auditor within 10 business days of entering into
all contracts estimated to cost more than $1 million and not exempt from the
notification requirement.

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Alameda and Lake County Superior Courts
To ensure staff members have sufficient guidance about appropriate
contracting practices, the courts should include in their local
contracting manuals information that the judicial contracting
manual recommends.
Agency Comments
The courts generally agreed with our recommendations. The
Orange and San Bernardino courts disagreed with certain aspects
of our finding that they did not fully comply with the requirement
to notify our office about high-value contracts.

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Introduction
Background
The California Judicial Branch Contract Law (judicial contract law) went into effect
in 2011. It generally requires all judicial branch entities to comply with the provisions
of the Public Contract Code that are applicable to state agencies and departments and
that relate to the procurement of goods and services. It also requires the Judicial Council
of California (Judicial Council)—which is the policymaking body of the California
court system responsible for ensuring the consistent, independent, impartial, and
accessible administration of justice in the State—to create a contracting manual for all
judicial branch entities, such as superior courts, and for these entities to adopt local
contracting manuals.
The judicial contract law also imposes reporting requirements on judicial branch
entities. Specifically, it requires that judicial branch entities notify the California State
Auditor’s Office (State Auditor) within 10 business days of all contracts for goods and
services they enter into that involve a total cost estimated at more than $1 million
in value, with limited exceptions such as trial court construction contracts. The law
further specifies that all administrative and information technology (IT) projects of
the Judicial Council or the courts with a total cost estimated to exceed $5 million
are exempt from this reporting requirement and shall be subject to the review of the
California Department of Technology. The law also requires the Judicial Council to
submit semiannual reports to the Legislature and the State Auditor containing specified
information about most of the judicial branch’s contracting activities. The Judicial
Council prepares the semiannual reports using information that judicial branch entities
are responsible for providing to it.
In addition, and subject to legislative appropriation, the judicial contract law directs
the State Auditor to audit judicial branch entities other than the Judicial Council every
two years to assess their implementation of the judicial contract law. This is our fifth
biennial audit report; in all, the five reports so far have covered procurement practices
at 24 of the State’s 58 superior courts since the judicial contract law went into effect
in 2011. For this audit, we selected the superior courts in the counties of Alameda,
Contra Costa, Lake, Orange, and San Bernardino. We audited two of our selected
entities—the superior courts in the counties of Alameda and Orange—previously, in
2014 and 2012, respectively. As state law requires, we based our selection of the courts
we examined on factors including, but not limited to, each court’s size, total volume of
contracts, previous audits or known deficiencies, and significant or unusual changes
in management. Table 1 provides the relative size, workload data, and volume of
expenditures of the five superior courts we selected for this audit.

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Table 1
The Five Courts We Reviewed Varied in Size, Workload, and Volume of Expenditures
COUNTY SUPERIOR COURT
ALAMEDA

CONTRA COSTA

LAKE

ORANGE

SAN BERNARDINO

$110,398,000

$62,951,000

$4,800,000

$207,031,000

$145,752,000

$19,196,000

$16,401,000

$1,675,000

$35,465,000

$25,920,000

224,000

112,000

10,000

410,000

287,000

Judges, total authorized positions as of
June 30, 2019

73

38

4

127

73

Court employees, total authorized
positions for fiscal year 2019–20

749

337

35

1,516

1,098

Total expenditures, fiscal year 2019–20
Total contract payments,
fiscal year 2019–20
Case filings, fiscal year 2018–19

Source: The Judicial Council’s 2020 Court Statistics Report; the Judicial Council’s Semiannual Report on Contracts for the Judicial Branch for July 1 through
December 31, 2019, and for January 1 through June 30, 2020; and the superior courts’ budget reports for fiscal year 2019–20.
Note: Data in this table are unaudited and rounded.

The Judicial Branch Contracting Manual
The judicial contract law requires the provisions of the Judicial
Branch Contracting Manual (judicial contracting manual) to be
substantially similar to those of the State Administrative Manual
and the State Contracting Manual and to be consistent with
the Public Contract Code. The State Administrative Manual is
a reference resource for statewide management policy, and the
State Contracting Manual provides the policies, procedures, and
guidelines to promote sound business decisions and practices in
securing necessary services for the State. The Public Contract
Code contains, among other provisions, competitive bidding
requirements for public entities. Competitive bidding requirements
help to provide all qualified bidders with a fair opportunity to
enter the bidding process, and to eliminate favoritism, fraud,
and corruption in the awarding of public contracts. In addition
to establishing procurement requirements consistent with the
law, the judicial contracting manual also contains recommended
procurement practices for courts. Although those provisions are
not mandatory, the judicial contracting manual favors the use of
recommended practices unless courts have good business reasons
for deviating from those recommendations.
Consistent with the Public Contract Code, the judicial contracting
manual generally requires judicial branch entities to secure
competitive bids or proposals for each contract, with certain
exceptions, as the text box shows. For example, state law and the
judicial contracting manual exempt purchases under $10,000 from
competitive bidding requirements as long as a contracting entity
determines that the price is fair and reasonable. State procurement

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rules and the judicial contracting manual also
do not require competitive bids on contracts
for emergency purchases or contracts with
governmental entities.

Judicial Purchases That Can Be Exempt From
Competitive Bidding Requirements
• Purchases under $10,000

The judicial contracting manual also allows several
• Emergency purchases
types of noncompetitive procurements. Two types
• Purchases from government entities
that judicial branch entities can use are sole-source
procurements and certain leveraged procurement
• Legal services
agreements (leveraged agreements), including state
• Purchases through certain leveraged
leveraged agreements. The judicial contracting
procurement agreements
manual defines a sole-source procurement as one
• Purchases from business entities operating
in which an entity affords only one vendor the
community‑based rehabilitation programs
opportunity to provide goods or services after the
entity shows appropriate justification for doing
• Licensing or proficiency testing examinations
so. An entity may use a leveraged agreement to
• Purchases through local assistance contracts
purchase goods and services from certain vendors
• Sole-source purchases
on the same or substantially similar contract
terms as those negotiated by the State or another
• Purchases from certified small businesses
entity without having to seek competitive bids.
• Purchases from disabled veteran business enterprises
The Department of General Services administers
Source: State law and the judicial contracting manual.
some leveraged agreements for use by state
agencies and local governments so that they may
buy directly from suppliers through existing state
contracts and agreements. The judicial contracting
manual includes a process for using leveraged agreements, but it
recommends that judicial branch entities consider whether they can
obtain better pricing or terms by negotiating directly with vendors
or soliciting competitive bids.

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Three Courts Did Not Always Adhere to Payment
Requirements or Recommendations
Key Points
• The Alameda, Lake, and Orange courts did not always follow required practices
or recommended safeguards when making payments. As a result, each court
increased its risk of improper payments, and the Alameda court made $16,000 in
questionable expenditures.
• The courts generally used purchase cards appropriately, and emergency purchase
card transactions related to the 2019 coronavirus disease (COVID-19) also appeared
to be appropriate and reasonable.
The Alameda, Lake, and Orange Courts Did Not Always Follow Payment Safeguards,
Increasing the Risk of Improper Payments
Following proper procedures for processing payments, including reviewing the accuracy
of invoices, establishing proper levels of approval authority (authorization limits), and
separating invoice approval duties from payment duties, is critical for ensuring that
courts use public funds appropriately. However, we found that three courts—Alameda,
Lake, and Orange—did not always follow these safeguards, which increases the risk
of improper payments. Specifically, the Alameda court made roughly $16,000 in
questionable payments in fiscal year 2019–20 because staff bypassed proper safeguards
for approving invoices. According to the Judicial Council’s Trial Court Financial Policies
and Procedures Manual (procedures manual), which the judicial contracting manual
instructs courts to follow when processing payments, court staff must match invoices
against appropriate supporting documentation, such as a contract, to ensure that the
court is paying the vendor the correct rate for the goods or services provided. However,
of the 18 payments (totaling approximately $1.5 million) we reviewed at the Alameda
court, a division director approved two payments that exceeded contracted rates by
$3,330 and $12,690, respectively.1 The two payments were for legal representation
provided by private attorneys. Although the contracts allowed for expenses in excess of
the contracted rates (extraordinary expenses) if attorneys submitted requests and the
court approved them, the division director approved the payments without determining
whether requests had been submitted and approved, and we found that the court had no
record of approval for the extraordinary expenses it paid. The division director indicated
that she did not request supporting documentation for the $3,330 overpayment because
she did not notice the discrepancy between the contracted rate and the invoice rate.
For the $12,690 overpayment, she approved the payment on the basis of the attorney’s
declaration that he provided additional services, not documentation showing that
the court approved the extraordinary expenses. Because the Alameda court did not

1

For the five superior courts we reviewed, we began by reviewing 10 payments for each court. If we saw issues that warranted
additional review of a court’s payment processes, we reviewed eight additional payments.

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match the amounts vendors charged to appropriate supporting
documentation in these two cases, it made payments that
lacked justification.
The Alameda court also allowed staff to disregard their
authorization limits when approving invoices. Specifically, the
Alameda court’s accounts payable manual identifies dollar limits
up to which it authorizes court employees in certain positions to
approve invoices for payment. Adhering to such authorization
limits reduces the court’s risk of making inappropriate
payments, but the Alameda court frequently did not do so. For
the 18 payments we reviewed, nine court employees approved
13 invoices that exceeded their authorization limits by amounts
ranging from $1,300 to more than $317,000. According to the
court’s accounts payable manual, an executive, such as the court’s
executive officer, must approve any payments over $10,000.
However, 12 of the 18 payments we reviewed were for invoice
amounts greater than $10,000, and none of the 12 invoices received
executive approval. Rather, managers and directors who had lower
authorization limits generally approved the invoices. In one case, a
nonsupervisory staff member with no authority to approve invoices
did so for an invoice for more than $317,000 from a vendor that
collects debts owed to the court, without additional review from
higher-level staff. The court’s executive officer and the court’s
finance and facilities director explained that they intended the court
to adhere to authorization limits when approving the contracts or
other underlying agreements associated with these payments, not
when approving invoices. However, the court’s accounts payable
manual clearly instructs staff to act within the scope of their
authority when processing invoices, and both the executive officer
and finance and facilities director agreed that they should do so.

Nine court employees approved 13 invoices
that exceeded their authorization limits
by amounts ranging from $1,300 to more
than $317,000.

The Lake court increased its risk of making improper payments
by not always fully separating payment duties. According to
the procedures manual, courts must assign work in a manner
that ensures that no one person is in a position to initiate or
conceal errors or irregularities, and the judicial contracting
manual recommends that different employees be responsible for
approving invoices and preparing payments. However, for six of

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the 10 payments we reviewed at the Lake court (accounting for
approximately $32,000 of the total $133,000 in expenditures we
reviewed), the court’s executive officer approved invoices and also
posted payments in the court’s accounting system. The executive
officer stated that this was because the court has limited staff
and explained that a staff member other than herself initially
entered payment information into the accounting system. Because
two individuals were thus involved in payment duties, court
staff members deemed this approach to separating those duties
adequate. Yet, the executive officer still performed two payment
duties, and a process that does not fully separate payment duties
is inherently higher in risk than one that does. The court indicated
that its risk is mitigated because a Judicial Council staff member
provides quarterly review of the court’s accounts. Nonetheless, it
would be a good practice for the court to take mitigating actions of
its own, and the court sometimes did so. For example, in two other
instances we reviewed, the executive officer approved invoices
and posted payments, but the court also documented secondary
approval of the invoices by other staff members. We believe the
court should consistently incorporate an additional safeguard such
as this when it cannot fully separate payment duties.

It would be a good practice for the
Lake court to take mitigating actions of
its own when it cannot fully separate
payment duties.

At the Orange court, we reviewed 10 payments totaling just over
$533,000 and identified one instance in which a staff member
approved an invoice of more than $160,000 for legal services
without seeking executive approval. The court’s accounts payable
procedures manual directs accounts payable staff members to
obtain approvals for invoices from managers, using a system that
requires an additional level of approval by an executive for any
payments exceeding $50,000. However, a supervisor at the Orange
court informed us that staff who specialize in reviewing court
documents, including validating legal invoices (specialists), handle
the approvals for certain invoices, such as those for payments
to lawyers who provide legal representation for low-income
defendants, and they do so outside of the system that requires a
second level of approval for invoices totaling more than $50,000.
The reason that the court does not process legal invoices through
the normal system is because of concerns about confidentiality,
according to the court’s chief financial and administrative officer.

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Although the $160,000 payment we reviewed was appropriate
per the terms of the court’s contract, the court bypassed a key
safeguard and increased the risk of improper payments for this
invoice and others that specialists handled. The chief financial and
administrative officer agreed that the court should incorporate
additional approvals for these types of invoices when they are for
payments above a certain dollar limit, and he said he would have
staff members look into finding a balance between confidentiality
and appropriate safeguards.
The Courts Generally Conducted Purchase Card
Transactions Appropriately
The courts whose purchase card transactions we reviewed generally
used their purchase cards appropriately. The state‑administered
procurement card program, CAL‑Card, is available to all superior
courts, although they are also allowed to use other purchase
cards. The Alameda, Contra Costa, Orange, and San Bernardino
courts used CAL-Cards and other purchase cards, primarily for
travel‑related expenses; the Lake court did not use a purchase card.
Proper safeguards over purchase cards help ensure that courts
use public funds appropriately. When courts make payments that
exceed approved transaction limits on purchase cards or do not
follow judicial contracting manual policies, they may put public
funds at risk. Because courts provide purchase cards so individuals
can make purchases directly from vendors, the cards are subject to
abuse if the courts do not strictly oversee their use.
We reviewed purchase card transactions at three courts—
Contra Costa, Orange, and San Bernardino—because their total
value of purchase card payments during fiscal year 2019–20 met
our threshold for reviewing individual transactions. The total value
of the Alameda court’s purchase card payments did not meet our
threshold for reviewing individual transactions. The purchases we
reviewed generally complied with applicable requirements. We
reviewed six transactions at each of the three courts, focusing on
purchases that exceeded the $1,500 transaction limit established
in the judicial contracting manual. The judicial contracting
manual allows courts to deviate from that limit but recommends
that they document alternative procedures, such as setting
different transaction limits, in their local contracting manuals.
The Contra Costa and San Bernardino courts adopted the judicial
contracting manual’s limit of $1,500, although they had procedures
allowing approval of higher purchase limits in certain cases. The
Orange court’s local contracting manual set higher transaction
limits ranging from $5,000 to $25,000 for certain staff members,
which the court’s chief financial and administrative officer
deemed reasonable given the court’s size and its business needs.

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All transactions we reviewed appeared to be reasonable and had
appropriate supporting documentation, such as purchase request
approvals and receipts for goods.

The purchases we reviewed generally
complied with applicable requirements.

Emergency Purchase Card Transactions Related to COVID-19 and
Exempt From Competitive Processes Appeared to Be Reasonable
In March 2020, the Governor proclaimed a state of emergency
in California to address the global COVID-19 outbreak. Because
the state of emergency began during our audit period of fiscal
year 2019–20, many of the purchase card transactions we reviewed
were for goods such as hand sanitizer or protective equipment.
Most of these purchases were under $10,000 in value, which is the
threshold at which state law and the judicial contracting manual’s
competitive bidding requirements typically apply. Regardless of the
value of a good or service, state law and the judicial contracting
manual also exempt contracting entities from competitive bidding
requirements when they make emergency purchases that are
necessary for the immediate protection of life, health, property,
or essential public services. The urgency of the courts’ COVID-19
related purchases, the possibility of increased prices for highdemand goods, and the potential deviation from certain standard
purchasing requirements together introduced additional risk for the
misuse of public funds.
Despite the increased risk, the COVID-19 related purchases we
reviewed appeared to be appropriate. We identified 12 purchases
related to COVID-19 among the 18 purchase card transactions we
reviewed for the Contra Costa, Orange, and San Bernardino courts.
These 12 purchases totaled approximately $65,000. The courts
made the purchases from March through June 2020 to obtain
goods including hand sanitizing supplies, face masks, and electronic
equipment for a virtual courtroom. In each case we reviewed, the
courts had documentation showing the approval of the purchase
request and the receipt of a good for which the court had a
reasonable need due to the public health emergency.

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Recommendations
Alameda County Superior Court
To ensure that it expends public funds appropriately, the court
should immediately require staff to match invoices to appropriate
supporting documentation and to adhere to the established
authorization limits when approving invoices.
Lake County Superior Court
To reduce the risk of improper payments, by July 1, 2021, the court
should revise its payment process to incorporate an alternative
safeguard in any instance when it is not practical to fully separate
payment duties.
Orange County Superior Court
To ensure appropriate approval of all payments, by July 1, 2021, the
court should revise its payment process to consistently require two
levels of approval for all invoices above a certain dollar limit.

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Four Courts Failed to Consistently Report
High-Value Contracts
Key Points
• Although state law generally requires that a court notify the State Auditor of
a contract with a total estimated cost of more than $1 million, the Alameda
court failed to comply with this requirement and did not report four such
contracts that it entered into during fiscal year 2019–20 worth approximately
$20 million combined.
• During fiscal year 2019–20, the Contra Costa, Orange, and San Bernardino
courts all failed to report five required contracts worth nearly
$19 million combined.
The Alameda Court Failed to Report Contracts Worth Approximately $20 Million
The Alameda court did not comply with the legal requirement to report certain
contracts. As we discuss in the Introduction, the judicial contract law requires
courts to notify the State Auditor in writing within 10 business days of entering
into a contract with a total cost estimated at more than $1 million; the law excludes
only IT projects valued at more than $5 million that are subject to review and
recommendations by the California Department of Technology and certain
contracts related to trial court construction. The Alameda court had four contracts
in fiscal year 2019–20 that it should have reported to us, but failed to do so. The
contracts, which were for services such as janitorial services, ranged in value from
$2 million to approximately $12.3 million and together were worth approximately
$20 million. In addition to not complying with the law, the court’s failure to notify
our office about its high-value contracts as required limits our ability to assess in
an accurate and timely manner whether the court’s contracts warrant review.
The Alameda court’s director of finance and facilities, who oversees its contracting
activities, acknowledged that the court did not notify our office about contracts
over $1 million in estimated value because it did not have procedures in place to
do so and because of a lack of knowledge and training for individuals responsible
for handling the notifications. The judicial contracting manual details the
notification requirement, and the Alameda court also included information
about it in a version of its local contracting manual that was effective through
January 2020. However, the director of finance and facilities explained that the
court later revised its local contracting manual and inadvertently omitted that
information from its current local contracting manual. After we discussed this
finding with the Alameda court, the court began adding procedures for identifying
and reporting contracts over $1 million to its process for reviewing contracts,
consistent with state law and the judicial contracting manual.

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The Contra Costa, Orange, and San Bernardino Courts Did Not
Consistently Report All High-Value Contracts
Although the other three courts that had contracts valued at over
$1 million during fiscal year 2019–20 were aware of the notification
requirement and reported certain high-value contracts to our office,
the Contra Costa, Orange, and San Bernardino courts did not do
so in all cases where the law required it. The Contra Costa court
notified us about one high-value contract, the Orange court notified
us about two, and the San Bernardino court notified us about three
such contracts. However, the Contra Costa court failed to inform
us about one contract worth $1.2 million, and the Orange and
San Bernardino courts each failed to inform us about two contracts
that were worth $5.5 million for the Orange court and nearly
$12 million for the San Bernardino court.
The Contra Costa court failed to report a contract for IT services
provided by the county of Contra Costa that was worth $1.2 million
in fiscal year 2019–20. According to the analyst responsible for
notifying our office of such contracts, the court did not notify us in
this circumstance because the court’s contractual agreement with
the county was originally established in 1998, and the notification
requirement in state law became effective in 2011. However, the law
applies to contracts entered into or amended from October 1, 2011
on. The court entered into a new contract with the county in 2016
that replaced the 1998 contract. This contract was therefore subject
to the legal requirement, and by failing to notify our office, the
court did not comply with the law.
Similarly, the Orange court failed to comply with state law when it
did not report one IT contract valued at $1.2 million that it entered
into during fiscal year 2019–20 and one legal services contract that
was worth $4.3 million in fiscal year 2019–20. The court’s chief
financial and administrative officer stated that the court uses an
automated reporting process to notify our office of contracts that
qualify for reporting, and the lack of reporting for the IT contract
was due to a gap in the automated process. He stated that because
the court entered into the IT contract based on an existing state
contract, it did not process this contract in the typical way and
therefore did not enter the contract into a system that automatically
issues notifications to our office. In addition, the court’s contracts
and procurement manager explained that the court did not notify
us about the legal services contract because a staff member made
an error entering contract information into the system. The court’s
chief financial and administrative officer explained that the court
will refine and implement appropriate processes and systems to
ensure that our office is notified about any contracts valued above
$1 million.

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Additionally, the San Bernardino court incorrectly exempted two
high-value contracts from the notification requirement in state law.
Specifically, the court failed to report two contracts for medical
benefits plans worth $7 million and $4.9 million that it entered
into during fiscal year 2019–20. The contracts and procurement
manager at the court explained that the court had relied on
direction that it received in response to a question a court staff
member asked a Judicial Council staff member in 2013, which
the court misinterpreted as excluding contracts for services such
as medical benefits plans from the notification requirement in
the judicial contract law. The manager indicated that the court
now properly understands the requirement and stated that it will
immediately begin notifying our office of these types of contracts
when their estimated value is more than $1 million.
Recommendation
Alameda, Contra Costa, Orange, and San Bernardino County
Superior Courts
To comply with the requirements of state law, each court should
immediately implement policies and procedures for notifying the
State Auditor within 10 business days of entering into all contracts
with estimated values over $1 million, except those contracts
exempted from the notification requirement in state law.

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Two Courts Lack Recommended Information in
Their Local Contracting Manuals
Key Points
• The Alameda court’s local contracting manual lacked certain information
recommended by the judicial contracting manual. Specifically, the court failed
to include a legal review policy and contract administration plan in its local
contracting manual.
• The Lake court also did not include the recommended contract administration plan
in its local contracting manual.
The Alameda Court Did Not Include a Legal Review Policy in Its Local Contracting Manual
Although all five courts met the requirements for local contracting manuals, two courts
did not include some information recommended by the judicial contracting manual.
Local contracting manuals serve to supplement the judicial contracting manual. They
provide specific details on procurement policies and procedures for each court in order
to familiarize court employees with the court’s specific purchasing and contracting
practices. The judicial contracting manual requires that the court’s local contracting
manual contain certain information, such as the court’s organizational structure,
including the individuals with responsibility and authority for procurement activities.
In addition to the required information, the judicial contracting manual recommends
that a local contracting manual should contain some additional information unless a
court has a good business reason for excluding it. However, two courts did not follow
certain recommendations or provide a compelling reason for disregarding the judicial
contracting manual’s guidance.
The Alameda court’s local contracting manual did not establish clear guidelines for
when staff should submit contracts for legal review (legal review policy). The judicial
contracting manual recommends that courts adopt a legal review policy, and it provides
circumstances in which courts should require legal review of contracts. For example,
courts should require legal review of contracts that provide for the performance of
high-risk activities, such as operating heavy equipment. However, the current version
of the Alameda court’s local contracting manual does not include a legal review policy.
The court’s executive officer explained that this is because the court may not be able
to obtain legal review promptly. The judicial contracting manual provides that courts
can arrange for legal review of their contracts through in-house legal staff, retained
counsel, or the Judicial Council’s Legal Services office. The court’s executive officer
explained that the court sometimes seeks legal review from one of its staff attorneys but
prefers to rely on the Judicial Council. He expressed concern that the Judicial Council
can have a backlog of legal review requests from multiple entities and that legal review
can sometimes be delayed as a result, so formally documenting requirements for legal
review of contracts could potentially hold the court to standards that would be difficult
to uphold in practice. However, the executive officer was unable to demonstrate that

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such a backlog had prevented the court from obtaining legal review
in a timely manner. Therefore, we believe the court’s reason for not
having a recommended legal review policy is inadequate, and the
executive officer indicated that the court is open to adding a legal
review policy in its local contracting manual.
The Alameda and Lake Courts Did Not Include a Contract
Administration Plan in Their Local Contracting Manuals
Neither the Alameda nor the Lake courts included a recommended
plan for administering contracts (contract administration plan) in
their local contracting manuals. The purpose of such a plan is to
detail the court’s contract administration practices and establish
clear lines of authority for the management and conduct of
contract administration functions—information that should help
staff members perform their duties appropriately. For example,
the San Bernardino court’s local contracting manual refers to the
judicial contracting manual’s guidance on contract administration;
it then supplements that guidance with additional information,
such as clarifying that the staff member who fulfills the role of
contract administrator is responsible for notifying the State Auditor
of high-value contracts. The director of finance and facilities at the
Alameda court stated that the contract administration plan was
inadvertently omitted from the current local contracting manual
during revision and, as we described above, she attributed the
court’s failure to notify our office of high-value contracts in part
to a lack of knowledge on behalf of the responsible individuals. A
contract administration plan that addressed contract administration
practices and management could have prevented this lack of
knowledge. The director of finance and facilities agreed that it
is a good practice to include the contract administration plan in
the local contracting manual, as the judicial contracting manual
recommends, and said the court will do so.
An administrative services manager at the Lake court explained
that the court did not include a contract administration plan in
its local contracting manual because the court has a very limited
number of staff members involved with contract administration
activities and including such a plan is not a mandatory provision.
However, having a contract administration plan as recommended
by the judicial contracting manual could help the court ensure
that knowledge of those activities transfers effectively when staff
members transition in or out of key roles, particularly if a transition
should occur unexpectedly. The Lake court’s executive officer stated
that the court would review the judicial contracting manual and
consider updating the local contracting manual to incorporate the
recommended contract administration plan.

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Recommendations
Alameda County Superior Court
To ensure appropriate administration and review of its contracts,
by July 1, 2021, the court should revise its local contracting manual
to include a contract administration plan and legal review policy, as
recommended by the judicial contracting manual.
Lake County Superior Court
To ensure appropriate administration of its contracts, by
July 1, 2021, the court should revise its local contracting manual
to include a contract administration plan, as recommended by the
judicial contracting manual.

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OTHER AREA WE REVIEWED
To address the audit requirements contained in the judicial contract law, we also
reviewed a selection of each court’s contracts to assess whether each court complied
with applicable requirements. Table 2 shows the results of our review.

Table 2
Other Area We Reviewed as Part of This Audit
The Courts We Reviewed Generally Complied With Other Procurement and Contracting Requirements
We reviewed a selection of contracts for each court to determine whether the courts adhered to requirements
for awarding contracts. We examined 50 contracts (10 from each court) that were active during fiscal
year 2019–20 and were worth approximately $84 million in total value. We determined that all five courts
met procurement and contracting requirements set forth in the judicial contracting manual and each court’s
local contracting manual. Courts competitively awarded 48 percent of the contracts we reviewed, totaling
$45 million in value. For all such contracts, the courts either achieved competition by securing multiple
bids or made a reasonable effort to achieve competition by advertising the contracting opportunities. The
remaining contracts we reviewed, worth $39 million, were noncompetitive. For those contracts, the courts met
applicable requirements from the judicial contracting manual, such as documenting the justification for using
a sole‑source procurement to obtain goods or services from only one vendor.

We conducted this audit in accordance with generally accepted government
auditing standards and under the authority vested in the California State Auditor by
Government Code 8543 et seq. Those standards require that we plan and perform the
audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on the audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions based on our
audit objectives.
Respectfully submitted,

ELAINE M. HOWLE, CPA
California State Auditor
January 14, 2021

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APPENDIX
Scope and Methodology
We conducted this audit pursuant to the audit requirements
contained in the judicial contract law. Our audit focused on the
superior courts in Alameda, Contra Costa, Lake, Orange, and
San Bernardino counties. The Table below lists the audit objectives
and the methods we used to address them.
Audit Objectives and the Methods Used to Address Them
AUDIT OBJECTIVE

METHOD

1

Review and evaluate the laws, rules, and regulations
significant to the audit objectives.

Reviewed relevant state law and the judicial contracting manual, as well as
each court’s policies and procedures.

2

Based on risk factors specified in the judicial contract law,
identify five judicial branch entities, excluding the Judicial
Council, for audit to assess their implementation of the
judicial contract law.

Evaluated all 58 California superior courts and ranked them based on the
following: significant changes that have occurred since 2018 that may
impact compliance with the judicial contract law; the amount of time since
they were last audited by our office or the Judicial Council and previous
audit results or known deficiencies; significant changes in management or
employee turnover; the complexity and size of the courts and their existing
contracting practices and procedures; the volume and type of procurements
made by the courts relative to total judicial branch procurements and to
county populations; and substantial changes to the number and amount of
total procurements from fiscal years 2018–19 to 2019–20.

3

For the five superior courts selected for this audit, perform
the following:

• Obtained versions of each court’s local contracting manual that were
applicable during fiscal year 2019–20 and assessed whether the local
contracting manuals conformed to the judicial contracting manual’s
requirements and recommendations.

a. Determine whether each court has developed its own
local contracting manual and assess its conformance to
the judicial contracting manual.
b. Assess each court’s compliance with key safeguards
related to procurement and contracting in the judicial
contracting manual and its local contracting manual,
including those related to competitive bidding,
sole‑source contracting, and payment and deliverable
review and oversight.
c. Evaluate each court’s contracts to determine whether
it may have inappropriately split contracts to avoid
obtaining necessary approvals or compliance with
competitive bidding requirements.
d. Review the appropriateness of each court’s CAL-Card or
other court-issued purchase card transactions when the
value of those transactions meets a certain threshold.

• Based on factors including contract value and type of goods or services
procured, judgmentally selected 12 contracts for each court that were
active in fiscal year 2019–20 using the Judicial Council’s Semiannual
Report on Contracts for the Judicial Branch (semiannual report) for fiscal
year 2019–20 or, for the Lake court, the court’s ad hoc report of contracts
active during that period.
• Based on factors including payment value, judgmentally selected
18 payments for each court (12 payments associated with the contracts
we selected and six not associated with those contracts) using a fiscal
year 2019–20 payment report provided by each court.
• To gain assurance that data used to select contracts and payments were
complete, traced source documents to the reports we used for selection.
Determined the payment reports were generally complete, although we
could not trace source documents to the Orange court’s payment report
because the Orange court does not maintain paper payment records.
Determined the semiannual reports were generally complete for the
Alameda, Contra Costa, Orange, and San Bernardino courts but incomplete
for the Lake court. Obtained an alternative data source, the Lake court’s
ad hoc report of contracts, to mitigate the risk of selecting contracts from
incomplete data.

continued on next page . . .

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AUDIT OBJECTIVE

METHOD

• For each court, reviewed 10 contracts and 10 payments (six associated
with contracts we selected and four not associated with those contracts)
against key requirements and safeguards identified in our review of the
judicial contracting manual, local contracting manual, and other relevant
policies and procedures. Followed up with court staff to determine the
cause of any exceptions.
• If exceptions in the first 10 items warranted further review of a court’s
contract or payment processes, reviewed additional items. Reviewed
10 contracts for each of the five courts; 10 payments for the Contra Costa,
Lake, Orange, and San Bernardino courts; and 18 payments for the
Alameda court.
• For each court, used the semiannual reports and the court’s list of active
contracts to identify contracts newly valued over $1 million in fiscal
year 2019–20. For any such contracts, reviewed the contracts and courts’
documentation of notifications sent to our office. In cases where the courts
did not notify us of the contracts as required, interviewed court staff to
obtain information about why we were not notified.
• Used the semiannual reports and the Lake court’s ad hoc contract report to
identify instances when courts may have split contracts. For the identified
instances, we evaluated additional information, such as payment reports
and contract documents, to identify whether a court entered into contracts
with the same vendor for similar goods or services during the same time
frame for the purposes of avoiding competitive bidding. Determined there
was no evidence indicating that any of the five courts split contracts.
• Determined whether each court used purchase cards and reviewed
monthly purchase card statements for transactions that appeared
questionable based on the amount or vendor. Based on factors including
transaction value, reviewed a judgmental selection of six transactions
at each of the three courts whose total value of fiscal year 2019–20
purchase card transactions met our threshold for review. For the selected
transactions, reviewed purchase requisitions and receipts, and interviewed
court staff to further assess any transactions that appeared questionable.
Source: Analysis of state law and information and documentation identified in the column titled Method.

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SUPERIOR COURT OF CALIFORNIA, COUNTY OF A.LAMEDA

Executive Office
Rene C. Davidson Courthouse • 1226 Fallon Street, Oakland, CA 94612
(610) 891-6012
TARA M. DESAUTELS

CHAD FINKE

Presiding Judge

Executive Officer

ELIZABETH ERICKSON
Assistant Executive Officer

December 16, 2020
Elaine M. Howle, CPA *
California State Auditor
621 Capitol Mall, suite 1200
Sacramento, CA 95814

Dear Ms. Howle,
The Superior Court of California, County of Alameda (Court) has reviewed the findings and
recommendations included in the California State Auditors draft report titled "Judicial Branch
Procurement: Courts Generally Met Procurement Requirements, But Some Need to Improve Their
Payment Practices,". The Court agrees with the recommendations contained in the report and has
provided our response to the recommendations, as detailed below.

Recommendation:
To ensure that it expends public funds appropriately, the court should immediately require staff to
match invoices to appropriate supporting documentation and to adhere to the established authorization
limits when approving Invoices.

Alameda Court Response:
The Court intends to revise its invoice approval authorization limit matrix and update to our invoice
approval signature cards, accounts payable staff desk manual, and the local contracting manual, as
appropriate.
AddltlonaJly, a revision will be made to invoice code strips to include accounts payable staff verification
and acknowledgement of invoice and supporting documentation matching prior to payment processing.

*

California State Auditor’s comment appears on page 29.

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Elaine M. Howle
December 16, 2020
Page 2
Recommendation:

To comply with the requirements of state law, each court should immediately implement policies and
procedures for notifying the State Auditor within 10 business days of entering into all contracts with
estimated values over $1 mi llion, except those contracts exempted from the notification requirement in
state law.
Alameda Court Response:

The Court has amended its contract review form to identify contracts valued over $1 million and has
begun to notify the State Auditor of contracts meeting the threshold in compliance with state law. Th e
local contract manual will also be revised to include information about the notification requirement, as
this was inadvertently omitted from the most recent version of the local contract manual.
Recommendation:

To ensure appropriate administration and review of its contracts, by July 1, 2021, the court should rev ise
its local contracting manual to include a contract administration plan and legal review policy, as
recommended by the jud icial contracting manual.
Alameda Court Response:

The Court will revise its local contract manual to include a contract administration plan and legal review
policy.
We would also like to thank your staff for the professional, respectful, and courtesy manner in which
they conducted themselves when working with our staff, during the audit process.

Chad Finke,
Court Executive Officer
cc: Hon . Tara M . Desaute ls, Presiding Judge
Elizabeth Erickson, Assistant Executive Officer
Melanie Lewis, Finance & Facilities Director

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COMMENT
CALIFORNIA STATE AUDITOR’S COMMENT ON THE
RESPONSE FROM THE SUPERIOR COURT OF CALIFORNIA,
COUNTY OF ALAMEDA
To provide clarity and perspective, we are commenting on
the Alameda court’s response to our audit. The number below
corresponds to the number we have placed in the margin of the
Alameda court’s response.
The Alameda court’s intention to revise and update its
authorization limits does not address our concern that it has not
required staff to adhere to authorization limits when approving
invoices. As noted on page 10, we found that despite having
established authorization limits in place for approving invoices, the
court allowed staff to disregard these authorization limits when
approving invoices. Such actions undercut the court’s management
controls designed to reduce its risk of making inappropriate
payments. Instead, the court should take steps to ensure that court
staff adhere to authorization limits when approving invoices.

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~up.erior Olourl of Olalifornia
COUNTY OF CONTRA COSTA
725 COURT STREET
P.O. BOX9 11
MARTINEZ , CA 94553-0091

December 14, 2020

Ms. Elaine M. Howle, CPA
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, CA 95814

Dear Ms. Howle,

Thank you for the opportunity to review and respond to the draft audit report titled Judicial
Branch Procurement: Courts Generally Met Procurement Requirements, But Some Need to
Improve Their Payment Practices. The Contra Costa Superior Court (Court) is responding to the
following recommendation:
To comply with the requirements of state law, each court should immediately implement
policies and procedures for notifying the State Auditor within 1O business days of
entering into all contracts with estimated values over $1 million, except those contracts
exempted from the notification requirement in state law.
We agree with the above recommendation. The Court already has a process in place to track
the value of its contracts in order to notify the State Auditor whenever a contract exceeds $1
million, or the total value of a contract and subsequent amendments reaches $1 million. The
report identified one Memorandum of Understanding (MOU) with the County of Contra Costa
(County) for over $1 million that was not notified. We entered into this MOU in 2016 to detail out
the terms and conditions for information technology services that the County has continued to
provide after the Court separated from the County as a result of the Lockyer-Isenberg Trial
Court Funding Act of 1997. The Court will update its tracking process to include the tracking of
MO Us to ensure notification to the State Auditor when the total value of purchase orders issued
or to be issued against MOUs exceeds $1 million or is estimated to exceed $1 million. We plan
to complete this process update by February 28, 2021.

Kate Bieker, Court Executive Officer
Superior Court of California, County of Contra Costa

cc.
Hon. Barry Baskin, Presiding Judge
Superior Court of California, County of Contra Costa

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MICHAELS. LUNAS

Superior Court

State of California
County of Lake
255 N. Forbes Street

KRISTA D. LEVIER

December 16, 2020

Elaine M. Howle, CPA *
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, CA 95814

Re: Response to Draft Audit Report
The Superior Court of California for the County of Lake (Court) has reviewed your draft audit
report pertaining to our procurement and contracting practices. The audit is required by the
Public Contract Code and the Court greatly appreciates the professionalism and work of the audit
team. The Court is pleased with the draft report's overall positive conclusion that the Court
generally met procurement requirements, as evidenced by the limited number of audit findings.
The State Auditor's draft report provides the Court with two recommendations, which are
addressed below.

Recommendation #1- Segregation of Duties
During its fieldwork, the audit team reviewed a sample of invoices and resulting payments to
vendors for various contracts and purchase orders. The draft report takes issue with the Court's
segregation of duties when processing and ultimately approving these payments. Specifically, the
audit team notes that the individual who approves an invoice for payment also approves the
equivalent entry in our Phoenix accounting system through the "posting" of the transaction. The
Court will carefully consider the audit team's recommendation to further segregate these
functions and will consult with the Judicial Council's accounting and procurement staff when
deciding on any corrective action that is necessary.
For context and clarity, the Court has already segregated the duties for many of its key
purchasing and accounting activities prior to the audit. For example, the Court has different

*

California State Auditor’s comment appears on page 35.

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01

individuals who: (1) initiate purchase requisitions and confirm the receipt of goods, (2) match
vendor invoices to the pricing and terms of the relevant contract or purchase order, and (3)
ultimately approve payments to vendors. Importantly, the individual approving payment-the
focus of this audit finding- does not maintain the master vendor file in the accounting system
and thus cannot create fictitious vendors. Further, the payment approver can only approve
accounting transactions entered by someone else and cannot both self-initiate (i.e. "park ) a
transaction and then approve ("post") it on her own. The Court believes its current internal
control structure significantly limits the risk of any single individual creating or concealing
payment errors. Nevertheless, the Court welcomes the audit team's observations as an
opportunity to further review and potentially enhance its internal controls.
Recommendation #2 - Local Contracting Manual

Section 19206 of the Public Contract Code requires the Judicial Council to adopt a Judicial
Branch Contracting Manual and for the Court to similarly develop a local contracting manual
that is consistent with state law and is substantially similar to the provisions contained in the
State Administrative Manual and State Contracting Manual. The audit team recommends that
the Court update its local contracting manual to include a contract administration plan in order to
ensure staff have sufficient guidance on duties related to the management and administration of
contracts. The Court agrees with the recommendation and intends to update its local manual on
or before July 1, 2021.

Again, the Court and its management team appreciates the work of the State Auditor's staff and
views the audit as an important tool for transparency and for promoting continual improvement
in our procurement practices. Please feel free to contact me at (707) 263-2575 should you have
any questions regarding the Court's response.

Krista D. Levier
Court Executive Officer

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COMMENT
CALIFORNIA STATE AUDITOR’S COMMENT ON THE
RESPONSE FROM THE SUPERIOR COURT OF CALIFORNIA,
COUNTY OF LAKE
To provide clarity and perspective, we are commenting on the Lake
court’s response to our audit. The number below corresponds to the
number we have placed in the margin of the Lake court’s response.
The Lake court’s response indicates that the court believes it
has significantly limited its risk through its current approach
to segregation of payment duties, but as we indicate beginning
on page 10 in the report, the executive officer still performed
two payment duties, and a process that does not fully separate
payment duties is inherently higher in risk than one that does.
Further, although the court did include additional safeguards in
some instances, it did not consistently do so. Therefore, to further
reduce the risk of making improper payments, the court should
consistently incorporate an additional safeguard when it cannot
fully separate payment duties.

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hp.erinr Q!nurt nf <llitlifnrnia

C!rnuntu nf ®rangt
DAVID YAMASAKI

700 CIVIC CENTER DRIVE WEST
SANTA ANA, CALIFORNIA 92701
PHONE: 657-622-7017

COURT EXECUTIVE OFFICER
CLERK OF THE COURT
JURY COMMISSIONER

December 16, 2020

Elaine M. Howle, CPA *
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, CA 95814

Re:

Orange County Superior Court's Written Response to "Judicial Branch Procurement:
Courts Generally Met Procurement Requirements, But Some Need to Improve Their
Payment Practices" Report 2020·301

Dear Ms. Howle:
This letter is the Orange County Superior Court's written response to the "Judicial Branch Procurement:
Courts Generally Met Procurement Requirements, But Some Need to Improve Their Payment
Practices" Report 2020-301 received from you on December 10, 2020.
The Orange County Superior Court ("Orange Court") values strategic planning, careful execution, and
regular monitoring and adjustments through extensive use of data analytics. Our comprehensive
approach has many checks and balances and internal controls that help to not only minimize the risk of
inappropriate use of funds, but more importantly, ensure optimal use of funds that are well aligned with
the.Orange Court's strategic goals and mission.
The Orange Court's strategic goals include enhancing access and use of data-driven decision making
for continuous improvement. The audit conducted by the California State Auditor's office of our
procurement practices was helpful in reviewing our existing processes and internal controls, consistent
with our goal of continuous improvement. It is important to note that the areas audited is a subset of a
continuum of end-to-end internal controls and monitoring process utilized by the Orange Court that
includes strategic planning, budget development, expenditure monitoring, project ideation and
prioritization, resource allocation, procurement, automated work flow purchase approvals, and
extensive use of interactive dashboards:
1) The Orange Court has an extensive strategic planning process that is the foundation for the
annual budget and expenditure plan, which is developed with input from approximately 65 cost
center managers with review and approval from the Orange Court's executive management
team, finance committee, executive committee, and the Presiding Judge.
2) The annual expenditure plan is routinely monitored by cost center managers through interactive
Power Bl dashboards that integrate near real time information from the State's SAP Financial
System.
3} These expenditures are also monitored by a dedicated team of budget analysts who work
closely with the cost center managers.

*

California State Auditor’s comments appear on page 41.

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December 16, 2020

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4) In addition, a monthly dashboard of the budget, actuals to date, variances, and revised budget
projection is shared by the Chief Financial and Administrative Officer with the executive
management team and the Presiding Judge (PJ) and Assistant Presiding Judge (APJ).
5) These interactive dashboards are available on the Orange Court's intranet site to all cost center
managers, executive management team, and PJ / APJ.
6) Coupled with this process, the Orange Court has developed an in-house invoice approval
work.flow process that has been in place since 2017. This workflow system ensures a stringent
approval process and documents the entire invoice approval process.
7) The Orange Court also implemented a 3rd party portfolio management tool to capture project
ideas and to track medium to large scale projects that typically involves a public bid process
administered by our procurement team. This is in addition to the existing contract management
system utilized by the Orange Court that automatically notifies the CA State Auditor's office of
contracts above $1 million when statutorily required.

I.

The Orange Court Did Not Always Follow Payment Safeguards, Increasing the Risk of
Improper Payments

The Orange Court concurs with the recommendation in the Report and will revise our payment process
to consistently require two levels of approval for all invoices above a certain dollar limit. Generally,
invoices greater than $50,000 are approved by both a cost center manager and a department chief.
The Orange Court developed and implemented an extensive accounts payable approval work.flow
process that has been in place for several years. This workflow system ensures a stringent approval
process and documents the entire invoice approval process. The $160,000 payment highlighted in the
Report was an exception to our process that was put in place with Presiding Judge and executive
management approval to balance confidentiality and timely payments for attorneys providing
representation for children and families {juvenile dependency counsel). The Orange Court is committed
to continuous improvement and will explore options to incorporate alternate defense billing invoices into
our accounts payable approval process to ensure we have at least two approvals for any invoice above
a certain dollar threshold.

II. Court Failed to Consistently Report High-Value Contracts

O1

The Orange Court concurs in part and rejects in part the State Auditor's conclusions and
recommendations that the Orange Court failed to consistently report high-value contracts.

O2

The Orange Court acknowledges that it did not achieve 100% compliance in reporting all high-value
contracts per state law as shown in the instance of 2 of the 10 contracts reviewed by the State Auditor,
and that it should implement enhancements to its existing policies and procedures for notifying the
State Auditor within 10 business days of entering all contracts with estimated values over $1 million,
except for those contracts exempted per state law.

03

However, the Orange Court rejects as inaccurate and unfair the characterization that it failed to
consistently report high-value contracts per state law and should immediately implement policies and
procedures for notifying the State Auditor within 10 business days of entering all contracts with
estimated values over $1 million when statutorily required. This description portrays the Orange Court
as not complying time after time with the state law requirement to notify the State Auditor within 10
business days of entering all contracts with estimated values over $1 million and operating without any
policies or procedures for such compliance.

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December 16, 2020

Page3

The Orange Court added its automated K2 BSA notification workflow to its existing Contract
Management Data System (CMOS) in 2012 to reduce its risk of noncompliance with the state law
requirement that each court notify the State Auditor within 10 business days of entering a contract with
an estimated value over $1 million unless exempt per state law. The Orange Court's automated K2
BSA notification workflow requires Procurement Staff to enter the same contract information for all
signed, written contracts into CMOS from SAP for the automated K2 BSA statutory notification to be
sent to the State Auditor.
In the first instance where the State Auditor found that the Orange Court failed to report an IT purchase
order contract valued at $1.2 million entered in fiscal year 2019-20, this failure was due to an
unintentional error in not entering the purchase order contract information into CMOS for the automated
K2 BSA statutory notification to be sent to the State Auditor. The Orange Court had issued a purchase
order on its form for this procurement per California Cooperative Agreement No. 7-14-70-04. As the
Cooperative Agreement itself was the existing written contract, Procurement Staff did not draft and
have a separate written contract signed. Since a separately signed, written contract did not exist for
this purchase order, Procurement Staff did not process the purchase order information into CMOS in
the typical way a separately signed, written contract would have been, and consequently, the K2 BSA
system did not have the information to generate and send a statutory notification to the State Auditor.
To reduce the risk of recurrence of such an instance, Orange Court Procurement has added the
following narrative to its existing CMOS workflow process: "Enter all approved POs with an Overall
Contract Value of more than $1 million into CMOS, regardless of whether the Court signed a written
contract for the PO so that the Court's automated system can send the requisite BSA Notice to the
State Auditor."
In the second instance where the State Auditor found that the Orange Court failed to report a legal
services contract worth $4.3 million in fiscal year 2019-20, this failure was due to human error when
entering the contract information into CMDS. The Orange Court is currently researching the
implementation of appropriate process enhancements to further reduce the risk of human error that
could result in noncompliance with the state law requirement to notify the State Auditor within 10
business days of entering a contract with an estimated value over $1 million when statutorily required.
This research includes the accessibility of exportable con1ract data from SAP and CMOS for review and
comparison at regular intervals to verify compliance with the state law requirement.
Thank you for your time and consideration.
Sincerely,

/t

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COMMENTS
CALIFORNIA STATE AUDITOR’S COMMENTS ON THE
RESPONSE FROM THE SUPERIOR COURT OF CALIFORNIA,
COUNTY OF ORANGE
To provide clarity and perspective, we are commenting on
the Orange court’s response to our audit. The numbers below
correspond to the numbers we have placed in the margin of the
Orange court’s response.
The court’s partial rejection of our conclusions and
recommendations is inconsistent with both its acknowledgment
that it did not notify us about all contracts as required by state law,
and its indication that it will take additional action to ensure future
compliance with the requirement. We stand by our conclusions and
recommendations and provide further comments on the Orange
court’s response below.

01

The court’s response that it did not achieve 100 percent compliance
as shown in the instance of two of 10 contracts we reviewed indicates
a misunderstanding of our work in this area. On page 16, we explain
that the court notified of us about two high‑value contracts that were
subject to the requirement but did not notify us about another two.
We reviewed the court’s compliance with the legal requirement to
notify us about high‑value contracts by identifying such contracts in
fiscal year 2019–20 contract reports we obtained from the Judicial
Council and the court. This was in addition to and distinct from our
review of a selection of 10 of the court’s fiscal year 2019–20 contracts
to determine whether the court adhered to requirements for
awarding contracts, the results of which we summarize on page 23.

02

Our conclusion that the court failed to consistently report
high‑value contracts per state law is accurate and fair. We explain on
page 16 that the court notified us about two such contracts but did
not notify us about two others, which the court acknowledges in its
response. Also, we do not state that the court was operating without
any policies or procedures for complying with the notification
requirement. Rather, as we describe on page 16, although the court
was aware of the notification requirement and reported certain
high‑value contracts to our office, it did not do so in all cases for
the reasons we note. Although the court does have policies and
procedures in place for complying with the notification requirement,
it needs to update its procedures to address the deficiencies we
describe and ensure it notifies us about all contracts as required by
law. We stand by our recommendation that it should do so.

03

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43

January 2021

~uperior q[:ourt of q[:alifornia
q[:ountp of ~an TJjernarbino
NANCY CS EBERHARDT
Court Executive Officer and Clerk
Jury Commissioner

247 West Third Street, Eleventh Floor
San Bernardino, CA 92415-0302

(909) 708-8747

December 16, 2020

Elaine Howle, California State Auditor *
621 Capitol Mall, Suite 1200
Sacramento, CA 95814
Dear Ms. Howle:
Thank you very much for the opportunity to review the draft audit report performed in
accordance with Public Contracting Code (PCC) sections 19201 through 19210. The audit team
was extremely professional, responsive, and courteous and the audit process went smoothly,
despite the varied challenges presented by the COVID-19 (coronavirus) pandemic.
In response to the draft report, the Superior Court of California, County of San Bernardino
(Court) respectfully submits some additional clarification regarding the reporting of two benefit
contracts and disagrees with the finding. As stated in the draft report, the Court was working
under prior direction and interpretation that benefit contracts did not need to be reported
pursuant to section PCC 19204, as the code specifically references "goods and services." This
interpretation was premised upon both the Judicial Council of California's staff guidance and a
local understanding related to other requirements regarding benefits.
Benefit contracts are unique from other "services" provided under contract in that they are
required as a condition of employment and subject to the terms of negotiated contracts with
local labor unions. In the instance of both benefit contracts, the Court adhered to all local
policies, procedures, and agreements with local labor unions. Also of note, the table presented
as background information regarding the audit excludes these contract amounts as they are not
included in the portion of the general ledger coding string for operating expenditures and
equipment ("goods and services"); rather, they are included as part of employee benefit costs.
The interpretation issue was related to "service", as benefits are required both locally per
existing bargaining agreements and personnel policies and under California law.

*

California State Auditor’s comments appear on page 45.

01

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Page 2 of 2
CSA Audit Response

O1

Additionally, the Court would like to note that immediately upon being advised that the benefit
contracts were included as part of PCC 19204 reporting requirements, they were reported to the
California State Auditor, and the court adjusted its internal policies accordingly to ensure future
compliance

ardt
Officer

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COMMENTS
CALIFORNIA STATE AUDITOR’S COMMENTS ON THE
RESPONSE FROM THE SUPERIOR COURT OF CALIFORNIA,
COUNTY OF SAN BERNARDINO
To provide clarity and perspective, we are commenting on the
San Bernardino court’s response to our audit. The numbers below
correspond to the numbers we have placed in the margin of the
San Bernardino court’s response.
It is unclear why the San Bernardino court states that it disagrees
with our finding since it acknowledges that it has now notified
our office about the medical benefit plans contracts in question,
and has revised its policies to ensure future compliance with the
notification requirement in state law. Moreover, as we describe on
page 17, the court’s contracts and procurement manager explained
that the court had misinterpreted direction from a Judicial Council
staff member about whether contracts for services such as medical
benefit plans were subject to the notification requirement in state
law, and she indicated the court now properly understands the
requirement. The clarification the court provides in its response
regarding its earlier misinterpretation does not alter our conclusion
that it failed to consistently report high‑value contracts as required
by state law.

01

State law establishes which contracts are subject to the notification
requirement. As we describe on page 5, the law generally requires
courts to notify our office of high‑value contracts for goods and
services and excludes only certain contracts from that requirement,
such as trial court construction contracts. Of the exclusions
provided in the law, there is no exception to the notification
requirement related to contracts for medical benefit plans or
for employment-related contracts that are required by state law.
Further, the court did not cite any authority excluding these types
of service contracts in its response. The table to which the court
refers is unaudited background information obtained from reports
provided by the Judicial Council. That information is not relevant to
our finding that the court incorrectly exempted two contracts from
the notification requirement set forth in state law.

02

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