California’s High-Risk Government: Newsom’s Accountability Problem

By Michael Phillips | CABayNews

By any fair reading, California’s latest state audit is not a partisan hit job. It is a warning flare.

The December 11, 2025 report from the California State Auditor—a nonpartisan watchdog—keeps eight agencies and statewide systems on its official “high-risk” list for waste, fraud, abuse, or severe mismanagement. These are not minor bookkeeping errors. They are structural failures with real financial and human costs, many of them persisting or worsening during the tenure of Gavin Newsom.

Critics have framed the findings as proof that Newsom has turned California into the “fraud capital of America.” That phrase is political rhetoric, not language used by auditors. But stripping away the slogans does not make the underlying problems disappear. What remains is a record of chronic oversight failures involving tens of billions of taxpayer dollars.

What the Auditor Actually Found

The State Auditor’s “high-risk” designation is not handed out casually. Agencies must meet strict criteria, including a substantial likelihood of serious harm and inadequate corrective action. This year’s list includes:

• Employment Development Department (EDD): Still plagued by improper unemployment payments and weak controls after pandemic-era fraud estimates ranging from $20 to $32 billion. Even years later, basic waste continues—such as millions spent on unused equipment.
• Management of Federal COVID-19 Funds: California received roughly $285 billion. Billions remain poorly tracked, and hundreds of millions have expired unused.
• Medi-Cal Eligibility Oversight: Persistent discrepancies risk billions in improper payments.
• State Financial Reporting Delays: California’s own books are routinely months late, undermining transparency.
• Information Security and IT Project Failures: Issues dating back more than a decade remain unresolved.
• Water Infrastructure: Aging systems with inadequate long-term planning.
• Department of Technology: Chronic delays and stalled critical projects.
• CalFresh (Newly Added): High payment error rates could expose the state to as much as $2.5 billion per year in new federal penalties.

None of this is labeled “personal corruption.” But together, it paints a picture of a government unable—or unwilling—to control the systems it oversees.

Homelessness: Spending Without Accountability

Nowhere is this clearer than homelessness. A 2024 audit reviewed roughly $24 billion spent over five years across dozens of programs. The core finding was not proven mass fraud—but something almost as damning: the state often cannot say what the money accomplished.

The California Interagency Council on Homelessness stopped consistently tracking outcomes after 2021. Billions flowed out the door with little standardized data on results. During the same period, homelessness increased by more than 50 percent statewide.

Add to that several 2025 criminal indictments involving misuse of housing grants, and the picture becomes unavoidable: lax oversight invites abuse, even if not every dollar was stolen.

Leadership Without Ownership

Supporters of the governor argue—correctly—that some of these issues predate Newsom. That is true. But leadership is not about inheriting problems; it is about fixing them. After six years in office, with supermajority allies in the Legislature and the nation’s highest state taxes, “this started before me” wears thin.

Equally telling is what has not happened. There has been no forceful, public reckoning from the governor’s office in response to the audit. No sweeping accountability plan. No high-profile resignations tied to repeated failures. Mostly, silence—punctuated by assurances that agencies will submit corrective plans sometime next year.

Not a Scandal—A Pattern

There is no credible evidence that Gavin Newsom has personally committed fraud or criminal acts. That matters, and it should be said plainly. But the absence of personal scandal does not equal good governance.

What the State Auditor documents is something more corrosive: a culture of tolerated dysfunction. When billions can be lost to fraud, wasted through incompetence, or spent without measurable results—and no one seems meaningfully accountable—public trust erodes.

California does not need more slogans, either pro-Newsom or anti-Newsom. It needs a governor willing to confront uncomfortable truths inside his own administration and impose consequences when agencies fail repeatedly.

Until that happens, the phrase “high risk” will continue to describe not just individual departments—but the credibility of California’s government itself.