Federal Watchdog Flags $10.8 Million in Questioned Costs for Newsom's Volunteer Program

A federal audit has identified significant oversight weaknesses in Gov. Gavin Newsom’s volunteer initiative, California Volunteers, flagging $10.8 million in questioned grant costs. The report, commissioned by the AmeriCorps Office of Inspector General, raised accountability concerns for Newsom and Josh Fryday, the state's "Chief Service Officer."

The audit found that California Volunteers and three of the seven examined organizations failed to adhere to federal grant requirements. Auditors recommended the recovery of nearly $4.8 million in federal funding from the nonprofit CivicWell and disallowed an additional $6 million in matching contributions. The report stated that "inadequate monitoring creates significant risk that federal funds are misused, wasted, or subject to fraud without detection."

California Volunteers, which falls under the Governor’s Office of Service and Community Engagement led by Fryday, has been a central focus of Newsom's administration. The governor has committed substantial funding to expand public service programs, including a $400 million investment through the "California Comeback Plan."

According to the audit, which covered activities and financial reports from January 2022 through April 2024, California Volunteers did not adequately assess recipients' financial systems before awarding grants and failed to conduct regular assessments to identify organizations needing closer oversight. The agency also did not detect missing documentation, improper accounting, and weaknesses in financial controls among grant recipients.

Auditors specifically noted that CivicWell’s accounting records did not sufficiently distinguish federal spending from matching contributions, making it impossible to verify that expenses were properly allocated and not duplicated. The report indicated that California Volunteers could be held liable for questioned costs that cannot be recovered from recipients.

A spokesperson for California Volunteers contested the questioned costs, attributing them to "reconciliation challenges with a former subrecipient rather than unallowable expenses." The agency has been called upon by auditors to implement stronger financial reviews, staff training, documented corrective actions, and to suspend payments to high-risk recipients.

In recent events, Newsom and Fryday participated in a ceremony celebrating the California Service Corps, with the governor's office reporting that over 50,000 individuals have participated since 2019, contributing nearly 26 million service hours. The audit’s findings cast a shadow over the program’s financial management despite its expanded reach and state funding increases.