— The Natural Resources Agency failed to submit required reports.
— The California Victim Compensation and Government Claims Board failed to identify and notify people eligible for a scholarship program funded by the plates.
"Our state government loses the public's trust when funds are being spent improperly," Sen. Mark DeSaulnier, D-Concord, said in a statement.
DeSaulnier, who chairs the Senate Transportation and Housing Committee, and Sen. Ted Gaines, the committee's vice chairman, promised more hearings if lawmakers find the agencies are not following the audit's recommendations.
"The egregious misuse of these funds is absolutely unacceptable," Gaines, R-Rocklin, said in a statement. He said motorists rightly expect their money will go for the causes they hope to support when buying the specialty plates, "not for unrelated office supplies and travel expenses."
The agencies generally agreed with the auditors' findings and recommendations for improvements. However, DMV cited limits in its database and unclear state laws that make it difficult to collect some funds.
The Food and Agriculture and Emergency Management agencies, Parks and Recreation department, and the Victim Compensation board all said they will do a better job tracking the spending of money generated by the plates.
The Natural Resources Agency disagreed with the findings, though auditors said the agency was misinterpreting its recommendations.
The AP's initial report focused on the memorial license plate created after the Sept. 11, 2001, attacks and emblazoned with the words, "We Will Never Forget."
The AP found that millions of dollars raised by selling the plates had been spent on such issues as livestock diseases and workplace safety — items with questionable links to threats of terrorism.
Some of the $1.5 million raised annually by selling those plates was supposed to fund scholarships for children of California residents who died in the attacks. The AP found the DMV was advertising the plates as benefiting those children seven years after the department stopped funding the program.
Assemblyman Mike Gatto, D-Los Angeles, chairman of the Assembly Appropriations Committee, said the audit will bring increased scrutiny of the funds in future budget hearings. After the AP's reporting, he was careful to add safeguards to his own bill last year that lets motorists buy retro "legacy" California license plates.
"We like to think we did ours correctly. We already put two clauses in there that make sure the money goes where it is supposed to go," he said.