Summary

June 2013 California Department of Corrections and Rehabilitation, and California Correctional Health Care Services Both Agencies Wasted State Resources by Improperly Accounting for Leave Taken by Their Employees Report I2010-1045 COMMITMENT INTEGRITY LEADERSHIP The first five copies of each California State Auditor report are free. Additional copies are $3 each, payable by check or money order. You can obtain reports by contacting the California State Auditor’s Office at the following address: California State Auditor 555 Capitol Mall, Suite 300 Sacramento, California 95814 916.445.0255 or TTY 916.445.0033 OR This report is also available on our Web site at www.auditor.ca.gov. The California State Auditor is pleased to announce the availability of an online subscription service. For information on how to subscribe, visit our Web site at www.auditor.ca.gov. Alternate format reports available upon request. Permission is granted to reproduce reports. For questions regarding the contents of this report, please contact Margarita Fernández, Chief of Public Affairs, at 916.445.0255. For complaints of state employee misconduct, contact the California State Auditor’s Whistleblower Hotline: 1.800.952.5665. Elaine M. Howle State Auditor Doug Cordiner Chief Deputy June 20, 2013 I2010-1045 The Governor of California President pro Tempore of the Senate Speaker of the Assembly State Capitol Sacramento, California 95814 Dear Governor and Legislative Leaders: Pursuant to the California Whistleblower Protection Act, the California State Auditor presents this investigative report concerning the California Department of Corrections and Rehabilitation, and California Correctional Health Care Services (Correctional Agencies) undercharging the leave balances of certain employees for workdays that they missed. This report concludes that the Correctional Agencies wasted $169,541 in state resources by improperly charging leave hours for 128 of the 170 employees whose leave usage we reviewed over a 12-month period. Most of these improperly charged hours resulted from the Correctional Agencies charging employees’ leave balances only eight hours for each workday missed. Because these employees were working nine or 10 hour workdays, they should have been charged nine or 10 hours of leave for each workday that they missed. The remaining mischarged leave hours resulted from the Correctional Agencies’ personnel specialists making clerical errors when entering information into the agencies’ leave accounting system. We further conclude that, in addition to wasting state resources at the six correctional facilities we visited, the Correctional Agencies likely wasted a substantial amount of state resources in a similar manner at their 27 other adult correctional facilities. Respectfully submitted, ELAINE M. HOWLE, CPA State Auditor 555 Capitol Mall, Suite 300 Sacramento, CA 95814 916.445.0255 916.327.0019 fax www.auditor.ca.gov Blank page inserted for reproduction purposes only. California State Auditor Report I2010-1045 v June 2013 Contents Investigative Results Results in Brief 1 Background 3 Investigative Approach 5 Facts and Analysis 7 Recommendations 16 Appendix The Investigations Program 19 Summary of Agency Responses 21 vi California State Auditor Report I2010-1045 June 2013 Blank page inserted for reproduction purposes only. California State Auditor Report I2010-1045 1 June 2013 Investigative Results Results in Brief Investigative Highlights . . . The California Whistleblower Protection Act empowers the Our investigation at the California California State Auditor (state auditor) to investigate and Department of Corrections and report on improper governmental activities by state agencies Rehabilitation, and California Correctional and employees.1 The state auditor initiated this investigation of Health Care Services (Correctional Agencies) the California Department of Corrections and Rehabilitation, substantiated the following: and California Correctional Health Care Services (Correctional » The Correctional Agencies wasted state Agencies) in response to allegations that they improperly resources by improperly accounting for undercharged the leave balances of certain employees for leave taken by employees, costing the workdays they had missed. State $169,541. Our investigation revealed that the Correctional Agencies » Personnel specialists did not charge wasted state resources by improperly accounting for time off employee leave balances correctly taken by nonmanagerial employees from October 2010 through due to a lack of understanding and September 2011. Of the 170 employees whose time sheets and poor oversight. leave records we reviewed during this investigation, we found • They undercharged leave for that the Correctional Agencies failed to charge leave accurately employees working alternate for 128 of the employees, mischarging them by 3,685 hours and work schedules. costing the State $169,541. The majority of these mischarged hours resulted from the Correctional Agencies charging employees’ leave • They made numerous clerical errors in balances only eight hours for each workday missed. Because the entering time sheet information into employees were scheduled to work nine- or 10-hour workdays, the agencies’ leave accounting system. they should have been charged nine or 10 hours of leave for each workday that they missed, in accordance with the policies of the » The Correctional Agencies likely California Department of Personnel Administration (Personnel undercharged leave at the other Administration).2 This type of undercharging leave occurred for 27 correctional facilities. 110 of the 170 employees whose time sheets and leave balances we examined and cost the State $146,527. » Substantial undercharging of leave has continued at adult correctional facilities. The undercharging of leave for employees working a scheduled nine- or 10-hour workday was caused by the Correctional Agencies’ poor oversight of the manner in which personnel staff performed leave accounting at California’s adult correctional facilities. Many of the supervising personnel officers at the adult correctional facilities we visited during this investigation did not have an accurate understanding of how to charge leave balances for certain employees. As a result, the personnel specialists that they supervised did not charge employee leave balances correctly. However, even at facilities where the supervising personnel officers had an accurate understanding of how to charge leave properly, we still found 1 For the definition of an “improper governmental activity” and more information about the state auditor’s investigative authority, please refer to the Appendix. 2 Effective July 1, 2012, Personnel Administration was incorporated into a new state department called the California Department of Human Resources. 2 California State Auditor Report I2010-1045 June 2013 the personnel specialists charging leave balances incorrectly, as this understanding was not shared with or implemented by all subordinate personnel specialists. The remaining undercharged leave occurred because the Correctional Agencies’ personnel specialists made numerous clerical errors when entering information into the leave accounting system used by these agencies. Although some of the errors made by personnel specialists disadvantaged the Correctional Agencies’ employees by charging their leave balances for time they were not absent from work, the majority of the clerical errors disadvantaged For the 170 employees whose the State by undercharging the employees’ leave balances for time time sheets and leave records we they were absent from work. For the 170 employees whose examined, the net cost of clerical time sheets and leave records we examined, the net cost of clerical errors to the State was $23,014. errors to the State was $23,014. The Correctional Agencies’ poor oversight over personnel specialists also facilitated this problem. Having identified substantial undercharging of the leave balances of certain employees working at the six adult correctional facilities we visited for this investigation, we performed a further analysis of the information we gathered at those facilities to identify factors associated with the undercharging of leave that might indicate the extent to which the undercharging of leave may be a systemic problem occurring at other adult correctional facilities throughout the State. In examining the information, we identified two factors strongly associated with the employees being undercharged leave for any workday missed. After identifying these factors, we conducted research regarding the remaining 27 adult correctional facilities to obtain a broad understanding of the extent to which those same factors were present at the remaining facilities. As part of that research, we surveyed supervising personnel officers at the 27 remaining facilities regarding their understanding of how to charge leave. Through our research, we found that at least one of the two factors associated with the undercharging of leave was present at all 27 facilities, and that supervising personnel officers at seven of these facilities had an incorrect understanding of how to charge leave properly. We thus concluded that in addition to wasting $169,541 in state resources during a 12-month period at the six facilities we visited, the Correctional Agencies likely also wasted a substantial amount of state resources at the remaining adult correctional facilities through the undercharging of leave. We estimated that the amount of the waste could have been more than $400,000 from October 2010 through September 2011, although this is just an estimate, and the actual amount of waste could be significantly higher or lower. After completing our analysis of 2010 and 2011 data, we obtained 2012 time sheets and leave records for the eight employees at California Correctional Institution (CCI) and the eight employees California State Auditor Report I2010-1045 3 June 2013 at California State Prison, San Quentin (San Quentin) who were undercharged the largest number of leave hours during our previous review period to assess whether the undercharging of The Correctional Agencies leave persisted. We found that the Correctional Agencies continued continued to undercharge leave to undercharge leave for these employees, with the eight employees in 2012. Eight employees at CCI at CCI being undercharged 200 hours of leave at a cost to the were undercharged 200 hours at State of $9,707 and the eight employees at San Quentin being a cost to the State of $9,707 and undercharged 124 hours of leave at a cost of $4,505. Our review of eight employees at San Quentin the 2012 information suggests that the substantial undercharging were undercharged 124 hours at a of leave continued at the State’s adult correctional facilities in an cost of $4,505. amount similar to what we found in 2010 and 2011. Background As of December 2012 the Correctional Agencies had more than 36,000 employees at California’s 33 adult correctional facilities, who, among other things, supervised offenders or provided them with rehabilitation and treatment services. Some of these employees, including medical staff, teachers, and chaplains, are classified as being exempt from the Fair Labor Standards Act (exempt). Exempt employees are not compensated with a wage that is based on how many hours they work. Instead, they are compensated with a salary that is based on completing specified job duties regardless of how many hours it takes. Thus, exempt employees are expected to work as many hours as necessary to fulfill their job duties, even if that means working more than a standard 40-hour workweek. On such occasions, an exempt employee is not entitled to receive any extra compensation, commonly called “overtime pay,” for working more than 40 hours. Many state employees, including exempt employees, are permitted to work an alternate work schedule that differs from a standard work schedule of five eight-hour days per week. Common alternate work schedules include working four 10-hour days over a one-week period (a 4/10/40 schedule) or working eight nine-hour days and one eight-hour day over a two-week period (a 9/8/80 schedule). According to policies issued by Personnel Administration and applicable provisions of the collective bargaining agreements in effect with the Correctional Agencies’ employees, nonmanagerial exempt employees are required to use leave only when they miss an entire day of work, and they may use leave only in whole-day increments. While the term “whole-day increments” could appear somewhat unclear as it applies to employees working an alternate schedule, a 2004 arbitration decision resolving a dispute between the State and an employee bargaining unit that included employees of the California Department of Corrections and Rehabilitation (Corrections) clarified 4 California State Auditor Report I2010-1045 June 2013 the meaning of that term. The arbitration decision interpreted “whole-day increments” to mean the regularly scheduled daily work hours for a nonmanagerial employee, which is nine or 10 hours for any exempt, nonmanagerial employee working an alternate work schedule.3 In the aftermath of that decision, in 2005 Personnel Administration distributed two directives to personnel officers at all state departments, including Corrections, explaining the arbitration decision, including the definition of “whole-day increments,” and instructing personnel officers to charge employee leave balances in In March 2006 the state auditor accordance with the arbitration decision.4 Then, in March 2006, the issued a report after finding that state auditor issued a report after finding that an adult correctional an adult correctional facility facility was not charging employee leave balances as mandated by was not charging employee Personnel Administration.5 The report declared that by charging leave balances as mandated by an exempt employee working an alternate work schedule only Personnel Administration. eight hours of leave for missing a scheduled nine- or 10-hour workday, Corrections was engaging in a wasteful practice. This is because leave not properly deducted from an employee’s leave balance remains available for the employee to use for additional paid time off from work or for conversion to a cash payment when leaving state service. Moreover, employees’ rates of compensation tend to increase over time as their careers advance in state service; therefore, when employees are paid for accumulated leave upon departing state service, they generally are paid at a higher rate than they were being paid at the time the leave was accrued. Based on the arbitration decision, Personnel Administration’s directives, and the state auditor’s report, Corrections was placed on notice that it should charge its nonmanagerial, exempt employees working an alternate schedule an amount of leave equal to their regularly scheduled hours when missing a workday, and that failing to do this constitutes a waste of state resources. Corrections is responsible for keeping track of the attendance and leave usage of the vast majority of employees at California’s adult correctional facilities. Under the direction of the chief personnel officer at Corrections’ headquarters, each facility’s head of personnel administration (institutional personnel officer) oversees 3 For a state holiday, nonmanagerial employees receive eight hours of holiday leave credit. Accordingly, when a nonmanagerial employee working an alternate schedule is absent from work because the workday is a holiday, the employee must be charged one or two additional hours of leave, depending on the employee’s alternate work schedule, to cover the absence. 4 California Correctional Health Care Services (Correctional Health Services) had not been established when these memoranda were distributed. 5 This report is titled Investigations of Improper Activities by State Employees: July 2005 Through December 2005 (I2006-1). California State Auditor Report I2010-1045 5 June 2013 the personnel specialists at the facility who enter attendance and leave information into Corrections’ leave accounting system for employees at the facility who work under Corrections’ supervision. In addition to the attendance and leave accounting performed by Corrections at the State’s adult correctional facilities, under a pilot program that began in 2008, Correctional Health Services took over responsibility for performing attendance and leave accounting for medical service providers at San Quentin. This attendance and leave accounting has been performed by personnel specialists working under the supervision of a chief personnel officer at Correctional Health Services’ headquarters in Sacramento. The pilot program subsequently expanded on January 1, 2012, and now requires Correctional Health Services to track the attendance and leave usage of medical service providers at a total of four adult correctional facilities. However, in executing this responsibility, Correctional Health Services simply has been following the policies and practices of Corrections. Investigative Approach Upon receiving complaints alleging that exempt employees working an alternate schedule were being undercharged leave at multiple adult correctional facilities, we decided to examine leave accounting practices at a variety of adult correctional facilities to develop a sense of the extent to which the alleged undercharging of leave could be occurring at the State’s 33 adult correctional facilities. We therefore selected a diverse sample of six adult correctional facilities to examine their leave accounting practices. The facilities we selected were CCI; California Medical Facility; California State Prison, Centinela (Centinela); San Quentin; California Substance Abuse Treatment Facility (Treatment Facility); and Sierra Conservation Center. The six facilities we selected are located throughout California and differ significantly in the number of nonmanagerial, exempt employees working at them. As shown in the Figure on the following page, the facilities we selected are located in both Northern and Southern California, along the coast, in the Central Valley, and on the eastern side of the State. Three of the facilities had a relatively large number of nonmanagerial, exempt employees, while two facilities had a relatively small number of these employees. The remaining facility had a moderate number of nonmanagerial, exempt employees. 6 California State Auditor Report I2010-1045 June 2013 Figure Map of Selected Facilities Source: California Department of Corrections and Rehabilitation. After selecting the six facilities, we visited each one to gather information about leave accounting for all nonmanagerial, exempt employees working an alternate schedule at the facility. We reviewed the time sheets for these employees covering a 12-month period that ran from October 2010 through September 2011 and compared the information on the time sheets to the employees’ leave usage as recorded in the leave accounting system used by Corrections and Correctional Health Services. This comparison allowed us to determine whether the Correctional Agencies charged each employee’s leave balance the correct number of leave hours whenever the employee took a day off work. We also interviewed personnel staff for each facility regarding the timekeeping and leave accounting practices at the facility. Through this process, we reviewed California State Auditor Report I2010-1045 7 June 2013 the attendance and leave information during the 12-month period previously stated for a total of 170 employees of the Correctional Agencies. We then conducted an analysis of the information to identify trends that could help us assess the extent to which the undercharging of leave for nonmanagerial, exempt employees working an alternate schedule could be causing a significant waste of state resources throughout the State’s 33 adult correctional facilities. Facts and Analysis At the six correctional facilities we visited, we found that the Correctional Agencies wasted state resources worth $169,541 over a 12-month period by improperly accounting for leave taken by their employees. The Correctional Agencies often charged the leave balances of employees who worked alternate work schedules only eight hours per workday missed, instead of the nine or 10 hours that constituted their normal workdays, resulting in the waste of state resources. This problem was caused by the Correctional Agencies’ poor oversight of their leave accounting practices. In addition, the Correctional Agencies’ personnel specialists made a significant number of clerical errors when they entered information into their leave accounting system, which was facilitated by the Correctional Agencies’ lack of oversight to ensure that information was being entered correctly. The Correctional Agencies Undercharged Leave Balances for Nonmanagerial, Exempt Employees Who Worked Alternate Work Schedules We found that at each of the six facilities we visited, the Correctional Agencies wasted state resources by failing to charge employee leave balances the correct amount of leave when a nonmanagerial, exempt employee working an alternate schedule missed a day of work. Of the 170 employees whose time sheets and leave records we examined, the Correctional Agencies undercharged leave for 110 of them by charging the employees Over the 12-month period we only eight hours of leave when they missed a day of work that was reviewed, the Correctional Agencies regularly scheduled to be nine or 10 hours. Because of this practice, failed to charge 110 employees’ the Correctional Agencies failed to charge the 110 employees’ leave leave balances for 2,861 hours of balances for 2,861 hours of missed work, at a cost to the State of missed work, at a cost to the State $146,527 over the 12-month period we reviewed. of $146,527. As shown in Table 1 on the following page, the six facilities varied significantly in the extent to which they undercharged employee leave balances. In particular, Corrections’ personnel staff at CCI undercharged the facility’s employees 1,368 hours of leave, which 8 California State Auditor Report I2010-1045 June 2013 is almost as many hours as were undercharged by the other five facilities combined. These uncharged hours at CCI cost the State $70,094 over the 12-month period we reviewed. On average, these 38 employees at CCI each were undercharged 36 hours of leave, worth $1,845. In one egregious example, Corrections’ personnel specialists failed to charge a CCI employee leave for 116 hours of time missed, at a cost to the State of $5,697. Table 1 Leave Hours Not Charged for Employees Who Worked Alternate Work Schedules October 2010 Through September 2011 NUMBER OF NUMBER OF EMPLOYEES WITH NUMBER OF COST OF EMPLOYEES UNDERCHARGED UNDERCHARGED UNDERCHARGED FACILITY REVIEWED HOURS HOURS HOURS California Correctional Institution 38 29 1,368 $70,094 California Medical Facility 33 8 62 3,550 California State Prison, Centinela 8 3 4 174 California State Prison, San Quentin 39 34 801 35,368 (San Quentin)* California Substance Abuse 39 32 574 32,206 Treatment Facility Sierra Conservation Center 13 4 52 5,135 Totals 170 110 2,861 $146,527 Sources: California State Auditor’s analysis of documents provided by the California Department of Corrections and Rehabilitation (Corrections), and the California State Controller’s Office. * Unlike the other listed facilities whose time sheets were processed solely by Corrections, California Correctional Health Care Services processed time sheets for 38 of the 39 employees that we reviewed at San Quentin. Similarly, personnel specialists performing leave accounting duties at San Quentin failed to charge most of the 39 employees we reviewed in a manner consistent with their alternate work schedules. In total, they undercharged them by 801 leave hours, worth $35,368. Correctional Health Services had leave accounting duties for 38 of the 39 employees whose time sheets and leave records we reviewed at San Quentin. For one of these employees, Correctional Health Services failed to charge 56 hours of leave, at a cost to the State of $2,192. Poor Oversight Facilitated the Undercharging of Leave The Correctional Agencies’ chief personnel officers and institutional personnel officers facilitated the undercharging of leave balances by failing to ensure that personnel specialists at California State Auditor Report I2010-1045 9 June 2013 each facility understood Personnel Administration’s guidance regarding the charging of leave and properly implementing that guidance. Personnel Administration distributed two guidance documents in 2005 to state agencies’ personnel officers explaining that certain exempt employees should be charged leave in whole-day increments when missing a day of work, and that a whole-day increment is the number of hours the employee was scheduled to work on the workday missed. Although Corrections’ chief personnel officer issued a guidance memorandum in 2004 with similar instructions, neither Corrections nor Correctional Health Services provided further guidance to its personnel staff prior to our initiating this investigation in 2010. In the absence of any additional direction from the Correctional Agencies’ chief personnel officers, we found that personnel staff Personnel staff at the facilities at the facilities we visited had an inconsistent understanding we visited had an inconsistent of Personnel Administration’s guidance regarding the charging of understanding of Personnel leave. To better understand why there was such an inconsistent Administration’s guidance regarding understanding of how leave should be charged, we surveyed the charging of leave. Corrections’ institutional personnel officers at the six facilities and Correctional Health Services’ chief personnel officer for medical services providers at San Quentin regarding their understanding and practices concerning the charging of leave. This survey was conducted several months after we visited the six facilities, so the institutional personnel officers and chief personnel officer had time to obtain clarification regarding the rules for charging leave prior to answering the survey. Nonetheless, the understanding of three of the institutional personnel officers regarding the charging of leave for nonmanagerial, exempt employees working an alternate work schedule was inconsistent with Personnel Administration’s directives. These institutional personnel officers did not believe they always should charge these employees’ leave balances for missed workdays in accordance with the number of hours the employees were scheduled to work on a given day. The Treatment Facility’s institutional personnel officer believed an employee should be charged only eight hours of leave for each regular workday missed but 10 hours when the employee missed a day of work because it was a holiday. CCI’s institutional personnel officer believed that a nonmanagerial, exempt employee working an alternate schedule should be charged only eight hours for each workday missed, including any workday missed because it was a holiday. Corrections’ institutional personnel officer at San Quentin similarly believed that a nonmanagerial, exempt employee working an alternate schedule should be charged only eight hours of leave for each workday missed, but Correctional Health Services’ personnel officer for San Quentin did not share this misunderstanding. 10 California State Auditor Report I2010-1045 June 2013 The Correctional Agencies’ chief personnel officers also facilitated the undercharging of leave balances by failing to monitor the leave-charging practices of the personnel staff operating under their supervision at the adult correctional facilities. We found no evidence that the chief personnel officers of Corrections or Correctional Health Services had undertaken any monitoring of the leave-charging practices at the six adult correctional facilities that we visited to ensure that personnel specialists at those facilities were charging leave balances properly. Moreover, Corrections’ headquarters did not know whether this lack of monitoring extended to the institutional personnel officers as well. Even at the three facilities where we found an institutional personnel officer who generally had a correct understanding of how the leave balance of a nonmanagerial, exempt employee working an alternate schedule should be charged when the employee misses a day of work, the personnel specialists at that those facilities did not charge employee leave balances consistently in accordance with the institutional personnel officer’s understanding. Had the chief personnel officers and institutional personnel officers been more aware of the leave charging practices and level of understanding among the personnel specialists working for them, they might have taken the initiative to ensure that their practices were consistent with Personnel Administration guidance. Clerical Errors Resulted in Incorrectly Charged Leave Hours In addition to leave hours being undercharged because of misunderstandings about how to charge leave for nonmanagerial, exempt employees working an alternate schedule, the Correctional Agencies incorrectly charged the leave balances of 47 employees by a total of 824 hours of leave due to clerical errors made by their personnel specialists at the six correctional facilities we visited. These incorrectly charged hours resulted from personnel specialists making miscalculations and typographical errors when they entered leave hours into the Correctional Agencies’ leave accounting system. As shown in Table 2, some of these clerical errors disadvantaged employees by charging them a total of 197 hours of leave for time they were not absent from work, although a majority of the errors disadvantaged the State by undercharging employees’ leave balances for 627 hours when they were absent from work. The net loss to the State for these clerical errors was As a result of clerical $23,014 over the 12-month period we reviewed. errors, Corrections charged one psychiatrist 23 hours of As a result of clerical errors, Corrections charged one psychiatrist at leave for time that he was the Treatment Facility 23 hours of leave for time that he was working, working, costing this employee costing this employee the equivalent of $2,832 in compensated the equivalent of $2,832 in time off. As another example, Corrections failed to charge the leave compensated time off. balance of a psychiatrist at CCI for 40 hours of time off he had taken, California State Auditor Report I2010-1045 11 June 2013 at a cost to the State of $4,304. In another instance, clerical errors caused Correctional Health Services to undercharge the leave balance of a vocational instructor at San Quentin by 90 hours for time off he had taken, at a cost to the State of $2,549. Table 2 Incorrectly Charged Hours Resulting From Clerical Errors October 2010 Through September 2011 EMPLOYEES WITH CLERICAL ERRORS UNDERCHARGED COST OF OVERCHARGED COST OF FACILITY ON LEAVE BALANCES HOURS UNDERCHARGED HOURS HOURS OVERCHARGED HOURS California Correctional Institution 7 112 $7,841 11 $1,173 California Medical Facility 4 36 2,844 11 727 California State Prison, Centinela 1 0 0 8 393 California State Prison, San Quentin (San Quentin)* 13 245 10,051 47 2,187 California Substance Abuse Treatment Facility 13 166 14,243 53 5,681 Sierra Conservation Center 9 68 2,995 67 4,799 Totals 47 627 $37,974 197 $14,960 Sources: California State Auditor’s analysis of time sheets and leave balances provided by the California Department of Corrections and Rehabilitation (Corrections), and the California State Controller’s Office. * Unlike the other listed facilities whose time sheets were processed solely by Corrections, California Correctional Health Care Services processed time sheets for 38 of the 39 employees that we reviewed at San Quentin. The Correctional Agencies’ Lack of Oversight Facilitated the Clerical Errors Although clerical errors made by personnel specialists were the immediate cause of these incorrectly charged leave hours, the failure of the Correctional Agencies’ chief personnel officers and institutional personnel officers to institute a process for reviewing the information entered into the leave accounting system by the personnel specialists facilitated the errors. At the time of this investigation, the Correctional Agencies simply trusted that personnel specialists were entering information into the leave accounting system correctly. There was no process in place at the adult correctional facilities we visited requiring anyone to perform a subsequent review of the information being entered into the leave accounting system to ensure that the information was being entered accurately. Two other state agencies that we contacted told us they have a review process in place as a regular part of their timekeeping procedures, which is designed to ensure that clerical errors are identified and addressed. The process used at these state agencies involves supervisory personnel comparing a report generated by the State Controller’s Office, which identifies the leave hours used by each employee, to the time sheets that each 12 California State Auditor Report I2010-1045 June 2013 employee has completed. Additionally, staff at these agencies perform periodic audits by comparing hours entered into the timekeeping system to employee time sheets. Upon identifying discrepancies between the time off reported on the time sheets and the amount of leave charged for the time off, supervisory staff can readily identify leave accounting errors. Once the errors are Had the chief personnel officers identified, the agency’s supervisory staff reviews the errors with and institutional personnel the responsible personnel specialists as a means of training them officers for the Correctional and then corrects the errors in the leave accounting system. Had Agencies established a review the chief personnel officers and institutional personnel officers process, the number of clerical for the Correctional Agencies taken either or both of these steps, or errors likely would have been established a comparable review process, the number of leave hours reduced significantly. improperly charged due to clerical errors likely would have been reduced significantly. Factors Related to Leave Undercharging at the Six Facilities Indicate Problems at Other Facilities Having identified substantial undercharging of the leave balances of nonmanagerial, exempt employees working an alternate schedule at the six adult correctional facilities we visited for this investigation, we performed a further analysis of the information we gathered at those facilities to identify factors associated with the undercharging of leave that might indicate the extent to which the undercharging of leave may be a systemic problem occurring at other adult correctional facilities throughout the State. Examining the information, we identified two factors strongly associated with nonmanagerial, exempt employees working an alternate schedule being undercharged leave for any workday missed. The first factor was the institutional personnel officer for a facility not understanding the proper way to charge leave, as directed by Personnel Administration, for nonmanagerial, exempt employees working an alternate schedule. The second factor was the absence of an effective review process, mandated for each adult correctional facility, to minimize the incorrect charging of leave due to clerical errors. We found that at the six facilities we visited, when the facility’s institutional personnel officer did not have a correct understanding of the proper amount of leave to charge a nonmanagerial, exempt employee working an alternate schedule, the employees were undercharged leave at a rate that was approximately 10 times higher than the rate at facilities where the institutional personnel officer had a correct understanding of the proper amount of leave to charge. Specifically, nonmanagerial employees at facilities where the institutional personnel officer had an incorrect understanding were undercharged leave by an average of 23.65 hours per employee over the 12-month period, compared to 2.19 hours per employee at California State Auditor Report I2010-1045 13 June 2013 facilities where the institutional personnel officer had a correct understanding. This difference is not surprising given that each institutional personnel officer is responsible for training and overseeing the work of the personnel specialists stationed at the facility. However, it is notable that even where the institutional personnel officer had a correct understanding of the proper amount of leave to charge, we nonetheless found that some personnel specialists were not charging leave in accordance with the institutional personnel officer’s understanding. Similarly, at facilities where the institutional personnel officer had an incorrect understanding of the proper amount of leave to charge, we nonetheless found that a few personnel specialists were charging leave correctly. This reflects the lack of oversight and accountability of personnel specialists that we observed at the six facilities we visited. We also found that in the absence of an effective process for As a result of clerical errors, reviewing the accuracy of leave information entered into the the personnel specialists at the Correctional Agencies’ leave accounting system at the six facilities, six facilities undercharged leave the personnel specialists undercharged leave at an average rate at an average rate of 3.7 hours of 3.7 hours per employee and overcharged leave at an average per employee and overcharged rate of 1.2 hours per employee, for a net average of 2.5 hours of leave at an average rate of leave undercharged per employee during the 12-month period 1.2 hours per employee. we reviewed. As clerical errors were common at each of the six facilities, we did not identify any deviation in the practices of the facilities that corresponded to clerical errors being more or less prevalent at one facility versus another. We simply found that, without an effective review process in place, clerical errors were prevalent at all facilities. Upon identifying the two factors described above, which corresponded to substantial undercharging of leave at the six facilities we visited, we conducted research regarding the remaining 27 adult correctional facilities to obtain a broad understanding of the extent to which those same factors were present at the other facilities. To find out the degree to which the institutional personnel officers at the remaining facilities had a correct or incorrect understanding of the proper amount of leave to charge a nonmanagerial, exempt employee working an alternate schedule who takes a day off, we conducted a survey of the institutional personnel officers at the facilities as well as the chief personnel officer for medical services personnel at San Quentin. In the survey we asked the institutional personnel officers how they charged leave for exempt employees. The survey revealed that at least seven of the institutional personnel officers had an incorrect understanding of the amount of leave to charge. To ascertain whether there is a review process in place at any of the facilities to ensure that the information is entered correctly into the Correctional Agencies’ leave accounting system, we 14 California State Auditor Report I2010-1045 June 2013 spoke with the chief personnel officers for both Corrections and Correctional Health Services. Each advised us that there is no mandatory review process in place to ensure that personnel specialists enter information correctly. Through our research, we found that at least one of the two factors associated with the undercharging of leave was present at all of the facilities. This led us to conclude that in addition to wasting $169,541 in state resources during a 12-month period at the six facilities we visited, the Correctional Agencies likely wasted a substantial amount of state resources at the remaining adult correctional facilities by undercharging leave. Because we did not examine the time sheets and leave records at the remaining 27 facilities, as we did at the six facilities we visited, we do not know the precise amount of state resources wasted at those facilities through the undercharging of leave. However, if we were to assume that during the period of our review the leave of nonmanagerial, exempt employees working an alternate schedule was undercharged at the remaining facilities at the same rate it was being undercharged at the six facilities we visited, the amount of waste could be more than $400,000. While many additional factors could come into play that might cause the actual amount of waste to be significantly higher or lower, it is likely that the annual amount of waste was substantial. Subsequent Actions Have Been Insufficient to Resolve the Wasteful Practices After we initiated our investigation at the six adult correctional facilities, Corrections’ chief personnel officer issued additional guidance to personnel staff at the State’s 33 adult correctional facilities regarding how to charge leave for nonmanagerial, exempt employees working an alternate work schedule. In April 2011 the chief personnel officer issued an e-mail providing guidance, and in January 2012 issued a policy incorporating the same guidance provided in the e-mail. The chief personnel officer sent both to all personnel officers at the 33 adult correctional facilities. The guidance stated that a nonmanagerial, exempt employee working an alternate schedule who is represented by a collective bargaining agreement should be charged leave for any workday missed in an amount equal to the length of the employee’s scheduled workday—for example, 10 hours if the employee normally works a 10-hour workday and nine hours if the employee normally works a nine-hour workday. This direction accurately reflected Personnel Administration’s guidance. California State Auditor Report I2010-1045 15 June 2013 To evaluate whether the additional guidance affected the Correctional Agencies’ charging of leave balances, we obtained time sheets and leave records spanning the period from January through December 2012 for the eight employees at CCI and eight employees Although Corrections issued at San Quentin who had the most undercharged leave hours during guidance to personnel officers our previous October 2010 through September 2011 review period.6 on appropriately charging leave, Upon analyzing the 2012 information for the employees at CCI, we found it still undercharged we found Corrections generally still charged these eight exempt eight exempt employees at CCI employees working an alternate schedule only eight hours of leave 200 hours, costing the State $9,707. for any workday they missed. The undercharged leave hours for these eight employees totaled 200 hours, worth $9,707, which averages 25 hours of undercharged leave per employee over the 12-month period. This average shows only limited improvement in the charging of leave for these eight employees. From October 2010 through September 2011 CCI undercharged the employees we reviewed by an average of 36 hours per employee. Thus, the additional guidance failed to reduce the average amount of undercharged leave per employee even by half. In addition, we found that in 2012, Corrections’ personnel specialists at CCI continued to undercharge leave balances due to clerical errors. Corrections undercharged the leave balances of the eight employees by an average of 3.3 hours per employee due to clerical errors. This was slightly worse than the average of 3.2 hours per employee that we originally found at CCI during our earlier review period. As such, the problem of clerical errors is continuing. When we analyzed the 2012 information for the eight medical services employees at San Quentin, we found that Correctional Health Services sometimes continued to charge these employees who worked alternate schedules only eight hours of leave for each workday missed. In 2012 Correctional Health Services undercharged the eight employees by a total of 124 hours, worth $4,505, which constitutes an average undercharge of 15.5 hours per employee. Although this is an improvement over the average of 20.5 hours of undercharged leave per employee that we found at San Quentin during our earlier review from October 2010 through September 2011, the problem persists to a significant degree. We also found that a high rate of clerical errors continued to occur. For the eight employees we reviewed in 2012, Correctional Health Services mischarged the employees’ leave balances an average of 25.8 hours per employee as a result of clerical errors. This is significantly higher than the average of 7.5 hours per employee 6 We excluded employees who no longer work at the facilities or who no longer have alternate work schedules. 16 California State Auditor Report I2010-1045 June 2013 we found at San Quentin during our previous review, and indicates that clerical errors persist in causing leave balances to be misstated by Correctional Health Services. Our limited review of 2012 information at CCI and San Quentin indicates that the Correctional Agencies continued to undercharge leave for nonmanagerial, exempt employees working an alternate work schedule. Without additional direction to Without additional direction to personnel staff and improved monitoring personnel staff and improved of the work that staff performs, we believe the Correctional Agencies will oversight, we believe the continue to waste state resources through the undercharging of leave. Correctional Agencies will continue Further, an amount akin to the single-year cost that we estimated from to waste state resources through October 2010 through September 2011 may be repeated every year going the undercharging of leave. forward until the Correctional Agencies take the critical remedial actions recommended in this report. Recommendations To remedy the effects of wasteful leave accounting practices described in this report, and to prevent them from recurring, we make the following recommendations to Corrections and Correctional Health Services. To reduce the loss to the State brought about by undercharging the leave balances of nonmanagerial, exempt employees working an alternate schedule: • Conduct an audit of the leave accounting system during the past three years to identify instances of nonmanagerial, exempt employees working an alternate schedule at an adult correctional facility being charged incorrect amounts of leave for missed days of work. • Adjust current employees’ leave balances in the leave accounting system to correct any improper charging of leave identified by the audit. • In instances where the audit has determined that an employee’s leave balance was mischarged but the employee subsequently departed state service, take appropriate measures to remedy any resulting incorrect compensation of the employee for unused leave upon his or her departure, including by seeking repayment of any amount overpaid to the employee. To reduce future undercharging of leave balances of nonmanagerial, exempt employees working an alternate schedule: • Train all personnel staff regarding the proper amount of leave to charge those exempt employees working an alternate schedule who miss a day of work. California State Auditor Report I2010-1045 17 June 2013 • Train all nonmanagerial, exempt employees eligible to work an alternate schedule regarding the proper completion of a time sheet to ensure the employees’ leave balances are charged correctly for an absence from work. • Establish a system of oversight at headquarters and at each adult correctional facility to ensure that personnel specialists are charging the correct number of leave hours for those nonmanagerial, exempt employees working an alternate work schedule. To reduce the number of clerical errors made by personnel specialists at adult correctional facilities: • Establish a system of supervisory oversight that involves reviewing employees’ time sheets and leave balances to ensure that personnel specialists are entering information into the leave accounting system correctly. • Establish a system for correcting mischarged leave in the leave accounting system and for reviewing errors with the responsible employee whenever mischarged leave hours are discovered. Respectfully submitted, ELAINE M. HOWLE, CPA State Auditor Date: June 20, 2013 Steven Benito Russo, JD, Chief of Investigations Legal Counsel: Julie Jacob, JD Staff: Russ Hayden, CGFM, Manager of Investigations Wesley Opp, JD, CFE Amanda Garvin-Adicoff Joshua Hooper, CIA For questions regarding the contents of this report, do not contact the above-listed staff. Please contact Margarita Fernández, Chief of Public Affairs, at 916.445.0255. 18 California State Auditor Report I2010-1045 June 2013 Blank page inserted for reproduction purposes only. California State Auditor Report I2010-1045 19 June 2013 Appendix THE INVESTIGATIONS PROGRAM The California Whistleblower Protection Act (Whistleblower Act) contained in the California Government Code, beginning with Section 8547, authorizes the California State Auditor (state auditor) to investigate allegations of improper governmental activities by agencies and employees of the State. Under the Whistleblower Act, an improper governmental activity, as defined by Government Code section 8547.2, subdivision (c), includes any action by a state agency, or by a state employee in connection with his or her employment, that violates a state or federal law; violates an executive order of the governor, a California Rule of Court, or a policy or procedure mandated by the State Administrative Manual or State Contracting Manual; is economically wasteful; or involves gross misconduct, incompetence, or inefficiency. To enable state employees and the public to report suspected improper governmental activities, the state auditor maintains a toll-free Whistleblower Hotline: (800) 952-5665. The state auditor also accepts reports of improper governmental activities by mail and over the Internet at www.auditor.ca.gov. Although the California State Auditor’s Office conducts investigations, it does not have enforcement powers. When it substantiates an improper governmental activity, the state auditor reports confidentially the details to the head of the state agency or to the appointing authority responsible for taking corrective action. The Whistleblower Act requires the agency or appointing authority to notify the state auditor of any corrective action taken, including disciplinary action, no later than 60 days after transmittal of the confidential investigative report and monthly thereafter until the corrective action concludes. The Whistleblower Act authorizes the state auditor to report publicly on substantiated allegations of improper governmental activities as necessary to serve the State’s interests. The state auditor may also report improper governmental activities to other authorities, such as law enforcement agencies, when appropriate. 20 California State Auditor Report I2010-1045 June 2013 Blank page inserted for reproduction purposes only. California State Auditor Report I2010-1045 21 June 2013 Summary of Agency Responses The California Department of Corrections and Rehabilitation (Corrections) agreed with each of the recommendations in this investigative report and has begun to take some corrective actions to address the improper leave accounting that we found. Corrections stated that it has distributed time sheet training documents and procedures to its correctional facilities. Further, Corrections stated that it will work with California Correctional Health Care Services (Correctional Health Services) to (1) investigate more fully the employees whose time sheets we reviewed during the investigation; (2) ensure that the institutional personnel officers and other personnel staff have in their possession the most current timekeeping policies by redistributing Corrections’ timekeeping manual to them; and (3) provide timekeeping training to Corrections’ institutional personnel officers, other personnel staff, supervisors, and managers. Correctional Health Services also agreed with the conclusions and recommendations in our report. Correctional Health Services agreed to correct mischarged hours in its leave accounting system. It also agreed to establish a system of supervisory oversight to ensure that information is entered correctly into its leave accounting system. 22 California State Auditor Report I2010-1045 June 2013 cc: Members of the Legislature Office of the Lieutenant Governor Little Hoover Commission Department of Finance Attorney General State Controller State Treasurer Legislative Analyst Senate Office of Research California Research Bureau Capitol Press