BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 757
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          Date of Hearing:   April 30, 2013

                   ASSEMBLY COMMITTEE ON WATER, PARKS AND WILDLIFE
                                Anthony Rendon, Chair
             AB 757 (Hernández, Roger) - As Introduced:  February 21, 2013
           
          SUBJECT  :   Department of Parks & Recreation; Regulations

           SUMMARY  :   Requires the Department of Parks & Recreation (DPR) to  
          adopt emergency regulations by July 31, 2014 implementing  
          recommendations of the State Controller's Office regarding  
          violations of out-of-class (OOC) assignments by the DPR.   
          Specifically,  this bill  :

          1)Requires DPR to adopt emergency regulations by July 1, 2014  
            implementing, to the extent practicable, policy recommendations  
            contained in an audit review report on DPR conducted by the  
            State Controller's Office (SCO) concerning compensation for  
            employees working OOC assignments.

          2)Provides that adoption of the regulations shall be deemed an  
            emergency and necessary for the immediate preservation of the  
            public peace, health and safety, or general welfare, and  
            provides that the regulations shall be exempt from review and  
            approval by the Office of Administrative Law (OAL).  Requires  
            DPR to transmit the regulations directly to the Secretary of  
            State for filing, and provides that the regulations shall take  
            effect immediately upon filing by the Secretary of State.

          3)Reiterates the recommendations of the SCO contained in the  
            audit of DPR completed on December 18, 2012, including:  
            recommendations on procedures that should be followed for  
            obtaining proper approvals before OOC assignments are entered  
            into the payroll system; review of bargaining contracts before  
            approval of OOC assignments to ensure compensation is not paid  
            beyond the time periods authorized; documentation of rules for  
            approval of OOC assignments for managers; training to be  
            provided by DPR to staff on adjustment of OOC pay for employees  
            on nonindustrial disability insurance (NDI); tools and training  
            to be provided to staff to ensure payment calculations are  
            calculated and documented correctly; the need for regular  
            internal audit reviews of OOC assignments to determine  
            compliance with state law, bargaining unit agreements and DPR  
            policies; and that DPR should seek reimbursement from employees  
            who received OOC payments to which they were not lawfully  








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            entitled.

          4)Requires DPR to report to the Legislature on the regulations  
            adopted on or before July 31, 2014.

          5)Sunsets this bill on December 31, 2014.  

           EXISTING LAW  :

          1)Establishes the DPR and vests it with control of the state park  
            system and responsibility for administering, protecting,  
            developing and interpreting state parks for the use and  
            enjoyment of the public.  Requires DPR to protect the state  
            park system from damage and to preserve the peace therein.

          2)Establishes the SCO in the California State Constitution and  
            vests the SCO with responsibility for supervising the fiscal  
            concerns of the State.  Requires the SCO to audit all claims  
            against the State and authorizes the SCO to audit the  
            disbursement of any state money for correctness, legality and  
            lawful payment.

          3)Delegates to State departments the authority to approve  
            employee OOC assignments, subject to limitations, rules and  
            procedures set out in administrative regulations and various  
            Department of Personnel Administration and State Civil Service  
            manuals.  Requires departments to refer to bargaining unit  
            contracts for represented employees.

          4)Establishes a process, pursuant to the Administrative  
            Procedures Act (APA) for adoption of emergency regulations,  
            where necessary to address situations calling for immediate  
            action to avoid serious harm to the public peace, health,  
            safety or general welfare.  Requires review and approval of  
            emergency regulations by the Office of Administrative Law  
            (OAL).

           FISCAL EFFECT  :   Unknown

           COMMENTS  :   On July 15, 2012 the Sacramento Bee reported that a  
          high-ranking official at DPR carried out a secret vacation  
          buy-out program during 2011 for himself and other headquarters  
          staff.  The Bee reported that the buy-backs cost more than  
          $271,264 and that DPR participated in additional unauthorized  
          vacation buy-backs in 2004, 2005 and 2008.  The vacation buy-outs  








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          were the subject of internal audits by DPR and the Attorney  
          General's Office, and are also being investigated by the Bureau  
          of State Audits.  After the Bee article came out, the SCO  
          determined how the buy-back transactions were entered into the  
          State's payroll system.  The SCO discovered that two DPR managers  
          keyed in the majority of the buy-back transactions, and that  
          these managers should not have been allowed keying input access  
          to the system due to their management status.  As a result of the  
          circumstances surrounding the leave buy-back program and the  
          security protocol violations, the SCO determined it was necessary  
          to perform a broader review of DPR's payroll processes.  The  
          review was released in December 2012 and identified internal  
          control weaknesses and/or violations of DPR and State policies  
          that created a risk of abuse, fraud and overpayments to employees  
          for OOC assignment pay.  Specifically, the SCO found:

           DPR management circumvented internal controls for authorizing  
            OOC assignments pay;
           DPR lacked proper supporting documentation for OOC assignments;
           OOC assignment periods exceeded limits set by bargaining unit  
            agreements and State regulations, resulting in overpayments to  
            employees;
           DPR did not wait 91 days before paying managers OOC  
            compensation, as required by the State Civil Service Pay Scales  
            Manual;
           OOC pay was not adjusted for employees receiving NDI, as  
            required by the State Civil Service Pay Scales Manual; and
           OOC payment calculations were not properly calculated or  
            documented, as required by the SCO's Payroll Procedures Manual.

          The SCO report made several recommendations, including but not  
          limited to the following:

           All OOC assignments should be forwarded to DPR's Classification  
            and Pay Unit for approval, and the DPR Transactions Unit should  
            ensure all proper approvals are obtained before entering  
            assignments into the payroll system and before the assignment  
            start date;
           DPR's Classification and Pay Unit should review bargaining unit  
            contracts before approval of OOC assignments to ensure that  
            compensation is not being paid beyond the end of the assignment  
            period and does not exceed the maximum number of days allowed  
            for the employee's classification;
           Justification documentation should state that approval for  
            managers to receive OOC may occur only after the manager  








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            already has worked in an OOC assignment for 90 days;
           The DPR Transactions Unit should provide training and tools to  
            staff to ensure they follow rules for employees on NDI, and to  
            ensure payment calculations are calculated correctly and are  
            adequately documented;
           DPR's Internal Audit Unit should conduct regular reviews of OOC  
            assignments for compliance with state law, bargaining unit  
            agreements, and DPR policies; and
           DPR should seek reimbursement from employees who received OOC  
            payments to which they were not lawfully entitled.

          DPR in its response to the SCO's audit agreed with the  
          recommendations made and noted that many of the improvements and  
          safeguards suggested have already been implemented.  They also  
          noted that DPR has in place an entirely new executive management  
          team.  With regard to the specific recommendations, DPR stated  
          that a majority were implemented prior to completion of the  
          audit.  The Classification and Pay Unit at DPR is following a  
          newly updated OOC Procedural Guide that includes several control  
          measures, including: requirements for bargaining unit contract  
          review; approval of OOC assignments by the DPR Budget Chief,  
          Division Chief, Classification and Pay Unit Manager, and  
          Administrative Division Chief; and other measures to ensure  
          approvals are received before the OOC effective date and rules  
          for management employee OOC pay are followed.  DPR indicated  
          other SCO recommendations would be implemented by December 31,  
          2012, including employee trainings, tools for ensuring proper  
          calculations, an internal audit review schedule (the first of  
          which are to be implemented in 2013), and plans to seek  
          reimbursement from employees who received OOC payments they were  
          not entitled to.  With regard to the latter, DPR indicated an  
          accounts receivable will be established within 60 days of  
          notification of the impacted employees.  DPR also noted that  
          managerial employees responsible for circumventing the OOC  
          approval process have been replaced or are no longer employed by  
          DPR.

          The OOC issues reviewed by the SCO audit were just one of several  
          problems at DPR revealed through multiple audits and  
          investigations last year, some of which are ongoing.  At least  
          four audits were conducted, including audits by the Department of  
          Finance, the Attorney General's Office, the Bureau of State  
          Audits, and the SCO audit which is the subject of this bill.  The  
          Bureau of State Audits is also in the midst of conducting a  
          second phase of their audit which is also looking closer at the  








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          vacation buy-out issue.  The Attorney General's investigation  
          found that certain management level employees at DPR  
          intentionally concealed the true balance of funds available in  
          the State Park and Recreation Fund from the Department of Finance  
          and the Legislature.  That revelation, coming closely on the  
          heels of the disclosure of the unauthorized vacation buy-outs,  
          led to the resignation of the DPR director and the termination of  
          several other management level employees.  Since that time, the  
          Governor appointed a new Director, and the Legislature and  
          Administration have taken several actions through budget trailer  
          bills to prevent these problems from happening again in the  
          future.  For example, a requirement has now been imposed that SCO  
          fund condition statements, and the budget balances reported by  
          departments to the Department of Finance, must be reconciled so  
          that the Legislature and Administration are relying on correct  
          information in developing and approving the state budget.

           Issues for Committee Consideration  :  In light of these  
          revelations, it is understandable that the author of this bill is  
          proposing legislation to ensure that the recommendations of the  
          SCO concerning OOC payments are implemented.  However, while the  
          goal of this bill is laudable, the use of the emergency  
          regulatory process as proposed may not be the best tool for  
          achieving this objective for several reasons. 

          First, regulations already exist governing the process for OOC  
          assignments for excluded employees such as managers (see Title 2,  
          California Code of Regulations, Section 599.810), and for  
          represented employees, procedures are contained in bargaining  
          unit agreements. The problem in DPR's case was not a lack of  
          rules and regulations governing OOC payments, but that DPR staff  
          was not following them.  Therefore, adoption of additional  
          regulations as proposed in this bill could be either duplicative  
          of existing rules, or potentially in conflict with the criteria  
          set out in bargaining unit contracts, which are renegotiated from  
          time to time.  

          Secondly, as defined in the Government Code, emergency  
          regulations are regulations that are necessary to address a  
          situation that calls for immediate action to avoid serious harm  
          to the public peace, health, safety or general welfare.   
          Emergency regulations are limited to such emergencies because the  
          adoption of emergency regulations involves a very truncated  
          public review process (normally just 5 days).  The APA also  
          requires all regulations, including emergency regulations, to be  








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          reviewed and approved by the OAL.  The purpose of the OAL review  
          is to ensure that regulations meet the standards of necessity,  
          authority, clarity, consistency, reference and non-duplication  
          required by the APA.  OAL also reviews emergency regulations to  
          ensure that the regulations meet the statutory standard for an  
          emergency, which is a factual determination. This bill would  
          "deem" the regulations to have met the emergency test.  However,  
          it is unclear that the situation in this case actually  
          constitutes the type of emergency that would meet the statutory  
          standard in the sense of being necessary to avoid immediate and  
          serious public harm.  The fact that DPR has already begun to  
          implement the recommendations would seem to indicate that  
          regulations - whether emergency or otherwise - are not necessary  
          in this case for DPR to comply with the audit recommendations.   
          This bill would also exempt the emergency regulations from OAL  
          review.  The Legislature has generally been reluctant to exempt  
          regulations from OAL review because the purpose of the review is  
          to ensure that regulations are necessary and consistent and not  
          in conflict with other provisions of law.  Exemptions can create  
          precedents for other exemptions, which cumulatively can begin to  
          erode the purpose of the APA.

           Suggested Amendments  :  Recognizing the important public policy  
          goals served by ensuring that DPR complies with the  
          recommendations of the SCO audit on OOC assignments, and also  
          recognizing, for all the reasons stated above, that the emergency  
          regulatory process may not be the best tool for achieving that  
          goal, staff recommends committee amendments be adopted to delete  
          the provisions of this bill requiring adoption of emergency  
          regulations, and instead require  in statute that DPR comply with  
          the SCO recommendations and report back to the Legislature  
          regarding its compliance by no later than July 1, 2014.            
            

           REGISTERED SUPPORT / OPPOSITION  :   

           Support                         Opposition
           
          None on file.                      None on file.
           

          Analysis Prepared by  :    Diane Colborn / W., P. & W. / (916)  
          319-2096 










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