BILL ANALYSIS Ó
AB 757
Page 1
ASSEMBLY THIRD READING
AB 757 (Roger Hernández)
As Amended May 2, 2013
Majority vote
WATER, PARKS & WILDLIFE 15-0
APPROPRIATIONS 17-0
-----------------------------------------------------------------
|Ayes:|Rendon, Bigelow, Allen, |Ayes:|Gatto, Harkey, Bigelow, |
| |Blumenfield, Bocanegra, | |Bocanegra, Bradford, Ian |
| |Dahle, Fong, Frazier, | |Calderon, Campos, |
| |Beth Gaines, Gatto, | |Donnelly, Eggman, Gomez, |
| |Gomez, Gray, Patterson, | |Hall, Rendon, Linder, |
| |Yamada, Bloom | |Pan, Quirk, Wagner, Weber |
| | | | |
-----------------------------------------------------------------
SUMMARY : Requires the Department of Parks and Recreation (DPR),
by July 31, 2014, to implement recommendations of the State
Controller's Office (SCO) regarding violations of out-of-class
(OOC) assignments by the DPR. Specifically, this bill :
1)Requires DPR, by July 1, 2014, to implement policy
recommendations contained in the SCO's Payroll Review Report
dated December 18, 2012.
2)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 that 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 entitled.
AB 757
Page 2
3)Requires DPR to report to the Legislature on its
implementation of the SCO's recommendations on or before July
31, 2014.
4)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 : According to the Assembly Appropriations
Committee, increased costs to DPR to implement the SCO
recommendations, including reporting and training, potentially
in the $100,000 range, offset by the potential recovery of
revenue from employees who unlawfully received OOC payments.
COMMENTS : On July 15, 2012, the Sacramento Bee reported that a
high-ranking official at DPR carried out a secret vacation
AB 757
Page 3
buy-out program during 2011 for himself and other headquarters
staff. The Sacramento 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 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 Sacramento 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:
1)DPR management circumvented internal controls for authorizing
OOC assignments pay.
2)DPR lacked proper supporting documentation for OOC
assignments.
3)OOC assignment periods exceeded limits set by bargaining unit
agreements and state regulations, resulting in overpayments to
employees.
4)DPR did not wait 91 days before paying managers OOC
compensation, as required by the State Civil Service Pay
Scales Manual.
5)OOC pay was not adjusted for employees receiving NDI, as
required by the State Civil Service Pay Scales Manual.
6)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
AB 757
Page 4
limited to the following:
1)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.
2)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.
3)Justification documentation should state that approval for
managers to receive OOC may occur only after the manager
already has worked in an OOC assignment for 90 days.
4)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.
5)DPR's Internal Audit Unit should conduct regular reviews of
OOC assignments for compliance with state law, bargaining unit
agreements, and DPR policies.
6)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
AB 757
Page 5
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
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.
Analysis Prepared by : Diane Colborn / W., P. & W. / (916)
319-2096
FN: 0000573
AB 757
Page 6