Since
the passage of Proposition 13, local governments have increasingly turned to
fees, assessments, and charges to raise revenue for government services. While generally limited by law to the
recovery of costs, they now constitute a substantial portion of local
government revenue.
Because
of the growing importance of fees, assessments and charges as a source of revenue
for local governments, the Grand jury chose to:
A) Examine the procedures
followed in county government for establishing fees, charges
and assessments charged to the public.
B) Examine the procedures
followed by county government in assigning cost to various
government functions and billing those cost to county
departments.
C) Investigate the complaint
of a county employee alleging improper billing practices in
the county Water and Wastewater Division of the Department of
Public Works.
·
Interview
county Auditor/Controller
·
Interview
county Chief Administrative Officer
·
Reviewed
county Unified Fee Schedule
·
Reviewed
county Cost Allocation Plan
·
Surveyed
numerous county departments concerning fee-setting practices.
·
Interview
county and city planning directors
The
Procedures Followed in County Government for Establishing Fees, Charges, and
Assessments Charged to the Public
Findings
1.
In
general, the county department or agency responsible for providing the
government service being charged for formulates the fees. The results of this formulation are then
forwarded to the County Administrative Officer who reviews and compiles a
proposal to the Board of Supervisors for modification to the counties “Unified
Fee Schedule.”
Response: Santa Cruz County Board of
Supervisors AGREES
2.
The
“Unified Fee Schedule” is adopted by the Board of Supervisors and constitutes
the direct legal authority for a department or agency to recover its cost
through the collection of fees from the “beneficiary” of the service provided.
Response: Santa Cruz County Board of
Supervisors AGREES
The County agrees with this
finding with the clarification that most fees charged by the County do not
fully recover the costs of providing the service, but rather recover a portion
of the costs expended in providing a service.
3.
In
general, the amount charged as a fee is limited by law to an amount required to
recover the cost expended in providing the service to the beneficiary who is
charge the fee.
Response: Santa Cruz County Board of
Supervisors PARTIALLY AGREES
The fees charged for many County services are statutory and cannot be amended by the County. Those that are not governed by statute cannot exceed the cost of providing the service.
4.
In
practice, full or even substantial cost recovery is rare in any department
other than the County Planning Department.
Response: Santa Cruz County Board of
Supervisors PARTIALLY AGREES
The County Planning Department, like other departments, does not
recover fees to cover the cost of service delivery.
5.
Therefore,
revisions to existing fees are often based on some “reasonable” adjustment to
the current fee.
Response: Santa Cruz County Board of
Supervisors AGREES
6.
These
adjustments to prior fees are sometimes based on factors unrelated to the
actual costs being recovered such as the local CPI or similar charges in other
jurisdictions.
Response: Santa Cruz County Board of
Supervisors AGREES
The County agrees with the
finding that adjustments are sometimes related to the local CPI or similar
charges in other jurisdictions, but believes that these factors are related to
the costs being recovered and are appropriate in determining fees.
7.
The
fee increase form or worksheet used by county departments to request adjustment
or additions to the fee schedule, does not specifically identify the cost that
are being recovered by the indicated fee.
Response: Santa Cruz County Board of
Supervisors PARTIALLY AGREES
On the fee worksheet, departments must cite the authority under which
the fee can be charged, indicate whether the fee is mandatory, and describe the
services for which the fee will be charged.
Sufficient information is provided to the Board of Supervisors to
justify the recommended fee.
8.
Public
frustration with and confusion about planning department fees are one of the
most important challenges facing the planning department.
Response: Santa Cruz County Board of
Supervisors
The fees
associated with the processing of ministerial permit applications, such as
building permit applications or over-the-counter plumbing or electrical
permits, typically are very simple, straight-forward, and easy to understand
fee calculations that do not present problems for members of the public wanting
to obtain these types of permits. The
majority of fees fall into this category.
However, fees associated with the processing and review of discretionary
permit applications have at times been a significant source of confusion for
some members of the public.
The Board of
Supervisors, in connection with the adoption of the County’s FY 2003-04 budget,
directed the Planning Department to implement a phased conversion of its
current method of fee collection to a largely “At Cost” collection
procedure. The Board also authorized
funds in the Planning Department’s budget to undertake a study of the
department’s fees during FY 2003-04.
The Planning Department is currently reviewing its cost estimate
worksheets, billing invoice forms and related materials for the purpose of
clarifying assumptions and explanations that provide the basis of fee costs or
estimates.
Response: City of
Capitola DISagrees
The City Council of the City of Capitola
disagrees with this finding as it may be applied to the City of Capitola
Planning Department. Recently the City
conducted a voter survey of 351 residents, none of whom commented on the
Planning Department fees.
Response: City of Santa Cruz DISagrees
The City has a clearly
written fee schedule for planning-related activities.
Response: City of Scotts Valley PARTIALLY agrees
The issue of fees can be confusing and most
concerns raised are not about “processing” fees but impact fees, which have a
greater burden than processing fees on most projects. We agree that more clarity as to the purpose of fees and the amounts
charged would improve relationships with our customers for all fees charged,
not just for the planning process
Response: City of Watsonville DISagrees
The City disagrees with this
finding to the extent that it relates to the City.
The City has printed fee schedules that are available to the public and City Staff is not aware of confusion related to fees.
9.
Public
dissatisfaction with the planing process and its expense leads to poor public
compliance.
Response: Santa Cruz County Board of
Supervisors
The County is not aware of any studies that support this finding, but
agrees that it may be true to some unknown degree. There are members of the
public who, because of their perceptions about the County’s planning process,
have decided to build projects or implement land uses without obtaining the
requisite permits. However, a variety
of other reasons exist for people not obtaining permits. For example, many
individuals indicate that they were unaware that a permit was required to do
their project. When it is brought to
their attention, and many times not at the urging of the County’s Code
Compliance staff, they voluntarily make application to secure the necessary
approval(s). Another reason that a
person may build a structure or introduce a land use and may not want to obtain
necessary approvals or permits is because the new structure or use will trigger
an unwanted increase in the property’s assessed valuation, associated tax
obligations, obligatory impact fees, etc.
Response: City of Capitola Partially agrees
As a general rule if permit fees so far outpace expenses that
they are unreasonable, the public will forego the permit process and risk the
penalties for non-compliance. However,
it is unclear how this matter relates to the City of Capitola or upon what
evidence this finding was made. In
Capitola we believe we have a very high degree of compliance.
Response: City of
Santa Cruz DISagrees
The Santa Cruz Planning Department is not aware of public dissatisfaction regarding the planning process.
Response: City of Scotts Valley partially agrees
The planning process and basis for the rules being applied needs to be
clearly conveyed at all times in the process.
The rules and regulations are complex, however, and often influenced by
outside factors such as State and Federal laws. Therefore, local government does not always have the choice about
how to apply regulations at another government level. This is particularly the case for issues related with the
Endangered Species Act. We agree that
the process can be confusing and difficult at times, especially when a case is
controversial and where neighbors oppose a particular project. Often, local government is blamed for the
controversy even though it is the private sector which opposes the
development. A reasonable process to
allow for public comment as well as a program to assist applicants is
needed. Also, a paramount issue is to
ensure that planners uniformly apply rules in the same manner so that there is
equity in the process. Reasonable
access to persons with authority to make decisions is also necessary so that
applicants can move forward through the process. We agree that trust in the process is very important to encourage
compliance with the regulations.
Response: City of
Watsonville DISagrees
The City disagrees with this
finding to the extent that it relates to the City.
The City has continually
worked to improve customer service and to acknowledge that growth is necessary
for the financial and social health of the City. The City provides timely response and full service permit center
that is open five days a week, nine hours a day.
Conclusions
1.
The
more fee revision is based on “reasonable” adjustment rather than “from
scratch” calculation, the greater the risk of error.
2.
To
avoid errors, adjustments to prior fees should be limited to factors related to
the actual costs involved.
3.
To
meet their responsibilities under the law, decision makers need to know what
actual costs are being recovered when approving a new or modified fee.
4.
The
County process for setting fees does not clearly identify to its decision
makers the cost being recovered by the proposed fee.
5.
Public
disputes over fee amounts can be quickly resolved if information on costs being
recovered is readily available in a form accessible to the public.
6.
The
cost basis of Planning Department fees needs to be better communicated to the
public to lesson public hostility to the planning process and improve citizen
compliance.
1.
The
County process for setting fees should be amended to require all fees to be
reviewed “from scratch” on a reasonable regular basis.
Response: Santa Cruz County Board of
Supervisors
This recommendation is already in place. Each year, as part of the
budget preparations, departments are instructed to review their sections of the
Unified Fee Schedule. Departments are also given the opportunity to review fees
in January.
2.
Unless
required by some outside authority, the Board of Supervisors should not approve
proposals for adjustments to fees based on factors unrelated to the actual cost
being recovered.
Response: Santa Cruz County Board of
Supervisors
This recommendation is
already in place.
3.
The
County Administrative Office should improve its fee request form to require a
worksheet attachment that specifically identifies the cost being recovered.
Response: Santa Cruz County Board of
Supervisors
This recommendation will be partially implemented. The County will add
a section to the fee form to assure that the fee does not exceed the cost of
the service delivered. However, as the Grand Jury pointed out, full or even
substantial cost recovery is rare in any department. The County has elected to
subsidize various services for the public’s benefit. For instance, if the Health
Services Agency charged fees sufficient to cover their costs, their clients
would not be able to afford to seek services. Likewise, if the Swim Center
charged participants the full cost of the pool, few people would swim there.
Because most fees are set by statute, and many fees cannot be expected to cover
the actual costs of the services provided, it is doubtful that preparing
additional worksheets would be useful.
4.
To
improve public confidence in Planning Department fee structures, the County
Administrative Officer and each City Manager should require a “from scratch”
analysis of all fees for Planning department services during the next regularly
scheduled review cycle.
Response: Santa Cruz County Board of
Supervisors
This recommendation will be
implemented. As previously indicated, the County Planning Department is
presently implementing a phased conversion of its fee collection system to a
largely at cost arrangement fee collection system. In connection with the project, the department is reviewing ways
to increase clarity and understanding regarding how fee estimates are
determined. The Board of Supervisors
has authorized the reservation of funds in the Planning Department’s budget to
conduct a fee study during Fiscal year 2003-04. The Planning Department reviews its fees on an annual basis and
will continue to do so. The County cannot speak for cities.
Response: City of Capitola
This recommendation will not be implemented
because of the following reasons: 1) It
is unfounded. At no time has the City
of Capitola received any information that its fees were unreasonable. 2) The
meaning of “from scratch” is unclear. 3) The City has just implemented a cost
recovery system for planning fees that is based on actual time spent on
processing applications for development.
Response: City of Santa Cruz
The recommendation requires further analysis. This idea will be considered over the next six months and then a determination will be made about the timetable of implementing an analysis of this nature.
Response: City of Scotts Valley
The City implemented this finding when our fee structure was reviewed
in 1991.
In 1991, the fees were established based upon a detailed analysis of
processing times for specific types of permits. An updated comprehensive analysis is proposed over the next
fiscal year, if enough cases are filed to allow for adequate review. Adequate time to develop a cost basis for
each fee is critical for such an evaluation to be accurate. This analysis will be “from scratch” analyzing
each fee and the actual time required to process each type of permit. In order to ensure the fees are reasonable,
a minimum number of similar cases must be reviewed. Depending on the cases analyzed, the City may update the fee
schedule in phases as enough historical data becomes available to have the
“from scratch” data available.
Response: City of Watsonville disagrees
The City disagrees with this
finding to the extent that it relates to the City.
The City of
Watsonville has recently completed a detailed assessment of its fees with the
assistance of Maximus Consulting. We
are confident in the analysis and have implemented changes accordingly. We cannot speak to other jurisdiction fees.
5.
The
detailed cost basis for each planning department fee should be identified and
made available for public review at each planning department office.
Response: Santa Cruz County Board of
Supervisors
This recommendation has been implemented. Project sponsors who have
their permit application processed at cost are provided a detailed cost
breakdown of services provided, including time allocated by position. When the department completes
implementation of the phased conversion of fee categories to the single at cost
arrangement method, project sponsors will uniformly receive detailed cost
breakdowns of fees applied to their permit applications.
Response: City of Capitola
This recommendation is in the process of
implementation and should be complete within the next three months, in the form
of assessing the results of the new cost recovery based approach to planning
fees.
Response: City of Santa Cruz
The recommendation requires further analysis. Along with the analysis of the fee schedule (above), this idea will also be reviewed within the next six months. However, it should be noted that to implement this properly would require a sophisticated cost-benefit analysis and may be beyond the capacity of local governments right now.
Response: City of Scotts Valley agrees
The City has implemented this recommendation. We have made our 1991 study available to those who request
documentation. However, upon completion
of the updated comprehensive fee analysis discussed in response 4 above, a
detailed cost basis for each fee can be provided.
Response: City of Watsonville disagrees
The City disagrees with this
finding to the extent that it relates to the City.
The City of
Watsonville has adopted fees which are equal to, or less than, the actual cost
of proving the service in accordance with state law. The report and recommendations are public documents. The vast majority of City Council-adopted
fees are set well below the actual costs of providing service due to the
implication on home owners and property owners and as an acknowledgement that a
City’s General Fund bears some responsibility to cover a portion of costs
related to City “ Police Powers”.
Responses Required
|
Entity |
Findings |
Recommendations |
Respond
Within |
|
Board of Supervisors County of Santa Cruz |
1-9 |
1-5 |
60 Days (Sept. 2, 2003) |
|
City Council of the City of Santa Cruz |
8-9 |
4-5 |
60 Days (Sept. 2, 2003) |
|
City Council of the City of Capitola |
8-9 |
4-5 |
60 Days (Sept. 2, 2003) |
|
City Council of the City of Scotts Valley |
8-9 |
4-5 |
60 Days (Sept. 2, 2003) |
|
City Council of the City of Watsonville |
8-9 |
4-5 |
60 Days (Sept. 2, 2003) |
A) The Procedures
Followed By County Government in Assigning Cost to Various Government Functions
and Billing Those Cost to County Departments.
Findings
2.
County
government, as with most local governments, operates on a July 1st to June 30th
Fiscal Year.
Response: Santa Cruz County Board of
Supervisors AGREES
2.
Prior
to each fiscal year, the county publishes it “Cost Allocation Plan” to be used
in the coming fiscal year. This plan is
prepared with the assistance of outside consultants in accordance with the
requirements of OMB Circular A-87, “Cost Principles for State and Local
Governments” and is based on the experience of the most recently completed
fiscal year. For example, the plan used
for the just completed 2002/2003 fiscal year was completed in January of 2002
and was developed using the financial data and experience compiled through
Fiscal Year 2000/2001.
Response: Santa Cruz County Board of Supervisors
AGREES
3.
This
Cost Allocation Plan is used for the purpose of allocating the cost of county
government incurred by one county function for the benefit of another. For example, use of office space at the
county government center is billed to each county department based on an
allocation of the cost of providing the building in proportion to the square
footage allocated to each department.
Response: Santa Cruz County Board of
Supervisors AGREES
4.
As
a further example, cost are allocated to the Grand Jury for use of the county
building, custodial services, maintenance of the landscaping at the county
building, purchasing, and assistance from the County Auditor/Controller, County
Counsel, and the County Chief Administrative Officer.
Response: Santa Cruz County Board of
Supervisors AGREES
5.
Theoretically,
the end result of this Cost Allocation Plan is that estimates of these costs
are allocated to each department in proportion to the use and benefit received
by the department.
Response: Santa Cruz County Board of
Supervisors AGREES
6.
This
allocation has three significant effects:
a.
the
true cost of providing a government service are better estimated for management
and budget purposes;
b.
the
proper amount for charges and accountings to federal, state, and local
governments for services provided are determined; and
c.
the
proper amount of charges, assessments, and fees to the public for services
provided are determined.
Response: Santa Cruz County Board of
Supervisors AGREES
7.
In
theory, since it affects their budget, each department acts as a check on the
propriety of these charges.
Response: Santa Cruz County Board of
Supervisors AGREES
8.
In
practice, this check is limited by a number of factors including:
a.
the
difficulty in contesting charges presented as authoritative;
b.
the
lack of bench mark testing to determine if charges are reasonable;
c.
the
limited benefit to the department given the budgeting process which is likely
to merely reduce the budget by the objected amount.
Response: Santa Cruz County Board of
Supervisors DISAGREES
Departments do question the
amount of the indirect costs, and corrections are made to the Plan when
appropriate. The Auditor’s Office facilitates the work of the departments by
preparing a Cost Plan Review Guide for departmental use. Often departments
identify situations where allocations appear incorrect for one reason or
another.
9.
Many
other charges are passed on in a similar ways based on the actual cost of
services provided.
Response: Santa Cruz County Board of
Supervisors AGREES
10.
Interest
in challenging such charges is thought to increase during tight budgetary times.
Response: Santa Cruz County Board of Supervisors
DISAGREES
County departments are always concerned with the accuracy of the Plan.
11. County departments are generally not allowed
to seek outside alternatives even when the
cost is significantly
more than private sources.
12. The experience of this year’s Grand Jury is
illustrative: The Grand Jury, as with many county departments, is charge by the
County Information Services Division for internet access and access to the
county’s main frame on a per connection basis.
The Grand Jury has little or no need to access the county
mainframe. However, it is our
understanding that if we objected to the charge for this access we would be
disconnected from all access and the line item would be deleted from next
year’s budget. Thus there is little or
no incentive to object to this charge.
Similarly, many Grand Jury members familiar with technology issues felt
that the amount charged to the Grand Jury for computer assistance and internet
access was for beyond that available commercially. However, since this is an established process, our options seem
to be to decline internet access entirely, to fight for outside access which
would potentially limit our access to the county intranet, or to accept the
current service as presented.
1.
Overly
broad cost distributions hide inefficiencies in the budgeting process.
2.
The
budgeting process does not adequately encourage questioning of such charges
3.
The
benefits of commercial competition are often lacking.
4.
Comparisons
to commercial alternatives would help to identify inaccuracies.
5.
Departments
are not encouraged by established processes to assess the actual benefit
received and to question charges that are out of proportion to that benefit.
Recommendations
1.
The
CAO and Auditor/Controller should explore ways to encourage departments to
evaluate allocated cost to ensure that they adequately represent the “benefit”
provided to the department and to challenge those that appear out of proportion
to the benefit received.
Response: Santa Cruz County Board of Supervisors
This recommendation has already been implemented. County departments
are encouraged to evaluate allocated costs and to challenge those that appear
inaccurate. However, it should be noted that these costs are not based on the
“benefit” provided to the department but are based on the proportionate cost of
the services which are provided.
2.
Where
possible, the CAO and Auditor/Controller should require comparison to commercial
alternatives to identify inaccuracies and inefficiencies.
Response: Santa Cruz County Board of Supervisors
This recommendation has already been implemented. The County has
conducted comparative analysis of services and in most instances found that the
public is better served without privatizing the function. Examples include:
rapid copy services, service center operations, custodial services, building
maintenance, and debt collection services. There are many services that have
been privatized or provided by vendors including: acute inpatient hospital
care, specialized physician services, consulting services, auditing services,
security services, body shop services, computer software and maintenance
service, special legal services, public defender services, ambulance services,
trash collection services, elevator services, investment advisory services,
dental services, actuary services, labor negotiators, window cleaning,
translator services, parking fine collections, and more. These comparisons are
continually being revisited.
Response: Santa Cruz
County Auditor/Controller
With
regard to the findings, conclusions, and recommendations related to cost
allocations and internal service fund charges, we believe more information
would have resulted in a different set of conclusions and recommendations.
Therefore, we believe that the recommendations are redundant these processes
already exist as explained below.
Indirect
Costs: The County-wide Cost Allocation Plan is an elaborate mechanism to
allocate the central administrative and support costs to the service delivery
departments to facilitate the recovery of costs from State and Federal Agencies
and to set fees. Cost Accounting is an art and not a science thus lending
itself to more than one approach to distributing costs; however, it is
important to select universal allocation basis which is consistently applied
and allowable under federal regulations.
Indirect
costs are budgeted for certain departments and others use this information to
develop appropriate overhead rates for grants and rate setting. Departments do
question the amount of the indirect costs and to facilitate their work we
prepared a Cost Plan Review Guide for the departmental use. Often departments
identify situations where allocations appear incorrect for one reason or
another. The County-Wide Cost Allocation Plan is not used to “hide
inefficiencies in the budget process.”
We do not understand your statement. It is important to remember the
unique nature of the public institution established under a set of complex
statutes, rules, and governance. Trying to compare the private sector to the
public sector does not work well in most instances and often finding comparable
public organizations can be challenging due to the different structures.
The
county has conducted comparative analysis of services and in most instances
found that the public is better served without privatizing the function.
Examples include: rapid copy services, service center operations, custodial
services, building maintenance, and debt collection services. There are many
services that have been privatized or provided by vendors including: acute
inpatient hospital care, specialized physician services, consulting services,
auditing services, security services, body shop services, computer software and
maintenance service, special legal services, public defender services,
ambulance services, trash collection services, elevator services, investment
advisory services, dental services, actuary services, labor negotiators, window
cleaning, translator services, parking fine collections, and more.
Internal
Service Fund Operations: The County has four internal service fund operations
that provide support services. They are the Fleet Service Center, Central
Duplication, Information Services, and Self-Insurance.
The
Fleet Service Center provides general-purpose use vehicle, supports and
maintains the sheriff vehicles, and provides some special purpose vehicles.
Vehicles are serviced on a regular schedule and fueled on site. Our analysis has
shown that it is more cost effective for employees to use pool vehicles over
IRS reimbursement rates when traveling more than 300 miles and assigning
vehicles where the annual mileage exceeds 10,000 miles.
Central
Duplicating provides a variety of printing services. These services are cost
effective and provide for quicker turnaround than most vendors can guaranty. If
services cannot be provided, department can be authorize to use outside
services. Our office has found the vendor solution to be more costly to print
financial statements and budgets.
Information
Services provides services on mid-size mainframe processor and provides a
number of client server services as well. The mainframe is used mostly to
process large applications both vendor and legacy systems. The County is at a
cross road as the State has assumed more processing duties. Members of the
Information Service Policy Task Force meet a several times a year to discuss
and prioritize work plans for the department and we do discuss the cost of the
operations. A number of years ago, our office recommended the creation to the
internal service fund to provide for a full accounting and to provide for the
service charges to be presented within each user budget. Prior to that
occurring the expenditures were reported as a General Fund Budget and the
charges were not fully applied to the user budgets. When charges do not appear
in the customers budget, there is a disincentive to question the costs.
Migrating away for the use of the mainframe is not a simple process because it
is the host to number of very large and complex systems, which are not easily
transferred to another plateform, and the cost of replacement could cost
several millions of dollars. It is not uncommon for counties to spend $7 to $15
million replacing the tax, human resources/payroll and financial systems. Our
office has made use of vendor systems for our financial systems, check writers,
internet financial reports, electronic timekeeping (in progress), and internet
banking inquiry.
Self-Insurance
Programs: The County has a self-insurance program which provides for a broad
range of insurance coverages through a combination of self-funding and umbrella
insurance policies to cover catastrophic losses. The County chose this option
because insurance coverage on the commercial market was and is either
unavailable or cost prohibitive. The cost of these programs are charged to the
County departments either as direct charges or allocated through the cost plan
depending on the financial reporting required and cost recovery considerations.
These costs are allocated on the basis of relative risk, exposure and history.
Responses Required
|
Entity |
Findings |
Recommendations |
Respond
Within |
|
Board of Supervisors County of Santa Cruz |
1-10 |
1-2 |
60 Days (Sept. 2, 2003) |
|
Santa Cruz County
Auditor/Controller |
1-10 |
1-2 |
60 Days (Sept. 2, 2003) |
B) Grand Jury Investigation of Improper Billing Practices in
the County Water and Wastewater Division of the Department of Public Works.
1.
Facilities
for the treatment and disposal of wastewater in the unincorporated areas of
Santa Cruz County are maintained by employees of the Water and Wastewater
Division of the County Department of Public Works.
Response: Santa Cruz County Board of
Supervisors AGREES
2.
The
expenses associated with this maintenance and the cost of new and replacement
parts and equipment are financed through assessments on property owners
collected through several County Service Areas (CSA) established for this
purpose.
Response: Santa Cruz County Board of
Supervisors AGREES
The County agrees with this finding, with the clarification that the
expenses associated with maintenance of not only the County Service Areas
(CSA), but also the Freedom, Davenport and Santa Cruz County Sanitation
Districts, are financed through service charges (not assessments) on only those
property owners whose homes or businesses are connected to these various
sanitary sewer systems.
3.
The
funds raise through each CSA may only be expended for the purpose of developing
and maintaining wastewater treatment and disposal for properties located in the
specific CSA for which they were collected.
Response: Santa Cruz County Board of
Supervisors AGREES
The County agrees with the finding, although, like finding #2, this
should also refer to the Freedom, Davenport and Santa Cruz County Sanitation
Districts, in addition to CSAs.
4.
The
Santa Cruz County Grand Jury received a complaint submitted by a county
employee alleging that employees of the Water and Waste Water Division of the
Department of Public Works were being required to bill their time to improper
accounts. Specifically, it was alleged
that labor and parts expended for the repair and maintenance of facilities
located in the Sand Dollar CSA had been billed to accounts associated with
other service areas. Additionally, it
was asserted that this was a common practice in the operations of the
department.
Response: Santa Cruz County Board of
Supervisors
While the County is unaware
of the details of the complaint filed with the Grand Jury, the County has
received a similar complaint that is currently the subject of review by the
Department of Public Works and the Auditor. The County is committed to
identifying and correcting any weaknesses in internal control.
5.
A
preliminary investigation of the complaint and a review of documents provided
to support the allegations appeared to members of the Grand Jury to
substantiate the complainant’s allegations.
Response: Santa Cruz County Board of
Supervisors
See comment to #4 above.
6.
Because
Grand Jury members lacked the necessary knowledge and expertise to evaluate the
accounting practices associated with these transactions, the Grand jury sought
the assistance of the County Auditor/ Controller and Chief Administrative Officer.
Response: Santa Cruz County Board of
Supervisors AGREES
7.
The
County Auditor/Controller suggested his department perform a review of the time
tracking system used by the Water and Wastewater Division of the Department of
Public Works to evaluate the allegations.
Response: Santa Cruz County Board of
Supervisors AGREES
8.
The
Grand Jury agreed to this proposal and requested the review.
Response: Santa Cruz County Board of
Supervisors AGREES
9.
Preliminary
results of this review indicated numerous inconsistencies between the
department’s daily report logs and the corresponding employee time cards. Of
the data reviewed so far, approximately 50% of the daily reports do not agree
to the corresponding time cards.
Response: Santa Cruz County Board of
Supervisors AGREES
The Department’s daily report logs were not intended for timekeeping
purposes, but should conform with time records. The daily logs are tools that allow Water and Wastewater Division
management to track which preventative maintenance measures and plant
operations were completed on a given day in any given service area or district
facility. All of the Department’s staff
in this and other divisions, like all other County employees, are required to
use employee time cards for tracking their actual time spent on any given
assignment in any of the CSAs or sanitation districts, using the job numbers
assigned to that service area or district and the specific task involved. The percentage of errors noted is misleading
in that the difference in the number of actual hours involved in the
preliminary comparison study indicates a very small percentage of difference
between the time entries in the daily logs and the hours shown on the
timecards.
10.
The
County Auditor/Controller will submit a report of his complete findings and
recommendations stemming from this review to the Board of Supervisors during
the Budget hearings in June of 2003.
Response: Santa Cruz County Board of
Supervisors
The report is expected
shortly.
1.
The
preliminary results of this investigation appear to at least partially
substantiate the allegations of the complainant.
2.
At
a minimum, the division appears to lack adequate internal controls to ensure
the accuracy of its time keeping system.
Further investigation would be required to determine if other issues are
raised by these findings.
3.
Allegations
that these irregularities are done for some intentional purpose have not to
this date been substantiated and would require further review.
4.
The
County/Auditor controller should be commended for his prompt attention to this
matter.
1. The Board of Supervisors should consider the adoption of a “whistleblower program” to facilitate better accounting practices and internal controls within County Departments.
Response: Santa Cruz County Board of Supervisors
This recommendation will be
considered when the Auditor-Controller submits his report and recommendations.
2. The County Auditor/Controller should submit to the Board of Supervisors proposals for further review of this and similar structures to determine;
a. whether the problem is limited to this particular structure; and
b. whether the problem is the result of merely inadequate internal controls or intentional misappropriation.
Response: Santa Cruz County Board of Supervisors
The County will defer to the
County Auditor-Controller to respond to this recommendation.
Response: Santa Cruz County Auditor/Controller
We agree with
the recommendation. Our office is in the final phase of completing the
investigation of cost accounting/timekeeping irregularities that reported in
the Sanitation Division of the Public Works Department. Our report will be
filed with the Board of Supervisors upon completion and include appropriate
recommendations.
Our report will
also recommend a “whistleblower” program, also known as a Hot Line intended for
reporting indications of fraud, misuse of County resources by employees,
vendors, or contractors; and significant violations of County policy. Examples
of reportable offenses include:
· Theft
· Conflict of interest
· Fictitious claims
· Misuse of County property
· Embezzlement
· Bribes and kickbacks
· Abuse of work hours
· Inappropriate use of County credit
cards
The individuals will be afforded
confidentiality and may choose to be anonymous.
This program is
not necessarily used to improve accounting procedures or internal controls but
is a tool to detect abuses. Accounting procedures and internal controls will
not in themselves prevent abuses where there is a willful intent or conspiracy
to carry out a reportable offense.
In addition, we
believe that the County should provide information and training on ethics for
public employee. I understand that the County’s conflict of interest and
incompatable activities policies are currently being reviewed. This will
provide an excellent opportunity to underscore the importance of ethics in
government. Public employees are entrusted to be accountable for the
expenditure of public money. Employees that are directed to participate in or
carry out a reportable offense, need a process to report such incidents without
the fear of reprisal or retribution. In 1984 the legislature created the
Reporting of Improper Governmental Activities Act, and provided additional
guidance in 1986. These Code Sections are attached.
Responses Required
|
Entity |
Findings |
Recommendations |
Respond
Within |
|
Santa Cruz County Board of
Supervisors |
1-10 |
1,2 |
60 Days (Sept. 2, 2003) |
|
Santa Cruz County
Auditor/Controller |
1-10 |
1,2 |
60 Days (Sept. 2, 2003) |