Report 2003-121 Summary - May 2004
California Public Utilities Commission
:It Cannot Ensure That It Spends Railroad Safety Program Fees in Accordance With State Law
HIGHLIGHTS
Our review of the California Public Utilities Commission (commission) revealed that:
- The commission does not have an effective method to track the time its employees spend on railroad safety activities.
- The commission cannot ensure that it charges only allowable travel-related expenses to the Railroad Safety Program.
- Inaccuracies in its cost allocation plan and table have caused the commission to incorrectly charge indirect costs to the Railroad Safety Program.
- Without a system to track direct and indirect costs, the commission cannot establish reliable budgets and set appropriate fees.
RESULTS IN BRIEF
The California Public Utilities Code (code) dictates how the California Public Utilities Commission (commission) must spend Railroad Safety Program fees, which it collects from railroad corporations to cover the cost of regulating their industry. According to the code, the commission can only spend the fees on the salaries and per diem and travel expenses of (1) railroad safety employees directly involved in inspecting railroads and enforcing rail safety regulations, (2) employees who perform clerical and support functions directly associated with railroad safety inspections, and (3) legal personnel who actually pursue violations of rail safety regulations beyond the formal complaint level. In 1999, the code was amended to allow the commission to recover a portion of its overhead costs while state personnel actually occupy the above positions and perform the duties related to these three activities.
However, the commission uses a timekeeping system that does not track the actual time its employees spend working on railroad safety activities. As a result, some inspectors inconsistently report their hours, and the commission uses estimates to determine the direct labor expenditures of clerical, supervisory, and legal staff who work on activities related to the Railroad Safety Program. In fiscal years 2002-03 and 2003-04, errors in those estimates resulted in overcharges to the Railroad Safety Program.
The commission has been trying to upgrade its timekeeping system since as early as the spring of 2002 to allow its employees to record the actual time they spend on projects or activities and to integrate its timekeeping system with its accounting system. However, the commission has experienced delays and does not expect to complete the upgraded system until September 2004. Thus, it cannot ensure that the fees it collects are spent only on the direct labor charges of Railroad Safety Program employees.
The commission also lacks adequate policies to ensure that its employees charge only allowable travel-related expenses to the Railroad Safety Program. Specifically, the commission does not always require inspectors to report the proper program cost account codes or the percentage of time they spend traveling for Railroad Safety Program inspections on their travel expense claims. Further, when inspectors do report percentages of their travel time, the commission's accounting staff disregard them when processing inspectors' claims. Consequently, the commission cannot ensure that all travel-related expenses charged to the Railroad Safety Program are allowed.
Weaknesses in its compliance with State procedures prevent the commission from ensuring that it equitably distributes indirect costs to programs and funding sources. The commission has no formal process to update its cost allocation plan (plan) as required by the State Administrative Manual, nor does it maintain its accounting system's cost allocation table (table), which contains the basis of the allocation of expenditures that cannot practically be charged directly to its programs that benefit from the expenditures. Since fiscal year 1999-2000, the commission has been using an informal process to update the plan that does not include obtaining management approval of proposed changes. For example, in July 2002, the commission merged two divisions affecting the Railroad Safety Program when creating its current Consumer Protection and Safety Division. However, the commission did not update its plan to incorporate changes resulting from this reorganization. As a result, errors occurred in the allocation of indirect costs to the Railroad Safety Program.
Because the commission does not adequately track the direct and indirect costs of the Railroad Safety Program, it cannot establish reliable budgets and set appropriate fees. Lacking data on actual expenditures, the commission does not know if the fees its sets and collects adequately cover Railroad Safety Program expenses or if the fees are excessive. Further, when the commission establishes its budget and sets fees for the Railroad Safety Program in subsequent years, it cannot effectively determine how much to credit or charge railroad corporations.
RECOMMENDATIONS
To properly determine the costs of administering the Railroad Safety Program and set appropriate fees, the commission should do the following:
- Move quickly to fully implement upgrades to its timekeeping system to allow employees to record the actual time they spend on railroad safety activities and to enable the commission to reconcile expenditures to funding sources.
- Establish procedures requiring inspectors to identify the program cost account codes to be charged for their travel expenses on their travel expense claims. Additionally, the commission should require its accounting staff to enter all valid codes shown on the travel expense claim into the accounting system.
- Develop policies and procedures to ensure that it maintains its plan and table for indirect charges in accordance with the State Administrative Manual. Specifically, it should periodically review and update the plan and table to ensure that the allocation bases are appropriate. Further, it should ensure that management reviews and approves any changes to the plan.
AGENCY COMMENT
The commission stated that it has initiated a plan of action to implement the recommendations.
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