Report 99026 Summary - January 2000
California Department of Corrections:
Poor Management Practices Have Resulted in Excessive Personnel Costs
RESULTS IN BRIEF
The California Department of Corrections (department) has failed to effectively manage sick leave use, holiday, and other paid leave programs. As a result, the department is incurring excessive overtime costs that are largely driven by the need to cover significant use of sick leave by custody staff. Furthermore, by allowing its custody staff to accumulate large balances of holiday, vacation, and annual leave, the department is faced with a huge and rapidly growing liability that will become increasingly expensive to liquidate.
The department could save about $17 million a year if average sick leave use among custody staff dropped to 48 hours per year and roughly $29 million a year if it reduced its average sick leave usage to a level comparable to that of the California Highway Patrol. Besides driving up costs, the extensive use of overtime to cover employees out on sick leave often allows custody staff to earn more than their superiors; many therefore choose not to accept promotions. The department's attempts to discipline staff who claim a lot of sick leave have been ineffective in curbing excessive use. Its efforts to control sick leave costs are hampered because it does not sufficiently track the reasons that custody staff use sick leave to determine a baseline level of back-up relief staff needed and to detect patterns of excessive use.
Furthermore, the department has not made optimum use of permanent full-time relief officers and intermittent staff to cover absences due to sick leave, even though using them costs less than paying others overtime. We estimate that the department could have saved approximately $5.5 million in fiscal year 1998-99 if it had scheduled permanent full-time relief staff instead of paying for overtime to cover sick leave. If all institutions had optimized the use of their permanent intermittent staff as well, the department could have saved even more money.
The department has also been shortsighted in its management of its holiday, vacation, and annual leave programs. It has allowed staff to accumulate huge balances of holiday leave, as well as vacation and annual leave that exceed mandatory limits. These combined balances (including only the excess vacation and annual leave, not the full amount) represent a liability exceeding $79 million, with the liability for holiday leave alone growing at a rate of approximately $8 million per year. Allowing these balances to accumulate saves money in the short term; however, deferring the usage of, or payment for, leave time to the future, when staff salaries will be higher because of raises and promotions, increases the ultimate cost to the department. The department has not yet developed a strategy to reduce its large accumulated liability.
We estimate that allowing the current holiday leave balances and the excess vacation and annual leave balances to accrue will cost at least an additional $62 million in just four years. This may also create a cash flow problem if a significant number of employees retire beginning in January 2000, as expected because of enhanced retirement benefits, and cash out their leave balances.
This rapid growth in leave balances has occurred because the department has not established practices to ensure that staff use all or most of the leave they earn each year. The institutions' inflexible practices for approving time off further restrict custody staff's use of leave. Staff also earn more leave than the department has budgeted for fill-in relief staff, which is a concern because employees may then be unable to take time off or cash leave out. When significant numbers of custody staff are unable to take time off, they may be less refreshed and alert when performing their duties.
Poor information hinders management's ability to control and contain the high costs of leave programs. Specifically, management has not studied daily leave patterns to determine the average level of relief needed to cover predictable absences, nor does it sufficiently link the use of personnel resources to the budget for the institutions' major needs. Significant errors in categorizing how staff spend their time further inhibit budgeting for, and effective management of, personnel resources.
To control costs related to sick leave, the department should take progressive disciplinary action against employees it believes use excessive sick leave, negotiate for financial incentives to reward those who use less sick leave and disincentives for those whose use is excessive, and collect more complete information regarding leave usage. In addition, to ensure the use of less costly alternatives to fill in for staff absences, the department should determine an appropriate number of full-time relief employees to cover for predictable needs, and optimize the use of permanent intermittent employees.
To prevent its personnel costs from rising even higher, the department should develop a plan to eliminate its significant liability for accumulated holiday leave and excess vacation and annual leave balances, enforce the mandatory limits on the accumulation of vacation and annual leave, and develop strategies to ensure that holiday leave is used during the year it is earned. In addition, to encourage staff to use the holiday, vacation, and annual leave balances they have earned, the department should develop more flexible practices for authorizing time off.
To ensure that its budget is aligned with the appropriate expenditure of personnel resources and is sufficient, the department should seek to adjust its funding for sick and vacation leave.
To monitor the sufficiency of its budget and measure the success of its personnel resource allocations, the department should collect accurate management information that compares the personnel budget for its major activities to the cost of using full-time employees, permanent intermittent employees, and overtime in carrying out those activities.
While it did not specifically address our recommendations, the department does recognize that it needs to improve some of its personnel practices and cited various planned and ongoing actions designed to correct problem areas during the next five months. Therefore, we look forward to the department's 60-day, six-month, and one-year responses to the audit to assess the steps it is taking to implement our recommendations.