Thirty years ago, California lawmakers created rules requiring state agencies to return any money to the General Fund not spent on positions vacant for more than six months, but without penalties for violating them. And they have been abused ever since.
Consequently, a new audit (pdf) from the Department of Finance (DOF) found “widespread noncompliance” with the rules and, instead, agencies gamed the system to hang on to budget dollars. “We observed a culture at some departments where circumvention of the code was commonplace and even encouraged by management,” the department wrote in the report.
The audit looked at 798 transactions in 10 departments between July 1, 2012, and June 30, 2013, and found that 58% “lacked adequate justification or documentation.” All 10, perhaps with a different interpretation of the rules, said they were in compliance. The auditor said only one was.
After 30 years, are they gaming the system, or compensating for a poorly designed one?
State agencies regularly transfer employees internally to fill vacant positions before the six-month deadline so they show up as occupied on ledger sheets. That means the agencies are getting paid for more positions than were actually occupied, so they take the extra money and spend it on other things.
The report doesn’t accuse anyone of pocketing ill-gotten gain or squandering it. In fact, the auditor couldn’t tell where it went. “Department heads informed us that vacant position funds were generally used in the program in which the vacancy occurs, or for personnel or contract purposes. . . . However, because departments are not required by the code, nor do they track the disposition of these funds, the assertions could not be confirmed.”
Several departments regularly swapped employees around without changing their job description, funding source or work assignment. The Sacramento Bee, which wrote extensively about vacant positions last year, found a Department of Food and Agriculture worker who shifted 14 times through nine positions in one year.
The departments said they play the vacancy game for budget flexibility “to accomplish mission-critical projects with limited funds,” because the six-month deadline can be too short to hire personnel, and to avoid permanent loss of a position when agencies are scrambling for every available dollar.
There is a procedure for agencies reclaiming positions lost to the six-month rule, but they claim it is onerous and too uncertain a proposition.
None of this is new.
The California State Auditor issued a report (pdf) in 2002, redundantly entitled, “Vacant Positions: Departments Have Circumvented the Abolishment of Vacant Positions, and the State Needs to Continue Its Efforts to Control Vacancies.”
The efforts continued and in 2008 the independent Legislative Analyst’s Office noted that gaming the system hadn’t changed. It recommended scrapping the “ineffective” law because it wasn’t reducing vacancies and saving money as expected, and generated a lot of noxious paperwork. That didn’t happen.
California's Department of Human Resources (CalHR) smacked the agencies around with a memo (pdf) in May 2014, reminding them about the six-month rule and warning that the Finance Department was about to audit and shame them in public.
The shaming this month did not include the naming of names or departments. The auditor recommended the law be fixed or abandoned.