High Risk Update: State Agencies Credited Their Employees With Millions of Dollars Worth of Unearned Leave

High Risk Update
State Agencies Credited Their Employees With

Millions of Dollars Worth of Unearned Leave
Report 2012-603
August 2014
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Doug Cordiner Chief Deputy
Elaine M. Howle State Auditor
621 Capi t ol Mal l , Sui t e 1200 Sacr ament o, CA 95814 916. 445. 0255 916. 327. 0019 f ax www. audi t or. ca. gov
Augusta6,ao aoa-6o
TeGovernorofCalifornia
PresidentproTemporeoftheSenate
SpeakeroftheAssembly
StateCapitol
Sacramento,California,8
DearGovernorandLegislativeLeaders:
TeCaliforniaStateAuditor(stateauditor)presentsthisreportconcerningtheStatesaccounting
of employee leave records. Tis report concludes that state agencies have credited their
employeeswithmillionsofdollarsworthofunearnedleavebecausetheStatehasweakcontrols
over its accounting of employees leave records. Specically, when we performed a statewide
electronicanalysisoftheCaliforniaStateControllersOces(statecontroller)CaliforniaLeave
AccountingSystem(leaveaccountingsystem),wefoundthatstateagenciescreditedemployees
withnearly,;,ooohoursofunearnedleavebetweenJanuaryaoo8andDecemberaoa.Asof
December ao the value of these erroneous leave hours was nearly s6. million, an amount
thatwilllikelyincreaseovertimeasemployeesreceiveraisesorpromotions.Teseerrorsalso
include nearly 6,ooo hours of sick leave, which state employees can convert to state service
creditwhentheyretire,ultimatelyincreasingtheStatespensionpayments.
Te large number of errors has occurred in part because the leave accounting system lacks
sucientcontrolstoassiststateagenciesinensuringthattheirleavetransactionsarecomplete,
accurate,andvalid.Toimprovetheaccuracyoftheleaveaccountingsystem,thestatecontroller
shouldimplementcost-eectivecontrolstopreventthesystemfromprocessingthetypesof
inappropriate transactions we identied in our analysis. Additionally, it should work with
theCaliforniaDepartmentofHumanResourcestoestablishcriteriathatthestatecontroller
can use to develop monthly exception reports, which identify unexpected or atypical leave
transactionstoaidstateagenciesindetectingerroneoustransactions.
Finally,unclearguidanceinstatelawputstheStateatriskofincurringadditionalcosts.Although
statelawrequiresagenciestoinitiatecollectioneortswithinthreeyearsfromthedateofthe
overpayment, it does not dene when an overpayment occurs. Tus, the Legislature should
amendstatelawtoclarifythestatuteoflimitationforrecoveringoverpaymentofleavecredits.
Respectfullysubmitted,
ELAINEM.HOWLE,CPA
StateAuditor
Blankpageinsertedforreproductionpurposesonly.
v California State Auditor Report 2012-603
August 2014
Contents
Summary 1
Introduction 5
Results of Our Review
State Agencies Erroneously Credited Employees With More
Than SixMillion Dollars Worth of Unearned Leave 17
State Controller Could Strengthen Its Leave Accounting Controls
to Assist State Agencies in Detecting and Correcting the Types of
Erroneous Transactions We Identied 24
CalHR Needs to Provide Additional Guidance on Leave Accounting 27
Three State Agencies We Visited Did Not Have Processes to
Identify Erroneous Leave Transactions 30
Recommendations 31
Appendix A
Overview of the Furlough and Personal Leave Program for
State Employees and the Furlough Program for California State
University Employees 35
Appendix B
State Entities That Use the California Leave Accounting System 39
Responses to the Review
California Department of Human Resources 45
California Science Center 49
California State Controllers Oce 51
California State Auditors Comments on the Response
From the California State Controllers Oce 57
California State University, Oce of the Chancellor 61
California Department of Veterans Aairs 63
California State Auditor Report 2012-603
August 2014
vi
1 California State Auditor Report 2012-603
August 2014
Report Highlights . . .
Our review of the California Leave
Accounting System (leave accounting
system) highlighted the following:
State agencies credited employees with
roughly 197,000 hoursvalued at nearly
$6.4 million as of December 2013of
unearned leave between January 2008
and December 2012.
Because of the absence of clear statutory
language, in the event of litigation
the State is at risk of not recovering the
funds that represent inappropriately
credited leave hours.
The leave accounting system lacks
sucient automated controls to
prevent state agencies from processing
erroneous transactions.
One state agency inappropriately
credited an employee with eight hours
of sick leave each month for 10 years
in addition to her monthly accrual of
annual leave.
One state agency erroneously gave an
employee 1,212 hours of holiday credit
in December 2012, worth more than
$33,000, instead of the eight hours to
which she was entitled.
Some state agencies misinterpreted
collective bargaining agreements related
to the number of leave hours their
employees should earn.
Of the 14 locations we visited, only
two performed procedures to ensure that
their sta properly entered information
from time sheets into the leave
accounting system.
Summary
Results in Brief
Stateagencieslavecreditedtleiremployeeswitlmillionsof
dollarswortlofunearnedleavebecausetleStatelasweak
controlsoveritsaccountingofemployeesleaverecords.Te
CaliforniaStateControllersOce(statecontroller)maintains
tle California LeaveAccountingSystem(leaveaccountingsystem)
totrackleaveactivityforemployeesatparticipatingdepartments,
agencies,CaliforniaStateUniversity(CSU)campuses,andotler
entities(state agencies).Wliletlestatecontrollerisresponsible
formaintainingandsupportingtleleaveaccountingsystem,eacl
participatingstateagencyretainsownerslipofitsdatastored
witlintlesystemandisresponsiblefortledatasaccuracyand
completeness.Wlenweperformedastatewideelectronicanalysis
oftleleaveaccountingsystem,wefoundtlatstateagencies
creditedemployeeswitlrouglly,;,oooloursofunearnedleave
between)anuary:oo8andDecember:o:.
1
AsofDecember:o
tlevalueoftleseerroneousleavelourswasnearlys6.( million,
anamounttlatwilllikelyincreaseovertimeasemployees
receiveraisesorpromotions.Teseerrorsalsoincludenearly
6,ooo loursofsickleave,wliclstateemployeescanconvert
tostateservicecreditwlentleyretire,ultimatelyincreasingtle
States pension payments.
Additionally,unclearguidanceinstatelawputstleStateat
riskofadditionalcosts.Specically,stateagenciesmustinitiate
collectioneortsonoverpaymentswitlintlreeyearsfromtle
dateofoverpayment.However,statelawdoesnotexplicitlydene
wlenanoverpaymentoccurs.BotltleCaliforniaDepartment of
HumanResources(CalHR)andCSUconsideroverpayments
of leavetooccurwlenemployeesusetleerroneousleavetocover
absencesfromworkorcasloutunearnedleavelours.Because
of tleabsenceofclearstatutorylanguage,intleeventoflitigation
tleStateisatriskofnotrecoveringtlefundstlatrepresent
inappropriatelycreditedleavelours.
Telargenumberoferrorsoccurredinpartbecausetleleave
accountingsystemlackssucientautomatedcontrolstoprevent
stateagenciesfromprocessingerroneoustransactions.According
totlestatecontroller,tleleaveaccountingsystemlasautomated
controlstoensuretleaccuracyofcertaintypesofmontllyaccruals,
suclassickleaveandvacationleave.However,tleseautomated
controlsdonotalwayspreventstateagenciesfromcrediting
1
There may be circumstances relating to specic transactions that result in those transactions
being appropriate or there may be additional errors that we did not identify. However, to account
for all errors would have required a manual review of all state employees time sheets.
August 2014
2
stateemployeeswitlunearnedleave.Forexample,formoretlan
oyearstleCaliforniaDepartmentofEducation(Education)
inappropriatelycreditedoneemployeewitleiglt loursofsickleave
eaclmontlinadditiontolermontllyaccrualofannualleave.
An employeecanelecttoreceivevacationandsickleavebenets
ortleannualleavebenet,butanemployeecannotreceivebotl
benets.Tus,Educationgavetlisemployee,68leaveloursto
wliclslewasnotentitled.
Toimprovetlecontrolsovertleleaveaccountingsystem,tle
statecontrollercouldaidstateagenciesindetectingerroneous
transactionsbygeneratingadditionalexceptionreportstlatidentify
unexpectedoratypicalleavetransactions.Forexample,wlenwe
preparedanexceptionreport,weidentiedoneinstanceinwlicl
CoalingaStateHospitalerroneouslygaveanemployee,:: lours
oflolidaycredit,wortlmoretlans,ooo,insteadoftle
eiglt lourstowliclslewasentitled.Witloutexceptionreports,
stateagenciesmaynotdetectoverpaymentsoftlisnature.
Furtler,weidentiedtwostateagenciestlatmisinterpreted
collectivebargainingagreementsrelatedtotlenumberofleave
loursemployeesslouldearn.Statelawandcollectivebargaining
agreementsestablislstateemployeesleavebenets.Forexample,
collectivebargainingagreementsestablisltletotalcompensation
inpayandleavecreditstlatemployeesslouldreceiveforworking
onlolidays.However,tleCaliforniaScienceCenter(Science
Center)misinterpretedtlelanguageintleseagreements.Asa
result,between)anuary:oo8andDecember:o:,iterroneously
gaveitsemployeesmoretlan(,,ooloursoflolidaycreditto
wlicltleywerenotentitled.Inanotlerinstance,ClulaVista
VeteransHomemisinterpretedcollectivebargainingagreements
andconsequentlygaveitsemployeestwicetlenumberofloliday
creditstlattleywereentitledtoforalolidayinMarcl:o:.We
believetlatCalHRslouldprovideadditionalguidancetostate
agenciestoavoidtlesetypesofmisinterpretations.
Altlougltlestatecontrollermaintainsdatainitsleaveaccounting
system,individualstateagenciesareresponsibleforensuring
tleaccuracyoftlesedata.Todeterminetleproceduresstate
agenciesfollowforensuringtlataccuracy,wevisited(locations
administeredbytleCaliforniaDepartmentofStateHospitals,
tleCaliforniaDepartmentofVeteransAairs(VeteransAairs),
andtleScienceCenter.Altlougleacloftlelocationsveried
tleaccuracyoftleinformationtleiremployeesrecordedon
tleirtimesleets,onlytwolocationsperformedproceduresto
ensuretlattleirstaproperlyenteredtleinformationfrom
tletimesleetsintotleleaveaccountingsystemandeventlose
August 2014
procedureswerelimited.Witloutsucientprocessestoverifytle
accuracyoftledatatleyenter,stateagenciesmaymakeerroneous
leaveaccountingtransactionstlatremainundetectedorare
never identied.
Recommendations
TeLegislatureslouldamendstatelawtoclarifytlestatuteof
limitationsforrecoveringtleoverpaymentofleavecredits.
Tocorrecttleerroneousleaveloursweidentiedinouranalysis
oftleleaveaccountingsystem,CalHRslouldworkwitltlestate
controllerandallstateagenciesunderitsautloritytoreviewand
taketleappropriateactiontocorrecttle errorsby)anuary:o,.
of tleleaveaccountingsystemrelatedtotleCSU,CSUsOceof
tleClancellorslouldworkwitltleCSU campusestoreviewand
taketleappropriateactiontocorrect tle errorsby)anuary:o,.
Toimprovetleaccuracyofinformationintleleaveaccounting
systemandtoensuretlatstateagenciesdonotimproperlycredit
employeeswitlleaveintlefuture,tlestatecontrollersloulddo
tlefollowing:
Implementadditionalcontrolsby)une:o,topreventtleleave
accountingsystemfromprocessingtletypesofinappropriate
transactionsweidentiedinourstatewideelectronicanalysis.
Forexample,itcoulddevelopcost-eectivecontrolsintleleave
accountingsystemtlatwouldpreventemployeesfromreceiving
annualleaveandsickleaveduringtlesamepayperiod.
WorkwitlCalHRtoestablislproceduresby)anuary:o,for
updatingtlecriteriaitusestoproducetlemontllyexception
reportstoensuretlattlecriteriareectclangesinstatelawand
collectivebargainingagreements.
UsingcriteriaprovidedbyCalHR,developmontllyexception
reportstlatidentifytransactionsintleleaveaccountingsystem
tlatareinconsistentwitltleguidelinesestablisledinstatelaw
andcollectivebargainingagreements,suclasinstancesinwlicl
stateemployeesreceivetoomanypersonallolidaysortoomucl
lolidaycredit.By)une:o,beginprovidingeaclstateagencys
lumanresourcesmanagementwitltletransactionsidentiedin
tleexceptionreportsforreviewandcorrectionas necessary.
August 2014
4
Toensuretlatstateagenciesaccuratelyaccountfortleir
employeesleavebenets,CalHRsloulddotlefollowing:
Consolidateguidanceby)anuary:o,regardingtleappropriate
amountofleavetlatemployeesslouldearneaclmontl
andprovidetlesecriteriatotlestatecontrollertousewlen
developingtleleaveaccountingsystemsmontllyexception
reports.Forexample,CalHRslouldidentifytlenumberof
lolidaycreditlourstlatemployeescoveredbyeaclcollective
bargainingagreementslouldreceiveforworkingona loliday.
Workwitltlestatecontrollertoestablislproceduresby
)anuary :o,forupdatingtlesecriteriatoensuretlattleyreect
anyclangestostatelawandcollectivebargaining agreements.
Provideadditionalguidancetostateagenciesby)anuary :o,
oninterpretingtleprovisionsoftlecollectivebargaining
agreementsrelatedtotleamountofleaveemployeesearn.For
example,CalHRcouldprovidescenariostoillustratetlenumber
ofloursemployeesslouldearnundercommoncircumstances.
Developguidelinesandproceduresby)anuary:o,requiringall
stateagenciestoverifyinformationtleirpersonnelspecialists
enterintoanysystemtleyusetotrackstateemployees
leave transactions.
Agency Comments
Initsresponsetotlisreview,CalHR,CSUsOceoftle
Clancellor,VeteransAairs,andtleScienceCenterresponded
totlereviewindicatingtleyagreedwitltlerecommendations
directedtoeacloftlem.Altlougltlestatecontrollerindicated
tlatitembracedmanyoftlerecommendations,itdidnot
agreewitltlendingsortledeptlandcompletenessofour
audit metlodology.
August 2014
Introduction
Background
Legislationtlatbecameeectivein)anuary:oo,autlorizestle
CaliforniaStateAuditor(stateauditor)todevelopariskassessment
processfortleStateandtoissuereportsfocusedonligl-risk
areas.InFebruary:oo,tlestateauditorpublisledareporttitled
High Risk: Te California State Auditor Has Designated the State
Budget as a High-Risk Area,Report:oo8-6o,wlicladdedtle
Statesbudgetconditiontotlestateauditorslistofligl-riskissues
becauseoftleStatesscalcrisisandlistoryofongoingdecits.
Italsoindicatedtlattlestateauditorwouldexplorecertain
budgetissuesinmoredetailintlefuturetolelpdecisionmakers
ndareaswleretleStatemigltreduceexpensesorimprove
operational eciencies.
Oneoftlebudgetissuesweidentiedforfurtlerdetailedreview
wastleStatesliabilityassociatedwitlleavebenets.According
totleLegislativeAnalystsOce(LAO),tleStatesliabilityto
payemployeeleavebalancestotaleds.,billionasof)une :o:,
2
ortleequivalentofapproximately:;percentoftleStates
annualsalarycostsliglertlanmostotlerpublicandprivate
employers.However,tleactualleavebenetliabilityfortleState
islikelyliglertlanreportedbecausetleLAOdidnotinclude
tleemployeesoftleStatespublicuniversitiesinitsreport.For
example,intlefallof:o:tleCaliforniaStateUniversity(CSU)
reportedtlatitemployedover((,ooofacultyandstastatewide.
Teleavebenetliabilityassociatedwitltleseemployeeswasnot
includedintleLAOstotalliabilityamountreportedfortleStates
accumulatedleave balance.
TeStatetracksitsemployeesleavebenetstlrouglavarietyof
electronicdatasystems.Tisreportfocusesontleaccuracyoftle
StatesaccountingofleavebenetstlrougltleCaliforniaState
ControllersOces(statecontroller)CaliforniaLeaveAccounting
System(leaveaccountingsystem).Anyindividualwloseleave
istrackedbytleleaveaccountingsystem(stateemployee)for
tleperiod)anuary:oo8tlrouglDecember:o:isincludedin
our review.
2
About , executive branch employees were included in the LAO report.
August 2014
6
State Employees Leave Benets
Statelawandcollectivebargainingagreementsestablislstate
employeesleavebenets.
3
Specically,statelawpermitsmost
state employeestojoincollectiveemployeeorganizations.Tese
employeeorganizationseitlernegotiatewitltleCalifornia
DepartmentofHumanResources(CalHR)ortleBoardof
TrusteesoftleCSUtodeterminestateemployeeswages,lours,
leavebenets,andotlertermsandconditionsofemployment
(employee benets).Twenty-onecollectivebargainingagreements
identifytleoutcomesoftlenegotiationswitlCalHRand
additionalcollectivebargainingagreementsdescribeCSUs
employeesbenets.Furtler,statelawexcludessomestate employees,
suclasmanagersoremployeesworkingforcertainstateagencies,
fromcollectivebargainingaltogetler,instead,statelawalonedenes
tleleavebenetsfortleseemployees.
Inadditiontoitsotlerduties,CalHRlasresponsibilityfor
issuesrelatedtotlemajorityofstateemployeessalariesand
leavebenets.Toassiststateagenciesinunderstandingleave
benetrules,CalHRprovidesconsultationandlostsforumstlat
providetrainingandguidancetostateagencieslumanresources
professionals.Italsodistributesandpublislespolicymemoson
itsWebsitetlatexplainlowtleagenciesslouldimplementand
interprettleprovisionsofeaclbargainingagreement.
Testatecontrollertracksvarioustypesofemployeeleavebenets
initsleaveaccountingsystem.Intlisreview,wefocusedour
statewideelectronicanalysisoneigltoftlenineleavebenetsfor
wliclstateemployeesearnedtlemostleavebetween)anuary :oo8
andDecember:o:.Tabledescribestleleavebenetswe
reviewed.Wedidnotreviewtleremainingleavebenet
compensatingtimeobecausetlestatecontrollerspayrolland
leaveaccountingsystemsdonotcontainsucientdetailtoallowus
toconductstatewideelectronicanalysisoftlisleavebenet.
4
AsslowninTable,statelawentitlesemployeeswloseparatefrom
stateservicetoreceivealump-sumpaymentforcertaintypesof
accumulatedleave.Employeesmayelecttoreceivetlelump-sum
paymentortleymaycontributeitintoapersonalretirement
account,suclasa(o(k)or(,;account.Statelawrequires
lump-sumpaymentstobecalculatedbyprojectingemployees
3
Certain state employees who work less than full time receive prorated benets based on their
time base.
4
Certain state employees may earn compensating time o in lieu of cash compensation based on
the number of overtime hours they work during a week. However, because the state controllers
systems do not contain the total number of hours employees work, without manually reviewing
the employees time sheets, we could not evaluate the appropriateness of the compensating
time o that state agencies credited to employees.
August 2014
accumulatedleaveontleirworkcalendarsuntildepletedasiftley
werestillemployed,potentiallyresultinginemployeesearning
additionalleavebasedontleiraccumulatedleavebalance.For
example,ifanemployeewloregularlyearned(loursofannual
leaveeaclmontltookotleentiremontlofAugust:o,tlereby
using;6loursoflisorleraccumulatedleave,tlatemployee
wouldstillearnanannualleavecreditof(loursfortlatmontl.
Terefore,ladtlisemployeeretiredon)uly,:o,witlatotalof
;6loursofaccumulatedannualleavecredit,tleStatewouldlave
compensatedlimorlerfortleoriginal;6loursofaccumulated
leave,plustle(additionallourstlisemployeewouldlaveearned
ladleorsleusedtleleave.However,wlentleStateterminates
anemployeeforcause,leorsleisnoteligibletoearnadditional
leavebasedontleaccumulatedleavebalancesandonlyreceives
paymentfortleaccumulatedleavebalancesasoftledateleorsle
leftstateservice.
Table 1
Types of Leave Benets That We Evaluated
LEAVE BENEFIT DESCRIPTION SEPARATION FROM STATE SERVICE
Vacation* State employees accrue vacation on a monthly basis. The amount
of leave state employees earn is based on state law or their
collective bargaining agreement and the length of time they
have worked for the State.
State employees are entitled to a lump-sum payment
for any unused vacation.
Sick Leave* State employees accrue sick leave on a monthly basis. Sick leave
is used to deal with a state employees own or a family members
illness, injury, or medical-related issues.
The State converts unused sick leave to state service
credit upon an employees retirement, potentially
resulting in the employee receiving increased
monthly pension payments.
Annual Leave* State employees accrue annual leave on a monthly basis in
lieu of vacation and sick leave. The amount of annual leave
state employees earn is based on state law or their collective
bargaining agreement andthe length of time they have worked
for theState.
State employees are entitled to a lump-sum payment
for any unused annual leave.
Holiday Credit State employees earn leave when they work on holidays or when
holidays fall on their regularly scheduled days o.
The State provides state employees with a lump-sum
payment for any unused holiday credit.
Personal Holiday
State employees earn one paid day o per year. The State generally provides most state employees
with a lump-sum payment for any unused
personalholidays.
Furlough
The State implemented a program to reduce current spending by
reducing its employee salaries in exchange for time o.
State employees must exhaust the leave
prior to separating from state service.
Personal Leave Program

for2010
Personal Leave Program
for2012
Sources: California Government Code, California Department of Human Resources policy memoranda, and executive orders.
* Employees can either elect to receive vacation and sick leave benets or the annual leave benet, but not both benets.
Some state employees have to complete six months of their initial probationary period in state service prior to receiving a personal holiday.
On rare occasions, when an employee separates from state service and has accumulated Personal Leave Program 2010 or 2012 hours and/or
furlough hours that cannot be used prior to separation, these unused hours must be paid at the time of the employees separation.
August 2014
8
vacat/oo,5/ck,aod4ooua/leave
Moststateemployeesareeligibletoreceiveacombinationofvacationand
sickleave.Typically,stateemployeesearnbetweensevenand6 lours
ofvacationpermontlbasedonstatelawortleircollectivebargaining
agreement,andlowlongtleylaveworkedfortleState.Asslownin
Table,stateemployeesreceivealump-sumpaymentas compensation
fortleirunusedvacationleavewlentleyseparatefromstateservice.
Inadditiontovacation,stateemployeestypicallyearneigltloursof
sickleavepermontl.However,tleStatedoesnotgenerallycompensate
employeeswitlalump-sumpaymentforsickleavewlentleyseparate
fromstate service,instead,itconvertstleemployeesunusedsickleaveto
stateservicecreditwlentleyretire.
5
BecausetleStateusesstateservice
creditinitscalculationofpensionpayments,convertingunusedsickleave
tostateservicecreditcanincreaseemployeesmontllypensionpayments.
Inlieuofvacationandsickleave,certainstateemployeesareeligible
toparticipateintleannualleaveprogram.Stateemployeesoptingto
participateinanannualleaveprogramtypicallyearnbetweenand
:o loursofannualleavepermontl.Similartovacation,employees
receivealump-sumpaymentascompensationfortleirunusedannual
leavewlentleyseparatefromstateservice.
5tateaodPersooa/ho//da,s
TeStategenerallycompensatesitsemployeesforstatelolidayswitlpaid
timeoorlolidaycredits.Stateemployeestypicallyreceiveeiglt lours
oflolidaycreditwlenalolidayfallsontleirregularlyscleduleddayo.
6
However,tleamountofcompensationstateemployeesearnforworking
onlolidaysvaries.Forexample,ifanemployeerepresentedbytleService
EmployeesInternationalUnion,Localooo,wasregularlyscleduled
toworkonTanksgivingin:o:andworkedeigltlours,leorsle
wouldreceiveeigltloursofregularpayandanadditional: loursof
compensationinlolidaycredit,compensatorytimeo,orcasl.However,
iftlesamesituationoccurredforanemployeerepresentedbytle
CaliforniaCorrectionalPeaceOcersAssociation,leorslewouldlave
beeneligibleforonlyeiglt loursofregularpayandeigltloursofloliday
pay.Moststateemployeesarealsoentitledtoone personallolidayper
year.
7
Stateemployeesreceivealump-sumpaymentascompensationfor
tleirunusedpersonallolidaysandlolidaycreditswlentleyseparate
fromstate service.
8
5
The California Public Employees Retirement System tracks state employees service credits for the
purpose of calculating their pension payments.
6
State holidays falling on a Sunday are generally observed the following Monday.
7
Some state employees have to complete six months of their initial probationary period in state service
before receiving a personal holiday.
8
For certain CSU employees separating from state service, their unused personal holiday may not
always be included in their nal lump-sum payment.
August 2014
lur/ouqbaodPersooa/leaveProqrams
InFebruary:oo,tleStateimplementedafurlouglprogramtoreduce
tleStatesspendingbyreducingemployeessalariesinexclangefor
timeo.AsdescribedinAppendixAbeginningonpage,,state
employeestypicallyreceivedbetweeneigltand:(furlougllours
eaclmontlinexclangeforanequivalentreductionintleirpay.
Tefurlouglprogramgenerallyrequiredemployeestotaketimeo
everymontl.However,iftleemployeesworkedinlocationssucl
aslospitalsorprisonswleretakingtimeomigltjeopardizetle
publicslealtlorsafetyandtleywereunabletotaketimeo, tle State
creditedtlemwitlfurlouglleaveforuseatafuturedate.Tefurlougl
programwasineectuntil)une :oo,October:oo,orMarcl :o,
dependingonanemployeescollectivebargainingunit.Teemployees
oftwocollectivebargainingunitsparticipatedinanadditionalfurlougl
programduringscalyear :o:.
Similartotlefurlouglprogram,tleStatealsoinstitutedyear-long
personalleaveprogramsin:ooand:o:toloweritssalary
expensesbyreducingemployeespayandcreditingtlemwitl
personalleave.AsslowninAppendixA,undertlesepersonal
leaveprograms,employeesreceivedeigltloursofpersonalleave
eaclmontl.However,tleStateallowedcertainemployeesto
accumulatetleseloursforfutureuseifitwasnotfeasiblefortle
employeetousetlemduringtlemontlinwlicltleywereearned.
leaveforfmp/o,eeswork/oq4/teroateworkweek5cbedu/es
TeStateallowssomeofitsemployeestoworkscledulestlatdier
fromtletraditionalscleduleofveeiglt-lourdays.Foremployees
tlatfollowanalternateworkweekscledule(alternatescledule),
tletotal numberoflourstleyworkinamontlmaydierfromtle
requirednumberofworklours.Terefore,adleringtoanalternate
scledulemayrequiresomestateemployeestousetleiraccruedleave
toensuretlattleyfullyaccountfortlerequirednumberofwork
loursintlemontlasestablisledinstatelawandregulation.For
example,wlentleseemployeestaketimeo,tleymustuseleave
lourstoaccountfortletotalnumberoflourstleywerescleduled
towork.Tus,iftleseemployeesnormallyworkfouro-lourdays
perweekandtleydonotworkonalolidaytlatfallsononeoftleir
regularlyscleduledworkdays,tleymustusetwoloursofleaveto
supplementtleeigltloursoflolidaycredittowlicltleseemployees
areentitled.Furtler,iftleiralternatescledulesresultintlemworking
moretlantlerequirednumberofloursinaparticularmontl,tle
employeesearnexcessloursofleavecredits.Conversely,iftleywork
fewertlantlerequirednumberofloursinamontl,tleseemployees
mustusetleirpreviouslyearnedexcessloursorotleraccumulated
leavelours(excludingsickleave)tomakeuptledierence.
August 2014
10
CalHRlasdierentpoliciesforemployeeswloareexempt
fromtleFairLaborStandardsAct.UnderCalHRpolices,tlese
employeesarenotrequiredtosupplementtleirtotalloursworked
fortlemontlwitlleavelours,noraretleyeligibletoearn
additionalleavecreditsforworkingexcesslours.
Leave Accounting System
Testatecontrollersleaveaccountingsystemallowsparticipating
stateagenciestorecordandtrackstateemployeesleave
accountingtransactions.Wliletlestatecontrollerisresponsible
formaintainingandsupportingtleleaveaccountingsystem,
eaclparticipatingstateagencyretainsownerslipofitsdata
storedwitlintlesystemandisresponsiblefortledatasaccuracy
and completeness.Testatecontrolleralsoprovidestrainingand
supportservicestoagenciesusingtleleaveaccountingsystem.
Altlouglotlersystemsexistfortrackingleave,manystateentities
cloosetotracktleiremployeesleaveusingtlestatecontrollers
leaveaccountingsystem.AsofDecember:o:,(:stateagencies,
includingsixCSUcampuses,participatedintleleaveaccounting
system.Teremaining;CSUcampusestrackedtleirleaveusinga
separatesystem,CSUsOceoftleClancellorisintleprocessof
movingallCSUcampusestotlisotlersystem.Otlerstateentities,
suclastleFrancliseTaxBoard,usealternativesystemstotrack
tleiremployeesleave.AppendixBbeginningonpage,contains
alistingofstateagenciestlatusedtlestatecontrollersleave
accountingsystembetween:oo8and:o:.
Processes for Recording State Employees Time and Attendance
Statelawandpolicyrequireallstateagenciestomaintain
completerecordsoftleiremployeesattendance,absences,and
useofleave.However,tleStatelasnotimplementedstandard
statewideproceduresforlowstateagenciesslouldmaintain
tleserecords.Togainanunderstandingofstateagencies
timekeepingandleaveaccountingprocesses,weinterviewedsta
attleCalifornia Department ofStateHospitals(StateHospitals),
tle CaliforniaDepartmentof VeteransAairs,andtleCalifornia
ScienceCenter.Figureidentiestle(locationsoftlese
tlree stateagenciestlatwevisited.
August 2014
Figure 1
Locations We Visited During This Review
California Department of Veterans Aairs (Veterans Aairs)
Mission: To serve Californias veterans and their families.
Veterans homes located in California8
Veterans homes we visited6
Mission: To stimulate curiosity and inspire science learning
in everyone by creating fun, memorable experiences.
Science Center located in California1
California Department of State Hospitals (State Hospitals)
Mission: Providing evaluation and treatment in a safe and
responsible manner, seeking innovation and excellence in
hospital operations across a continuum of care and settings.
State hospitals located in California8
State hospitals we visisted7
California Science Center (Science Center)
West Los Angeles
State Hospitals
Metropolitan Los Angeles, Norwalk
Atascadero
Barstow
Yountville
Ventura
Chula Vista
Patton
Coalinga
Napa
Sacramento
Vacaville
Veterans Aairs
Headquarters
State Hospital
Headquarters
Los Angeles
Sources: California State Auditors visits to the locations listed above and Web sites for the State Hospitals, Veterans Aairs, and the Science Center.
August 2014
12
Altlouglwenotedsomevariationsbetweentlelocationswe
visited,tleygenerallyfollowedasimilarprocesstoaccountfor
employeetimekeepingandattendancerecords.Teprocessbegins
witleaclemployeecertifyinglisorlermontllyabsenceand
additionaltimeworkedreport(timesleet),tlenforwardingit
tolisorlersupervisortoreviewandapprovetleattendance
recordedontletimesleet.Atsomelocations,atimekeeper
tlencollectstleapprovedtimesleetandcomparesittootler
attendancerecords,suclassign-insleets.Next,tlesupervisoror
timekeeperforwardstletimesleettoapersonnelspecialist,wlo
isresponsibleforreviewingitandenteringeaclemployeesleave
informationintotleleaveaccountingsystem.
Statelawlimitsstateagenciesabilitytocorrecterrorstlat
occurintlisprocess.Specically,ifastateagencyerroneously
creditsanemployeewitltoomuclleave,tlatagencymust
initiatecollection eortswitlintlreeyearsfromtledateoftle
overpayment.Altlouglstatelawdoesnotexpresslydenewlen
anoverpaymentoccurs,CalHRandCSUconsideranoverpayment
asoccurringwlenanemployeeusestleerroneousleavetocover
absencesfromworkorcaslesouttleleave.
Past Reviews and Investigations
Overtlepastseveralyears,somestateagencieslavecalled
attentiontotleStatesaccountingofemployeeleave.In
Marcl :oo6tlestateauditorreleasedaninvestigativereporttlat
foundtlattleSierraConservationCenter(center)oftleCalifornia
DepartmentofCorrectionsandRelabilitation(Corrections)lad
inappropriatelyaccountedforemployeeabsencesandconsequently
underclargedemployeesleavebalances.Teinvestigationrevealed
tlattlecenterallowednineexemptemployeestoworko-lour
days,wlicl,becauseoflanguageintlebargainingunitcontract,
allowedtlemtomissworkwitloutlavingtoclargeatotalofmore
tlan,(6olourstotleirleavebalances,resultinginagiftofpublic
fundstotleemployeestotalingmoretlans(,,ooo.
Furtler,inMarcl:o,tleLAOissuedareportexplainingtleimpact
oftlefurlouglandpersonalleaveprogramsonstateemployeesleave
balances.AccordingtotleLAO,stateemployeesusedfewerlours
ofvacationandannualleavewliletlefurlouglandpersonalleave
programswereineect,causingtlemtoaccruelargerleavebalances.
TereportprovidedoptionstotleLegislaturerecommendingtlat
ittakestepstowardsreducingorcontainingtlefuturegrowtloftle
Statesleavebalances,tlerebyreducingtleStatesunfundedleave
liability.TeCaliforniaDepartmentofFinance(Finance)alsoreleased
areportinMarcl:oaddressingitspreviousrecommendationtlat
StateHospitalsinstitutetimekeepingprocedurestoensuretlatit
August 2014
adequatelyprepares,certies,andretainsattendancerecordsforfuture
audits.Initsreport,Financeconcludedtlatveoftlesevenstate
lospitalsladyettoimplementitsrecommendation.
9
Mostrecently,tlestateauditors)une:oinvestigativereport
identiedweaknessesintleleaveaccountingprocessesof
CorrectionsandCaliforniaCorrectionalHealtlCareServices
(CorrectionalAgencies).Specically,tleCorrectionalAgencies
underclargedleavebalancesfornonmanagerialstawlowere
workingalternatescledules,costingtleStatenearlys(;,ooo.
Furtler,tleCorrectionalAgenciesmadeclericalerrorsin
(; employeesleavebalances,resultinginanetlosstotleState
of moretlans:,ooo.
Scope and Methodology
CaliforniaCovernmentCode,Section8,(6.,,autlorizestle state
auditortoestablislaligl-riskauditprogramtoidentifystate
agenciesandstatewideissuestlateitlerpresentaliglriskfor
potentialwaste,fraud,abuse,andmismanagementortlatpresent
majorclallengesrelatedtotleireconomy,eciency,oreectiveness.
InFebruary:oo,tlestateauditordesignatedtleStatesbudget
conditionanareaofliglrisktotleState.BecausetleLAOfound
tlatemployeeleavebalancesasof)une:o:representedanancial
liabilityofs.,billion,orabout:;percentoftleStatesannualsalary
costs,tlesebalancescouldsignicantlyimpacttleStatesbudget.We
tlereforereviewedtleleaveaccountingsystemtodetermineifstate
agenciesladerroneouslycreditedleavetoemployees.Wefocused
ourreviewontleobjectiveslistedin Table :.
Table 2
Review Objectives and the Methods Used to Address Them
REVIEW OBJECTIVE METHOD
1 Review and evaluate the laws, rules, and
regulations signicant to the review objectives.
We reviewed relevant laws, rules, regulations, policy memoranda, collective bargaining
agreements, and other background materials.
2 Review and evaluate the roles and responsibilities
of the agencies that oversee the tracking of leave
accounting information.
We interviewed key sta at the California Department of Human Resources (CalHR), the
California State Controllers Oce (state controller), and the California State Universitys
Oce of the Chancellor.
3 Review select application controls of the state
controllers California Leave Accounting System
(leave accounting system).
We reviewed system documentation for the leave accounting system.
We interviewed key sta at the state controller to determine whether the leave
accounting system has controls that prevent agencies from entering erroneous
leavetransactions.
9
Stockton State Hospital was opened in July . Thus, it was not included in Finances
Marchreport.
continued on next page . . .
August 2014
14
4 For ve years (2008 through 2012), determine
whether state employees accrued leave within the
maximum allowable limits dened by state law and
collective bargaining unitagreements.
We performed a preliminary statewide electronic analysis of all employees whose
leave is tracked in the leave accounting system (state employees) and identied the
nine leave benet categories for which state employees earned the most leave.
Using state law, collective bargaining agreements, and guidance from CalHR, we
determined the maximum amount of leave that state employees were eligible to
receive each month for eight of the nine leave benets we reviewed. We did not
review the remaining leave benetcompensating time obecause the state
controllers payroll andleave accounting systems do not contain sucient detail to
allow us to conduct statewide electronic analysis of this leave benet.
We analyzed the leave accounting system data to identify all instances in which state
employees earned leave in excess of the maximums allowed each month. We used
the state controllers salary information to calculate the value of these erroneous
leave hours based on state employees salaries when the error occurred and as of
December 2013.
Our statewide electronic analysis could not account for all of the specic circumstances
relating to individual transactions because knowledge of these circumstances would
require a manual review of the employees time sheets. As such, certain transactions
we identied as errors in our analysis may not be errors and, conversely, we may have
identied some transactions as appropriate when they are in error.
The leave accounting system data we received from the state controller did not
contain the number of months employees have worked for the State (months of state
service). Because this information is necessary to calculate the amount of vacation
and annual leave a state employee should earn each month, we assumed that all
employees earned leave at the highest rates set forth by state law and the collective
bargaining agreements.
Because most state employees must complete at least six months of work at the
State before they are eligible to receive certain leave benets, we used payroll data to
identify the employees sixth month of pay.
5 Review and evaluate the policies and
procedures state agencies use for tracking leave
accountinginformation.
Based on our preliminary statewide electronic analysis of state departments, agencies,
California State University campuses, and other entities (state agencies) leave
transactions in the leave accounting system, we selected three state agencies for
manual reviewthe California Department of State Hospitals (State Hospitals), the
California Department of Veterans Aairs (Veterans Aairs), and the California Science
Center (Science Center). We selected these three agencies because they have large,
medium, and small workforces and they appeared to have many employees earning
leave in excess of the allowablemaximums.
We conducted interviews at the three state agencies to determine their policies and
procedures for timekeeping and leave accounting.
6 For a selection of 45 time sheets for state
employees who received erroneous furlough or
personal leave program hours, determine whether
the employees also received pay reductions.
We tested a total of 19 time sheets at the Science Center and Veterans Aairs, which
represented all of their erroneous furlough and personal leave program transactions.
We tested the remaining 26 time sheets at State Hospitals. Specically, we reviewed the
employees time sheets and payroll information to determine whether they received a
reduction in their pay corresponding to the number of erroneous leave hours they received
or if the state agencies gave the employees extra leave without reducing their pay.
7 For a selection of 60 time sheets from 2012,
use source documents to determine whether
agencies accurately calculated the amount of
leaveemployees earned and used.
We randomly selected 20 time sheets at each of the three state agencies we visited and
veried that they correctly entered the time sheet information into the leave accounting
system and that all earned leave was appropriate. Although the State bases certain
types of leave credit, such as vacation and annual leave, on an employees months of
stateservice,we did not conrm the accuracy of the each state employees months
ofstate service information for purposes of our manual review.
8 Determine if state agencies accurately tracked
leave for employees working alternate work
weekschedules (alternate schedules).
For the three state agencies we visited, we haphazardly selected a total of 55time sheetsfor
state employees represented by employee organizations who worked alternate schedules.
For these time sheets, we veried that the state agencies correctly calculated the
number of hours the employees should have used to cover their absences from work and
that the entities correctly entered the employees time sheet information into the leave
accountingsystem.
August 2014
9 Review and assess any other issues that are
signicant to leave accounting.
We reviewed the leave accounting system to identify all transactions where a state
employee earned 250 or more hours of any leave benet in one month and requested that
the state agencies that processed the transactions provide supporting documentation.
These transactions included a total of nearly 7,500 hours of compensatory time o, for
which we found less than 24 hours to be in error. We found no additional errors besides
those we previously identied in our statewide electronic analysis. Further, we removed all
transactions that we determined were appropriate based on supporting documentation
from our statewide electronic analysis.
Sources: California State Auditors planning documents and analysis of information and documentation identied in the column titled Method.
4ssessmeotof0atake//ab///t,
Inperformingtlisreview,weobtainedelectronicdatales
extractedfromtleinformationsystemslistedinTable.Toassess
tlesuciencyandappropriatenessoftliscomputer-processed
information,weconductedtleanalysesdescribedinTable.
Table 3
Methods Used to Assess Data Reliability
INFORMATION SYSTEM PURPOSE METHODS AND RESULTS CONCLUSION
California State
Controllers Oces
(state controller)
California Leave
Accounting
System (leave
accountingsystem)
Data for the period
from January2008
through
December2012
Determine the amount
of leave employees
should have received.
We performed data-set verication procedures and found no issues.
However, when we performed electronic testing of the leave accounting
system, we found errors in more than 14,000 employees records.
Additionally, we tested 60 time sheets by tracing the leave accounting
system information back to supporting documents and found four errors.
Finally, we haphazardly selected 55 time sheets of employees who
worked alternate work week schedules and traced the information back to
supporting documents. We found 11 errors.
Not suciently
reliable for the
purposes of
this review.
State controller
Uniform State
Payroll System
(payroll data)
Data for the
period from
July2007 through
December2012
Review 60 time sheets to
determine whether state
agencies appropriately
accounted for their
employees leave.
We performed data-set verication procedures and electronic testing of key
data elements and found no issues.
We relied on the accuracy testing performed as part of the States annual
nancial audit for payroll transactions between July 2007 and June 2011.*
Because we found the payroll data to be accurate between July 2007 and
June 2011, we have reasonable assurance that the payroll data for the
period of July 2011 through December 2012 are also accurate.
We relied on the completeness testing performed as part of the States
annual nancial audit for payroll transactions between July 2007 and
June2013.
Suciently
reliable for the
purposes of
this review.
continued on next page . . .
August 2014
16
INFORMATION SYSTEM PURPOSE METHODS AND RESULTS CONCLUSION
State controller
Employee History
Database
Data for the period
from January2008
through
December2013
Determine the hourly
salaries of employees
we identied as having
inappropriate leave
transactions in the
leaveaccounting system
in order to calculate
the value of this
erroneousleave.
We performed data-set verication procedures and electronic testing of key
data elements and found no issues.
We did not perform accuracy or completeness testing because the
pertinent supporting documents are located throughout the State, making
such testing cost-prohibitive.
Undetermined
reliability.
Sources: California State Auditors (state auditor) analysis of various documents, interviews, and data obtained from the state controller.
* Beginning in July 2012 the state auditor revised its nancial audit procedures and no longer performs transaction testing of payroll records.
Although we concluded these systems were either not suciently reliable or of undetermined reliability for the purposes of our review, they were
the best available sources for the data.
August 2014
Results of Our Review
State Agencies Erroneously Credited Employees With More Than
SixMillion Dollars Worth of Unearned Leave
From)anuary:oo8tlrouglDecember:o:,statedepartments,
agencies,CaliforniaStateUniversity(CSU)campuses,andotler
entities(stateagencies)tlatparticipatedintleCaliforniaLeave
AccountingSystem(leaveaccountingsystem)inappropriately
creditedtleiremployeeswitlunearnedleave.Specically,
stateagenciescreditednearly,;,oooerroneousleavelours
tomoretlan,percentofemployeesforwlomtleytracked
leaveintleleaveaccountingsystem(stateemployees).
10
Asof
December :o,tlecostoftleseerrorswasnearlys6.(million,
someofwlicltleStatecannotrecoverbecauseofrestrictions
in statelaw.
11
AswedescribedintleIntroduction,statelawallows
state agenciestorecoveroverpaymentstotleiremployeesonlyif
tleagencies initiatecorrectiveactionwitlintlreeyearsoftledate
of tle overpayment.
Furtler,tlecostoftleerrorsweidentiedwillincreaseovertimeas
stateemployeesreceiveraisesandpromotions.AsslowninTable(
ontlefollowingpage,wlentlestateagenciesinitiallyenteredtle
errorsweidentiedintotleleaveaccountingsystem,tleirvaluewas
approximatelys,.8million.However,byDecember:otlatvalue
ladrisennearly,percent,ortleequivalentofmoretlans,oo,ooo.
Tisincreaseistleresultofligleremployeesalariesandwill
continuetoincreaseuntiltleStatecorrectstleerrors.
Tevalueoftleunearnedleaveloursisalsolikelytoincrease
wlenstateemployeesretireorotlerwiseleavestateservice.As
discussedintleIntroduction,wlenemployeesseparatefrom
stateservicewitloutfault,statelawgenerallyrequirestleaected
agencytocalculatetloseemployeeslump-sumcompensationfor
anyaccruedleavebyprojectingtlataccumulatedleaveontleir
workcalendarsasiftleywerestillemployed.Separatingemployees
continuetoearnadditionalleaveuntiltleiraccumulatedleave
balancesaredepleted.Forexample,tleCaliforniaDepartmentof
CorrectionsandRelabilitation(Corrections)erroneouslygranted
anemployee,6loursoflolidaycreditforFebruary:oo8instead
oftle6lourstowlicllewasentitled.Correctionsfailedto
identifyandcorrecttleerrorbeforeleretiredin)anuary:oo,.
10
As discussed in detail in a later section, there may be circumstances relating to specic
transactions that result in those transactions being appropriate or there may be additional errors
that we did not identify. However, to account for all errors would have required a manual review
of all state employees time sheets, which was not feasible.
11
This amount includes the value of all errors we identied through our statewide electronic
analysis. Subsequent to our analysis, some state agencies may have taken corrective action prior
to December .
August 2014
18
Asaresult,wlenCorrectionscalculatedlislump-sumpayment
itcompensatedlimfortle,ooextraloursplusanadditional
66 loursaccruedontleunearnedleave.Tus,asFigure:slows,
Correctionserroneouslypaidlimmoretlans;,ooofortle
unearnedleave.Correctionscannotrecovertlesecostsbecause
moretlantlreeyearslavepassedsinceitmadetleoverpayment.
Table 4
Number and Value of Unearned Leave Hours Identied Through Statewide Electronic Analysis That State Agencies
Credited to Their Employees From January 2008 Through December 2012
LEAVE TYPE
NUMBER OF
AFFECTED STATE
EMPLOYEES
NUMBER OF
UNEARNED
LEAVEHOURS*
VALUE OF UNEARNED LEAVE HOURS
BASED ON THE STATE EMPLOYEES
SALARIES AT THE TIME OF THE ERRORS
VALUE OF UNEARNED LEAVE HOURS

BASED ON THE STATE EMPLOYEES
SALARIES AS OF DECEMBER 2013
Holiday Credit 9,951 127,209 $3,805,987 $4,146,269

Furlough Leave 1,208 26,062 744,232 817,512
Sick Leave 664 15,750 568,495 602,112
Personal Holiday 1,644 15,120 350,147 390,977
Personal Leave Program 2010 1,061 10,434 301,557 323,465
Personal Leave Program 2012 183 1,727 46,592 49,266
Annual Leave 5 388 25,230 25,252
Vacation Leave 6 55 2,315 2,240
Totals 14,302
196,745 $5,844,555 $6,357,093

Sources: California State Auditors analysis of data obtained from the California State Controllers Oces California Leave Accounting System and
Employment History Database.
* There may be circumstances relating to specic transactions that result in these transactions being appropriate or there may be additional errors
that we did not identify. However, to account for all errors would require a review of all state employees time sheets.
These values represent the salary costs for the unearned leave hours when the errors occurred should the state employees take that time o.
These amounts include the value of all errors we identied through our statewide electronic analysis valued as of December 2013. However,
subsequent to our analysis, some state agencies may have taken corrective action prior to December2013.
This number represents all state employees to whom state agencies credited unearned leave. Because some state employees inappropriately
received leave hours for more than one leave type, the total for this column is less than the sum of the number of employees in the column.
Furtler,someinappropriateleaveloursimpacttleStatespension
program.Specically,asdiscussedintleIntroduction,tleState
convertsemployeesunusedsickleavetostateservicecredit
wlentleyretire.BecausetleStateusesstateservicecreditin
itscalculationofpensionpayments,sickleaveerrorsintleleave
accountingsystemmayincreaseitslong-termpensionobligations.
Finally,unclearguidanceinstatelawputstleStateatriskof
additionalcosts.AsdiscussedintleIntroduction,stateagencies
mustinitiatecollectioneortsonoverpaymentswitlintlreeyears
fromtledateofoverpayment.However,statelawdoesnotdene
wlenanoverpaymentoccurs.BotltleCaliforniaDepartment
of HumanResources(CalHR)andCSUconsideroverpaymentsof
leavetooccurwlenemployeesusetleerroneousleavetocover
August 2014
absencesfromworkortocasloutunearnedleave lours.Because
oftleabsenceofclearstatutorylanguage,intleeventoflitigation
acourtmayndtlattleStatewaitedtoolongtorecovertlefunds
tlatrepresentinappropriatelycreditedleavelours.Fortlisreason,
webelievetlattleLegislatureslouldamendstatelawtoclarifytle
statuteoflimitationforrecoveringtleoverpaymentofleavecredits.
Forexample,itcouldrequirestateagenciestoprovidenoticetotle
employeetlatleorslewasinappropriatelycreditedleavelours
witlintlreeyearsfromtledatetleemployeewascreditedtle
loursortlreeyearsfromtledatetleemployeeseparatedfrom
stateserviceandininstancesoffraud,tlreeyearsfromtledate
tle Statediscoveredtlefraud.
Figure 2
Payment of Accrued Leave for a January 2009 Retiree
March 23
Employee depletes earned leave
April 1
Employee depletes additional leave accrued
while using up earned leave, and begins
using erroneous leave
Personal holiday
Csar Chvez Day Memorial Day
June 26
Employee depletes
erroneous leave
July 9
Employee depletes
additional leave
accrued while
using up the
erroneous leave
0 100 200 300 400 500
Leave Hours
600 700 800 900 1,000
JAN. FEBRUARY MARCH APRIL MAY JUNE JULY
January 22, 2009
Employee retires
January 23
Employee begins
using up earned leave
Independence Day
Lincolns birthday
Washingtons birthday
Cost to the State:
$17,660
Cost to the State:
$12,219
Earned leave
Additional leave accrued
on earned leave
Leave due to holidays
Erroneous leave
Additional leave accrued
on erroneous leave
Sources: California State Auditors analysis of California Department of Corrections and Rehabilitations personnel documents and data obtained from
the California State Controllers Oces California Leave Accounting System.
August 2014
20
5tate4qeoc/es0fteo/oappropr/ate/,Cred/ted5tatefmp/o,eesI/me0
forho//da,s
From:oo8tlrougl:o:,;,stateagencieserroneouslycredited
stateemployeesmoretlan(:,oooloursoflolidaycredit
andpersonallolidays,wortlmoretlans(.,millionasof
December :o.Teseerrorsoccurredwlenstateagenciesentered
erroneouscreditsforlolidaystlatfellonSaturdays,wlen tley
misinterpretedcollectivebargainingagreements,andwlen
tley entereddata incorrectly.
Manystateagenciesinappropriatelygrantedstateemployees
twicetleallowableamountoflolidaycreditwlenlolidaysfell
onSaturdays.AsdescribedintleIntroduction,stateemployees
typicallyreceiveeigltloursoflolidaycreditwlenaloliday
fallsontleirregularlyscleduleddayo.Accordingly,wlena
lolidayfallsonaSaturday,tleCaliforniaStateControllersOce
(statecontroller)recordseigltloursoflolidaycreditinitsleave
accountingsystemfortleseemployeesandnotiesstateagencies
tlattleemployeesreceivedtleirlolidaycredit.
12
However,we
foundtlatsomestateagencieserroneouslycreditedtlosesame
employeesanadditionaleigltloursoflolidaycredit,resulting
intleemployeesreceivingdoubletleamountofleavetowlicl
tleywereentitled.Forexample,CorrectionsDeuelVocational
Institutiongavemoretlanooemployeestwicetleamount
oflolidaycredittleywereentitledtoforSaturdaylolidays,
resultinginnearly:,,ooloursoferroneousleave.Altlougl
onlyfour montlsinourve-yearreviewperiodweremontls
witlSaturdaylolidays,tlesemontlsaccountedformoretlan
,,ooo lours,or:8percent,oftleinappropriatelolidaycredit
loursweidentied.
Inaddition,botltleCaliforniaScienceCenter(ScienceCenter)
andtleClulaVistaVeteransHome(ClulaVista)misinterpreted
collectivebargainingagreementsandconsequentlygavetleir
employeestoomucllolidaycredit.Specically,tleScience Center
misinterpretedtleprovisionsoftlecollectivebargaining
agreementsrelatedtololidaycompensationandgaveemployees
anadditionaleigltunearnedloursoflolidaycreditwlentley
workedonlolidaystlatfellontleirregularlyscleduledworkdays.
Similarly,ClulaVistaerroneouslygavesomeofitsemployees
twice tlenumberoflolidaycreditlourstowlicltleywere
entitledbecauseitmisinterpretedtlecollectivebargaining
agreementsas well.
12
As specied in collective bargaining agreements, some state employees earn other types or
amounts of leave when holidays fall on a Saturday.
lromzoo8tbrouqbzo:z,)pstate
aqeoc/eserrooeous/,cred/ted
stateemp/o,eesmoretbao
:|z,oooboursofbo//da,cred/taod
persooa/bo//da,s,wortbmoretbao
s|. m////ooasof0ecemberzo:.
August 2014
Finally,inadditiontoobservedstatelolidays,stateemployees
typicallyreceiveonepersonalloliday,equaltoeigltloursofleave,
eaclyear.However,wefoundtlatstateagenciesgavemoretlan
,6oostateemployeesexcesspersonallolidays,foratotalofmore
tlan,,oooloursofunearnedleave.
5tate4qeoc/es6ave5tatefmp/o,ees0oearoed5/ckleave,
4ooua/ leave,aodvacat/ooleave
Stateagenciesimproperlycreditedstateemployeeswitlmoretlan
6,oooloursofsick,annual,andvacationleavefrom:oo8tlrougl
:o:.Specically,weidentied8stateemployeeswlowere
entitledtoreceiveeitlerannualleaveorvacationandsick leave
loursbutwloinsteadreceivedmoretlan:,;ooloursofleavein
excessoftlelimitssetbylaworcollectivebargainingagreements.
Forexample,in:oo8SanDiegoStateUniversity(university)made
akeyingerrorwlenanemployeetransferredfrompart-timeto
full-timestatus.Asaresult,tleuniversityinappropriatelygranted
ler:o loursofsickleaveeaclmontlfortlefollowingfourmontls
insteadoftleeigltlourstowliclslewasentitled,resultingin
ler receiving(8unearnedsickleavelours.
Furtler,wlilestatelawandcollectivebargainingagreements
allowcertainstateemployeestoearneitlerannualleaveor
vacationandsickleaveeaclmontl,wefoundtlatstateagencies
credited,, stateemployeeswitlbotlannualleaveandsickleave
intlesamemontl.From:oo8tlrougl:o:,tleseemployees
inappropriatelyreceivednearly,8ooloursofsickleaveinaddition
totleannualleavetowlicltleywereentitled.Infact,six oftlese
employeesinappropriatelyreceivedeigltloursofsickleaveevery
montlfortleentireve-yearperiodwereviewed.Altlouglsick
leaveistypicallynotcompensableincasl,stateemployeescan
usetleselourstotakepaidtimeoforpersonalorfamilyillness
insteadof usingotleraccruedleave.Basedontleemployees
salariesas ofDecember:o,tlevalueoftleseerroneoussick
leavelourswasapproximatelys,o,ooo.Alternatively,tlesestate
employeescanconvertsickleavetostateservicecreditwlentley
retire,potentiallyincreasingtleirpensionpayments.
5tate4qeoc/esfrrooeous/,6avelur/ouqbaodPersooa/leaveProqram
hoursto5ome5tatefmp/o,eesaod/oappropr/ate/,keducedtbePa,
of 0tbers
FromFebruary:oo,tlrougl)une:o,tleStateimplemented
severalfurlouglandpersonalleaveprogramstlatreducedtle
numberoflourscertainstateemployeesworkedeaclmontl
inexclangeforanequivalentreductionintleirpay.However,
wefouodtbatstateaqeoc/es
cred/tedpstateemp/o,eesw/tb
botbaooua//eaveaods/ck/eave
/otbesamemootbtbeva/ueof
tbeseerrooeouss/ck/eavebours
wasapprox/mate/,so,ooo.
August 2014
22
from:oo,tlrougl:o:,stateagencieserroneouslycredited
tleiremployeeswitlmoretlan8,ooounearnedfurlougland
personalleaveprogramlours,wortlnearlys.:millionasof
December :o.Forexample,during)uly:oo,amontlwlen
tleStatedidnotfurlouglanyemployees,stateagenciescredited
, stateemployeeswitlmoretlan,,ooofurlougllours.
Todeterminewletlerstateagenciessimplygavetleiremployees
erroneousleaveloursoriftleyalsoinappropriatelyreducedtle
employeespay,wetestedaselectionof(,stateemployeeswlo
receivedunearnedfurlouglorpersonalleaveprogramloursat
tletlreeagencieswevisited:tleCaliforniaDepartmentofState
Hospitals(StateHospitals),tleCaliforniaDepartmentofVeterans
Aairs(VeteransAairs),andtleScienceCenter.Weidentied
tlreetypesoferrors:
Stateagenciesinappropriatelyincludedstateemployeeswlo
werenotsubjecttotlefurlouglorpersonalleaveprograms,tlus
reducingtleseemployeespayinerror.
Stateagenciesgavestateemployeeserroneousfurlouglor
personalleavelourswitloutreducingtleirpay.
Stateagenciescreditedstateemployeestlecorrectnumberof
loursbutfortlewrongprogram.
Inourreviewoftle(,employeestimesleets,wefoundtlat
StateHospitalsandVeteransAairsinappropriatelyincluded
tlree employeesinfurlouglorpersonalleaveprogramswlo
werenotsubjecttotleseprograms.Tesestateagenciesgavetle
aectedemployeesunearnedleavecreditsanderroneouslyreduced
tleirpay.Forexample,inDecember:o,tleVeteransHomeof
Barstowcreditedasupervisoreigltpersonalleaveprogramlours
andreducedlispaybynearly,percent,eventlougllewasnot
subjecttotlepersonalleaveprogram.
Ourreviewalsofoundtlattletlreestateagenciesinappropriately
gave;employeesatotalof,;unearnedfurlouglorpersonal
leaveprogramlours.Intleseinstances,tleagenciesdidnot
imposeacorrespondingreductionintleemployeespay.For
example,ClulaVistacreditedanemployee:loursoffurlouglin
)uly:oo,amontlwlentleStatedidnotfurlouglanyemployees,
witloutreducingtleemployees pay.
Finally,wefoundtlatinveseparateinstances,StateHospitals
andVeteransAairscreditedfourstateemployeeswitltle
correctamountofleavebutfortlewrongfurlouglorpersonal
leaveprogramcategory.Forexample,tleVeteransHomeof
West Los Angelesgaveoneemployeeeigltpersonalleaveprogram
August 2014
loursduringAugust:o:wlenleslouldlaveearnedeigltlours
offurlougl.Becausetleleavecategorieslavedierentusage
rulestlatcouldimpactemployeecompensation,inappropriately
creditinglourstotlewrongleavecategorycouldeventually
increasetleStatesnancialliability.
0ur4oa/,s/sCaooot4ccouotfor4//oftbeI,pesoffrrorsIbat5tate
4qeoc/esHade
Ouranalysissuggeststlat,asofDecember:o,stateagencieslave
creditedstateemployeeswitlnearlys6.(millioninunearnedleave
from:oo8tlrougl:o:.However,assessingtletruemagnitude
oftleproblemwouldrequireamanualreviewoftlemontllytime
sleetsfortlemoretlan:;,,ooostateemployeeswloseleavewas
trackedintleleaveaccountingsystemduringourreviewperiod.
Ourstatewideelectronicanalysiscomparedactualemployee
leaveaccrualstotlemaximumallowableaccrualsspecied
instatelaworcollectivebargainingagreements.Tisanalysis
couldnotaccountforalloftlespeciccircumstancesrelatingto
individualtransactionsbecauseknowledgeoftlesecircumstances
wouldrequireamanualreviewoftimesleets.Assucl,certain
transactionsweidentiedaserrorsinouranalysismaynotbe
errorsand,conversely,wemaylaveidentiedsometransactionsas
appropriatewlentleywereinerror.Forexample,wewereunable
toidentifyinstancesinwliclemployeesreceivedmoreleavetlan
tleywereentitledtobutlesstlantlemaximumallowed,suclas
part-timeemployeeswloreceivedmoreleavetlantleprorated
amountstowlicltleywereentitled.Wealsowerenotableto
identifyinstancesinwliclstateagenciesgaveemployeestoolittle
leaveoroverclargedemployeesleavebalanceswlentleytook
timeofromwork.
Todeterminetleprevalenceofsuclerrorswitlintleleave
accountingsystem,wereviewedaselectionof:otimesleetsat
eacloftletlreestateagencieswevisited.Weconrmedone error
tlatweladpreviouslyidentiedtlrouglourstatewideelectronic
analysis.Additionally,wefoundtlreeerrorstlatweladnot
previouslyidentiedintlatanalysis.Specically,tleVeterans
HomeofYountvilleincorrectlygaveapart-timeemployee6 lours
oflolidaycreditinsteadoftleeigltlourstowliclslewas
entitled.Inaddition,tleScienceCenterfailedtocreditanemployee
eiglt loursofcompensatingtimeotlatleladearned.Finally,
tleAtascaderoStateHospitalinappropriatelygaveanemployee
eiglt excessloursofleave.
13
13
An employee can earn excess hours when working an alternate work week schedule (alternate
schedule) as described in theIntroduction.
0uraoa/,s/ssuqqeststbat,asof
0ecemberzo:,stateaqeoc/es
bavecred/tedstateemp/o,eesw/tb
oear/,s.|m////oo/ouoearoed
/eavefromzoo8tbrouqbzo:z.
August 2014
24
Wealsotestedatotalof,,timesleetsforstateemployeeswlo
workedalternatescledulesattle tlreestateagencieswevisited
andwefoundsimilarerrors. Tetlreestateagenciesdidnotalways
requiretleiremployeestouseleavewlentleiralternatescledules
resultedintlemworkingfewerloursfortlemontltlanrequired.
AsslowninTable,,tletlree stateagenciesfailedtoclargetleir
employeesatotalof(.,loursofleave,atacosttotleStateof
s,o,6.Forexample,inMarcl:o:VeteransAairsfailedtoclarge
oneemployeesevenloursofleavetoaccountfortlefullnumber
ofrequiredworkloursasstatelawandregulationsdene.Furtler,
twooftletlreestateagenciesoverclargedotleremployeeswlo
workedanalternatescleduleatotalof8lours,atacosttotlose
employeesofs(6.Forexample,PattonStateHospitaloverclarged
oneemployeeeiglt loursofleavein )uly:o:.Becausewecould
notidentifytlesetypesoferrorsinourstatewideelectronic
analysis,itislikelytlatsignicantlymoreerrorsoftlisnatureexist
intleleaveaccounting system.
Table 5
Three State Agencies Inappropriate Leave Transactions for Employees on Alternate Work Week Schedules
During2012
STATE AGENCY
NUMBER OF
TIME SHEETS
REVIEWED
NUMBER OF
TIME SHEETS
WITH
ERRORS
NUMBER OF HOURS
THAT THE AGENCY
UNDERCHARGED
EMPLOYEES LEAVE
VALUE OF
UNDERCHARGED
HOURS AS OF
DECEMBER 2013
NUMBER OF HOURS
THAT THE AGENCY
OVERCHARGED
EMPLOYEES LEAVE
VALUE OF
OVERCHARGED
HOURS AS OF
DECEMBER 2013
California Department of State Hospitals
(State Hospitals)
19 3 4.0 $175 12 $272
California Department of Veterans Aairs
(Veterans Aairs)
16 4 11.5 287 0 0
California Science Center (Science Center) 20 4 28.0 594 6 144
Totals 55 11 43.5 $1,056 18 $416
Sources: California State Auditors analysis of data obtained from the California State Controllers Oces California Leave Accounting System and
Employment History Database, and time sheets obtained from State Hospitals, Veterans Aairs, and the Science Center.
State Controller Could Strengthen Its Leave Accounting System
Controls to Assist State Agencies in Detecting and Correcting the
Types of Erroneous Transactions We Identied
AltlougltleStateControllerisresponsibleformaintainingand
supportingtleleaveaccountingsystem,eaclparticipatingstate
agencyisresponsiblefortleaccuracyandcompletenessofitsdata.
Nevertleless,weaknessesintlestatecontrollersleaveaccounting
systemcontributetotleenormityoftleproblemswefound.
Specically,tleleaveaccountingsystemlackssucientcontrols
tlatassiststateagenciesinensuringtlattleirleavetransactionsare
complete,accurate,andvalid.Ideally,tleleaveaccountingsystem
August 2014
wouldleverageacombinationofautomatedandmanualcontrolsto
preventanddetectincorrectleavetransactions.However,wefound
tlatitsexistingautomatedandmanualcontrolsarenotadequateto
preventanddetecttletypesoferrorsweidentiedinourstatewide
electronicanalysis.Inadditiontotlislackofsucientcontrols,
duringourreviewperiodtleleaveaccountingsystemdidnot
generatereportstlatwouldeasilyidentifyunusualtransactionsto
enablestateagenciestodetecterrors.Similarly,itdidnotidentify
inappropriatemanualadjustmentstlatstateagenciesmaketotle
totalnumberofmontlsastateemployeelasworkedfortleState
(stateservicebalance),akeyfactorindeterminingtleamountof
leaveanemployeeearnseaclmontl.
Teautomatedcontrolsintlestatecontrollersleaveaccounting
systemdonotalwayspreventstateagenciesfromcreditingstate
employeeswitlleavetowlicltleyarenotentitled.Wewould
expectasystemfortrackingstateemployeeleavebalancesto
applyaccuratelytleconditionssetfortlinstatelawandcollective
bargainingagreements.Forexample,tleleaveaccountingsystem
slouldlaveautomatedcontrolstopreventstateagenciesfrom
creditingemployeeswitlmoretlantlerespectivemaximum
allowableloursforeacltypeofleaveeaclmontlorwitl
concurrentaccrualsofbotlsickleaveandannualleave.According
totlestatecontroller,tleleaveaccountingsystemlasautomated
controlstoensuretleaccuracyofcertaintypesofmontlly
accruals,suclasvacationandsickleave,butlackscontrolsfor
certainbenetssuclaslolidaycreditandfurlougl.Wlenweasked
tlecliefoftlestatecontrollersPersonnelandPayrollServices
Divisiontledivisiontlatmaintainstleleaveaccountingsystem
wlytlesystemlackscontrolstlatwouldpreventtletypesoferrors
weidentied,slestatedtlatitwasdesignedtobeexibleenougl
toaccommodatetlemultitudeofbenetsforwliclemployees
areeligible,includingtlenuancescreatedbycollectivebargaining
agreements,timebases,andtleuseofalternatescledules.
However,asslownbytleresultsofourstatewideelectronic
analysisinTable(onpage8,weidentiedmanyinstancesin
wliclstateagenciescreditedtleiremployeeswitlinappropriate
amountsofleavedespitetlestatecontrollersautomatedcontrols.
Altlouglwerealizeitwouldnotbecost-eectivetodesign
automatedcontrolscapableofdetectingeverytypeoferror,we
wouldexpecttlestatecontrollertolavedevelopedautomated
controlstodetecttletypesoferrorswepresentinTable(.
Attimes,tleseerrorslaveresultedinsignicantcoststotleState.
Forexample,inMay:oo,tlePortervilleDevelopmentalCenter
(Porterville)oftleCaliforniaDepartmentofDevelopmental
Services(DevelopmentalServices)gaveoneemployee8ooloursof
lolidaycreditinsteadoftleeigltlourstowliclslewasentitled.
Furtler,inMarcl:oo,Portervillerepeatedtlissamekeyingerror
Ibeautomatedcootro/s/otbe
statecootro//ers/eaveaccouot/oq
s,stemdooota/wa,spreveot
stateaqeoc/esfromcred/t/oqstate
emp/o,eesw/tb/eavetowb/cbtbe,
areooteot/t/ed.
August 2014
26
foranotleremployee.Hadwenotdetectedtleseerrors,tleywould
laveresultedinPortervilleawardingtleemployeeswitlunearned
leavecreditswortlnearlys6,ooo.Wlenwebrouglttlese
transactionstotleattentionofDevelopmentalServices,statlere
conrmedtlatbotlweretleresultofdataentryerrors.Porterville
istakingactiontoresolvetleseissues.Similarly,tleCalifornia
DepartmentofEducation(Education)inappropriatelycredited
one employeewitleigltloursofsickleaveeaclmontlinaddition
tolermontllyaccrualofannualleavefortleentireve-year
periodwereviewed.AfterwebrouglttliserrortoEducations
attention,Educationfoundtlatitladerroneouslycreditedlerwitl
sickleaveeaclmontlformoretlanoyears.Asaresult,Education
ladgivenler,68loursofsickleavetowliclslewasnotentitled.
AccordingtoEducation,itultimatelycompletedcorrectionstotlis
employeesleavebalancesin)anuary:o(.
Intleabsenceofadequateautomatedcontrolsoveritsleave
accountingsystem,tlestatecontrollercouldgeneratemontlly
exceptionreportstlatidentifyunusualorunexpectedleave
transactionsforstateagenciestoreviewmanually.Currently,
tlestatecontrollerproducesamontllyreportdetailingeacl
employeesleavebalancesandactivity,wliclrequiresstateagencies
toreviewtlisinformationforeacloftleiremployeestoidentify
errors.Teadditionofexceptionreportswouldallowstateagencies
tomorequicklyandeasilyidentifytransactionstlatareattle
greatestriskofbeinginappropriate,suclasemployeesatanystate
agencywloearnedmoretlaneiglt loursofsickleaveduringa
montl.Tesereportswouldallowstateagenciestoquicklyidentify
tleemployeesreceivingmoretlantlemaximumallowablelours
ofleave.However,duringourreviewperiod,tlestatecontrollerdid
notgeneratesuclamontllyexceptionreport.
Infact,wlenwepreparedanexceptionreportofunusuallyligl
leavetransactions,weidentiedoneinstancewlereCoalingaState
Hospitalerroneouslygaveanemployee,::loursofloliday
creditinDecember:o:,wortlmoretlans,ooo,insteadof
tleeiglt lourstowliclslewasentitled.Wlenwebrouglttlis
transactiontotleattentionofCoalingaStateHospitalinMay:o,
itvoidedtlistransactionandenteredanewtransactiongiving
tleemployeeeigltloursoflolidaycredit.Witlouttlistypeof
exceptionreport,stateagenciesmigltnotdetectsimilarerrors.
Similarly,stateagenciescouldalsouseexceptionreportstomonitor
clangestotleiremployeesmontlsofstateservicebalances.Te
leaveaccountingsystemreliesontlesebalancestocalculatelow
manyloursofannualorvacationleaveemployeesareeligible
toaccrueeaclmontl.Teleaveaccountingsystemallowsstate
we/deot/edooe/ostaocewbere
Coa//oqa5tatehosp/ta/errooeous/,
qaveaoemp/o,ee:,z:zboursof
bo//da,cred/t/o0ecemberzo:z,
wortbmoretbaos,ooo,/ostead
oftbee/qbtbourstowb/cbsbe
was eot/t/ed.
August 2014
agenciestomanuallyupdateanemployeesstateservicebalance.
14
However,duringourreviewperiod,tlerewasnomeclanism
inplacetonotifystateagencieswlenclangesweremade.Tis
makestlesystemvulnerablebotltoerrorswlenmakingsucl
updatesandtodeliberatewrongdoing.Becausetlereisno
statewiderequirementtoaudittlestateservicebalanceintleleave
accountingsystem,agenciesareunlikelytodetecterrorsunlesstley
areabletoreviewanexceptionreport,lowever,attletimeofour
statewideelectronicanalysisnosuclreportwasbeinggeneratedby
tlestatecontroller.Asaresult,stateagenciescouldinappropriately
grantadditionalleavecreditstostateemployeeseaclmontl.
InSeptember:owediscussedtleideaofimplementingexception
reportswitltlecliefoftlestatecontrollersPersonnelandPayroll
ServicesDivisionandsleagreedtlattlereportscouldimprove
tlecontrolsovertleleaveaccountingsystem.Infact,inFebruary
:o(,tlestatecontrollerbeganproducingexceptionreportstlat
identifytransactionscreditingemployeesmoretlanoolourseacl
fortlefollowingleavetypes:compensatingtimeo,lolidaycredit,
andexcesslours.Inaddition,tlestatecontrollerbeganproducing
areportidentifyingcertainstateservicebalancetransactions.
However,additionalexceptionreportscouldbedevelopedtoidentify
transactionstlatcreditemployeeswitlmoretlantlemaximum
allowableleaveforaspecicleavebenet.Tiswouldfurtlerensure
tlatstateagenciesaccuratelytrackemployeesleavelours.
CalHR Needs to Provide Additional Guidance on Leave Accounting
Anotlerfactortlatlascontributedtostateagenciescrediting
unearnedleavetostateemployeesistlefailureofCalHRtodene
statepolicysucientlyforemployeeswloworkalternatescledules,
wliclmaylavecausedonestatelospitalwevisitedtoaccount
inappropriatelyforitsemployeesleave.Furtler,somestateagencies
lavemisinterpretedcollectivebargainingagreements.Specically,
twolocationswevisitedmisinterpretedcollectivebargaining
agreementsandconsequentlygrantedunearnedleave loursto
tleiremployees.WebelievetlatCalHRslouldprovideadditional
guidancetostateagenciestoavoidtlesetypesof misinterpretations.
CalHRdoesnotlavesucientpoliciesinplacerelatedtoemployees
wloworkalternatescledules.Becausecollectivebargaining
agreementsdonotprovideguidanceonlowtotrackleavebenets
foremployeeswloadleretoalternatescledules,weexpected
tlatCalHRwouldlaveprovidedstatewidepolicies.Wlilewe
identiedsomerelevantpolicymemorandatlatCalHRissued,tlese
14
The leave accounting system limits access to an employee record to the most current employing
state agency.
Iwo/ocat/ooswev/s/ted
m/s/oterpretedco//ect/ve
barqa/o/oqaqreemeotsaod
coosequeot/,qraoteduoearoed
/eavebourstotbe/remp/o,ees.
August 2014
28
memorandadidnotaddresslowstateagenciesslouldaccount
forlourlyemployeesworkingalternatescledules.Wlenwe
followedupwitlCalHRaboutitspolicies,itprovideduswitlsome
additionalguidancetlatwaslastupdatedinMarcl,8(.However,
tlisguidanceisnotreadilyavailableforstateagenciestoaccess.
AltlouglCalHRsWeb sitecontainsinternalproceduresforitsown
employeeswloworkalternatescledules,tleseinternalprocedures
arenotstatewidepoliciesanddonotapplytoallstate employees.
IntleabsenceofclearguidancefromCalHRrelatedtoalternate
scledules,stateagenciesmaybeovercompensatingemployees
wloworklesstlantlerequirednumberofmontllyloursor,
alternatively,undercompensatingemployeeswloworkmoretlan
tlerequirednumberofloursinamontl.Forexample,employees
wlodonotworktlerequirednumberofloursinamontlmust
generallyreceiveareductioninpayfortlemontlormustuse
leavelourstobalancetledecitintleloursworked.Tus,itis
criticaltlatstateentitiestracktlenumberoflourstlatemployees
workeaclmontltoensuretlattleseemployeesarecompensated
correctly.However,CalHRdoesnotprovidespecicguidanceto
stateagenciestlatinstructstlemtotracktlenumberoflours
workedand,asaresult,wefoundtlattliswasnotoccurringat
onestatelospital.Specically,NapaStateHospitaldidnottrack
wletleremployeesworkedtlerequirednumberoflourseacl
montlwlenitsemployeesworkedanalternatescledule,tlus,it
wasnotadjustingtleemployeesleavebalancesorpayaccordingly.
Telumanresourcesdirectorindicatedtlatsledidnotbelieve
itwasnecessarytotracktlemontllyloursbecauseanemployee
workinganalternatescleduleslouldworktleappropriatenumber
ofloursovertlecourseofayear.However,wlenwereviewedtle
scleduledloursofoneemployeeworkinganalternatescledule
for:o,wefoundtlatbytleendoftleyeartlatemployeewould
lavebeenovercompensatedfor8lours.Additionally,NapaState
Hospitalcannotguaranteetlatitsemployeeswloareworking
alternatescleduleswillremainontlatscleduleforafullyear.
Ultimately,accordingtotlelumanresourcesdirector,Napa
StateHospitalbegantrackingtleloursofemployeesworkingan
alternatescledulein)anuary:o(.However,additionalguidance
fromCalHRtoallstateagenciesonlowtleyslouldtracktle
loursoftleemployeeswloworkalternatescleduleswouldlelp
ensuretlattleseemployeesareappropriatelycompensated.
Furtler,weidentiedtwostateagenciestlatmisinterpreted
collectivebargainingagreements.Specically,tleScienceCenter
misinterpretedlanguageincollectivebargainingagreements,causing
ittograntemployeesmorelolidaycredittlanitslouldlave.
TecollectivebargainingagreementsfortleServiceEmployees
InternationalUnion,Localooo,allstatetlatwlenafull-time
employeeinWorkWeekCroup:isrequiredtoworkonapremium
Ca/hkdoesootprov/despec/c
qu/daocetostateaqeoc/estbat
/ostructstbemtotracktbeoumber
ofboursworkedaod,asaresu/t,we
fouodtbattb/swasootoccurr/oqat
ooestatebosp/ta/.
August 2014
loliday,tleemployeeslallreceiveeigltloursoflolidaycreditand
oneandone-lalftlelourlyrateforallloursworkedontleobserved
loliday,compensablebylolidaycredit,casl,orcompensatory
timeo.
15
AccordingtoCalHRsmanagerofitsPersonnelServices
Brancl,tlisprovisionidentiestletotalcompensationinregular
payandleavelourstlatemployeesreceiveforworkingona
premiumloliday.Terefore,tlemanagerindicatedtlatifemployees
workeigltloursonapremiumlolidaytlatfallsontleirregularly
scleduledworkday,tleyareentitledtotleirnormaleigltlours
ofpayplusanadditional:loursofcompensationintleformof
lolidaycredit,casl,orcompensatorytimeo.However,tleScience
Centerbelievedtlisprovisionoftlecollectivebargainingagreement
speciedcompensationinadditiontoemployeesregularpayand
tlusroutinelygranteditsemployeeseigltloursofpayaswellas
:o loursoflolidaycreditratlertlantleappropriate:lours.
Similarly,tleScienceCentermisinterpretedtlesectionoftle
collectivebargainingagreementsrelatedtononpremiumlolidays.
Asaresult,wlensomeofitsemployeesworkedeigltloursona
nonpremiumlolidaytlatfellontleirregularlyscleduledworkday,
tleScienceCentergavetlemeigltloursofpayand6loursof
lolidaycredit,insteadoftleeigltloursoflolidaycredittowlicl
tleywereentitled.Intotal,wequestionedmoretlan(,,oolours,
ornearlypercent,oftlelolidaycreditlourstleScienceCenter
gaveitsemployeesfrom)anuary:oo8tlrouglDecember:o:.
Additionally,ClulaVistainappropriatelycalculatedtleamount
oflolidaycredititsstateemployeesslouldlavereceivedfor
aSaturdaylolidaytlatoccurredinMarcl:o:.Specically,
Clula Vistagave8 employeeseigltloursoflolidaycredit,after
tlestatecontrollerladalreadygiventleseemployeeseigltlours,
ortwice tlelourstleywereentitledto,foratotalofmoretlan
,ooloursofunearnedleave.AccordingtoClulaVistassenior
personnelspecialist,sleunderstoodtlattlepertinentcollective
bargainingagreemententitledemployeestoreceiveeigltloursof
lolidaycreditforworkingonalolidayinadditiontotleeigltlours
oflolidaycredittlestatecontrollergavetleemployees.However,
accordingtoCalHR,itisinappropriateforastateagencytoprovide
tlelolidaycredittostateemployeeswlentlestatecontroller
lasalreadydoneso.Terefore,ClulaVistasemployeeswerenot
entitledtoreceivetleadditionaleigltloursoflolidaycredit.
Toavoidtlesetypesofmisinterpretationsofcollectivebargaining
agreements,CalHRslouldprovidestateagencieswitladditional
guidance.Specically,CalHRcouldprovideexamplescenarios
15
Work Week Group employees are hourly employees covered by the federal Fair Labor Standards
Act. Premium holidays include New Years Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving, and Christmas.
Ioavo/dtbeset,pesof
m/s/oterpretat/oosofco//ect/ve
barqa/o/oqaqreemeots,Ca/hk
sbou/dprov/destateaqeoc/esw/tb
add/t/ooa/qu/daoce.
August 2014
30
slowingtleamountofleaveemployeesearnincommonsituations.
Tesescenarioswouldallowstateagenciestoquicklyunderstandlow
toapplycollectivebargainingagreementsandreducetlerisktlatstate
agenciesinappropriatelycreditleavetotleir employees.
Three State Agencies We Visited Did Not Have Processes to Identify
Erroneous Leave Transactions
Altlouglstatelawrequiresallstateagenciestoensuretleaccuracy
oftleirleaveaccountinginformation,tletlreestateagencies
wevisiteddidnotlavesucientprocessesinplacetoverifytlat
tleirleaveaccountingdataarecorrect.Specically,wevisited
( locationsadministeredbyStateHospitals,VeteransAairs,and
tleScienceCenterandfoundtlateaclladproceduresforreviewing
employeestimesleetstoensuretleiraccuracyintermsoftleleave
tleemployeesusedandearnedduringtlemontl.However,only
two locationsimplementedprocedureswliclwerelimitedduring
ourreviewperiodtoconrmtlattleirstaproperlyenteredtlisleave
informationintotleleaveaccountingsystem.
Stateregulationrequireseverystateagencytomaintainaccurateleave
records.Incompliancewitltlisregulation,eacloftle(locations
wevisitedladproceduresinplacetoverifytleiremployeesleave
informationontleirtimesleets.However,eacllocationfolloweda
dierentprocesstovalidatetlisinformation.Forexample,tleHuman
ResourcesdirectoratVacavilleStateHospitalstatedtlatsupervisors
reviewandapprovetleiremployeestimesleetseaclmontl,tlen
forwardtlemtolumanresourcesforentryintotleleaveaccounting
system.Incontrast,tleHumanResourcesdirectoratNapaState
Hospitalstatedtlatsliftsupervisors,unitsupervisors,timekeepers,
andtleprogramdirectoreaclreviewemployeestimesleetsand
otlerattendancerecordsbeforeforwardingtlemtoHumanResources
fornalreviewandentryintotleleaveaccountingsystem.
Altlougltlelocationswevisitedladproceduresinplacetoreview
tleiremployeestimesleets,tleytypicallydidnotlaveprocedures
forensuringtlatstateagenciesproperlyenteredtlisinformationinto
tleleaveaccountingsystem.Infact,duringourreviewperiodfrom
)anuary :oo8tlrouglDecember:o:,onlytwooftlelocationswe
visitedladproceduresinplace,albeitlimited,toidentifykeyingerrors
intleleaveaccountingsystem.Specically,tlepersonnelsupervisor
atPattonStateHospitalassertedtlatitperformedmontllyreviews
ofitsleaveaccountingdataforasampleofemployeesbetween
November :oand)anuary:o:.Likewise,tleScienceCentersHuman
ResourcesdirectorstatedtlatinOctober:o:,itbeganreviewingits
leaveaccountingdataforasampleofemployeeseaclmontl.Finally,
two statelospitalsassertedtlattleybeganconductingmontllyaudits
oftleirleaveinformationinearly:o,afterourreviewperiodended.
0ur/oqourrev/ewper/od
fromIaouar,zoo8tbrouqb
0ecember zo:z,oo/,twoof
tbe/ocat/ooswev/s/tedbad
procedures/op/ace,a/be/t//m/ted,
to/deot/f,ke,/oqerrors/otbe/eave
accouot/oq s,stem.
August 2014
Unlessstateagenciesimplementconsistent,comprelensive
proceduresforreviewingtleinformationenteredintotleleave
accountingsystem,keyingerrorsarelikelytocontinuetooccur.
Teseerrorsmayremainundetectedoronlybedetectedyearslater
iftleagenciesdonotreviewanyorreviewonlyasmallnumber
ofleaveaccountingentries.Forexample,inreviewingtleleave
accountingsystemdataforPattonStateHospital,weidentied
onestateemployeewlowasgranted,:(loursoflolidaycreditin
November:oo,insteadoftle:(lourstowliclslewasentitled.
If,attlattime,PattonStateHospitalladinplaceamontlly
procedureforreviewingleavetransactionsenteredintotleleave
accountingsystem,itwouldlavebeenmorelikelytoidentifyand
correcttliserrorslortlyafteritoccurred.
Recommendations
TeLegislatureslouldamendstatelawtoclarifytlestatuteof
limitationsforrecoveringtleoverpaymentofleavecredits.For
example,itcouldrequirestateagenciestoprovidenoticetotle
employeetlatleorslewasinappropriatelycreditedleavelours
witlintlreeyearsfromtledatetleemployeewascreditedtle
loursortlreeyearsfrom tle datetleemployeeseparatedfrom
stateserviceand,ininstancesoffraud,tlreeyearsfromtledate
tle Statediscoveredtlefraud.
oftleleaveaccountingsystem,CalHRslouldworkwitltlestate
controllerandallstateagenciesunderitsautloritytoreviewand
taketleappropriateactiontocorrecttle errorsby)anuary:o,.
of tleleaveaccountingsystemrelatedtotleCSU,CSUsOceof
tleClancellorslouldworkwitltleCSUcampusestoreviewand
taketleappropriateactiontocorrecttleerrorsby)anuary :o,.
Toimprovetleaccuracyofinformationintleleaveaccounting
systemandtoensuretlatagenciesdonotimproperlycredit
employeeswitlleaveintlefuture,tlestatecontrollersloulddo
tlefollowing:
Implementadditionalcontrolsby)une:o,topreventtleleave
accountingsystemfromprocessingtletypesofinappropriate
transactionsweidentiedinourstatewideelectronicanalysis.
Forexample,itcoulddevelopcost-eectivecontrolsintleleave
accountingsystemtlatwouldpreventemployeesfromreceiving
annualleaveandsickleaveduringtlesamepayperiod.
August 2014
32
WorkwitlCalHRtoestablislproceduresby)anuary:o,for
updatingtlecriteriaitusestoproducetlemontllyexception
reportstoensuretlattlecriteriareectclangesinstatelawand
collectivebargainingagreements.
UsingcriteriaprovidedbyCalHR,developmontllyexception
reportstlatidentifytransactionsintleleaveaccountingsystem
tlatareinconsistentwitltleguidelinesestablisledinstatelaw
andcollectivebargainingagreements,suclasinstancesinwlicl
stateemployeesreceivetoomanypersonallolidaysortoomucl
lolidaycredit.By)une:o,beginprovidingeaclstateagencys
lumanresourcesmanagementwitltletransactionsidentiedin
tleexceptionreportsforreviewandcorrectionas necessary.
Toensuretlatstateagenciesaccuratelyaccountfortleir
employeesleavebenets,CalHRsloulddotlefollowing:
Consolidateguidanceby)anuary:o,regardingtleappropriate
amountofleavetlatemployeesslouldearneaclmontl
andprovidetlesecriteriatotlestatecontrollertousewlen
developingtleleaveaccountingsystemsmontllyexception
reports.Forexample,CalHRslouldidentifytlenumberof
lolidaycreditlourstlatemployeescoveredbyeaclcollective
bargainingagreementslouldreceiveforworkingona loliday.
Workwitltlestatecontrollertoestablislproceduresby
)anuary :o,forupdatingtlesecriteriatoensuretlattleyreect
anyclangestostatelawandcollectivebargaining agreements.
Establislgeneralparametersandissueguidancetostateagencies
by)anuary:o,onlowtoaccountfortleleaveloursfor
employeeswloworkalternateworkweekscledules.
Provideadditionalguidancetostateagenciesby)anuary :o,
oninterpretingtleprovisionsoftlecollectivebargaining
agreementsrelatedtotleamountofleaveemployeesearn.For
example,CalHRcouldprovidescenariostoillustratetlenumber
ofloursemployeesslouldearnundercommoncircumstances.
Developguidelinesandproceduresby)anuary:o,requiringall
stateagenciestoreviewinformationtleirpersonnelspecialists
enterintoanysystemtleyusetotrackstateemployees
leave transactions.
ByFebruary:o,tleScienceCenterslouldprovidetrainingtoall
ofitspersonnelspecialistsontlenumberofleaveloursemployees
earnforworkingonlolidays.
August 2014
ByFebruary:o,ClulaVistaslouldprovidetrainingtoallof
itspersonnelspecialistsregardingtlenumberofleavelours
employeesearnforworkingonlolidaystlatfallon Saturdays.
WepreparedtlisreportundertleautlorityvestedintleCaliforniaStateAuditorbySection 8,(6of
tleCaliforniaCovernmentCode.
Respectfullysubmitted,
ELAINEM.HOWLE,CPA
StateAuditor
Date: August:6,:o(
Sta: DeniseL.Vose,CPA,DeputyStateAuditor
Miclelle).Baur,CISA,AuditPrincipal
BenWard,CISA,ACDA
SaralRaclaelBlack,MBA
RyanP.Coe,MBA,CISA
RiclardW.Fry,MPA,ACDA
AmandaCarvin-Adico
CrantVolk,MA,CFE

LegalCounsel: SteplanieRamirez-Ridgeway,Sr.StaCounsel
AmandaH.Saxton,Sr.StaCounsel
Forquestionsregardingtlecontentsoftlisreport,pleasecontact
MargaritaFernndez,CliefofPublicAairs,at,6.((,.o:,,.
August 2014
34
August 2014
Appendix A
OVERVIEW OF THE FURLOUGH AND PERSONAL
LEAVE PROGRAM FOR STATE EMPLOYEES AND THE
FURLOUGH PROGRAM FOR CALIFORNIA STATE
UNIVERSITY EMPLOYEES
WeworkedwitltleCaliforniaDepartmentofHumanResources
toidentifytletimelineandnumberoffurlouglandpersonalleave
programlourstlatstateemployeesreceivedfromFebruary :oo,
tlrougl)une:o.Furtler,wereviewedtleteclnicalletter
describingtleimplementationoftleCaliforniaStateUniversity
(CSU)furlouglprogramtodeterminetlenumberoffurlougl
loursCSUemployeesreceivedfrom)uly:oo,tlrougl)une :oo.
FigureAontlefollowingpagedetailstletimeframetlat
eaclprogramwasineect,andtletotalreductioninlours
per montlforeacloftleStatesrepresentedemployees,tleStates
non-representedemployees,andtleCSUemployees.TableA
beginningonpage8describeseaclcollectivebargainingunit
and identiestleassociatedunion.
August 2014
36
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August 2014
38
Table A
Collective Bargaining Units Representing State and California State University Employees
State of California Collective Bargaining Units
COLLECTIVE BARGAINING UNIT COLLECTIVE BARGAINING UNION NAME
Unit 1 : Professional, Administrative, Financial, and Sta Services Service Employees International Union (SEIU), Local 1000
Unit 2 : Attorneys and Hearing Ocers California Attorneys, Administrative Law Judges, and Hearing Ocers in
StateEmployment
Unit 3 : Professional Educators and Librarians SEIU, Local 1000
Unit 4 : Oce and Allied SEIU, Local 1000
Unit 5 : Highway Patrol California Association of Highway Patrolmen
Unit 6 : Corrections California Correctional Peace Ocers Association
Unit 7 : Protective Services and Public Safety California Statewide Law Enforcement Association
Unit 8 : Fireghters California Department of Forestry Fireghters
Unit 9 : Professional Engineers Professional Engineers in California Government
Unit 10 : Professional Scientic California Association of Professional Scientists
Unit 11 : Engineering and Scientic Technicians SEIU, Local 1000
Unit 12 : Craft and Maintenance International Union of Operating Engineers (IUOE)
Unit 13 : Stationary Engineers IUOE
Unit 14 : Printing and Allied Trades SEIU, Local 1000
Unit 15 : Allied Services SEIU, Local 1000
Unit 16 : Physicians, Dentists, and Podiatrists Union of American Physicians and Dentists
Unit 17 : Registered Nurses SEIU, Local 1000
Unit 18 : Psychiatric Technicians California Association of Psychiatric Technicians
Unit 19 : Health and Social Services/Professional American Federation of State, County, and Municipal Employees
Unit 20 : Medical and Social Services SEIU, Local 1000
Unit 21 : Educational Consultant and Library SEIU, Local 1000
California State University (CSU) Collective Bargaining Units
COLLECTIVE BARGAINING UNIT COLLECTIVE BARGAINING UNION NAME
Unit 1 : Physicians California Federation of the Union of American Physicians and Dentists
Unit 2 : Health Care Support California State University Employees Union (CSUEU), SEIU, Local 2579
Unit 3 : Faculty California Faculty Association
Unit 4 : Academic Support Academic Professionals of California
Unit 5 : Operations Support Services CSUEU, SEIU, Local 2579
Unit 6 : Skilled Crafts State Employees Trade Council
Unit 7 : Clerical/Administrative Support Services CSUEU, SEIU, Local 2579
Unit 8 : Public Safety Statewide University Police Association
Unit 9 : Technical Support Services CSUEU, SEIU, Local 2579
Unit 10 : Crafts, Maintenance and Sanitary Engineer Employees
atthe California Maritime Academy
International Union of Operating Engineers, Stationary Engineers, Local 39,
AFL-CIO
Unit 11 : Teaching Associates, Graduate Assistants, Instructional
Student Assistants
International Union, United Automobile, Aerospace, and Agricultural
Implement Workers of America, AFL-CIO, Local 4123
Unit 12 : Head Start CSUEU, SEIU, Local 790
Unit 13 : English Language Program Instructors, CSU Los Angeles CSUEU, SEIU, Local 2579
Sources: California Department of Human Resources Web site; California State Universitys Web site, and collective bargaining agreements.
August 2014
Appendix B
STATE ENTITIES THAT USE THE CALIFORNIA LEAVE
ACCOUNTING SYSTEM
Tefollowingstatedepartments,agencies,CaliforniaState
Universitycampuses,andotlerentities(stateagencies)participated
intleCaliforniaStateControllersOcesCaliforniaLeave
AccountingSystemforatleastonemontlbetween)anuary :oo8
andDecember :o::
16
AirResourcesBoard
AlcololicBeverageControlAppealsBoard
BaldwinHillsConservancy
BoardofPilotCommissionersfortleBaysofSanFrancisco,
San PabloandSuisun
BoardofStateandCommunityCorrections
CaliforniaAfricanAmericanMuseum
CaliforniaAlternativeEnergyandAdvancedTransportation
FinancingAutlority
CaliforniaArtsCouncil
CaliforniaCareerResourceNetwork
CaliforniaCitizensRedistrictingCommission
CaliforniaCommissiononAging
CaliforniaCommissiononDisabilityAccess
CaliforniaCommissionontleStatusofWomenandCirls
CaliforniaCommunityCollegesBoardofCovernors
CaliforniaConservationCorps
CaliforniaCourtofAppeal,
st
DistrictCourtofAppeal
CaliforniaCourtofAppeal,:
nd
CaliforniaCourtofAppeal,
rd
CaliforniaCourtofAppeal,(
tl
16
We relied on the state agencies Web sites and the Governors budgets to identify the state
agencies names as of November .
August 2014
40
CaliforniaCourtofAppeal,,
tl
CaliforniaCourtofAppeal,6
tl
CaliforniaDebtandInvestmentAdvisoryCommission
CaliforniaDebtLimitAllocationCommittee
CaliforniaDepartmentofAging
CaliforniaDepartmentofAlcololicBeverageControl
CaliforniaDepartmentofBusinessOversiglt
CaliforniaDepartmentofClildSupportServices
CaliforniaDepartmentofCommunityServicesandDevelopment
CaliforniaDepartmentofConservation
CaliforniaDepartmentofConsumerAairs
CaliforniaDepartmentofCorrectionsandRelabilitation
CaliforniaDepartmentofDevelopmentalServices
CaliforniaDepartmentofEducation
CaliforniaDepartmentofFairEmploymentandHousing
CaliforniaDepartmentofFinance
CaliforniaDepartmentofFislandWildlife
CaliforniaDepartmentofFoodandAgriculture
CaliforniaDepartmentofForestryandFireProtection
CaliforniaDepartmentofCeneralServices
CaliforniaDepartmentofHousingandCommunityDevelopment
CaliforniaDepartmentofHumanResources
CaliforniaDepartmentofIndustrialRelations
CaliforniaDepartmentof)ustice
CaliforniaDepartmentofMotorVelicles
CaliforniaDepartmentofParksandRecreation
CaliforniaDepartmentofPesticideRegulation
CaliforniaDepartmentofResourcesRecyclingandRecovery
CaliforniaDepartmentofStateHospitals
August 2014
CaliforniaDepartmentofTeclnology
CaliforniaDepartmentofToxicSubstancesControl
CaliforniaDepartmentofTransportation
CaliforniaDepartmentofVeteransAairs
CaliforniaEartlquakeAutlority
CaliforniaEducationalFacilitiesAutlority
CaliforniaEmergencyMedicalServicesAutlority
CaliforniaEnvironmentalProtectionAgency
CaliforniaCamblingControlCommission
CaliforniaCovernmentOperationsAgency
CaliforniaHealtlandHumanServicesAgency
CaliforniaHealtlBenetExclange
CaliforniaHealtlFacilitiesFinancingAutlority
CaliforniaHigl-SpeedRailAutlority
CaliforniaHiglwayPatrol
CaliforniaHousingFinanceAgency
CaliforniaIndustrialDevelopmentFinancingAdvisoryCommission
CaliforniaInstituteforRegenerativeMedicine
California)udicialCenterLibrary
CaliforniaLawRevisionCommission
CaliforniaMaritimeAcademy
CaliforniaMilitaryDepartment
CaliforniaNativeAmericanHeritageCommission
CaliforniaNaturalResourcesAgency
CaliforniaOceofEmergencyServices
CaliforniaOceofTracSafety
CaliforniaPollutionControlFinancingAutlority
CaliforniaPublicEmployeesRetirementSystem
CaliforniaScloolFinanceAutlority
August 2014
42
CaliforniaScienceCenter
CaliforniaSeniorLegislature
CaliforniaStateAuditor
CaliforniaStateBoardofEqualization
CaliforniaStateControllersOce
CaliforniaStateIndependentLivingCouncil
CaliforniaStateLandsCommission
CaliforniaStateLibrary
CaliforniaStateLottery
CaliforniaStateParks,DivisionofBoatingandWaterways
CaliforniaStatePolyteclnicUniversity,Pomona
CaliforniaStateSummerScloolfortleArts
CaliforniaStateTeaclersRetirementSystem
CaliforniaStateTransportationAgency
CaliforniaStateUniversityClannelIslands
CaliforniaStateUniversitySanMarcos
CaliforniaStateUniversity,Bakerseld
CaliforniaStateUniversity,BoardofTrustees
CaliforniaStateUniversity,Clico
CaliforniaStateUniversity,DominguezHills
CaliforniaStateUniversity,EastBay
CaliforniaStateUniversity,Fresno
CaliforniaStateUniversity,LosAngeles
CaliforniaStateUniversity,MontereyBay
CaliforniaStateUniversity,Sacramento
CaliforniaStateUniversity,SanBernardino
CaliforniaStateUniversity,Stanislaus
CaliforniaTaloeConservancy
CaliforniaTaxCreditAllocationCommittee
August 2014
CaliforniaTransportationCommission
CaliforniaUrbanWaterfrontAreaRestorationFinancingAutlority
CoaclellaValleyMountainsConservancy
CoastalConservancy
Commissionon)udicialPerformance
CommissiononPeaceOcerStandardsandTraining
CommissiononStateMandates
CommissiononTeaclerCredentialing
DeltaConservancy
DeltaProtectionCommission
DeltaStewardslipCouncil
DepartmentofManagedHealtlCare
DepartmentofRelabilitation
DepartmentofSocialServices
EducationAuditAppealsPanel
ElectricityOversigltBoard
EmploymentDevelopmentDepartment
EnergyResourcesConservationandDevelopmentCommission
FinancialInformationSystemforCalifornia
First,California
CovernorElectandOutgoingCovernor
CovernorsOceofBusinessandEconomicDevelopment
HabeasCorpusResourceCenter
HumboldtStateUniversity
)udicialCouncilofCalifornia
LaborandWorkforceDevelopmentAgency
LittleHooverCommission
ManagedRiskMedicalInsuranceBoard
MentalHealtlServicesOversigltandAccountabilityCommission
August 2014
44
OceofAdministrativeLaw
OceofEnvironmentalHealtlHazardAssessment
OceofLegislativeCounsel
OceofStatewideHealtlPlanningandDevelopment
OceofSystemsIntegration
OceoftleInspectorCeneral
OceoftleStatePublicDefender
OceoftleStateTreasurer
PostsecondaryEducationCommission
PublicEmploymentRelationsBoard
SanDiegoRiverConservancy
SanDiegoStateUniversity
SanCabrielandLowerLosAngelesRiversand
Mountains Conservancy
San)oaquinRiverConservancy
SantaMonicaMountainsConservancy
SclolarslareInvestmentBoard
SeismicSafetyCommission
SonomaStateUniversity
StateCompensationInsuranceFund
StateCouncilonDevelopmentalDisabilities
StatePersonnelBoard
StateWaterResourcesControlBoard
SupremeCourtofCalifornia
VictimCompensationandCovernmentClaimsBoard
WildlifeConservationBoard
August 2014
August 2014
46
August 2014
August 2014
48
August 2014
August 2014
50
August 2014
* California State Auditors comments begin on page 57.

August 2014
52
We received the draft report of your audit of the SCOs California Leave Accounting System
(CLAS). We appreciate the efforts undertaken by the State Auditor and support many of the
recommendations relating to how our office can provide additional tools to assist the 280 state
agencies and entities utilizing CLAS to fulfill their duty to post reliable and complete leave data
into our system. But, with all due respect, we believe the findings in this report fall short in
several critical areas:
ROBUST ROOT CAUSE ANALYSIS OF YOUR FINDINGS IS REQUIRED TO
CONFIRM THAT THE ERRORS FOUND ARE INDEED ERRORS, AND TO
RELIABLY DETERMINE IF THOSE ERRORS WERE THE RESULT OF SYSTEM
SHORTCOMINGS OR FAILURE OF EMPLOYER DEPARTMENTS TO USE THE
SYSTEM CORRECTLY.
Repeatedly, throughout your report, you disclose that your analysis could not account for all the
specific circumstances relating to individual transactions because knowledge of these
circumstances would require manual review of time sheets. As such, certain transactions we
identified as errors in our analysis may not be errors. . . The SCO has offered and continues to
offer our subject matter expertise to forensically analyze each of the found errors to not only
validate whether a leave credit was unearned, but importantly, to determine its root cause.
Without this more in-depth review and root cause analysis, conclusions cannot be drawn as to
whether the errors were attributable to the lack of automated controls in the system or to the
employer agencies entering dirty data into the system. For example:
Employee Jane Smith at the Department of Justice (DOJ) is placed on unpaid absence (i.e., dock)
and does not work the necessary number of days to qualify for the 8 hours of sick leave that she
would normally earn. If DOJ fails to timely input her dock status into the system, CLAS will
automatically credit Jane with 8 hours of unearned sick leave.
As demonstrated by this example, the errant 8 hours of sick leave credited to Jane Smith was
rooted in the failure of her employer to input data timely as required, not due to a system
deficiency.
Again, we continue to offer the resources of our office to complete the important analysis that
you have begun. However, until such time as a more complete and in-depth review is
completed, your audit report lacks sufficient data for us to concur with many of your conclusions
relating to the automated controls in the CLAS system.
WHILE AN EXCEPTION REPORT IS A WORTHWILE NEW TOOL TO MAKE
AVAILABLE TO EMPLOYER AGENCIES, THEY ARE A REDUNDANCY AND
WOULD NOT BE NECESSARY IF ALL STATE AGENCIES TOOK FULL
ADVANTAGE OF CURRENTLY-AVAILABLE REPORTS.
1
2
3
4
2
5
4
1
6
August 2014
In the 1990s, when the leave accounting system was decentralized, individual agencies were
given the responsibility and the risk associated with inputting data into the system. To mitigate
the risks of dirty data corrupting the integrity of the system, the SCO developed both
automated and manual controls to help state agencies discharge their responsibility. This
included thousands of automated edits and audits, as well as the Leave Activity & Balance
(LAB) report.
LAB reports, furnished to all state agencies participating in CLAS since 1998, provide
employers with all the information necessary to identify and correct the errors outlined on Table
4 in your report. The LAB report includes
each employees beginning balance per leave type,
each adjustment for the period, reflecting leave credits used and earned,
each ending balance, and
their number of months of state service.

Lets use the previous example of employee Jane Smith to demonstrate how the LAB report
would easily identify the 8 hours of sick leave that was erroneously credited to her. If her
employer, the Department of Justice, reviews the LAB report furnished to it on a monthly basis
and diligently reconciles it against its own internal records for Jane Smith, it would show that
Jane earned 8 hours during a period in which she was on unpaid absence (dock) and, therefore,
was prohibited from earning any such credits. Once the error was identified, a correction to
CLAS system would be posted by DOJ.
LAB reports are widely-utilized by state agencies to verify the accuracy and completeness of the
data inputted into the CLAS system. To ensure that LAB reports are not unwieldy and are user-
friendly (especially for large departments or those with multiple facilities throughout the State),
employer agencies can either view the electronic report or distribute the hard copy by
organizational unit to meet their specific organizational review needs in a meaningful and
practical manner. Departments are trained on how to use this report.
Regrettably, your audit report devotes only one sentence to it and its material role in helping
state agencies to identify and prevent input errors.
Of course, there are other state agencies which fail to utilize the resource. This is why we
support your recommendation that the SCO add suspenders on top of the belt by also
producing exception reports which separate and highlight select data that can be derived from
the existing LAB report as a convenience for employers who may be less careful in their due
diligence. As matter of fact, in the Recommendations section of this response, we will speak
in detail regarding the fact that we began production of exception reports in February 2014, six
months ago.
7
6
8
6
August 2014
54
AUTOMATED CONTROLS FOR MANY LEAVE TYPES ARE NOT FEASIBLE
CLAS contains records for approximately 193,000 employees, is more than 20 years old, yet it is
sufficiently robust and flexible enough to allow users to track 46 different leave benefits that are
accrued, earned, or used according to applicable rules. It also allows for retroactive adjustments.
Out of the 46 unique leave types, the system calculates the accruals for five types based on
information contained in the system. There are over 200 audits to ensure accurate accruals. The
other leave types cannot be calculated in the system because supporting documentation, such as
work schedules and timesheets, necessary to perform accurate calculations for the majority of
leave benefits, exists only at agencies.
For example, only agencies have the supporting documentation to allow the usage of jury duty,
bereavement and military leave. These leave types cannot be calculated by the system, nor
audits created to ensure accuracy.

THE MAGNITUDE OF THE ERRORS NEEDS TO BE PUT INTO PROPER
PERSPECTIVE
As stipulated by your own report, the errors found by your audit may be over- or understated.
However, accepting at face value the number of errors shown in table 4 of your report, we
calculate an overall error rate of .00086 over the five-year period covered by your analysis. In
other words, your analysis suggests that the leave accounting process and system is operating at
over 99.99% accuracy.
Note that this error rate does not mean that the errors rest squarely with CLAS. Without the type
of in-depth, root-cause analysis discussed earlier in this response, readers of this report cannot
discern whether the errors are rooted in a system deficiency or in state agencies failing to use the
system correctly. Therefore, the error rate is shared for every entity involved in the process.
Leave Type Number of
Unearned Leave
Hours
Total Leave
Hours Credited
*
Error Rate
Holiday Credit 127,209 21,773,359 .0058
Furlough Leave 26,062 67,463,644 .0004
Sick Leave 15,750 65,357,237 .0002
Personal Holiday 15,120 660,750 .0229
Personal Leave Program 2010 10,434 15,453,203 .0007
Personal Leave Program 2012 1,727 7,590,003 .0002
Annual Leave 388 46,812,674 .000008
Vacation Leave 55 93,806,175 .0000006
Total 196,745 228,410,199 .00086
* Earned Leave is based on a 4-year average (2009-2012) projected over 5 years.
9
7
9
9
10
2
August 2014

Regardless of the overall error rate of .00086, we mutually agree that the State can and must do
more to pursue a zero error rate. While we may not see eye-to-eye with your findings or in the
depth and completeness of your audit methodology, we embrace many of the recommendations
contained in your report. The following is our response to them:
RESPONSE TO RECOMMENDATIONS
To correct the erroneous leave hours we identified in our analysis of the leave accounting
system, by January 2015 CalHR should work with the state controller and all state agencies
under its authority to review and take the appropriate action to correct the errors.
SCOs Response
We will assist CalHR and the specified agencies in the effort to correct all identified errors.
However, as this effort requires agency cooperation, we cannot guarantee that we can meet the
January 2015 deadline.
To improve the accuracy of information in the leave accounting system and to ensure that
agencies do not improperly credit employees with leave in the future, the state controller should
do the following:
Implement additional controls by June 2015 to prevent the leave accounting system from
processing the types of inappropriate transactions we identified in our statewide
electronic analysis. For example, it could develop cost-effective controls in the leave
accounting system that would prevent employees from receiving annual leave and sick
leave during the same period.

SCOs Response
We will explore the possibility of cost effective automated solutions to prevent the leave
accounting system from processing inappropriate transactions. In the absence of such
system changes, we have already implemented, and will continue to develop and
implement exception reports to identify inappropriate transactions, enabling agencies to
correct errors promptly.

Work with CalHR to establish procedures by January 2015 for updating the criteria it
uses to produce the monthly exception reports to ensure that the criteria reflect changes in
state law and collective bargaining agreements.

SCOs Response
SCO has already started working with CalHR on this issue and we will continue to do so.

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August 2014
56
Using criteria provided by CalHR, develop monthly exception reports that identify
transactions in the leave accounting system that are inconsistent with the guidelines
established in state law and collective bargaining agreements, such as instances in which
state employees receive too many personal holidays or too much holiday credit. By June
2015 begin providing each state agencys human resources management with the
transactions identified in the exception reports for review and correction as necessary.

SCOs Response
As stated in this audit report, we currently provide monthly reports of excess hours (over
the criteria of 100) keyed for compensating time off, excess hours, and holiday credit.
Since this was implemented, we have worked with agencies to correct the rare exceptions
found. An additional monthly report shows manual adjustments to state service beginning
balances. We will create and provide a report showing instances in which state employees
receive too many personal holidays by June 2015.

CONCLUSION
In conclusion, while the SCO maintains the system, agencies own the data and are responsible
for the completeness and accuracy of that data. And while we strive for a zero error rate, there is
no automated system that prevents ALL errors. The tools the SCO has already provided and
others that we will explore will only function if the employer agencies are well staffed, well
trained, institute proper controls and perform their due diligence by using the tools the SCO
provides. Internal controls, whether automated or manual, will always require a human
component.

August 2014
Comments
CALIFORNIA STATE AUDITORS COMMENTS ON
THE RESPONSE FROM THE CALIFORNIA STATE
CONTROLLERS OFFICE
Toprovideclarityandperspectivewearecommentingontle
CaliforniaStateControllersOce(statecontroller)responsetoour
review.Tenumbersbelowcorrespondtotlenumberswelave
placedintlemarginoftlestatecontrollersresponse.
Westronglydisagreeandstandbyourndingsandconclusions.
Asdiscussedonpage;anddepictedinTable(onpage8,our
statewideelectronicanalysisoftleCaliforniaLeaveAccounting
System(leaveaccountingsystem)foundtlatstateagenciescredited
employeeswitlnearly,;,oooloursofunearnedleavebetween
)anuary:oo8andDecember:o:.Tevalueoftleseerroneous
leaveloursasofDecember:owaswortlnearlys6.(million.
Furtler,asstatedonpage:(,weaknessesintlestatecontrollers
leaveaccountingsystemcontributetotleenormityoftleproblems
wefound.Specically,tleleaveaccountingsystemlackssucient
controlstoassiststateagenciesinensuringtlattleirtransactions
arecomplete,accurate,andvalid.Aswestateonpage:,,we
identiedmanyinstancesinwliclstateagenciescreditedtleir
employeeswitlinappropriateamountsofleaveandtlestate
controllersautomatedcontrolswerenotabletopreventtlose
errors.Weprovidesomeexamplesoferrorstlatlaveresultedin
signicantcoststotleStateontlatsamepage.
Testatecontrollersresponseattemptstominimizetleapproacl
wetooktoensuretleerrorswedetectedtlrouglstatewide
electronicanalysiswereactuallyerrors.Weconrmedwitl
tle stateagenciestlatprocessedtletransactionstlatmanyoftle
errorsidentiedinouranalysiswereinfacterrors.Forinstance,on
pages:,and:6,wedescribefourexampleswlerestateagencies
madekeyingerrorstlattleleaveaccountingsystemsautomated
andmanualcontrolsdidnotprevent,butwewereabletoidentify
wlenweperformedourstatewideelectronicanalysis.Furtler,
becauseofasystemslortcoming,oneerrorrecurredmontllyfor
moretlanoyearsandwentundetecteduntilweperformedour
statewideelectronic analysis.
Testatecontrollerisdisingenuousinitsresponseandlastaken
ourreportlanguageoutofcontextbyfailingtoquotetleentire
sentence.Specically,onpage:,tleentiresentencestates,As
sucl,certaintransactionsweidentiedaserrorsinouranalysis
maynotbeerrorsand,conversely,wemaylaveidentiedsome
transactionsasappropriatewlentleywereinerror.Trouglout
tlisreviewasdiscussedonpage:,weemployedaconservative
1
2
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August 2014
58
approacltoourstatewideelectronicanalysisbycomparingactual
employeeleaveaccrualstotlemaximumallowableaccruals
speciedinstatelaworcollectivebargainingagreements.Tus,
altlouglsomeoftletransactionsweidentiedmaynotbein
errorifwereviewedtleunderlyingsupport,becausewetooka
conservativeapproacltlerelikelyaremanyotlererrorstlatwe
didnotidentifyaspartofourstatewideelectronicanalysis.In
fact,todeterminetlelikeliloodofadditionalerrors,wereviewed
aselectionof,timesleetsattletlreeagencieswevisitedand
found(additionalerrorsnotpreviouslydetected.
Wecommendtlestatecontrollerforitsdesiretodeterminetle
rootcauseoftleseerrorsandcompletetlisimportantanalysis
because,aswerecommendonpage,by)anuary:o,tle
CaliforniaDepartmentofHumanResourcesslouldworkwitl
tle statecontrollerandallstateagenciesunderitsautlorityto
reviewandtaketleappropriateactiontocorrecttle errors.
Testatecontrollerispointingoutanobscureexampletlatwe
wouldnotlaveidentiedinourstatewideelectronicanalysis.
However,asTable(onpage8slows,usingourelectronic
analysis weidentiednearly6,oooloursofunearnedsickleave.
Wedisagreewitltlestatecontrollersassertiontlattleexception
reportwerecommendisredundanttotleLeaveActivityand
Balance(LAB)report.AltlougltleLABreportcontainstle
informationstateagencieswouldneedtocorrectanerror,itdoes
noteectivelypresenttleinformationinamannertlatallowsstate
agenciestoquicklyandeasilyidentifyanerror.Aswedescribeon
page:6,tlestatecontrollersLABreportrequiresstateagencies
torevieweveryemployeesleavebalancesandactivitytoidentify
errors.However,anexceptionreportwouldallowstateagenciesto
morequicklyandeasilyidentifyonlytloseemployeestransactions
tlatareattlegreatestriskofbeinginappropriate.Infact,asnoted
onpage:;,tlecliefoftlestatecontrollersPersonnelandPayroll
ServicesDivisiontledivisiontlatmaintainstleleaveaccounting
systemagreedtlatexceptionreportscouldimprovetlecontrols
oftleleaveaccountingsystem.
Testatecontrollerassertstlatitlasdevelopedtlousands
ofautomatededitsandaudits,nevertleless,aswepresent
in Table(onpage8,tleseeditsandauditswerenoteectivein
detectingalmost,;,oooloursofunearnedleavevaluedatnearly
s6.( millionasofDecember:o.
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5
6
7
August 2014
TestatecontrollerisincorrectwlenitassertstlattleLABreport
canbeusedtopreventinputerrors.BecausetleLABreportis
generatedbytlestatecontrollersubsequenttodataentry,itcan
onlybeusedbystateagenciestoidentifyerrorsaftertleerrorslave
alreadyoccurred.TeLABreportcannotpreventinputerrors.
Aswediscussonpage:,,werealizeitwouldnotbecost-eective
todesignautomatedcontrolscapableofdetectingeverytypeof
errorandagreetlatareviewoftlesupportingdocumentation
atagencieswouldbenecessarytoensuretleaccuracyofsome
leavebenets.However,wewouldexpecttlestatecontrollerto
laveautomatedcontrolstodetecttletypesoferrorswepresent
inTable(onpage8,andtlosetlatfalloutsidetletypicalrange
formanyoftleleavetypes,aswedidinourstatewideelectronic
analysis.Forexample,onpage:6weidentiedanerrortlrougl
ourelectronicanalysiswlereCoalingaStateHospitalerroneously
gaveanemployee,::loursoflolidaycreditinDecember:o:.
Testatecontrollercouldaddacontrolintleleaveaccounting
systemtlatwouldpromptausertoverifyifanentryiscorrect
wlentlenumberoflourscreditedfalloutsidetlerangeoftypical
transactionsassociatedwitltlespecicleavebenetsuclastle
lolidaycredit.
Againtlestatecontrollerisattemptingtominimizetlemagnitude
oftleresultsofourstatewideelectronicanalysis.Altlougl
tleerrorsweidentiedaccountforasmallpercentageofall
transactionsintleleaveaccountingsystem,tleystillrepresent
nearlys6.(millionwortlofunearnedleaveand,aswestatein
commenttlreebeginningonpage,;,usingourconservative
approacl,tlerearelikelymanymoreerrorstlatwedidnotidentify
aspartofourstatewideelectronicanalysis.
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August 2014

High Risk Update: State Agencies Credited Their Employees With Millions of Dollars Worth of Unearned Leave

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High Risk Update: State Agencies Credited Their Employees With Millions of Dollars Worth of Unearned Leave

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High Risk Update

State Agencies Credited Their Employees With

Personal Leave Program

VALUE OF UNEARNED LEAVE HOURS

Holiday Credit 9,951 127,209 $3,805,987 $4,146,269

196,745 $5,844,555 $6,357,093

California State Auditor Report 2012-603

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