Report 2014-108 Recommendations and Responses in 2015-041

Report 2014-108: State Board of Equalization Building: Despite Ongoing Health and Safety Concerns, the State Has Not Thoroughly Analyzed the Costs and Benefits of Relocating Employees

Department Number of Years Reported As Not Fully Implemented Total Recommendations to Department Not Implemented After One Year Not Implemented as of 2014-041 Response Not Implemented as of Most Recent Response
Department of General Services 1 1 1 N/A 1
State Board of Equalization 1 4 4 N/A 4

Recommendation To: General Services, Department of

To ensure that resources are spent wisely, General Services should seek the funding and approval needed to analyze whether keeping or selling the BOE building would be in the State's best financial interest. As part of that analysis, General Services should conduct, or contract for, appraisals to assess the value of the building with and without the repairs to determine whether making the repairs is in the best interest of the State. If continued ownership of the building appears to be prudent, General Services should evaluate potential productive uses for the building should BOE move to a new facility. General Services should report the results of its analysis to the Legislature no later than September 2015.

Response

DGS is actively conducting an analysis to determine whether keeping or selling the BOE building is in the state's best interest. As part of that process, DGS contracted with an architectural and engineering services consulting firm to perform facility condition assessments of its Sacramento region state-owned building portfolio, including the BOE building. In a July 2015 report, BOE's building ranked 16 of 29 buildings based on the need for renovation, repair or replacement. The assessment results are providing critical information in valuing the asset as part of the appraisal discussed below.

In June 2015, as recommended by the State Auditor, DGS contracted with an appraisal firm to assess the value of the BOE building. The appraisal, which is in-progress, is a complex endeavor that includes valuing a high-rise building under various appraisal scenarios. Although not the sole source for a decision, the final appraisal report will contain information and value conclusions that are relevant in analyzing keeping or selling the building.

Currently, DGS estimates that the keep or sell analysis will be completed in February 2016.

  • California State Auditor's Assessment of Status: Pending
  • Estimated Completion Date: February 2016
  • Response Date: September 2015

Recommendation To: Equalization, Board of

To more clearly demonstrate its case for a new facility, BOE should ensure that it has a supportable rationale for the assumptions underlying its analysis of the costs and benefits of moving to a new consolidated facility.

Response

Contracts with HGA Architects and Engineers and Sixth Dimension to conduct an Efficiency and Process Improvement Study (study) were executed on May 15, 2015, and June 18, 2015, respectively. This study will examine the BOE's revenue generating processes to identify process improvements within the current headquarters building, once renovated, and in alternative facilities. With this data, process options will be developed and evaluated according to costs, improved quality and speed of delivery, reduced risks, and increased satisfaction.

With the goal of achieving the most optimal physical design, the consultants will determine whether consolidation and centralization of the BOE's headquarters revenue generating processes is cost effective and evaluate the benefit of a low-rise campus versus a high-rise building. HGA's Architects and Engineers and Sixth Dimension will present their findings and recommendations to the BOE and Department of General Services (DGS) in December 2015. The consultant's findings and recommendations will identify potential business process improvements that will assist in the preparation of a cost-benefit analysis regarding the desired consolidation of the BOE's headquarters operations at 450 N Street.

  • California State Auditor's Assessment of Status: Pending
  • Estimated Completion Date: TBD
  • Response Date: September 2015

Recommendation To: Equalization, Board of

To more clearly demonstrate its case for a new facility, BOE should continue its plans to conduct a study to identify inefficiencies in its current spatial configuration and how its operations could improve with a new consolidated facility.

Response

Contracts with HGA Architects and Engineers and Sixth Dimension to conduct an Efficiency and Process Improvement Study (study) were executed on May 15, 2015, and June 18, 2015, respectively. This study will examine the BOE's revenue generating processes to identify process improvements within the current headquarters building, once renovated, and in alternative facilities. With this data, process options will be developed and evaluated according to costs, improved quality and speed of delivery, reduced risks, and increased satisfaction.

With the goal of achieving the most optimal physical design, the consultants will determine whether consolidation and centralization of the BOE's headquarters revenue generating processes is cost effective and evaluate the benefit of a low-rise campus versus a high-rise building. HGA's Architects and Engineers and Sixth Dimension will present their findings and recommendations to the BOE and Department of General Services (DGS) in December 2015. The consultant's findings and recommendations will identify potential business process improvements that will assist in the preparation of a cost-benefit analysis regarding the desired consolidation of the BOE's headquarters operations at 450 N Street.

  • California State Auditor's Assessment of Status: Pending
  • Estimated Completion Date: TBD
  • Response Date: September 2015

Recommendation To: Equalization, Board of

To more clearly demonstrate its case for a new facility, BOE should incorporate staffing growth into its analysis of costs and benefits, using projections based on long-term historical data.

Response

Staffing Growth:

The BOE continues to project a three-percent annual staffing growth rate over a ten-year average, and will update each fiscal year. As stated in the BOE's six-month response, the BOE must allow for adjustments to this staffing growth rate based on existing mandates, e.g.: Fire Prevention Fee and Pre-Paid Mobile Telephony Service Surcharge, Hazardous Materials Fee (Rail Transportation) and potential new legislative mandates that will likely impact staffing, including administration of a new program to regulate medical cannabis related businesses.

Rental Escalation Factor:

The projections the BOE previously provided to the CSA are consistent and have been verified with DGS rent escalation values, which are realistic for long-term planning. As stated in the BOE's six-month response, the DGS will provide all future rent estimates to the CSA.

  • California State Auditor's Assessment of Status: Pending
  • Estimated Completion Date: TBD
  • Response Date: September 2015

Recommendation To: Equalization, Board of

To ensure that it can accurately estimate any shifts in worker productivity and state revenue, BOE should strengthen its current methodology by analyzing the productivity and revenue collection of its employees and by monitoring those metrics at least semiannually. Additionally, BOE should support its methodology with documentation.

Response

The BOE has strengthened the methodology used to estimate revenue per employee for the Sales and Use Tax Department's Audit and Collection programs. The BOE will be able to accurately estimate shifts in worker productivity and revenue for the entire agency, due to a concentrated effort to report revenue and associated positions by program across the agency. The proposed allocation of revenue and positions has been reviewed and changes have been recommended. These changes are being incorporated into an agency-wide activity based costs analysis that will track revenue per personnel year beginning with the section level and summarized at the department and agency level.

With the activity based costs analysis, the BOE's estimate of revenue per employee will be available to assist in calculating and documenting the anticipated revenue loss associated with an employee being unable to work and the estimated revenue loss related to the Efficiency and Process Improvement Study.

  • California State Auditor's Assessment of Status: Pending
  • Estimated Completion Date: TBD
  • Response Date: September 2015

Current Status of Recommendations

All Recommendations in 2015-041