Report 2001-110 Summary - March 2002
Departments Have Circumvented the Abolishment of Vacant Positions, and the State Needs to Continue Its Efforts to Control Vacancies
Our review of vacant positions in the State disclosed that:
- Although the Legislature amended state law to shorten the period a position can be vacant before it is to be abolished, the law's effectiveness is hindered by departments' efforts to preserve positions.
- The five departments we visited misused certain personnel transactions to circumvent the abolishment of vacant positions.
- Changes in state law have not completely addressed the reasons departments have lengthy vacancy periods in some positions.
- Finance performed two reviews and plans to continue monitoring vacant positions during the next two years, but has not established an ongoing monitoring program.
- A method to provide the Legislature with an up-to-date yet reliable count of vacancies still does not exist.
RESULTS IN BRIEF
The Legislature and the Department of Finance (Finance) have acted to address concerns about the number of vacant positions in the State and the uses of the associated funding. As a result, some departments have abolished or redirected vacant positions and eliminated or redirected the funding for the positions. However, departments have also misused transactions to circumvent the abolishment of vacant positions. Thus, the State needs to continue its efforts to control the number of vacancies, eliminating positions no longer needed.
Government Code, Section 12439, mandates the State Controller's Office (SCO) to annually abolish positions that have been continuously vacant for a specified period of time. In July 2000 the Legislature amended the statute to shorten the uninterrupted vacancy period from a specific nine months to six consecutive monthly pay periods within a fiscal year. However, because state law confines the vacancy period before abolishment to a particular fiscal year, positions that become vacant after January 1 could stay continuously vacant almost one year.
Although the SCO reported it abolished 536 vacant positions for fiscal year 2000-01, a significant increase over the 94 positions it abolished in the prior fiscal year, the effectiveness of the law is hindered by the efforts departments take to preserve positions. Our review of five departments revealed that these departments misused certain personnel transactions and, thus, circumvented the purpose of the law. Departments used "120" transactions, which are intended to legitimately move existing employees between positions, to preserve vacant positions. Our analysis of 50 large departments showed that they increased their use of such transactions by 53 percent in the year after the Legislature shortened the allowable vacancy period. The departments also shifted the timing of their high-volume periods of transactions to compensate for the shortened period. The increased volume and shifts in timing suggest that, because of the change in state law, the departments increased their efforts to preserve vacant positions.
In fact, our testing at five departments found that during fiscal years 1999-2000 and 2000-01, the departments performed, on average, at least 89 percent of the "120" transactions we reviewed to save vacant positions. However, our findings should not be interpreted to mean that departments throughout the State performed 89 percent of "120" transactions to preserve vacant positions, as we selected some transactions to review because the patterns of use appeared questionable. During that same period, the five departments performed no less than 22 percent, on average, of the transactions we reviewed to change established positions-known as "607" transactions-to preserve vacancies. Staff acknowledged in many instances that the transactions were being used to preserve vacant positions and, in fact, stated that they used significant time and resources to ensure that positions were not abolished. The Employment Development Department reported, for example, that it spent 1,840 hours during fiscal year 2000-01 to monitor and preserve its vacancies.
Changes in state law have not completely addressed the reasons departments have lengthy periods of vacancy in some positions. For example, the departments' ability to reestablish some abolished vacant positions does not resolve the problems caused by lengthy examination and hiring processes. Additionally, departments may maintain some vacant positions to absorb other costs not fully funded. These include the higher costs associated with filled positions, as well as increases in overtime and operating expenses.
Finance performed two reviews to address the Legislature's concerns about the number of vacant positions and recommended that 4,236 positions be eliminated or redirected. We found the methodology used by Finance in its reviews to be reasonable. Although we found some inaccuracies in information submitted by the five departments we reviewed, they had little impact on the overall conclusions reached by Finance. The five departments we visited generally followed Finance's recommendations. Although it plans to continue monitoring the status of vacant positions during the next two years, no ongoing monitoring program has been established. In addition, even though Finance and the SCO worked together to calculate a reliable, up-to-date number of vacancies as of June 30, 2001, their efforts yielded an estimate that proved to be inaccurate. Thus, a method to provide the Legislature with an up-to-date yet reliable count of vacancies statewide still does not exist.
Finance should issue an explicit policy to prohibit the use of "120" and "607" transactions to preserve vacant positions from abolishment. The SCO should issue guidance to departments on processing these transactions consistent with the policy issued by Finance. Further, the SCO should periodically provide to Finance reports of such transactions. Finance should analyze the reports to identify potential misuses of the transactions and follow up with departments as appropriate. Departments should discontinue their practice of using "120" and "607" transactions to circumvent the abolishment of vacant positions.
In conjunction with the SCO, Finance should continue with its current plans to examine the costs associated with modifying the SCO's position control system to track vacancies across fiscal years. If Finance determines that the necessary system changes are feasible, it should seek to amend Government Code, Section 12439, to require that the six consecutive monthly pay periods for which a position is vacant before abolishment be considered without regard to fiscal year.
Finance should continue to work with departments and other oversight agencies to fully identify and address the issues that lead to positions being vacant for lengthy periods. Finance should then consider seeking statutory changes that provide it with the authority to approve the reestablishment of vacant positions in additional circumstances, including when delays in hiring and examination processes extend the time it takes to fill positions. To ensure that the State continues to monitor vacant positions and the associated funding, Finance should direct departments to track and annually report the uses of such funding. Additionally, Finance should continue to analyze the departments' vacant positions and uses of funds, recommend to what extent departments should eliminate vacant positions, and either eliminate or redirect the funding for the positions. Further, it should periodically report its findings to the Legislature to ensure that the information is available for informed decision making.
To ensure that budgets represent a true picture of how departments manage their programs, Finance should continue to assess if common uses of funds resulting from vacant positions represent unfunded costs that should be reevaluated and specifically funded.
To ensure that the State's decision makers have an accurate picture of the number of vacancies during the fiscal year, Finance and the SCO, in consultation with the Legislature, should work together on a method to calculate an up-to-date and reliable number of vacant positions statewide.
Finance, the SCO, and the five departments we visited generally concurred with our findings. However, Finance expressed concern about the consequences of prohibiting personnel transactions to preserve vacant positions in some instances. It also believes that the costs and benefits of monitoring the personnel transactions must be taken into account. In addition, the Department of Mental Health and the Water Resources Control Board expressed concerns about some of the specific information we presented in the report.