Report 2009-608 Summary - October 2009
High Risk Update—State Overtime Costs:
A Variety of Factors Resulted in Significant Overtime Costs at the Departments of Mental Health and Developmental Services
Our review of the State's overtime costs revealed the following:
- Employees at five entities, excluding the Department of Corrections and Rehabilitation, were paid at least $1.3 billion of the more than $2.1 billion in overtime pay during fiscal years 2003-04 through 2007-08.
- Significant amounts of overtime were paid to a relatively small number of individuals in two job classifications at the departments of Mental Health and Developmental Services. For instance, in fiscal year 2007-08, at Mental Health's Napa State Hospital (Napa), 19, or 4 percent, of the 489 nurses in the registered nurse- safety classification averaged $78,000 in regular pay and $99,000 in overtime compensation.
- According to various studies, individuals working excessive amounts of overtime may compromise their own and their patients' or consumers' health and safety.
- One reason for the significant amounts of overtime at Napa and Developmental Services' Sonoma Developmental Center (Sonoma) is fluctuations in staffing ratios caused by the need to provide certain patients or consumers with one-on-one care.
- Pursuant to their respective bargaining unit agreements (agreements), both Mental Health and Developmental Services allowed leave hours to be counted as time worked in calculating overtime. For instance, during our review of overtime at Sonoma, we identified one employee who was paid for 160 hours of overtime in one month, even though that same employee took 167 hours of leave during that same month.
- State law was changed in February 2009 to no longer allow leave to be counted in computing overtime for the two job classifications we tested. However, this same state law indicates that it may be superceded by agreements ratified subsequent to the law's effective date that once again could contain provisions that allow employees' leave time to be counted as time worked in computing overtime.
RESULTS IN BRIEF
Because of the current economic conditions and the State's growing budget deficit, it is critical to examine the State's spending, including its payroll costs, to ensure that limited funds are being used efficiently. One source of significant expense is the amount of overtime being paid to state employees. In fact, a review of the State Controller's Office uniform state payroll system (payroll records) found that the State paid more than $2.1 billion in overtime costs to state employees, excluding overtime paid by the California Department of Corrections and Rehabilitation (Corrections), during the five-year period from fiscal years 2003-04 through 2007-08. We excluded Corrections' payroll information from our universe because in September 2009, the Bureau of State Audits issued a report that included, among other things, an evaluation of Corrections' overtime costs. Our review of the payroll records for all other state entities showed that employees of five entities—the California Highway Patrol, the Department of Forestry and Fire Protection, the Department of Veterans Affairs, the Department of Mental Health (Mental Health), and the Department of Developmental Services (Developmental Services)—were paid at least $1.3 billion of the more than $2.1 billion in overtime pay during the five-year period.
Although all five entities incurred high overtime costs, we noted that significant amounts of overtime were paid to a relatively small number of individuals in two job classifications at Mental Health and Developmental Services. For instance, in fiscal year 2007-08, at Mental Health's Napa State Hospital (Napa), 19, or 4 percent, of the 489 nurses in the registered nurse-safety (nurses) classification averaged $78,000 in regular pay and $99,000 in overtime compensation. Similarly, during fiscal year 2007-08, Developmental Services' Sonoma Developmental Center (Sonoma) paid 27, or 6 percent, of its 430 psychiatric technician assistants an average of $33,000 in regular pay and $41,000 in overtime compensation. Furthermore, 10 individuals each at Napa and Sonoma with significant overtime earnings averaged 36 hours of overtime per week in fiscal year 2007-08, which creates a health and safety issue.
Under the terms of the bargaining unit agreements for nurses and psychiatric technician assistants, Mental Health and Developmental Services must make every effort to schedule staff in a manner that will minimize the need for mandatory overtime. Thus, rather than requiring all nurses and psychiatric technician assistants to work a specified amount of overtime, the facilities allow employees to volunteer for overtime. However, the bargaining unit agreements (agreements) do not impose a cap on the amount of voluntary overtime an employee can work nor do they provide a method for distributing voluntary overtime evenly. This can result in a disproportionate amount of overtime being worked by a relatively small number of employees, a situation we observed at Napa and Sonoma. Generally, these locations do not give preference when scheduling overtime to volunteers with the least accumulated overtime. According to various studies, individuals working excessive amounts of overtime may compromise their own and their patients' or consumers' health and safety.
One reason for the significant amounts of overtime at these facilities is fluctuations in staffing ratios caused by the need to provide certain patients or consumers with one-on-one care.1 Staffing ratios may fluctuate based on assessments of a patient's or a consumer's needs made by physicians and other licensed persons. The departments' number of authorized positions does not take such staffing enhancements into consideration, so these facilities rely on overtime to cover enhanced services. Additionally, the use of overtime at Mental Health and Developmental Services most likely will increase because of recent furloughs imposed by the governor and layoff notices given to staff providing direct patient and consumer care. This will impose additional costs on the State. However, based on the Department of Finance's (Finance) audit of Mental Health's budget estimates performed in 2008, Finance concluded that Mental Health's current staffing model might not adequately reflect the hospitals' workload and noted that some level-of-care staff were performing administrative functions not directly related to patient care that could be performed by lower-paid staff. As a result of this audit, the Legislative Analyst's Office (Legislative Analyst) suggested in its 2009-10 Budget Analysis Series on Health that an independent consultant evaluate Mental Health's workload distribution, all staffing ratios, and overtime.
A factor that affected the number of hours classified and paid as overtime was that before February 2009, pursuant to their respective agreements, both Mental Health and Developmental Services allowed leave hours to be counted as time worked in calculating overtime. For instance, during our review of overtime at Sonoma, we identified one employee who was paid for 160 hours of overtime in one month, even though that same employee took 167 hours of leave during that same month. State law was changed in February 2009 to no longer allow leave to be counted when computing overtime for the two job classifications we tested. However, this same state law indicates that it may be superceded by agreements ratified subsequent to the law's effective date that contain provisions that allow employees' leave time to be counted as time worked when computing overtime.
Despite the large amounts of overtime paid at Napa and Sonoma in fiscal year 2007-08, we found that the cost of hiring a new nurse at Napa and a new psychiatric technician assistant at Sonoma, including base salary and benefits as well as the cost of recruiting and training these new employees, is comparable to paying overtime to the highest-paid nurse and psychiatric technician assistant at the respective facilities.
We also noted that Napa and Sonoma did not always follow their overtime policies and procedures. For example, not all overtime documentation was completed or maintained properly. In addition, 11 of the 20 employees in our sample from Napa and Sonoma were either overpaid or underpaid for overtime during the two months tested. Finance noted similar issues during an internal control review of Napa conducted in 2007. Among its recommendations was that Napa perform random overtime audits to help reduce fraud and abuse. However, Napa has yet to perform any such audits.
To make certain that the patients and consumers are provided with an adequate level of care, and that the health and safety of the employees, patients, and consumers are protected, Mental Health and Developmental Services should encourage the Department of Personnel Administration (Personnel Administration)—which is responsible for negotiating labor agreements with employee bargaining units—to include provisions in future collective agreements to cap the number of voluntary overtime hours an employee can work and/or to require the departments to ensure overtime hours are distributed more evenly among staff. One solution would be to give volunteers who have worked the least amount of overtime preference over volunteers who already have worked significant amounts of overtime.
To ensure that all overtime hours worked are necessary, and to protect the health and safety of its employees and patients, Mental Health should implement the Legislative Analyst's suggestion of hiring an independent consultant to evaluate the current staffing model for Mental Health's hospitals. The staffing levels at Mental Health should then be adjusted, depending on the outcome of the consultant's evaluation.
To ensure that the State is maximizing the use of funds spent on patients and consumers, Mental Health and Developmental Services should encourage Personnel Administration to resist the inclusion of provisions in agreements that permit any type of leave to be counted as time worked for the purpose of computing overtime compensation.
To improve internal controls over payroll processing:
- Napa and Sonoma should research the overtime over- and underpayments we noted and make whatever payments or collections necessary to compensate their employees accurately for overtime earned.
- Napa and Sonoma should review, revise, and follow procedures to ensure that their overtime documentation is completed properly; that timekeeping staff are aware of the overtime provisions of the various laws, regulations, and bargaining unit agreements; and that staff who work overtime are paid the correct amount.
- Mental Health should fully implement Finance's recommendations cited in its report on Mental Health's internal controls dated December 2007.
Mental Health and Developmental Services generally agreed with our findings and recommendations. However, although the departments indicated they will implement some of the recommendations included in our report, they were silent on what, if any, action would be taken to address others.
1 Developmental Services refers to the individuals it cares for as consumers.