Although Section 19851 of the California Government Code allows state agencies to use overtime to extend regular work schedules to properly carry on state business during staffing shortages, this section also states, "It is the policy of the State to avoid the necessity for overtime work whenever possible." Nevertheless, with about 15 percent of the State's nearly 188,000 available positions vacant as of December 31, 1998, it is more likely that state employees will work overtime.
Excessive amounts of overtime can be detrimental to the State as well as to its employees. Excessive overtime can be more costly to the State than hiring additional employees because overtime pay rates are typically one and one-half times normal pay rates (time and a half). Overtime can also lead to increased use of employee sick leave, greater employee turnover, more workplace injuries, added disability claims, and loss of productivity.
To assess overtime paid to state employees from July 1997 through March 1999, we examined several departments that had high amounts of overtime, had paid high percentages of their payroll for overtime, or had paid overtime to ineligible employees during this 21-month period.
Although our review disclosed no widespread pattern of excessive use of overtime, we did find isolated problems indicating that some departments should take steps to improve their management of overtime. In these instances, we notified the six entities of the problems. We have included specific findings by department as part of this report.
Our concerns about overtime varied from department to department. In one example, the Department of Forestry and Fire Protection (Forestry) relied heavily on overtime to cover staffing shortages during nonemergency situations. Rather than using other less costly alternatives, it regularly schedules overtime to cover employee vacations, training, and other absences. Due in part to this practice, Forestry has the highest proportion of overtime payments among major state departments; its overtime payments were 11 percent of its total payroll while the average for major state departments was less than 3 percent.
In other cases, the departments of Mental Health and Corrections incurred additional salary costs because they violated the State's policy prohibiting the payment of overtime to certain classifications of employees. Specifically, they inappropriately paid overtime totaling nearly $74,000 to 4C employees-administrative, executive, professional, managerial, and supervisory staff-who are not eligible to earn overtime under state policy.
We also found that while most departments have generally established sufficient internal controls for overtime, they do not always enforce these controls. For example, Forestry and the Department of Corrections could not always provide documentation showing that their management had properly authorized the overtime worked by their employees. Finally, California State Polytechnic University, Pomona, made simple keypunch errors that resulted in $5,700 in overpayments to two employees when these employees received time and a half instead of a small hourly pay differential for working evening and night shifts.
BACKGROUND, SCOPE, AND METHODOLOGY
As part of our annual financial and compliance audit of the State of California for the fiscal year ended June 30, 1999, the Bureau of State Audits performed a limited review of the State's payment of overtime to its employees from July 1997 through March 1999. Generally, we focused our efforts on those departments that made large overtime payments or who spent large percentages of their payrolls on overtime. Data from the State Controller's Office (controller) showed that during our 21-month review period, the 27 departments with payrolls greater than $100 million paid overtime totaling more than $650 million, an average of more than $1 million per month per department. The overtime each of these 27 departments paid ranged from none to $255 million. These data also showed that overtime comprised, on average, 2.8 percent of each department's total payroll, with the percentage for individual departments ranging from 0 percent to 11 percent. We further narrowed our focus to two of the top four departments paying overtime.
We also targeted those 4C employees who had received overtime payments. Payroll data from the controller showed that, during our 21-month period, 188 4C employees received $1.2 million in overtime payments.
We reviewed the administration and payment of overtime for Forestry because overtime payments during the 21-month period of our review comprised 11 percent of its payroll-the largest percentage among major departments in the State. We also reviewed the Department of Corrections because it incurred nearly $255 million in overtime payments during the 21-month period of our review-the largest amount in the State. Additionally, we reviewed the departments of Transportation, Corrections, and Mental Health to determine whether their 4C employees inappropriately received overtime.
For Forestry and the Department of Corrections, we identified and tested internal controls, such as policies to ensure that employees received advance authorization to work the overtime. We also reviewed evidence, such as signatures on time sheets, to ensure that the employees' supervisors approved the number of overtime hours claimed, and we reviewed evidence, such as payroll documents, time sheets, and other records, showing that employees actually worked the overtime hours.
To determine whether it properly made certain payments for overtime, we also asked California State Polytechnic University, Pomona, to review overtime payments to two employees earning large amounts of overtime.