Subject of Investigation
The Hazardous Materials Division of the Environmental Management Department (EMD) is responsible for protecting the citizens of Sacramento County from the effects of accidents involving toxic and otherwise dangerous materials. Under Federal and State laws, businesses in the community which have more than a threshold amount of specified toxic and dangerous materials must submit a plan for the management of an accidental spill or release of such materials. Such a plan is referred to as a Risk Management Plan (RMP). EMD reviews these plans and charges a fee for this service.
Reason for Investigation
The Grand Jury received a complaint regarding refunds and credits given by EMD of fees it collected for its mandated reviews of RMPs submitted by regulated businesses in the community. The refunds and credits amounted to more than $270,000 in fees paid or owed by those businesses.
The Grand Jury relied heavily on interviews of EMD and County staff, interviews of other persons, and numerous records provided in response to a request from the Grand Jury (including letters, notes, e-mail records, billing records, and other written materials that pertain to the RMP program and to the circumstances surrounding the refunds and credits). The Department's budget was reviewed for background and other information.
For about ten years the County has been responsible for the implementation of state and federal legislation related to development of management and mitigation programs for containment of hazardous materials and spills. EMD has the obligation, on behalf of the County in administering these laws, to review RMPs to determine their technical and administrative adequacy. Regulated businesses pay the County for its review of RMPs. Since 1997, the County has been using its own employees to conduct the program, both to supervise reviews and to determine the technical accuracy and adequacy of the plans.
During this time, each business had been charged between $8000 and $12,000 to compensate the County for its reviews. The charge was based on a reasonably detailed estimate provided by EMD staff performing the review. The charge was calculated by using an hourly billing rate approved by the Board of Supervisors. (As of March 2000, EMD staff has proposed a different approach, discussed later in this report, to the review of and billing for RMPs.) Upon completion of the review in the past, any deficiencies were reported back to the business for correction, or the plan was determined to be adequate and complete. Presumably, additional steps as required by the law would also be followed.
By July 1999, the County had required approximately 46 businesses to submit RMPs. EMD management believed that approximately 30 RMPs were nearing completion of their review. There was one technical staff person assigned the primary responsibility for conducting the RMP reviews.
EMD billed the businesses on a quarterly basis for staff time and for departmental overhead, as reported on time sheets. However, for three quarters in 1998-1999, no bills were sent due to a conversion of the Department's computer system and the extended absence of the person responsible for preparing the billings.
Over the last 2 to 3 years, there were some key management, supervisory, and staff changes in EMD. A long-time senior manager of the program retired from the Department, and the key Hazardous Materials Division technical staff person who reviewed the RMPs resigned. These changes resulted in a decision to review and perhaps overhaul the County's approach to handling of the reviews of RMPs. These changes also resulted in there being no experienced staff available for the technical reviews of the RMPs. Finally, these changes contributed to the decision to refund approximately $130,000 of fees that had already been paid, and to issue credits for another approximately $140,000 of fees that had been billed but not yet paid. Budget reserves were used to cover the revenue deficiency, resulting in the public paying twice for the reviews in progress but not completed.
The Grand Jury found that there are a number of other issues related to the decision to grant refunds and credits that warrant comment:
· Currently there is not sufficient understanding, among the technical, management, or supervisory staff, of the level of technical expertise and the amount of time required to administer the RMP program.
· Since March 1999, when the Program Manager retired, only one employee in the Department was considered properly qualified to conduct the required reviews. In July 1999, he resigned, and a consultant was hired to help EMD staff understand the essential elements of the RMP review task, and to identify program weaknesses, but not to assess the technical detail such a review should include.
· Although EMD hired a consultant to help them revamp the program, the consultant was not asked to complete the reviews in progress, nor to help identify options that would have allowed completion of the RMP reviews without refunding all of the fees previously collected and billed.
There are and were a number of options available to the management of EMD to handle the situation in which they found themselves in July 1999.
· Contract for completion of RMP reviews with the EMD staff person who was doing the reviews prior to resigning from the County.
· Contract for completion of RMP reviews with the recently retired Program Manager.
· Contract with other experts to determine what was necessary to complete the incomplete RMP reviews, and possibly to complete them.
· Explore billing adjustments, partial refunds, or extended payment periods.
Most of these options would have resulted in the County keeping some or most of the fees it had charged for the RMP reviews and in completing the unfinished reviews. It seems such options should have been, but were not, considered prior to refunding all payments and crediting all other charges, given the status of the RMP program and the status of the reviews in progress at the time.
As previously mentioned, in July 1999 EMD hired a consultant to review EMD's administration of the RMP program, to identify program weaknesses, and to provide some input to help EMD reconstruct the program to be more responsive to the community of businesses it oversees. The consultant commented on a particular program weakness, stating
"Only one staff member has the detailed knowledge of the CalARP [California Accidental Release Program] regulations. There was little or no understanding of the program by managers or supervisors; thus, there was no input for identifying or strengthening weak spots in the program."
That one technical staff person the consultant referred to left County employment in July, 1999.
The first draft of a new program presented to the business community in March 2000 has been prepared by the remaining EMD staff, managers, and supervisors with no technical assistance from outside the Department. Moreover, EMD's proposal for administering the RMP program from this date forward is to reduce the amount of time spent on the reviews by approximately 75%. There is no apparent basis for determining that the reviews, which were originally believed to require 80 to 100 hours each, can be satisfactorily completed in as little as 24 hours. Costs to the businesses will also be reduced by approximately 75%. In addition, EMD plans to involve those who are regulated in the overhaul of the RMP review process.
The Grand Jury has not found evidence of what it considers to be wrong-doing. However, it has serious concerns regarding the judgment management used, both in deciding to refund or credit fees, and in restructuring the review program. EMD management authorized and carried out the refunds without the knowledge or approval of the responsible agency chief, the County Executive, or the Board of Supervisors.
EMD management did contact County Counsel, and while County Counsel states that County Ordinances authorize such refunds, the Ordinance cited (County Code section 6.99.180) does not appear to cover refunds of this type. That section provides that:
"The County Director shall be authorized to order refunds and the county Auditor-Controller shall draw warrants for such refunds in such amounts as the county director prescribes in connection with any fees collected at the time of application for a Permit or License which were overestimated." (Emphasis added.)
The section does not appear to be applicable to EMD's refunds for two reasons. First, a payment by a regulated business was not made for a permit or license. A payment was made to pay the county's expense in reviewing a plan to control toxic spills. Second, and even more compelling, refunds were not made because EMD had overestimated the amount due. They were made because EMD had not maintained any records of the expert's time expended on the reviews and had no idea whether the amounts were overestimated or underestimated.
Although EMD hired a consultant to help them revamp the program, the consultant was not asked to complete the reviews in progress, nor to help identify options that would have allowed completion of the RMP reviews without refunding all of the fees previously collected and billed. Apparently, options short of full refunds to all parties were not considered prior to the decision in November 1999 to refund the fees already collected, and to credit those that were billed but unpaid.
1. EMD should immediately complete reviews of the RMPs currently pending, to protect the citizens of Sacramento County. The most efficient and expedient approach to completing or performing the necessary reviews to provide this protection should be done. The basis for determining the level of administrative and technical detail required in the RMP review for the approach chosen should be clearly stated.
2. Before adopting any revisions to the RMP review process for the future, EMD management must acquire the necessary technical expertise to assure that the technical content of its RMP review process is adequate to protect fully the citizens of Sacramento County.
3. Any RMP review process adopted by EMD must include step-by-step documentation of the reviews, and a method to track the progress of each review.
4. The County Executive should propose an ordinance to the Board of Supervisors regarding the authority of departments to refund and credit fees charged. The ordinance should put in place clearly defined and understandable policies and procedures regarding the authority of departments to refund and credit fees charged to the regulated community. A thorough description of the circumstances calling for such refunds/credits, detail of their proper authorization, and proper tracking, reporting and accounting procedures must be included.
5. The procedure should result in accurate and timely reporting of such refunds in budget documents and other public materials, including identifying when budget shortfalls or transfers from reserves are required to cover such refunds.
The Penal Code requires that responses to all of the recommendations contained in this Report be submitted to the Presiding Judge of the Sacramento Superior Court by September 30, 2000, from:
· Sacramento County Executive