2006-2007 Santa Clara County Civil Grand Jury Report San Jose 911 Surcharge:

Conclusions 1

• CL1 Page 4
  The Finance Department recognizes that failure to collect accurate telephone line data is a problem, but their efforts to correct the problem have been inadequate. The Finance Department sends letters to all telephone companies as part of its annual ECSS Fee review process that specifically identifies and requests missing information, but these letters are largely ignored. One avenue of investigation authorized by the ordinance is on-site compliance audits of telephone company data, but to date the Finance Department has never conducted such an audit. Even if telephone companies do comply with full reporting requirements, audits of source data are the only way to ensure that reported data are complete and accurate. Those interviewed at the Budget Office and Finance Department believe that accurate subscriber data from the telephone companies would only result in an increase or decrease of 2 or 3 percent in the surcharge rate. That represents a change of as much as $0.05 per telephone line in the monthly surcharge, an additional cost or savings of $0.60 per year for each subscriber line. While this might represent an insignificant financial impact on the average individual telephone subscriber, the aggregate represents a significant impact on the City’s General Fund. The updated projections in the Fiscal Year 2007-2008 City Manager’s Budget Request indicate a $16.2 million General Fund deficit. Accurate data in assessing the ECSS Fee could conservatively alleviate $1 million to $2 million of that shortfall depending on the actual exemptions allowed based on actual telephone company data. 4 The data collection process is compromised by lack of an acceptable nondisclosure agreement with the telephone companies. There has been no attempt to negotiate with telephone companies regarding their concerns about terms of a nondisclosure agreement. After the telephone company in question rejected the nondisclosure agreement proposed by the City Attorney, the Finance Department should have solicited suggestions from telephone companies on nondisclosure agreement language and facilitated a resolution with the City Attorney. In Fiscal Year 2006-2007, the ECSS Fee revenue represents 88 percent of the ECC budget, that is, $20.6 million of a $23.5 million budget; the remaining 12 percent is paid from the General Fund and represents costs associated with subscribers exempt from the fee. The purpose of the ordinance, the amount of money involved, and the lack of full enforcement of the ordinance requires an objective review of the process. The City Auditor has never been asked to audit the assessment and management of the ECSS Fee. The Grand Jury concludes that the City should improve administration of this ordinance by having the Auditor examine the process and suggest improvements to internal controls.

No Responses Found 2

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