Management Failures at Planning and Building Department Cost Oakland Millions

Recommendations 16

• R1

  Page 149
  Overtime authorizations are routed to payroll without supervisor approval.
• R2

  Page 149
  Overtime authorizations are not kept in a retrievable format and cannot be checked against timecards.
• R3

  Page 149
  There is no process for comparing overtime hours authorized to overtime hours reported.
• R4

  Page 149
  There is no systemic reconciliation of hours reported for expedited service billing and hours reported for expedited service overtime compensation.
• R5

  Page 149
  There is no limit to the amount of overtime an individual can work by day, week, or year. Investigation of an Irregularity In 2019, a plan check manager within the Building Bureau noticed a material discrepancy between the overtime hours reported by an engineer to payroll and that same engineer’s report of hours worked on expedited services that were billed to applicants. The net impact of this discrepancy was that many fewer hours were billed to applicants than were paid to the engineer in their overtime compensation. The Grand Jury learned the manager failed to take immediate steps to investigate, waiting at least several months before asking the engineer for an explanation and nearly a year before escalating to their supervisor. 156 2021-2022 Alameda County Civil Grand Jury Final Report _______________________________________________________________________________________ As of April 2022, the internal investigation into this discrepancy has been underway for over two years and the Grand Jury understands that the investigation remains open. Despite a written acknowledgement by the engineer of intentionally misreporting hours worked for an extended period, the Grand Jury was unable to find any evidence that disciplinary actions were taken or that efforts were made to recover funds that might have been owed to the city from applicants for work performed that went unbilled or for overtime compensation that might have been paid but not earned. Through its investigation, It is the Grand Jury’s understanding that despite this recent example the Grand of a control gap which could result in applicants receiving expedited Jury learned there was an service without paying the mandated fees and/or engineers receiving absence of a overtime compensation for hours not actually worked, PBD has not yet common implemented a control to ensure matching entries in the compensation understanding and applicant billing systems. among PBD staff of the policies and Management and Senior Leadership Engagement procedures for providing the Through its investigation, the Grand Jury learned there was an absence expedited of a common understanding among PBD staff of the policies and service for procedures for providing the expedited service for plan checks. The plan checks. Grand Jury further learned that there was limited visibility of the economics and operational dynamics of this service outside of the Building Bureau. The Grand Jury observed that management expressed little concern about the extended time frame required to complete plan checks as well as a lack of engagement on the underlying dynamics that were leading to a plan check engineer being frequently one of the city’s highest paid employees. The Grand Jury noted a lack of urgency and accountability in PBD management’s investigation into the discrepancy between overtime hours paid and the hours billed to applicants for expedited service that was described earlier in this report. The Grand Jury learned that several management positions within PBD have been vacant or filled on an acting basis for extended periods, and acting managers are often tasked with performing multiple jobs during their acting role period, which may limit their ability to be effective at either job. In particular, the Grand Jury is concerned that the role of chief building official, who serves as the primary interface between PBD senior leadership and the Building Bureau, has remained vacant since the end of 2020. The Grand Jury believes that the combination of inadequate process controls and insufficient management engagement have contributed to creating an environment around plan checks where poor service levels are accepted as the norm and identified financial risks go unaddressed. 157 2021-2022 Alameda County Civil Grand Jury Final Report _______________________________________________________________________________________ The Grand Jury views stronger leadership around these issues by senior executives within the Building Bureau and PBD as essential for improving the current situation. Reasonableness of Fees Local governments in California are empowered to establish and collect fees for certain services subject to the requirements of California Proposition 26 which states: the local government bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is not more than necessary to cover the reasonable costs of governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or benefits received from the governmental activity. A common method for meeting this burden is through the commission of an independent analysis to estimate the government’s cost to provide services. The study used in setting Oakland’s current fee for expedited service processing was completed in 2015. This study’s recommendations were documented in a 69-page report that addressed a broad range of services provided by PBD. The city council adopted the study’s proposed recommendations for fee levels and incorporated them into the city’s Master Fee Schedule. Applicants requesting expedited plan checks at the time of this report are charged a fee of $465 per hour of plan checker time engaged on their project. This hourly cost represents the fee of $375 per hour recommended in the 2015 Cost Study with periodic increases for inflation and 14.75% in additional charges to support records management and technology enhancements. The Grand Jury’s analysis of the study used to set the fee for expedited service on plan checks identified several areas of analytical concern that when considered together represent strong evidence, in the Grand Jury’s opinion, that the fee is likely not fully compliant with the requirements of Proposition 26. Specifically, the Grand Jury notes:
• R79

  Page 160
  Oakland’s Planning and Building Department shall integrate a comprehensive set of process controls to protect against the risk of fraud in the reporting of overtime.
• R80

  Page 160
  Oakland’s Planning and Building Department shall establish and enforce a limit on the maximum annual number of hours of overtime for that can be worked by each plan checker.
• R81

  Page 160
  Oakland’s Planning and Building Department shall establish a process for regularly reconciling Authorized Overtime, Paid Overtime, and Expediting Fees charged to applicants.
• R82

  Page 160
  Oakland’s Planning and Building Department shall fill the currently vacant post of Deputy Director/Chief Building Official.
• R83

  Page 160
  Once the chief building official is hired, the director of Oakland’s Planning and Building Department shall direct the chief building official to provide updates to Planning and Building Department senior leadership on the state of the plan check function and progress on implementing these recommendations on a quarterly basis during their first year in the role. 160 2021-2022 Alameda County Civil Grand Jury Final Report _______________________________________________________________________________________
• R84

  Page 161
  In the next update to the Planning and Building Department cost study, Oakland’s Planning and Building Department shall direct the independent consultants to address or respond to the cost estimate methodological issues identified in this report.
• R85

  Page 161
  With the next amendment to Oakland’s Master Fee Schedule, the city council shall ensure the cost estimate methodological issues and the Proposition 26 compliance issues identified in this report have been addressed in fees set for expedited plan checks.
• R86

  Page 161
  Oakland’s Planning and Building Department shall extend the practice of tracking plan checker activity to all projects not just those for which expedited Service has been requested.
• R87

  Page 161
  Oakland’s Planning and Building Department shall establish and maintain forecasting models for plan checker supply and demand.
• R88

  Page 161
  Oakland’s Planning and Building Department shall make use of forecast models of plan checker supply and demand in resource planning.
• R89

  Page 161
  Oakland’s Planning and Building Department shall establish contracts with on-demand resources, such as third-party plan checkers, that can be utilized during periods in which internal resources are inadequate to meet applicant demand. 161 2021-2022 Alameda County Civil Grand Jury Final Report _______________________________________________________________________________________