Introduction
Background
With an annual budget of about $1.7 billion and a staggering employee totaling approximately 14,000, the Los Angeles County Sheriff’s Department (LASD) is without doubt, the largest sheriff’s Department in the United States, and perhaps in the whole world. Although it is also involved in specialized services such as the Sheriff’s Youth Foundation, International Liaison and Employee Support Services, the department is basically, divided into ten divisions, each headed by a division chief. The department encompasses three patrol divisions, custody operations, correctional services, a detective division, court services, technical services, homeland security, administrative services, and leadership and training.
In addition, the Sheriff’s department also provides law enforcement (patrol) services in the unincorporated areas of the county and to over 40 cities in the County that contract with the sheriff for these services. The Los Angeles County Sheriff’s Department has approximately 2,200 deputies assigned to patrol service, with an estimated 1,000 deputies assigned to this contract cities.
Considering its numerous services and the huge amounts of employees of the County Sheriff’s Department, one would ordinarily expect the department to incur staggering costs and as a result operate a budget in hundreds of millions. This would explain why the Sheriff’s Department remained unquestioned about it’s over $1 billion budget for several years. The budget of the Sheriff’s Department has however, recently been in the heat of political debate. Despite its huge budgets, the department has continually complained of funds, it has closed down several jails in recent years due to financial constraints and has also cut the time served by county inmates to record low levels, in a bid to remedy fiscal shortfalls. However, according to the Los Angeles Times writer, Lichtblau (1997), this changed when a series in the Times of November (1997) questioned the expenditure of millions of dollars in purchases and contracts carried out by the department. The ensuing criticism of the departments budgeting and spending practices prompted the County Supervisors to call for a broad audit of the agency.
The initial audit revealed that the department was infact wasting several millions of taxpayers’ dollars due to inefficient budgeting and accounting practices. It was shown that the department, through its ‘gold plated’ spending was virtually wasting as much as $44 million annually. Besides the wasteful spending, the department was also alleged to have become a de facto creditor in some operations. Due to its poor revenue collection practice, the department has failed to collect millions of dollars that it was owed. For patrol services to contract cities, the department was owed $2.4 million at the end of the previous year for billings more than 90days old, and did not enforce any form of late fees or charges against any delinquent cities. The department was also reportedly owed an additional $800,000 in uncollected payments for security operations at filming locations, special events services and other law enforcement areas. Neither did it require the payment of upfront deposits for such special services or cut off debtors from further services.
While it was the practice of other large county departments to break down their budgets into as much as nine smaller units, for greater accountability and better monitoring and control; the Sheriff’s department has only one central budget. The effect of this was that internal transfers of large sums of money were not necessarily approved by the board and not even necessarily discussed during budget deliberations nor was it made readily available to the public.
Such revelations led to recommendations for more aggressive revenue collection practices, better and tighter accountability and control over the budget process. The department has witnessed several budget cuts in order to enforce better accountability and budgeting and has seen several years of implementing strategies at improving its budgeting and spending practices. This paper therefore intends to look into the financial issues within the department’s financial services such as overtime and the attempts made or solving these issues.
Statement of Problem
The Los Angeles County Sheriff’s Department is regarded, and supposed to be, a non profit organization, however, its operating budgets, frequently in the range of billions of dollars calls for a look into the financial activities of the agency. The budget of the department has considerably increased in recent years, presently estimated at a staggering $1.7 billion, together with employees over 13,000 seriously questions the notion that the department is a non-profit agency. Hence, a critical look into the financial activities of the agency is imperative. Therefore, the attempt to critically review the financial aspects of the Los Angeles Sheriff’s department will shape the direction of this paper.
Significance of Study
The Los Angeles County Sheriff’s Department is an important agency that takes care of security and law enforcement in the county. The efficiency or otherwise of the department holds serious implication for the county. Since financial issues are central to the success and efficiency of any organization or agency, examining the financial aspects of the sheriff’s department; the several issues that plague this agency, financially and the solutions that have been identified and implemented towards resolving these issues, are of great significance.
Limitations
This paper is essentially based on data and information that was made public about the financial activities of the Sheriff’s Department, especially the audit reports, internal memos and, opinions from the public and media about this financial information. Therefore, the information in this paper is limited by the veracity of the data gathered form this aforementioned sources. Since there is no way to completely ensure the veracity of the data gathered for this research, it would be difficult to make generalizations of the opinions expressed is this paper.
Overview of the Financial Services Bureau of the LASD
According to the Los Angeles Sheriff Department’s website, the financial functions of the agency are entrusted primarily to two large divisions – the Fiscal Administration Bureau and the Financial Programs Bureau. The Fiscal Administration Bureau is in charge of financial support services to the entire sheriff’s department. To ensure efficient services, the Fiscal Administration Bureau is further subdivided into five units:
· The Accounts Payable Unit processes payments due to suppliers for a variety of ‘encumbrance’ types, including purchase orders, Board of Supervisors approved contracts, Departmental expenditures and miscellaneous expenditures. And these functions are carried out in line with the Los Angeles County fiscal policies.
· The General Fund Accounting unit is charged with maintaining an accurate and efficient accounting of all expenditures made from the Department’s budget. Also, this unit is responsible for all petty cash distributions, and employee expenditure reimbursement.
· The Grants Administration unit, on the other hand, is in charge of providing a centralized grant administration for the Department. Its functions includes, but not limited to, locating and securing alternative funding for proposed departmental projects and programs that cannot normally be funded through the department’s budget process.
· The Contracts Administration Unit, as the implies, manages and coordinates all aspects of the contracting process for Board of Supervisors approved Master Agreements for services and supplies and single vendor contracts where the individual contract value is over $100,000. Besides coordinating, this unit is also in charge of the continual monitoring of such approved contracts.
· The Special Funds and Grants Accounting unit in involved with the accounting of the revenues and expenditures, the processing of claims, and the preparation of the financial statements for eight special funds accounts and the funds belonging to the grant inventory.
The operations and functions of the Financial Programs Bureau are more focused on the departmental financial matters, with emphasis on areas such as budget, revenue and warehousing. As a result it is divided into: Budget services unit, Central Property and Evidence Unit, Central Supply and Logistics Unit, Items Control and Special Account Units. Like the subunits of the fiscal Administration Bureau, each of these subunits is responsible for a particular financial aspect of the LASD.
· The Budget Services Unit of the Financial Programs Bureau is responsible for preparing the Department’s annual budget request and subsequent submission to the Chief Administrative Officer (CAO). Furthermore, this unit continually monitors the department’s budgetary expenditure and revenues to make sure that the Department does not go beyond the Board of Supervisors adopted budget for the agency.
· The Central Property and Evidence Unit functions as the central repository of all evidence and property seized by the Department during the course of duty. This unit is also in charge of maintaining accurate chain of custody records.
· The Central Supply and Logistics unit serves as the major commodity and law enforcement equipment distribution center for the Department. Besides this, the unit also keep the records of the Department’s fixed assets, coordinates all printing, duplicating and reproduction services for the Department.
· The Item Control Unit takes care of monitoring and tracking employee positions department-wide. It also provides executives and requesting units with reports on the status of staffing and vacancies for sworn and professional staff.
· Lastly, the Special Accounts Unit is responsible for collecting the Department’s revenue, however, because of the nature of this service it is further divided between four subunits, which are; the Cost Studies, Prisoner Maintenance, Revenue and Billing, and Trust and Cashiering.
As can be observed from the structure of the financial services highlighted above, unlike other large County Departments whose budget responsibility is divided among as much as nine different categories or sub units, to allow for better accountability, the Sheriff’s Department has its budget taken care of by a single unit, and thus operates a single budget for the whole department. The implication of this structure is that internal transfers of large sums of money can be done without necessarily being approved by the Board of Supervisors; neither is such transactions even open for discussion during budget deliberations or made available to the public.
Examination of the revenue collection and budgeting practices of the Department shows several misdoings. For a start, the first audit of the department that was initiated late in the late 1990s, with subsequent follow ups, revealed that the department, as a whole, does not maintain sufficient written procedures for its financial operations, leaving some employees with only “limited knowledge of the entire process”. However, the Department’s revenue collection practices appear to be more intriguing. The audit report mentioned earlier reveals that the department has been grossly inefficient in collecting monies owed it by different creditors, and they cited several instances.
It was estimated that the Department was owed approximately $2.4million at the end of the previous year (before the audit) for patrol services to contract cities, for billings which were more than 90days old. Also, the department was owed an additional $800,000 in uncollected payments for security operations at filming locations, special events services and other law enforcement areas. It was interesting to note that the department did not require upfront deposits for services rendered, did not enforce late fees against aberrant debtors nor did it cut off debtors from future services. Furthermore, the report reveals that the county, due to the actions/inactions of the Sheriff’s Department, was losing an estimated $3 million annually because the Sheriff’s Department fails to bill the state for providing security for state prisoners receiving medical care at the County’s USC jail ward. In one case, the state was reportedly billed for only four out of 42 prisoners who fell under the County’s responsibility. Such financial practices of the Sheriff’s Department was considered grossly inadequate and in need of drastic measures aimed at improving its budgetary, accountability and revenue collection drive.
However, recent publications of the Sheriff’s Department appear to be reassuring. After several years of budget cuts and implementation of numerous recommendations of the audit report, the department appears to be operating better financial practices. A recent document from the Department’s Fiscal Administration Unit spelt out the Department’s ‘Purchasing and Contract Policies’. The document known as the ‘Unit Commanders’ Letter’ and titled ‘Purchasing and Contract Policies and Procedures’ state that the policies and procedures of the Sheriff’s Department dealing with purchasing and Contracting processes were in line with the County of Los Angeles specific policies and procedures for such activities. The document spelt out the Department’s purchasing authority and concluded with a list of the concerns of the Department about violations with a stern warning that violations will be investigated and punished, irrespective of who is involved. This would be seen as a sharp distinction from the early audit days when the Department was reportedly immersed in several unapproved, contestable and sometimes improper purchases and expenses, which prompted the calls for stricter regulation of the Department’s fiscal operations.
Fortunately, recently, the Los Angeles County supervisors have decided to add millions of dollars to the Sheriff’s Department which has had several years of deep cuts to its budget following the reports of the audit. Now, after losing about 1,200 deputies, closing two jails and releasing thousands of inmates early, the board finally says the sheriff has earned their confidence with a series of cost-cutting measures and deserves more money.
Nonetheless, with or without cuts in budget or financial misdealing, the Los Angeles Sheriff’s Department is without doubt a very unpeculiar type of non-profit organization. One can hardly agree that the Sheriff’s Department is actually a non-profit organization. Obviously, a non-profit organization is supposed to run on very minimal budgets, carry out its business without the intention to multiply revenues or accumulate funds. The Sheriff’s Department, with an operating budget in the vicinity of $1.7 billion and an estimated 13,000+ employees, the agency does not, in any way, operate like a non profit organization. Furthermore, besides the issue of its huge budget, issues like the staff strength, the aggressive recruitment practices and the issue of staff overtime that have continually plague the Department are enough to conveniently conclude that the Sheriff’s Department does not look or act like a non profit organization.
According to a statement credited to Lt. Joe Fennell, who heads the recruiting unit for County Sheriff Lee Baca, the goal of the Department is to recruit an average of 1000 deputy sheriff generalists per year till 2008. Despite the already staggering amount of the Department’s staff strength, the head of the recruiting unit still believes that recruiting is the foremost priority for the department. And although the department was able to hire 75 deputy sheriffs in 2003 and 190 in 2004, it still believes that the cut in the department’s budget that was prompted due to the report of financial inefficiency in the department has put the brakes on much of the agency’s hiring plans. In this respect, several strategies have been put in place to further improve the recruiting abilities of the Department, such as salary rise, recruitment-related sponsorships with a variety of organizations, billboard advertising campaign and several other approaches that were not reported. In a sense, the continual struggle of the Department to compete with the corporate world does not speak well of a non profit organization.
Financial Issues Within the LASD
Despite the various financial issues plaguing the Sheriff’s Department that have been identified and discussed above, one issue that stands out is the problem with overtime expenditures and budgeting. The Department has continually failed to adequately plan or budget for its overtime expenditures, despite the several measures that have been planned and implemented. In a budget study carried out over a five year period, from FY 1997-98 to FY 2001-2002, the Sheriff’s Department was shown to have spent $67 million and $110 million on overtime annually. The five year budget study compared the budgeted overtime and the actual overtime expenditures and demonstrated that total overtime expenditures increased over 40% from 1998 to 1999. For the next two years, overtime expenditures were shown to increase 8% and 7% respectively. However, a decrease of 15% was observed for the FY 2002. Nevertheless, in four out of the five years studied, the department exceeded the budgeted overtime amount by significant amounts. It was estimated that on average, the department spent 38% more on overtime than was budgeted for, during the five year period under study.
In a bid to better understand the problem of overtime that the department is contending with, the budget study identified different types of overtime that should be considered differently, rather than as one entity, if the department actually wants to get it right with overtime budgeting. The different types of overtime identified in the department includes: Contract events overtime, Grants, Regular, Unusual occurrences, Court and Vacancy induced overtime. Each of these types of overtime requires brief explanation.
Regular overtime takes up about 23% of the total overtime cases and expenditures of the department. As defined in the study report, regular overtime subsumes all overtime that is routinely part of the organization. This includes overtime incurred when an employee works over to complete something in progress at the end of a shift. A good example is a patrol deputy who is in the middle of handling a call for service or completing an arrest when his shift ends, or a court bailiff who works over because court session was extended beyond normal shift, or better still, an administrative personnel who works over to complete a special or time sensitive project.
The cost of regular overtime is a cost that is included in the determination of contract rates charged cities, schools districts, the MTA and others that the department provides services to, under contract. A portion of the revenue collected for these services, therefore, reimburses the department for its overtime expenses incurred. The study also reported that during the five year period under review, the department was reimbursed $23.2 million for contract service overtime. This sum amounts to about 5.4% of the department’s total overtime expenses.
Besides, overtime due to contract services, many of the department’s personnel often attend training on overtime, or overtime is paid for someone else to cover for the staff on training to avoid staff shortages in major areas. This overtime also falls under the regular overtime category. However, a substantial amount of overtime expenses related to training is reimbursed by the state, specifically the Standards for Training for Corrections (STC). During the five year under review, the state reimbursed the Sheriff’s Department approximately $14.2 million for overtime expenses related to staff training and this accounts for about 3.2% of the department’s total overtime expenditure over the study period.
Vacancy overtime is much easier to explain. As the name sounds, it includes overtime incurred by staff covering positions that are vacant due to someone leaving the department, falling sick, on leave, on loan to another unity or incapacitated on duty. This type of overtime accounts for the largest single source of overtime in the department. During the five year study, overtime due to vacancies accounted for 50% of the total overtime expenditures recorded in the department.
Court overtime also includes overtime that is incurred by the Sheriff’s Department personnel who have to appear and testify in court regarding an incident or arrest that they were involved in. This overtime includes both the actual court time and the time standing by or on call to appear in court. However, court overtime takes up a very small portion of the department’s overtime expenditure. Court overtime accounted for 4% of the department’s overtime expenditure – the lowest, through the study period.
Unusual occurrences overtime, also know as emergency overtime includes the overtime that is incurred in responding to unexpected and unusual circumstances, such as a natural disaster, riots, demonstrations, or the overtime spent in such activities as attending funerals of the Sheriff’s Department personnel killed in the line of duty. Unusual overtime accounts for 8% of the overtime expenditures incurred by the department. It is usually declared and logged by the Emergency Operations Bureau, whose duty is to determine who is involved in each occurrence and also to track emergency overtime spent.
Contract events Overtime is usually as a result of security or other law enforcement services that the department provides to contract events like parades, marathons, film makings etc. Because this events are limited in time and in occurrence, it is not wise or practical to staff the events with full time positions, as a result, such events are usually staffed using overtime. This type of overtime accounts for about 7% of the department’s total overtime expenditures, though the event sponsors reimburse the Sheriff Department for the overtime cost incurred for such events. Through the five year studies, the report showed that the department spent and was reimbursed a total of $31 million on such special events overtime.
Grant overtime also accounts for 8% of the department total overtime expenditures. Like the contract events, the department often requires temporary personnel to fulfill the requirements of limited term grants. Since the personnel would no longer be need when the term of the grant ends, hiring permanent staff for such positions is not practical. Again, overtime is used to fulfill requirements of term grants. Over the five year period, the department spent a total of $36.6 million of grant funds on overtime which amounted to 8% of its total overtime expenditures.
The inability of the department to adequately plan and budget for its overtime expenditures have been hinged on two major factors. First, the sheriff’s Department does not have any standardized structure for overtime budgeting. The Department’s approach to overtime budgeting is a best guess approach. The department essentially bases its overtime budgeting on a consideration of the past years overtime expenditures, as well as some basic assumptions such as the projected number of vacancies for the year. For instance, the overtime budget for the year 2001 was reduced from what was actually spent in 2000 based on the assumption that several vacancies being filled and increase staff level will automatically cause a decrease in the overtime expenditure for the year. Unfortunately, that was not the case; actual overtime expenditure did not reduced as expected. Again, the budgeted overtime expenditure for the year 2002 was further reduced based on the same old assumption that increase staffing and hence reduced vacant positions would result in reduced overtime expenditures. Though, this time, there was indeed a reduction in overtime expenditure, however, overtime expenditure did not decline nearly as low as the budgeted amount.
Another factor that has further weakened the ability of the department to accurately predict and budget for its overtime expenditures, according to the budget study, is that overtime budget is considered as a total number, instead considering the different types of overtime discussed above differently, which could further strengthened the ability of the department to clearly predict each component of the overtime expenditures.
Thirdly, the study showed that the department has not been able to accurately predict its overtime expenditures because it has not carefully considered the numerous factors that have continually and consistently driven up the overtime resources need of the department. In this regard, it is apparent that the variances in the budgeted and actual overtime expenditures has been, largely, as a result of increases in salary, increases in staffing, expansion of services, increases in overtime spent on unusual occurrences or emergencies, and increases in overtime reimbursed through grants and contracts events.
Solutions to LASD’s Overtime Issues
With the identification of the perennial issue of overtime expenditures facing the department, several recommendations have been made and implemented towards enabling the department to adequately and accurately predict, plan and budget its overtime expenditures. The budget study group recommended that the Sheriff’s Department should consider developing a model that enables it to accurately predict its overtime expenditures. The recommendation advice that such a model should incorporate each type of overtime identified above. Also, to make sure such a model works well, the factor underlying the need for each overtime should be specifically identified. This implies that what qualifies as overtime should be properly spelt out along with the guidelines for registering such overtime. For instance, the training that will require staff attendance outside their normal shift, or will require others to work in place of those attending such training should be specifically identified.
Also, vacant positions that should be staffed using overtime should identified and the overtime required to adequately staff such positions should be calculated before hand. Furthermore, the overtime need to cover essential positions due to sick staff, injury time and other related factors should be estimated and included in the model. While unusual events or emergencies that resulted in the use of overtime should be reviewed and analyzed to develop a base overtime budget for such occurrences.
Implementing these recommendations, Sheriff Baca in a memo to the Board of Supervisors dated January 13, 2004, stated that department has fully implemented stricter and more aggressive controls of its overtime expenditure by: updating the roaster of personnel authorized to sign employee time sheets, overtime worked report and absence requests; providing a mandatory time and attendance training to timekeeping personnel of the department to accept only the authorized signatures and to ensure that all timekeeping-related documents have appropriate levels of reviews and accuracy; assigning timekeeping supervisors to work in the regions to provide adequate oversight and to ensure that all timekeeping personnel comply with overtime policies and procedures; finally, the Department’s Executive Planning Council (EPC) which is made up of the Sheriff, Undersheriff, Assistant Sheriffs and Chiefs, continually and aggressively monitors overtime expenditures centrally and periodically.
Furthermore, in line with the recommendations of the budget study, the department also reported that it continually re-evaluates the amount budgeted for overtime, the overtime usage and has reduced overtime by hiring additional employees in instances where hiring was more cost effective. In furtherance of this compliance, the department also set up an Overtime Working Committee, which is made up of representatives from each division of the department. The committee was saddled with the responsibility of identifying the several different types of overtime, such as operational, routine, attending training, preparing for or testifying in court, filling in vacant positions or injuries on duty, and working on grant funded programs; and methods of adequately predicting these overtime expenditures.
One of the solutions to overtime expenditures that came out of the deliberations of this committee was the agreement that a new overtime coding method was required when entering data into the County Wide Timekeeping and Payroll Personnel System (CWTAPPS), in order to properly differentiate the different types of overtime, such as reimbursed overtime and the funding source, and in order to prevent errors resulting from inaccurate reporting, overtime tracking was relegated o a centralized operation. Obviously a lot has been said and done about overtime expenditures; however the problem is far from been completely resolved. The department, especially with the recent increase in its budget is embarking on an aggressive recruiting campaign, and since overtime due to vacant positions take 50% of the department’s overtime expenditures, maybe the overtime problem will be resolved soon.
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