Transmittal Letter

BOARD OF SUPERVISORS
BUDGET ANALYST
1390 Market Street, Suite 1025, San Francisco, CA 94102 (415) 554-7642
FAX (415) 252-0461

January 9, 2007
Honorable Aaron Peskin, President
and Members of the Board of Supervisors
City and County of San Francisco
Room 244, City Hall
1 Dr. Carlton B. Goodlett Place
San Francisco, CA 94102-4689

Dear President Peskin and Members of the Board of Supervisors:

The Budget Analyst is pleased to submit this Management Audit of the Department of Public Works. On May 3, 2005, the Board of Supervisors adopted a motion directing the Budget Analyst to conduct a management audit of the Department of Public Works, pursuant to its powers of inquiry defined in Charter Section 16.114 (Motion No. M05-67). The purpose of the management audit has been to: (i) evaluate the economy, efficiency and effectiveness of the Department of Public Works' programs, activities, and functions and the Department of Public Works' compliance with applicable State and Federal laws, local ordinances, and City policies and procedures; and (ii) assess the appropriateness of established goals and objectives, strategies, and plans to accomplish such goals and objectives, the degree to which such goals and objectives are being accomplished, and the appropriateness of controls established to provide reasonable assurance that such goals and objectives will be accomplished. The scope of the management audit includes all of the Department of Public Works' programs, activities, and functions.

This management audit report reviews the Department of Public Works management of:

The core responsibility to maintain the City's public right of ways, including street repair and improvement projects, street cleaning, graffiti removal, and urban forestry;

Public right of way permitting and inspection functions;

Capital project design, construction bids, schedules, accounting, and staffing;

Building maintenance and repair performance and customer service, including project management, materials and maintenance management, and fleet management;

Health, safety, and environmental issues, including management of workers compensation costs; and

Interdepartmental work order fund budgets and overhead.

The management audit was conducted in accordance with Governmental Auditing Standards, 2003 Revision, issued by the Comptroller General of the United States, U.S. Government Accountability Office. The management audit staff presented a draft report to the Director of Public Works on November 7, 2006, and held an exit conference with the General Manager and key members of the Department of Public Works' management staff on November 21, 2006, to discuss the draft report. Subsequent to careful consideration of the additional information provided by the Department of Public Works after submission of our draft report to the Department of Public Works, the management audit staff prepared a final report. The Department of Public Works has provided a written response to the Budget Analyst's Management Audit of the Department of Public Works, which is appended to this report, beginning on page 182.

The Department of Public Works' Performance Goals and Measures

The Department of Public Works has insufficient procedures to set performance standards and measure performance against these standards. None of the Department's eight bureaus fully measures performance to ensure that the bureau achieves the best possible outcomes. The weaknesses in performance measurement can result from a variety of factors.

The Bureau of Street and Sewer Repair cannot show that it delivers street projects cost-effectively because it does not track average project labor costs and productivity. Consequently, although the Bureau received $500,000 in additional General Fund monies in FY 2005-2006 to patch streets and repair potholes, and $3.4 million in additional General Fund monies in FY 2006-2007 to resurface streets, the Bureau cannot determine if these monies are used optimally to achieve intended results.

The Bureau of Street Environmental Services lacks staff productivity standards, resulting in inefficient staffing plans. Further, the Bureau measures street cleanliness, including the presence of graffiti and cleanliness of trash receptacles, in accordance with Proposition C, which was approved by the voters in November 2003 and requires street maintenance standards that are published on the Department's web site. However, the Bureau has not used the information provided by these measurements to reallocate street cleaning schedules despite evidence that such reallocation would be productive.

The Bureau of Urban Forestry lacks performance goals and measures and staff productivity standards. Currently, the Bureau has no performance measures related to its activities. Although Proposition C does not require the Department to publish maintenance schedules for tree maintenance, the Department does publish a pruning schedule on its web site. However, this published pruning schedule is the Bureau of Urban Forestry's goal for pruning street trees and does not reflect the actual maintenance schedule. The Department does not report its performance in pruning individual trees, as would be required by Proposition C for other types of park and street maintenance schedules. Nor does the Bureau keep records of its routine maintenance on its landscape properties that the Bureau is responsible for maintaining.

The Department's three bureaus responsible for capital projects – the Bureau of Architecture, Bureau of Engineering, and Bureau of Construction Management – do not measure some key performance indicators and lack consistent measures among the bureaus. For example, the Bureau of Engineering and the Bureau of Architecture do not currently track the number of construction contracts that have significant contract change orders and additional costs due to design errors and omissions, although this is a key indicator of performance. Also, the Bureau of Engineering and Bureau of Architecture have different performance standards to measure construction cost estimates against actual construction bids. Further, the Bureau of Construction Management's change order tracking system is intended to track the impact of construction contract change orders on project schedules and costs. However, system data is frequently inaccurate or insufficient to allow the Bureau to accurately track and report change order information.

The Bureau of Street Use and Mapping is responsible for inspecting public streets to identify safety hazards, including notifying property owners of the need to eliminate identified safety hazards and re-inspecting hazards to ensure they have been removed or repaired to the standard described by the Public Works Code. Most of these inspections are initiated by calls from citizens who have observed a safety hazard. One of the Bureau of Street Use and Mapping's performance goals is to respond to 65 percent of complaints within 24 hours. According to the Controller's June 2006 performance measure report, as of December 2005, the Bureau responded to 63 percent of complaints within 24 hours. According to the Bureau's policy, district inspectors should conduct routine inspections to identify safety hazards and Code infractions as well as respond to citizen complaints, although under current practice and staffing levels, district inspectors conduct almost no routine inspections. The current approach results in more frequent inspections and citations in neighborhoods with a high volume of calls, rather than high level of risk, leading to unequal enforcement of the Public Works Code.

Management Audit Recommendations

This management audit report of the Department of Public Works includes 17 findings and 120 related recommendations prepared by the Budget Analyst. A list of the management audit recommendations is shown in the Attachment to this transmittal letter.

Proper implementation of the Budget Analyst's recommendations would result in cost savings, efficiency gains, and increased revenues of $5,446,260, including $2,545,000 in annual revenues and cost savings and $2,901,260 in one-time savings. The Budget Analyst's recommendations include:

Annual revenue increases of $1,520,000 by increasing permit fees to recover the costs of permit processing;

One time revenues of $638,661 by collecting outstanding fines and penalties;

Annual cost savings of $845,000 through recommended position reductions and reductions in claim costs;

One time capital project savings of approximately $200,000;

Annual efficiency improvements of approximately $180,000; and

One-time savings over time of approximately $2,062,599 by reducing workers compensation costs.

The following sections summarize our findings and recommendations.

Section 1. Street Resurfacing and Pothole Repair Projects

The Board of Supervisors appropriated $500,000 in additional General Fund monies in the FY 2005-2006 budget to patch streets and repair potholes, increasing funding from $1 million annually to $1.5 million annually. The Board of Supervisors also appropriated $15 million in new General Fund monies in the spring of FY 2005-2006 to fund street resurfacing projects.

Despite these new resources, the Department of Public Works cannot show that it is providing street repair projects cost-effectively. The Department does not routinely track average project labor costs and productivity to ensure that projects are completed efficiently.

Based on cost and productivity data provided by the Department, project labor costs for street resurfacing and patching projects vary widely from year to year and do not reflect projected increases in salaries, benefits, and overhead. For example, the Bureau of Street and Sewer Repair's labor cost per square foot to patch streets decreased by 25.6 percent in FY 2004-2005, from $1.76 per square foot in FY 2003-2004 to $1.31 per square foot in FY 2004-2005, and increased by 45.8 percent in FY 2005-2006, from $1.31 in FY 2004-2005 to $1.91 in FY 2005-2006. The 45.8 percent increase in labor costs in FY 2005-2006 far exceeds increases due to salary, benefits and overhead. The Bureau of Street and Sewer Repair needs to evaluate the labor hours, labor costs, and productivity of street resurfacing and patching projects, including the accuracy of cost and productivity data, to ensure that these projects are delivered cost-effectively.

The Bureau of Street and Sewer Repair has a high rate of nonproductive hours. Approximately 12.3 percent, or 35,095 hours of the Bureau's scheduled hours of 285,664 are nonproductive paid and unpaid sick and disability leave. The Bureau, which has approximately 90 employees, lost the equivalent of 8.3 full time positions due to unpaid sick and disability leave in the 18 month period from January 2005 through June 2006, resulting in a productivity loss of approximately $725,000 in salaries and benefits.

The Department incurs unexpected costs and delays from street improvement projects that incur design problems. For example, the Cesar Chavez Street Improvement Project incurred $579,000 in contract change order costs, or 25.2 percent of the total construction contract amount of $2.3 million, to pay for the redesign of a street bridge and compensate the contractor for overhead due to project delays. These costs could have been reduced or avoided if the Department had ensured adequate quality control over the project's design.

Section 2. Cleaning and Maintaining the City's Streets and Public Right of Ways

The Department of Public Works' measures of the cleanliness of the public right of way show that the Department is not currently providing optimal service. For example, according to the Controller's Office Annual City Survey in 2005, less than half of resident respondents rate neighborhood street cleanliness as "good" or "very good" (49 percent), which is a decrease from the proportion finding neighborhood street cleanliness favorable in 2004 (52 percent).

Also, although the Department's goal is to resolve service requests within 48 hours, in FY 2005-2006 the Department did not resolve 18.6 percent of street cleaning service requests within that time frame, or 623 requests out of an average 3,347 requests each month. 68 percent of graffiti requests were not resolved within 48 hours, or 636 requests out of an average 935 requests each month.

Further, the Department referred 13,773 service requests that were called in on the Department's 28-CLEAN service request telephone line to other City departments and agencies from July 2004 through June 2006. Of these 13,773 service requests, 8,346 requests, or 60.6 percent, were not resolved within 48 hours.

The Bureau of Street Environmental Services lacks staff productivity standards, adequate service request prioritization methods or other criteria to determine optimal allocation of resources, resulting in inefficient staffing plans and the aggravation of deferred maintenance issues.

Proposition C, which was approved by the voters in November 2003, required the Department of Public Works to set standards for street maintenance, publish maintenance schedules, and regularly evaluate Bureau performance based on the standards and schedules. Despite now having over a year's worth of data, the Bureau has not significantly shifted resources based upon the information learned from Proposition C evaluations. The Bureau has not used the data from the Proposition C evaluations to alter street cleaning schedules, despite evidence that such a reallocation would be productive.

The Bureau of Street Environmental Services does not adequately collect fines for litter citations. From June 16, 2003 through August 29, 2006, the Bureau levied 12,680 fines and citations. Of the $1,290,800 amount due from the fines assessed during this approximately three-year period, including delinquent penalties and interest, the Department has only collected $524,209, or 40.6 percent, of the fines, and waived $167,930. This leaves $598,661 in uncollected fines. The Department needs to aggressively pursue the collection of these fines.

The Department is responsible for the removal of graffiti on its own properties, which includes street surfaces and trash receptacles. When graffiti is on public structures and buildings that do not belong to the Department, such as mail boxes, street signs, etc., the Department notifies the appropriate public agencies, such as the Public Utilities Commission and the Municipal Transportation Agency, of the graffiti and of their responsibility to abate.

The Bureau of Street Environmental Services' graffiti crews abate graffiti on public properties not under its jurisdiction when they are working in the same area. However the Bureau was not previously billing other City departments for this service. In August of 2006, the Bureau began billing the Public Utilities Commission and the Municipal Transportation Agency for graffiti abatement. Only the Municipal Transportation Agency has given the Bureau funds ($225,000) for graffiti removal. Unfortunately, the Bureau has been slow to implement this billing procedure and has not pursued the previously anticipated $250,000 work order with the Public Utilities Commission.

The Bureau of Street Environmental Services experiences significant lost work time due to work related injury and illness, personal or family leave, and sick leave, contributing to reduced productivity and understaffing. Of the 51,547 hours that the Bureau's 340 employees were scheduled to work in the month from May 19 through June 16, 2006, only 38,063 hours, or 73.8 percent, were actually worked. 7.39 percent of the scheduled hours were taken as sick leave (paid and unpaid) and 4.22 percent were taken as disability leave (paid and unpaid). The Bureau of Street Environmental Services is only exceeded by the Bureau of Urban Forestry in its level of unproductive use of scheduled work hours, as noted below.

Section 3. Urban Forestry

The Department of Public Works' Bureau of Urban Forestry manages City-owned street trees. Of an estimated 106,000 street trees on public rights-of-way, the Bureau of Urban Forestry manages approximately 26,000. The remaining trees are maintained by private property owners, in accordance with the Public Works Code.

The Department of Public Works' tracking, reporting and monitoring of street trees and maintenance is inadequate to manage tree planting and maintenance efficiently. The Bureau of Urban Forestry publishes a tree pruning schedule on the Department's website. However, this published pruning schedule is the Bureau of Urban Forestry's goal for pruning street trees and does not reflect the actual maintenance schedule. The average number of years between prunings for a department-maintained tree is seven years, compared to a goal of three years. The Department can estimate the average number of years between prunings by calculating the number of trees it maintains per year, but it does not have an overall picture of the actual pruning schedule of its street trees.

The Bureau of Urban Forestry's database of all trees that it maintains has several inadequacies that limit the ability of the Department to efficiently perform its work. For example, the database cannot generate important reports that would help it develop a work plan and allocate resources efficiently, such as a report listing the number of trees which haven't been pruned in a given number of years. Also, using its existing database, the Department cannot track the survival rate of newly planted trees, thereby missing potentially valuable information about patterns in tree mortality. The Bureau needs to reallocate resources or re-think planting strategies and young tree-maintenance.

Accurate street tree information, including tree location, condition, and maintenance history is especially important as the City moves forward with its goal is to plant an additional 5,000 trees each year. The Department of Public Works will need accurate information to efficiently allocate staff resources to planting and maintaining trees.

The Department of Public Works could do much more to increase tree and landscape maintenance productivity. The Department needs to establish performance goals and measures and enhance the productivity of its existing staff. For example, the Department needs to develop procedures to prioritize and coordinate routine maintenance with service requests. The Department also needs to better manage staff performance, attendance, and productivity.

The Department's ability to plant and maintain new street trees will impact the presence of street trees throughout the City. The Urban Forest Plan published by the Urban Forestry Council in February of 2006 found that street trees are not distributed equitably among neighborhoods. Aggravating this inequity is the cost burden for property owners to maintain street trees, resulting in more inequality in the status of the urban forest based on variations in economic status across the City's neighborhoods.

The Department does not adequately monitor street trees that are removed illegally or enforce citations and fines for doing so. In FY 2005-2006, the Department sent 103 fine letters for illegal tree removal or pruning. The Department states that approximately 65 percent of cases that are eventually followed up upon result from citizen complaints rather than proactive inspections by the Department. Further, as of August 2006, the Budget Analyst has calculated that the Department collected only $13,740 in fines, or only 12.6 percent, out of $109,364 for 103 citation letters sent during FY 2005-2006. $36,120 of the remaining uncollected $95,624 represents fines that have been waived or are pending administrative review. Therefore, $59,504 in fines is unaccounted for, representing the amount not collected, not waived, or pending administrative review.

Interviews with supervisors of the Bureau indicate that employee productivity and quality of work are issues of concern to the Bureau. Further, in field visits with crews, it was observed that productivity was frequently lost due to absent staff. Of all bureaus in the Department, the Bureau of Urban Forestry has one of the highest rates of scheduled hours not worked due to absenteeism. In the 12 pay periods between December 18, 2004 through December 16, 2005, Bureau of Urban Forestry staff worked 148,965 of their scheduled 192,195 hours, or 77.5 percent. 14,335 hours, or 7.5 percent of scheduled hours, were taken in sick leave (paid and unpaid). 9,270 hours, or 4.8 percent of scheduled hours, were taken in disability leave (paid and unpaid).

Section 4. Permit and Inspection Revenues and Performance

Over the past four years, the Board of Supervisors has approved new or increased Department of Public Works fees, including excavation permit fees and street occupancy fees in 2002, 15 General Fund fees in 2003, and subdivision fees in 2005. In FY 2003-2004, the Board of Supervisors approved Public Works Code Article 2.1, establishing a new fee schedule for many of the Department of Public Works' General Fund fees and authorizing the Department to increase the fees annually based on the Consumer Price Index.

Although the Department of Public Works adjusts its fees annually by the Consumer Price Index, the Department's salary costs are increasing faster than the rate of inflation, causing the Department's fees to fall behind the growing costs to provide services. These revenue shortfalls are significant. For example, the Department's FY 2006-2007 General Fund fees fell short of the estimated costs to provide fee-based services by $1.4 million.

The Department assesses a street improvement permit processing fee for property owners who have received a notice to repair the sidewalk fronting their property based on outdated Public Works Code language. In 2003 the Board of Supervisors authorized a $540 processing fee for street improvement permits to reconstruct sidewalks, curbs, and parking strips fronting a property. The Department charges property owners who have received a notice to repair the sidewalk a $165 permit processing fee under a 1987 Public Works Code revision rather than the $540 permit processing fee charged to property owners who initiate sidewalk reconstruction projects. According to the City Attorney's Office, the Department is authorized to charge this $165 fee under the Public Works Code. However, the Department cannot demonstrate that this fee, which was first authorized 19 years ago, recovers the costs of processing permits. The Department needs to evaluate the administrative costs to process this fee and submit a fee proposal to the Board of Supervisors for approval during the FY 2007-2008 budget review.

The Bureau of Street Use and Mapping assesses new construction projects the standard $850 street improvement fee, which includes the $540 permit processing fee and a $310 permit inspection fee. If the street improvement project is large or requires additional inspections, the Bureau assesses additional inspection fees, equal to 7.5 percent of the estimated cost of the construction project. However, the Public Works Code specifies that the additional fees charged should be sufficient to recover the actual costs and should be charged on a time and materials basis. Because a fee based on a percentage of construction costs does not correspond to the Department's actual inspection costs, the percentage-based fee does not comply with this Public Works Code provision.

The Bureau of Street Use and Mapping's district inspectors conduct inspections of public streets to identify safety hazards. Most of these inspections are initiated by calls from citizens who have observed a safety hazard. According to the Bureau's policy, district inspectors should conduct routine inspections to identify safety hazards and Code infractions as well as respond to citizen complaints, although under current practice and staffing levels, district inspectors conduct almost no routine inspections. The current approach results in more frequent inspections and citations in neighborhoods with a high volume of calls, rather than neighborhoods with a high level of risk, leading to unequal enforcement of the Public Works Code.

Section 5. The Impact of Claims in the Public Right of Way

The Department of Public Works paid $2,848,511 in claims settlement costs in FY 2005-2006 from claims related to tree problems, sidewalk falls, vehicle accidents and other Department activities. The Department's number of claims settlements has increased by approximately 50 percent over the past ten years, from 415 claims settlements in FY 1996-1997 to 621 claims settlements in FY 2005-2006. The Department's claims settlement costs have increased by $1,259,119 or 79 percent, from $1,589,392 in FY 1996-1997 to $2,848,511 in FY 2005-2006.

The Department of Public Works incurs high costs for claims settlements for tree-related incidents. $1,661,936 in claims settlement costs in FY 2005-2006 resulted from tree problems, or 58.3 percent of the Department's total claims settlement amount of $2,848,511. Sidewalks lifted and damaged by tree roots are the primary reason for the increase in tree problem settlements.

According to the Department, the Bureau of Urban Forestry assesses sidewalk damage due to tree problems and prioritizes sidewalk repairs based on this assessment. However, the cost of tree-related claims has increased significantly over the past 10 years. The number of tree-related claims settlements increased from 56 in FY 1996-1997 to 251 in FY 2005-2006, an increase of 348 percent. The claims settlement amount increased by $1,503,930 or approximately 952 percent, from $158,006 in FY 1996-1997 to $1,661,936 in FY 2005-2006.

The Department should more thoroughly assess causes of tree-related claims to efficiently plan sidewalk repairs and reduce the incidence and costs of claims settlements resulting from tree problems.

Section 6. Capital Project Design Costs

The Department of Public Works incurs increased construction costs for project design errors and omissions. Design errors and omissions, a preventable occurrence, accounted for $2.1 million in increased construction contract costs, or approximately 2.9 percent of total construction costs for 49 construction contracts completed in 2004 and 2005 with total value of $72.5 million.

Despite the impact of design errors and omissions on construction costs, the Department does not measure the impact. Although the Bureau of Engineering previously had a performance goal to limit construction contract cost increases due to design errors and omissions to 3 percent, the Bureau does not currently measure such increases. The Budget Analyst found that 11 of the 49 construction contracts sampled by the management audit, or 22.4 percent, had cost increases of more than 3 percent due to design errors and omissions.

The Department's Bureaus of Architecture and Engineering have project design quality assurance and control programs, but the Bureau of Engineering has not fully implemented their program. Further, the Department formed a task force to assess capital project quality assurance procedures but has not moved forward in evaluating or implementing the task force recommendations for the Department as a whole.

Projects designed by outside consultants have incurred high costs. For example, the recently completed Juvenile Hall construction project, designed by a consultant, is expected to incur $9.3 million in additional costs due to design problems, equal to 18 percent of the $51.7 million construction contract. Although the Department intends to pursue a claim for professional liability against the architectural and engineering design contractor, in many contracts the City and not the consultant pays the increased costs.

The Helen Wills Park construction project incurred $164,700 in construction contract change orders, equal to 6.3 percent of construction contract costs of $2.6 million, and more than 230 days in project delays. The project, which was designed by a consultant, required frequent modifications to meet American with Disabilities Act requirements and to accommodate the design to the actual site conditions.

Section 7. Construction Contract Bids and Awards

Accurate construction cost estimates are important to ensure that a capital project can be achieved with available funds. The Department of Public Works has had to re-bid or re-define projects when the construction bid amounts have significantly exceeded the construction cost estimates and available funds.

Although the Bureau of Engineering's FY 2005-2006 performance target was that 75 percent of all construction contract awards were to be less than 105 percent of the construction contract estimate, only 55 percent of construction contract awards met this target.

Although the Bureau of Architecture's FY 2005-2006 performance target was that 75 percent of all construction contract awards were to be less than 110 percent of the construction contract estimate, only 58 percent met this target.

City departments overall have reported that construction contract bids are high compared to construction contract estimates and that these high bids are due to a low number of contractors bidding on City construction projects. Although the number of construction contractors that bid on each project has declined citywide, the Department also needs to assess its cost estimating procedures.

The City Attorney's Office has taken the lead in forming a task force to address these issues, including improving the bid environment. The task force has looked at a variety of issues, and recommendations will most likely address departments' procedures as well as interdepartmental practices and City policies. The Department of Public Works should develop a plan and formal process to review, consider, and implement appropriate task force recommendations once the City Attorney's Office releases the report.

Several Department of Public Works construction projects have resulted in large cost overruns, significant delays and litigation. Department staff identified some of these potential problems during the contract bid, award, and negotiation process. However, the Department lacks procedures to identify and divert potential construction problems early in the process.

For example, Department of Public Works staff had concerns at the beginning of the Fourth Street Bridge construction project that the successful bidder, Mitchell Engineering/ Obayashi Corporation lacked sufficient experience in bridge building and large complex projects. Despite the contractor's delay in submitting required documents within the contractually required time frame, the Department chose not to cancel the contract. The contractor was also late in procuring materials, submitting shop drawings, and having sufficient staff in place to perform the job. The Fourth Street Bridge project has continued to have significant problems, delays and cost overruns. The original project scope anticipated an 18-month project, from April 2003 through September 2004, but the project was not substantially complete until May 2006, approximately one year and eight months after the originally scheduled completion date. The original contract amount was $16.98 million. The City and contractor are currently in Dispute Review Board hearings. The contractor is seeking a total claim of $22 million. Previously, the contractor filed nine claims against the City for a total of $7 million. The Department is seeking liquidated damages of $8.6 million.

The Department needs to identify potential problems with contractors and develop strategies to avert problems early in the project. The Department should work with the City Attorney's Office to develop risk management protocols, allowing the Department to promptly identify and address potential problems with contractors, and make decisions on the best course of action.

Section 8. Construction Management Costs and Construction Project Timelines

Most of the Bureau of Construction Management's construction projects are not completed on the originally scheduled completion date. In a review of 27 construction contracts completed in 2004 and 2005, only 22 percent, or six contracts, were completed by the original contract completion date. 78 percent, or 21 construction contracts, extended beyond the original contract completion date, ranging from two months to more than two years. When projects are not completed on time, not only does the project incur additional construction and construction management costs, but the City and the public are denied timely access to the facility.

The Bureau of Construction Management extends contract timelines due to weather delays, changes in work scope, and delays requested by the client or attributed to an outside factor. The Bureau generally documents time extensions through contract change orders. The Bureau of Construction Management's contract change order procedure specifies that the resident construction manager or engineer initiates construction change orders and routes the change order documentation through the appropriate engineering and management staff. Both the contractor and the Department of Public Works managers sign the change order, formally agreeing to additional work, costs, and time extensions.

In practice, the Bureau of Construction Management often approves time extensions after the fact. According to the Bureau of Construction Management Manager, the contractor proceeds with additional work requested by the Department of Public Works prior to change order approval to prevent unnecessary delays in the project. The Department of Public Works needs to re-evaluate construction project time extension approval and documentation procedures, including change order policies, procedures, and practices, to ensure that the written procedures provide sufficient project control over project timelines and that actual practices comply with procedures.

The Bureau of Construction Management's procedures to document construction contract time extensions varies significantly among projects. The Bureau often documents and approves time extensions after the completion of the contract, sometimes as much as 16 months after the contract completion. By not approving and documenting contract time extensions during the course of the construction project, the Bureau reduces its control over time extensions and cannot ensure that the construction project does not incur unnecessary costs and delays.

A review of the 21 contracts discussed above with extended timelines shows that:

In only nine contracts, or 42.8 percent, did the Department formally approve contract time extensions through a change order signed by the Department managers and the contractor during the course of the construction project. However, in one of these nine contracts which had a total 225 day extension, the Bureau formally approved 114 days of the 225 day time extension in change orders during the project, but did not approve the final change order to extend the contract by 101 days of the 225 day time extension until six months after the completion of the project.

In six contracts, or 28.6 percent, the Department did not document approval for all the days included in the time extension. The contract extension days, or "overrun", were included in the final time summary in the contract close out documents. For example, project 2019N timelines were extended by 546 days. The Department documented 293 days in time extensions in eight change orders approved and signed during the course of the project. However, according to the Bureau of Construction Management, the 253 (546 less 293) day overrun, which included 81 days for a holiday moratorium during the winter holiday period in which street projects can not be conducted in major commercial corridors and 172 days for delays attributed to PG&E and design changes, will be recommended in the time summary, on an after-the-fact basis, in the final close out documents.

In the remaining six contracts, or 28.6 percent, the Department documented approval for all time extensions after the completion of the project. The Department documented these time extensions in change orders or in the time summary in the final close out documents from one month to 16 months after the completion of the project. For example, in project 0494J, the Department documented time extensions totaling 182 days (12 days for inclement weather and 170 days for additional work and client delays) in a change order that was approved one year after the completion of the project. In project 0390J, the Department documented time extensions totaling 92 days (17 days for inclement weather and 75 days for design changes) in a change order that was approved 16 months after the completion of the project.

Section 9. Capital Project Accounting and Closeout

The Department of Public Works processes for accounting and reporting of capital projects does not facilitate effective project management. The Budget Analyst's review found several weaknesses that indicate a lack of internal controls surrounding the management of capital projects. These issues include: a) projects not being closed timely once complete or indefinitely delayed, resulting in labor charges after projects appear to be complete and significant unspent project balances, b) unclear project parameters, c) inconsistent treatment of labor spent on projects with no established funding source or insufficient funding, d) negative project funding balances, and e) inaccurate and incomplete project information in the Department's Project Management Database.

For example, the San Francisco Fire Department Boat Headquarters, which had a budget of $1,724,238, had an original project start date of May 5, 1997 and an original project close date of October 24, 2001. The project was placed on hold and the last significant labor and non-labor charges were in May 2000, more than six years ago. Since that time, an additional 24 hours were charged to the project at a cost of $2,671. Further, according to the project manager, $26,643 in outstanding encumbrances are for specialty engineering consultants used during the initial planning phase. Yet, these encumbrances remain open. Finally, on April 19, 2005, the project budget was reduced by $487,610 to provide funding for supplemental appropriations for the San Bruno Jail and Juvenile Hall projects. It is the understanding of the Fire Department that these funds will be returned to the project.

Also, the War Memorial Opera House Seismic Upgrade, which had a budget of $49,243,118, had an original project start date of February 1, 1993, and a project close date of September 5, 1997. In FY 2001-2002 the Project Management Database included $48,420 in labor charges and it is unclear, given the project close date of September 5, 1997, whether these charges were appropriately charged to the project. The Director of the War Memorial reports that an email inquiry was made at the time of the charges for an explanation, but that the Department of Public Works did not respond. Additionally, the Project Management Database listed an individual that never worked on the main seismic project as the project manager. When contacted during this management audit, this individual was unable to comment on project status other than to indicate that the project may have been kept open to fund other projects. According to the Director of the War Memorial, the funding spent after the project close date and the remaining project balance were earmarked for capital improvements to the facility that could not be incorporated into the initial project due to the restricted project schedule. The Director attributed the ten-year delay for expending the final funds to a number of factors, including other repair and maintenance priorities that resulted from the initial construction project and the disintegration of the Department of Public Works project management team. However, the final component of this project, a fire sprinkler protection upgrade, has recently been initiated and is expected to utilize all remaining funding in this project.

These issues are due in large part, but not entirely, to the way capital projects are structured in FAMIS, the City's general ledger accounting system, in which management of a project and budgetary control can be shared by two or more responsible departments. These issues also stem from a lack of established and documented protocol for opening and closing projects, working on projects with no established funding source, maintaining budgetary control, and maintaining current data and information in the Project Management Database.

The annual reconciliation of inactive funds is not sufficient to mitigate these issues and a significant backlog of unreconciled projects at the Department of Public Works persists. The Director of Public Works, in consultation with the Controller, needs to address process issues and increase internal controls and standardization to the greatest extent possible. This is especially critical at this time given the City's renewed focus on the capital program and the development of the 10-Year Capital Plan.

Section 10. Engineering and Architecture Staff Resources

The Department of Public Works is not able to plan long-term for its capital project staffing needs. Although some of the Department's capital project funding is stable or predictable, project funding and work provided by other City departments fluctuates. Consequently, the Department could potentially have insufficient project funding to pay for the Department's existing engineering and architecture staff, resulting in overstaffing.

For example, the Municipal Transportation Agency is performing more electrical engineering work in-house to provide sufficient work to its own engineering staff as the Agency's funding for large projects declines, and providing less electrical work to the Department of Public Works. As the Municipal Transportation Agency assumes more of its own electrical engineering work, the Department of Public Works, who expected to perform all such work, could be overstaffed with electrical engineers.

Also, beginning in October 2006 the Recreation and Park Department will hire project managers for Recreation and Park Department projects, potentially creating overstaffing in the Department of Public Works as its project managers, who previously managed Recreation and Park Department projects, return to their former classifications.

Currently, the Department of Public Works can only project sufficient project funding to pay for current staff for two months for electrical engineers to 12 months or more for engineers designing and managing street projects. A Citywide task force report in 2005 found that the City needs effective strategic planning for capital resources to prevent shifts in work load, overstaffing, and layoffs.

Although the City's capital program is decentralized, the City's Administrator is coordinating the Citywide capital planning process pursuant to 2005 Administrative Code provisions. The City Administrator should assist the City departments, including the Department of Public Works, in planning capital project staff resources as part of the capital planning process.

Section 11. The Bureau of Building Repair's Performance and Customer Service

The Bureau of Building Repair has inadequate performance measures and business processes. The Bureau does not measure the performance of its building repair and remodeling activities and therefore cannot determine if it performs these activities efficiently. Nor does the Bureau measure customer satisfaction effectively. Consequently, the Bureau cannot gauge the quality of services that it provides to client departments. For example, although the Bureau of Building Repair's performance measure is based on customer satisfaction, the Bureau of Building Repair has not received full-year feedback from its customers on their perception of the Bureau's performance for at least two years. The Budget Analyst requested a copy of the customer survey results for FY 2004-2005 and FY 2005-2006 and was informed that "Surveys for the requested periods were not completed. Survey revisions were recently finished, and the survey for 05/06 was sent out in July."

In response to a survey conducted by the Budget Analyst, the Bureau of Building Repair's customers considered customer service satisfactory overall. However, the customers said that the Bureau provides insufficient information about work order requests, work performed against the work order, and billing.

The Bureau of Building Repair's business processes are weak, preventing timely and sufficient information to its customers. The Bureau does not have a standardized format for receiving customers' work order requests, and at least one department has developed its own work request form.

The Bureau has inadequate management reporting systems, leaving the Bureau with insufficient information for its internal management operations and for its customers. The Bureau is unable to generate basic work order and workload information, such as the total number of work orders completed and the labor hours for work orders completed.

The Bureau has insufficient maintenance planning and scheduling. Consequently, productivity of the journeymen workforce is significantly less than it would be were adequate planning and scheduling processes employed, resulting in unnecessary down time or travel time.

The Bureau of Building Repair does not consistently obtain building permits, in violation of the City's Building Code. The Director of Public Works should ensure that the Bureau obtains necessary permits, and work with the Department of Building Inspection to implement a permit processing priority system. For example, the Bureau performed 12 projects at the Department's maintenance facility located at 2323 Cesar Chavez Street without permits. These projects included (a) installing sheet rock and in-built furniture, repairing sidewalks and paving outdoor surfaces, and digging gate post holes and trenches without obtaining building permits; (b) rerouting electrical conduits, installing outlets and circuits, relocating wall switches, providing power supply to a new fan in the radio room, and installing electric push button operators without electrical permits; and (c) installing irrigation lines and water supply and waste lines without plumbing permits.

The Department expended $336,000 appropriated by the Board of Supervisors for the Bureau's facilities maintenance activities on the San Francisco Housing Authority's Sunnydale Basketball Court Project without Board of Supervisors approval and the Controller's authorization for this Housing Authority project. Although the Department was reimbursed by the Housing Authority and the Mayor's Office of Community Development, the Director of Public Works needs to obtain proper authorization and appropriation approval for reallocation of project funds.

Section 12. Bureau of Building Repair Annual and Continuing Project Management

There are significant control weaknesses related to the Bureau of Building Repair's management of annual and continuing projects. These weaknesses include committing to and incurring expenditures in excess of budgeted amounts, unwarranted carry-forward of annual projects, and a lack of protocol for project definition. These weaknesses obscure Bureau of Building Repair activities and make project tracking and monitoring difficult, which in turn prevents effective planning and resource allocation. The time spent on projects and project spending cannot be readily isolated and evaluated and problems cannot be readily identified and corrected.

For example, the Department of Public Works tracks specific project budgets and expenditures through job orders. The Bureau of Building Repair creates "tags" for the job order, which is an authorization to perform work against the job order. The Bureau of Building Repair may create tags for any given job order and obtain additional departmental authorization in excess of the amount budgeted for the job order. Thus, the Bureau of Building Repair can and has committed to and incurred expenditures without obtaining budgetary authority and funding. The Bureau's Work Order Tracking System produces a report of job orders that either have been "over-allocated" (i.e. tags have been developed for more work than the budget allows), or have been over-expended. According to this Work Order Tracking System report, queried on April 12, 2006, the Bureau had 66 job orders, in which the funding allocated to the individual tags exceeded the job order budget. Cumulatively, these "over-allocated" tags exceeded the job order budgets by $2.4 million.

Also, the Bureau of Building Repair reports that funds for 88 projects, with a total unexpended and unencumbered budgetary balance of $1,783,101, were carried forward from FY 2004-2005 to FY 2005-2006. 58 of these projects were designated by the Bureau of Building Repair as annual appropriations with a total unencumbered budgetary balance of $1,164,709. Projects with budgetary balances carried forward include the following:

§ $130,517 for custodial and other Bureau of Building Repair services at the Water Department's 425 Market Street offices (Project IBRG10, Job Order 0853R). Some of the tags in the Work Order Tracking System dated back to FY 2003-2004 and it is not clear how much was expended in each of the fiscal years and on what activities. Only six tags were active with a balance remaining on those tags of approximately $6,100 on April 17, 2006. $121,255 of the $130,517 was carried forward to FY 2006-2007 and, as of October 23, 2006, this job order had a total remaining balance of $93,134.

§ $39,529 for maintenance and repair for the Department of Telecommunications and Information Services (Project IBRG84, Job Order 0959R). According to the Work Order Tracking System, only two tags were active with a balance remaining for those tags of approximately $6,900 for stationary engineers on April 12, 2006. All of the $39,529 was carried forward to FY 2006-2007 and, as of October 23, 2006, this job order had a total remaining balance of $18,658.

§ $137,272 of $2,398,612 appropriated for several Bureau of Building Repair activities including custodial services, Occupational Safety and Health Administration requirements, and non-recurring and emergency maintenance and repair projects for the Police Department in FY 2004-2005 (Project IBRH34, Job Order 1083R). The FY 2004-2005 job order continued to be regularly charged until September 28, 2005. Since that date, three charges occurred between December 28, 2005 and February 28, 2006 which do not appear to be associated with a tag and for which the Bureau of Building Repair could not provide an explanation. A new tag of $3,153 was established March 6, 2006 for painting and, as of April 12, 2006, has been over-expended by $52. Interestingly, this job order carried forward $152,413 into FY 2006-2007, more than the $137,272 carried forward in FY 2005-2006. The increase over the FY 2005-2006 carry-forward may have been due to a release of encumbered funds or an increase in budgeted funds during the year. As of October 23, 2006, the job order had an unexpended balance of $5,990. In FY 2005-2006, the annual job order established for the same purpose (Project IBRI18, Job Order 1418R) was budgeted at $2,365,244 and, as of October 23, 2006, was over-expended by $126,960.

§ $90,545 of $110,000 for the Police Department maintenance and repair projects (Project IBRH71, Job Order 1321R). According to the Police Department, $110,000 is budgeted annually for facilities maintenance. Similar to the previous job order also with the Police Department, a larger amount of $98,301 was carried forward to FY 2006-2007. As of October 23, 2006, the balance remaining of the FY 2004-2005 funding was $37,570.

§ $19,000 in six separate job orders for Tax Collector maintenance and repair projects (Projects IBR75G and IBR95-99G, Job Orders 3475R and 3495-99R). These job orders have not posted any expenditure since being established in FY 2003-2004. These balances were carried forward into FY 2006-2007 as well.

The lack of control over annual and continuing projects is compounded by an automated tracking system, the Work Order Tracking System, which does not provide the Bureau of Building Repair with a definitive understanding of job order status at the detail level or of its activities in general. In part, this is due to the Work Order Tracking System using estimates of financial data and information rather than real-time financial transactions.

The Department reports that several initiatives are under way to address Bureau of Building Repair job order management and control issues, including the consideration of a computerized maintenance management system. These initiatives should be formalized with project timelines and should include a business process review such that appropriate controls over job order creation, management and closeout are established.

Section 13. Materials Management Controls and Procedures

The Department of Public Works has recently remodeled and expanded its materials storeroom at the 2323 Cesar Chavez Street maintenance yard, which stores the materials and supplies used by the Bureaus of Street and Sewer Repair, Urban Forestry, and Street Environmental Services.

The Bureau of Building Repair expended approximately $3.0 million on work order materials during fiscal year 2005-2006. However, materials ordered for use by the Bureau of Building Repair are not processed through the storeroom. In general, the Bureau of Building Repair trade shops do not order materials for inventory; each materials order is in support of an approved work order.

The trade shops of the Bureau of Building Repair do, however, maintain materials within the confines of the shop or a shop annex. These inventories consist of materials left over from completed jobs, from materials ordered but not used because of cancellation of the work order, or from materials removed from equipment and fixtures no longer in service. The Bureau has no formal inventory of these materials, creating the risk of theft, loss or misuse of the materials. The Department of Public Works needs to develop formal materials policies and procedures to ensure standardized and efficient materials management and adequate controls to prevent theft, loss or misuse.

In general, City departments lack adequate inventory and material storeroom internal controls. Since 2003 the Budget Analyst has audited the storerooms of the Port, the Public Utilities Commission, the Recreation and Park Department, and the Department of Public Works, and found that many of the departments lacked standard storeroom practices and in some instances had significant control deficiencies. Inadequate storeroom internal controls has been a long-standing Citywide problem, previously identified by the Budget Analyst in a 1991 management audit report on the Purchasing and Storekeeping Functions as Administered by the Purchasing Department. The Department of Public Works should work with the City Services Auditor to establish a system of controls that can be extended to other City departments.

The Department of Public Works does not ensure that only authorized staff approve department purchases. The City's Office of Contract Administration has procedures to ensure that only authorized staff approve purchases. The Office of Contract Administration provided the Budget Analyst with its list of Department of Public Works staff persons authorized to engage in departmental purchasing. The list contained five names, including one of a recently retired employee. Also, our review of delegated departmental purchasing documents showed three Department of Public Works staff members who regularly approve delegated departmental procurements were not named on the authorized listing obtained from the Office of Contract Administration. Thus, a set of controls developed by the Office of Contract Administration to provide reasonable assurance that procedures developed to implement the sensitive authority of procuring commodities and services of up to $10,000 on each such procurement, were not being adhered to by the Department of Public Works.

Section 14. Automotive and Mobile Equipment Management

Under the Administrative Code, the Department of Public Works can allow up to 17 City-owned vehicles equipped with emergency equipment to be used for commuting to and from work. Currently, the Department allows 16 such City-owned vehicles to be used for commuting to and from work. However, although the Administrative Code requires that the Department of Public Works maintain detailed vehicle use records for these 16 vehicles, the Department only began doing so in response to the Budget Analyst's inquiry during the course of the management audit.

Also, the Administrative Code provides for garaging City-owned vehicles at an employee's place of residence during non-working hours, with the approval by resolution of the Board of Supervisors, where the head of the department having jurisdiction over such vehicles finds that the public interest will be best served by permitting the employee to take such vehicles home, rather than require the City to garage the vehicle. However, the Department of Public Works has not received Board of Supervisors approval for 20 Department employees who currently garage a City-owned vehicle at their residence during non-working hours.

The Department has not ensured that its general-purpose vehicles are routinely serviced. Of the 206 general-purpose vehicles maintained by Central Shops for the Department of Public Works, 98 or approximately 47.6 percent, were overdue for the six-month preventive maintenance lubrication and service. Some general-purpose vehicles last completed a preventive maintenance service in the first half of 2004, more than two years ago.

The Department does not maintain sufficient documentation or oversight of the Employer Pull Notice Program, implemented by the California Department of Motor Vehicles to notify employers as to their suspended licenses or other issues precluding employees from driving vehicles during their work time. Our review of 67 employees required to be enrolled in the Employer Pull Notice Program revealed that Driver Record Information records for 10 employees required to be enrolled in the program were not available for examination. Further, the Driver Record Information forms revealed expired medical examinations for two employees.

Finally, the General Services Agency's Central Shops does not consistently comply with the California Code of Regulation's standards for maintenance inspection and record keeping.

Section 15. Health, Safety, and Environmental Issues

The Department of Public Works has significant environmental issues at the maintenance yard at 2323 Cesar Chavez Street. A health and safety inspection, conducted at the request of the Budget Analyst, noted several environmental deficiencies, allowing pollutants to spill into the City's sewer system and causing strain on the City's treatment of waste water.

For example, the street sweepers dump debris such as trash, gravel, and sediments into standard catch basins, offering minimum pretreatment of the liquid waste stream for smaller particles and trash. The Department has no procedures to prevent an acute discharge of collected hazardous materials or reduce the chronic influx of pollutants from the street sweepers to the sewer and waste water treatment system.

The Department of Public Works has a high rate of Workers' Compensation claims. Both the incidence and the severity of the Department's work place illnesses and injuries, resulting in Workers' Compensation claims, exceed the California Occupational Safety and Health Administration (Cal-OSHA) rate recorded for California public and private employers.

According to the California Occupational Safety and Health Administration, the average incidence of workplace injury and illness for repair and maintenance organizations in 2004 was 4.1 incidents per 100 employees. The Department of Public Works' rate of 18 incidents per 100 employee exceeds the 4.1 incidents by 13.9 incidents, or 339 percent.

The Department's number of work place illnesses and injuries has not increased significantly between 2002 and 2005 but the severity, including time lost from work, has increased by a large amount. The Department's Operations Division's severity of work place illness and injury claims is very high. In 2005, the Operations Division reported 994.5 lost work days per 100 employees compared to the Public Utilities Commission's Hetch Hetchy Enterprise, which reported 233.2 lost work days per 100 employees. If the Operations Division's work place illness and injury severity rate were comparable to the Hetch Hetchy Enterprise, the Operations Division would gain work days and associated productivity equivalent to approximately 23.4 full time employees, or $2.0 million in annual salary and fringe benefit costs.

The Department's six person Environmental Health and Safety Office effectively provides Department-wide guidance and technical assistance to the Director of Public Works, the Deputy Directors, and to the Bureau Managers in implementing a comprehensive health and safety program. Management commitment to the Health and Safety Program and an emphasis on safety planning for work to significantly improve the Health and Safety Program.

Section 16. Interdepartmental Work Order Funds

Since the interdepartmental work order fund budgets included in the Annual Appropriation Ordinance provide the Department of Public Works with authority to fund and hire positions to provide services to client departments, these budgets should accurately reflect expected revenues and expenditures. This is particularly important since 38.6 percent of the Department's budget, or $54.4 million, which includes direct salary and fringe benefit costs as well as overhead costs allocated to the interdepartmental work order funds and as shown in Table 2 in the Introduction to this report, out of the $141.1 million appropriated in FY 2006-2007, is budgeted in interdepartmental work order fund budgets.

However, the Department of Public Works interdepartmental work order fund budgets do not balance. As noted in the management audit report and in the Budget Analyst's response to the Department's written disagreement with the management audit report recommendation, as discussed below:

The interdepartmental work order fund budgets do not reflect actual expenditures. The bureaus' interdepartmental work order fund budgets include salary and overhead expenditures but do not include non-salary expenditures.

These interdepartmental work order fund budgets do not show the actual revenues. Rather, these budgets show expenditure recoveries that offset budgeted salary and overhead expenditures so that the budget balances to zero. These expenditure recoveries are a placeholder rather than actual monies appropriated in other City budgets, grants, and projects.

The interdepartmental work order fund budgets overstate required funding for positions by budgeting all expenditures as salary expenditures and by budgeting positions for higher than actual expenditure recoveries. For example, the Bureau of Street and Sewer Repair interdepartmental work order fund salary and benefit budget was $10.6 million in FY 2005-2006 while actual costs for the positions providing work order services was only $7.0 million in that year.

Although client departments provide the Department of Public Works expenditure authority through individual work orders, the Department's current processes do not provide sufficient information for client departments to effectively monitor work order project expenditures.

Because interdepartmental fund budgets are not transparent or readily available to either the client department managers, the Board of Supervisors, other policy makers or the public, client departments cannot effectively justify or communicate annual interdepartmental work order fund activities, measure actual expenditures against projected expenditures, or track changes in expenditures from year to year. To provide meaningful appropriation and budgetary control, the Department of Public Works should develop interdepartmental work order budgets that accurately reflect estimated salary and non-salary budgetary requirements for the coming year and the client departments' cost of services.

Section 17. Allocation of Overhead Costs

The Department of Public Works overhead costs represent administrative and support costs within the Department, as well as Citywide indirect cost charges. In FY 2006-2007, the Department budget includes $57.8 million in overhead expenditures, which are funded by direct charges to the Department's General Fund, Gas Tax and Road Fund, and interdepartmental work order fund budget.

The Department of Public Works needs to contain overhead costs to limit the impacts on projects and services. Further, because the Department was incorporated into the General Service Agency in FY 2004-2005 and must now absorb a portion of indirect costs incurred by that Agency, the Director of Public Works needs to work with the City Administrator to consolidate functions and reduce costs where possible, especially human resource and information technology functions.

The Department of Public Works will need to address barriers to establishing more efficient services and greater consolidation within the General Services Agency, such as incompatible payroll systems among the different departments that make up the General Services Agency, and inflexible job classifications and job descriptions that prevent streamlining of processes and more efficient allocation of staff resources.

The Department of Public Works' five-year plan to replace obsolete information technology or implement new systems does not include an assessment of the bureaus' current systems needs or a staffing plan for central and bureau information technology staff. Each of the three capital bureaus – the Bureaus of Architecture, Engineering, and Construction Management – has their own information technology staff. However, although these bureaus are jointly responsible for capital projects, these information technology staff have no shared planning process or channels of communication. Further, according to interviews, staff time is not fully utilized for bureau functions. Better integration of information technology functions performed by the three bureaus would lead to a more efficient use of resources, including staff reductions and estimated associated salary and benefit savings of $233,000 annually.

The Department of Public Works' Written Response

The Director of Public Works' written response is attached to this management audit report beginning on page 182. The Director of Public Works' written response agrees with 104, or approximately 86.7 percent, of our 120 recommendations, and partially agrees with 8 recommendations, or approximately 6.7 percent. The Director of Public Works' written response disagrees with 3 of our 120 recommendations, or approximately 2.5 percent. The Department did not respond to five recommendations, or 4.2 percent, of which one was directed to the City Administrator (Recommendation 13.1), two were directed to the City Services Auditor (Recommendations 13.2 and 13.2), and two were directed to the Manager of the Department of Administrative Services Central Shops.

The Department's Disagreement with Recommendations 16.4 and 16.5

According to the Director of Public Works written response, the Department of Public Works disagrees with Recommendation 16.4, which recommends that the Department develop an annual interdepartmental work order fund budget for the operating bureaus that includes the salary and non-salary budget details in the individual work orders.

According to the Director's written response to Recommendation 16.4, "the Department manages work order budgets by the specific work order, not by all work orders combined. A significant number of our work orders are for projects that we cannot anticipate which job classes will be performing the work, or the level non-labor resources that will be needed at the beginning of the year. For example, the facilities maintenance work order from general hospital may include plumbing work one year, (which is almost all labor) and a roof patching contract in another year (which is almost all non-labor as it would be provided through a contract)."

According to the Director of Public Works written response, the Department of Public Works disagrees with Recommendation 16.5, which recommends that the Department develop procedures that allow the operating bureau superintendents to track interdepartmental work order fund budgets at a summary level.

According to the Director's written response to Recommendation 16.5, "as stated above, bureau superintendents are responsible for managing each individual work order budget. In addition, they must manage the work load of the bureau, which involves managing position counts and not budgets. There is nothing for them to manage at a summary budget level in their ID budgets."

However, the Department of Public Works interdepartmental work order fund budgets do not balance. As noted on page 164 of the management audit report:

Also, as noted on page 165 of the management audit report, the operating bureaus do not consistently manage specific work order budgets. For example, the Bureau of Building Repair does not sufficiently control budgets and expenditures for individual work orders. The Bureau (a) does not define projects, (b) commits to and incurs expenditures in excess of budgeted amounts, and (c) carries forward annual project expenditures without proper authorization.

Although the Director states in the written response that the Department cannot anticipate which job classes will be performing the work, the Department currently has both permanent, filled positions and temporary salaries allocated to the interdepartmental work order funds. Therefore, the Department is already committed to paying the salaries of specific job classes under the existing practice. Also, the Department would continue to have the same flexibility to hire temporary positions to meet the requirements of specific work order services as it currently has under its existing practice if the Department developed an annual interdepartmental work order fund budget for the operating bureaus that includes the salary and non-salary budget details in the individual work orders, which we have recommended in Recommendation 16.4.

The Department's Disagreement with Recommendation 17.4

According to the Director of Public Works written response, the Department disagrees with Recommendation 17.4, which recommends that the Director of Public Works should submit proposed reductions or reallocation of human resources staffing within the General Services Agency as part of the human resource function evaluation to the Board of Supervisors during the FY 2007-2008 budget review.

According to the Department's written response, "GSA HR is attempting to improve service quality, improve service timeliness, and streamline processes while absorbing additional responsibilities from DHR, serving additional departments and implementing new programs. GSA HR staffing ratios are comparable to other City HR departments."

As noted on pages 175 and 176 of the management audit report, the benefits of consolidating City departments under the General Services Agency in FY 2004-2005, which includes the Departments of Administrative Services, Telecommunication and Information Services, and Public Works, include integrating and streamlining administrative and support functions within the new General Services Agency. Because the Department must now absorb a portion of indirect costs incurred by that Agency, the Director of Public Works needs to work with the City Administrator to consolidate functions and reduce costs where possible, including human resource functions.

In conjunction with the Budget Analyst's recommendation to reduce the Department's human resource staffing levels, either through elimination of positions within the Department, or reallocation of positions from the Department to the General Services Agency, the Budget Analyst recommended and the Department of Public Works agreed that (a) human resource job classifications and job descriptions should be revised to allow increased cross-training and flexibility in staffing (Recommendation 17.1) and (b) the Department should work with the General Services Agency to identify ways to consolidate payroll processes within the Agency (Recommendation 17.2). Successful implementation of Recommendations 17.1 and 17.2 would allow the General Services Agency, as well as the Department of Public Works, to employ existing human resources staff more efficiently and allow reallocation of staff resources within the General Services Agency. The Budget Analyst will review the Department's implementation of Recommendations 17.1, 17.2, and 17.3 during the FY 2007-2008 budget review.

We would like to thank the Director of Public Works, his staff, and various representatives from other City departments for their cooperation and assistance throughout this management audit.

Respectfully submitted,

Harvey M. Rose
Budget Analyst

cc: Supervisor Alioto-Pier
Supervisor Ammiano
Supervisor Daly
Supervisor Dufty
Supervisor Elsbernd
Supervisor Jew
Supervisor Maxwell
Supervisor McGoldrick
Supervisor Mirkarimi
Supervisor Sandoval
Clerk of the Board
Controller
Nani Coloretti

Cheryl Adams

Director of Public Works

Transmittal Letter

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