Report 2011-120 Recommendation 25 Responses

Report 2011-120: California Department of Transportation: Its Poor Management of State Route 710 Extension Project Properties Costs the State Millions of Dollars Annually, Yet State Law Limits the Potential Income From Selling the Properties (Release Date: August 2012)

Recommendation #25 To: General Services, Department of

To ensure that it charges its clients appropriately for the work it performs, General Services should reassess the construction unit's methodologies for determining the hourly burden rate and direct administration fees.

1-Year Agency Response

DCU has revised its rate and cost estimating processes for the 2013/14 fiscal year to fully address the State Auditor's concerns. Specifically, the revised process provides that DCU's hourly burden rate be calculated based on prior year expenditure data and projected billable hours. Further, the process provides that a predetermined percentage for various individual types of administrative fees will no longer be added to estimates for new projects started during the 2013/14 fiscal year. Instead, the costs are either being included in the hourly burden rate or estimated individually on a project by project basis.

California State Auditor's Assessment of 1-Year Status: Fully Implemented

The Department of General Services has revised its method for calculating its hourly burden rate and applying direct administration fees, using prior year expenditure data and billable hours, and adjusting for any known or projected increases or decreases. We reviewed the department's methodology for determining its hourly burden rate and determined the process is based on supportable information and is mechanically correct.

6-Month Agency Response

General Services revised its rate-setting process for fiscal year 2013-14 to ensure that the hourly burden rate is accurately and properly calculated based on prior year expenditure data and projected billable hours.

California State Auditor's Assessment of 6-Month Status: Partially Implemented

General Services did not provide the revisions made by its construction unit or the methodology for determining the direct administration fee.

60-Day Agency Response

General Services stated that its construction unit will revise its rate-setting process for fiscal year 2013–14 to fully address the state auditor's concerns. General Services also stated that the revised process will ensure that the construction unit's hourly burden rate and direct administration fees are accurately and properly calculated based on prior year expenditure data and projected billable hours. Further, General Services stated that, to date, the construction unit has consulted with General Services' budget, accounting, and information technology staff on improvements that can be made to its rate and fees calculation function. (See 2013-406, p. 174)

California State Auditor's Assessment of 60-Day Status: Partially Implemented

All Recommendations in 2011-120

Agency responses received after June 2013 are posted verbatim.