Thursday, May 19, 2010 | A scathing report released Wednesday by the Orange County performance auditor revealed a culture of excess within the county's human resources department in recent years that has allowed lavish pay increases for executives and sweetheart deals for labor groups while county revenues have plummeted.
In all, auditors found 75 instances where the department essentially allowed top-level executives to reclassify their jobs, in some cases their own, without documentation such as classification studies.
The report (see attached) points to one deputy CEO who in 2007 received two raises within six months that added up to a 30 percent pay increase. Another executive received several raises between 2006 and 2008 totaling nearly 40 percent.
In addition to the lax oversight of executive compensation, the report concluded that the department has not negotiated well with labor groups over pension benefits or performance incentive bonuses, which are routinely granted.
In all, auditors pointed to nearly $150 million in concessions that the county should take back at the negotiating table when negotiations with the largest labor groups — the Orange County Employees Association and the Association of Orange County Deputy Sheriffs — begin next year.
The report is so critical of the human resources department that it calls for the appointment of outside negotiators for upcoming labor talks, and a majority of county supervisors seem to agree.
The performance auditor's report comes in the midst of a crippling recession during which dwindling revenues have forced cuts in county services and pay cuts and layoffs for rank and file employees.
"We should follow the rules, and clearly we didn't. I'm disappointed in that," said county supervisors' Chairman Bill Campbell.
Half of the reclassifications among executives came from inside the CEO's office or the Human Resources Department, according to the report.
Many of the other reclassifications occurred when county supervisors agreed to establish a new department, Community Resources, in 2008. While officials told supervisors the new department would save half a million dollars, auditors concluded the merger ended up costing millions, partly because of reclassifications.
County CEO Tom Mauk acknowledged that the report didn't make the county bureaucracy look good.
"It's a good report," Mauk said. "It has positives and negatives. It does point out things that need to be addressed, including the reclassification process."
Yet Mauk clearly didn't like the attention being given to the reclassification issues, calling it "three pages at the end of a 127-page report."
He preferred to concentrate on the $150 million in potential givebacks from labor groups. He said he would support the appointment of an outside negotiator.
"We should be tougher at the bargaining table," Mauk said.
But the CEO admitted that the disclosures about executive raises could complicate future labor negotiations.
"From a perception side, yeah, it hands Nick [Berardino, general manager of the Orange County Employees Association] the ability to challenge that part of it. But on the practical side, the negotiation issues that the report calls out that have to be addressed are far more meaningful than 75 reclassifications that are mostly justified."
Berardino avoided the issue of labor group givebacks raised by the performance auditor's report, and instead took aim at Mauk.
"The CEO's remarks about the negotiations is just another attempt to distract the attention from the fact that the union has been right over the last several years regarding the executives and managers lining their pockets secretly," Berardino said.
County supervisors reacted Wednesday to the report with a mixture of shock, frustration and resolve to deal with the situation.
"As a board member, it [reclassification] was news to me," said Supervisor Shawn Nelson. "And I'm here to know. I never knew to look under that rock."
"When you're telling all your employee groups to take cuts, then you see all these upper level executives raising their salaries, yeah, irritating would be an understatement," Nelson said.
Nelson and other supervisors said they would immediately move to tighten up such reclassifications.
"We should get rid of these classifications at that level," Nelson said, adding that Mauk would be held accountable for the practice, given that his job review is pending.
"It's a perfect time to deal with it. There's no passing the buck here," Nelson said.
Indeed, many of the woes at the human resources department go back years with numerous critical state audits that were withheld from county supervisors. Local grand juries have also issued numerous critical reports.
The auditors' primary proposed solution is to exclude the human resources department from labor negotiations, and it appears that a majority of county supervisors agree.
One major policy question facing supervisors is whether they should hire an outside negotiator.
County Supervisor John Moorlach has been proposing an outside negotiator for years. He applauded the report's conclusions as well as the support gathering for a different approach toward negotiations.
Moorlach called the report's conclusions "hard to digest" but important in terms of understanding how the county bureaucracy works.
"Its premature for me to say heads have got to roll," Moorlach said. We have to digest it."
But the recommendation to have an outside negotiator has him excited. "It's a model I've been asking for since I got here."
Campbell also said he was supportive of the idea of excluding human resources from negotiations but aid he preferred to keep such work in-house.
"Maybe it does mean we need a second person to implement the changes from this," Cambpell said.