Report 2013-130 Summary - June 2014
California Public Utilities Commission:
It Fails to Adequately Ensure Consumers' Transportation Safety and Does Not Appropriately Collect and Spend Fees From Passenger Carriers
Our audit of the California Public Utilities Commission's (commission) efforts to regulate passenger carriers, revealed the following:
- The commission's oversight of passenger carriers is insufficient to ensure consumer safety.
- It does not have formal policies and procedures to address complaints against passenger carriers.
- It does not ensure complaints are resolved timely or adequately.
- When it issues citations to passenger carriers, the citations have been for amounts much lower than what state law allows.
- It does not perform periodic reviews of passenger carrier fee payments to ensure the State received the proper amount of fee revenue.
- The commission does not track—by class of carrier—how it spends fees received from each class of common carrier.
- The commission is not using some of its staff for airport enforcement although it received funding for this purpose.
- The commission lacks effective program leadership.
- It has not established program goals, strategies, or performance measures to guide its efforts.
- It has high turnover and vacancies in key management positions.
RESULTS IN BRIEF
The Transportation Enforcement Branch (branch) of the California Public Utilities Commission (commission) does not provide sufficient oversight of charter-party carriers and passenger stage corporations (passenger carriers) to ensure consumer safety. Because of this insufficient oversight, the commission is also failing to collect the proper amount of fee revenue from these carriers and to spend it appropriately. Through the efforts of the branch, the commission is responsible for ensuring that passenger carriers—for-hire limousines, for example—comply with requirements to have branch-issued permits, which include regular inspections by the California Highway Patrol, applicable insurance, and participation in driver safety programs. However, the branch does not adequately ensure that such passenger carriers comply with state law. Specifically, it has not established formal policies and procedures for staff to follow when addressing complaints against passenger carriers, and it does not ensure that staff resolve these complaints in a timely or adequate manner. Because they do not have formal guidance, investigators have not always ensured that passenger carriers are complying with critical safety requirements. In addition, when the branch's investigators have issued citations to passenger carriers, the citations have been for amounts much lower than state law allows and often for amounts below an internal threshold that requires manager review, a process that investigators appear to avoid because of reported long delays in receiving manager approval.
In addition to consistently low citations, the branch has failed to ensure that the State receives the appropriate amount of fees from passenger carriers. In general, state law requires passenger carriers to submit fees based on a percentage of their revenue, which they self-report. However, commission staff do not perform periodic reviews of these revenues to verify that the carriers calculate the fees correctly. Although state law allows the commission to inspect carriers' financial records, its staff do not exercise this authority. As a result, the commission may not be collecting all the revenue it is entitled to collect, revenue that could be used to oversee more effectively the safety and service standards of passenger carriers.
Moreover, the branch has not taken the steps necessary to ensure that it appropriately spends funds from the Public Utilities Commission Transportation Reimbursement Account (transportation account). State law requires the commission to spend fees received from each class of common carrier, including passenger carriers, for the regulatory activities related to those carriers. However, the commission does not track how it spends these fees by each class of carrier, which hinders its ability to ensure that it spends passenger carrier fees only on regulating passenger carriers. Additionally, although the fiscal year 2007-08 budget authorized the commission to hire five new investigators to enforce statutes concerning passenger carriers operating at the State's major airports, it is not using those staff for airport enforcement. By not using all of the new positions for the authorized purpose, the commission fails to meet budget requirements and risks not having sufficient resources to enforce passenger carrier requirements at major airports.
The core reason for the deficiencies we found is a lack of effective program leadership. Specifically, branch management has not adequately established program goals, strategies, or performance measures to guide its oversight efforts. Additionally, it does not consistently provide training to investigators that would equip them with the knowledge and skills necessary to investigate complaints against passenger carriers. One of the key reasons for the lack of program oversight and training is turnover and vacancies in key branch management positions. Because the commission has a large and growing balance in its transportation account, the branch appears to have the resources to resolve these program deficiencies. However, without major improvements to its management processes, we question the branch's ability to resolve its current issues and to implement the expanded oversight required by recent legislation as well as by a recent initiative requiring the branch to regulate other types of passenger carriers.
To ensure carrier and public safety, the branch should develop policies and procedures for receiving complaints and investigating passenger carriers by December 31, 2014.
To ensure that it resolves complaints against passenger carriers in a timely manner, the commission should establish a method for prioritizing complaints and it should implement a policy specifying the maximum amount of time allowed between receipt of a complaint and completion of any subsequent investigation. Further, the commission should require branch management to monitor and report regularly on its performance in meeting that policy.
To ensure that the branch conducts thorough investigations of passenger carriers, the commission should require investigators to review passenger carriers for compliance with each state law relating to passenger carrier requirements, and it should implement a formal training program to ensure that all investigators have adequate knowledge and skills related to regulating passenger carriers.
To better ensure passenger carrier and public safety, the commission should create a system to determine when a carrier merits a penalty and what the magnitude of the penalty should be. In addition, to be an effective deterrent, the amount of such penalties should be more consistent with what state law permits.
To ensure that passenger carriers submit accurate fee payments, the commission should require its fiscal staff to implement a process to verify passenger carrier fee payments and associated revenue.
To ensure that it complies with state law and uses passenger carrier fees appropriately, the commission should implement a process to ensure that passenger carrier fee revenues more closely match related enforcement costs.
To detect and deter carriers from operating illegally at airports, the branch should use as intended the five positions added for passenger carrier enforcement at airports. If the branch chooses not to designate five positions solely for this purpose, then it must be prepared to demonstrate regularly that an equivalent number of full-time positions are working on this activity.
To strengthen its leadership and ensure carrier and public safety, the branch should produce a draft strategic plan by December 31, 2014, with a final strategic plan completed as the commission specifies. The strategic plan should include goals for the program; strategies for achieving those goals, including strategies for staff development and training; and performance measures to assess goal achievement.
The commission agreed with all of our findings and recommendations and indicated that it plans to make all necessary changes to address them.