Report 2001-123 Summary - July 2002
Deaf and Disabled Telecommunications Program
:Insufficient Monitoring of Surcharge Revenues Combined With Imprudent Use of Public Funds Leave Less Money Available for Program Services
HIGHLIGHTS
Our review of the Deaf and Disabled Telecommunications Program (DDTP) concludes that:
- Neither the DDTP nor the California Public Utilities Commission (CPUC) is fulfilling its responsibilities to ensure that telephone companies (carriers) are remitting required surcharges, possibly resulting in hundreds of thousands of dollars going uncollected.
- Only about 32 percent of certified carriers remitted surcharge payments over the last two years.
- Some of the DDTP's expenditures are for unreasonable or unnecessary items.
- The salaries of select DDTP employees average 24 percent higher than those of comparable state positions.
- Most DDTP contracts we reviewed comply with the Public Contract Code and contain adequate standards for contractors to adhere to.
RESULTS IN BRIEF
The Deaf and Disabled Telecommunications Program (DDTP)-a quasi-governmental entity subject to the oversight of the California Public Utilities Commission (CPUC)-is responsible for providing telecommunications services to the deaf and disabled communities of California. Specifically, the DDTP fulfills its legislative mandate by providing specialized telecommunications equipment to certified deaf, hearing impaired, and disabled individuals. In addition, the DDTP administers the California Relay Service, connecting individuals who are deaf or hearing impaired with those who have normal hearing through the use of trained operators who relay the conversation. The DDTP is financed through a surcharge that appears on all consumers' telephone bills. This surcharge applies to most calls made within the State. After telecommunications companies (carriers) collect money from the customer, they are required to remit the funds to the Deaf Equipment Acquisition Fund Trust (DEAF Trust) through the fund's trustee, the Bank of America.
Neither the DDTP nor the CPUC is fulfilling its responsibilities to ensure that carriers are collecting and remitting required surcharges on intrastate telecommunications charges, possibly resulting in hundreds of thousands of dollars going uncollected. For example, neither the DDTP nor the CPUC knows which of the almost 1,500 carriers certified by the CPUC to operate in California are providing services subject to surcharge. Roughly 32 percent of the certified carriers have submitted the payments over the last two years. In addition, the DDTP does not maintain accurate records of carrier payments, making it difficult to identify delinquent carriers. Further, these carriers frequently remit surcharges past their due date and usually do not pay appropriate late-payment penalties. The DDTP does not report late payments to the CPUC, which can assess penalties and revoke carriers' certifications. In addition, carriers often do not submit payments as frequently as required and do not always consistently apply the surcharge rate to the various types of intrastate service charges. This could be due to unclear instructions from the CPUC. The lack of proper monitoring and oversight also create the potential for many errors and can mean the DDTP is not receiving all it is owed, hampering its ability to carry out its mission.
Moreover, the DDTP does not always further its mission when expending public funds. In part, this is because the DDTP does not always ensure that the public funds it spends are for reasonable or necessary items. For example, it previously did not have adequately defined policies and procedures for credit card use, resulting in frivolous expenditures on flowers and other items of a personal nature. In addition, it has expended funds on items typically not allowed in state service, such as employees' moving expenses and rent. The DDTP implemented new policies on nonallowable expenses after we brought many of these imprudent expenditures to its attention. In addition, its employees have repaid many of these expenditures.
Furthermore, salaries and benefits of some DDTP employees appear very generous when compared with those of similar state employees. Although DDTP employees are not state employees, the DDTP is a publicly funded entity. Thus, we used state civil service employees as a benchmark in our comparison. In fact, our salary comparison of 12 DDTP employees shows that the maximum step of the salary ranges of these employees averages 24 percent higher than those of comparable state positions, with one salary as high as 48 percent above a similar classification in state service.
The DDTP also gives many of its employees fringe benefits, including paid parking and use of leased vehicles. In the past, the DDTP has failed to report these taxable benefits to the proper taxation authorities. After we brought our concerns to the DDTP's attention, it made efforts to report parking benefits, although we believe it can strengthen its internal controls to prevent the personal use of leased vehicles.
Finally, most DDTP contracts that we reviewed comply with the Public Contract Code and contain adequate benchmarks and standards for contractors. However, some of its contracts contain no performance measures or provisions for the collection of monetary penalties should a contractor fail to comply. Although the DDTP is beginning to implement performance requirements for some of these contracts, the initial lack of provisions to collect penalties may have cost the DDTP thousands of dollars in noncompliance fees, or monetary damages it would have been entitled to if the contractor failed to meet established standards.
RECOMMENDATIONS
The administration of the DDTP is being reconfigured. It has not yet been determined who will be responsible for the day-to-day provision of program services, so we are making several recommendations. Because the DDTP's current structure will remain intact for another year, we recommend that it take the following actions to better track carrier remittance practices and payments and to ensure that the DEAF Trust is receiving all the money it is owed:
- Work with the CPUC to develop and maintain a reliable record of active carriers that are providing services subject to the surcharge.
- Track the payment history of each carrier and monitor these records to identify delinquent carriers.
- Regularly notify delinquent carriers and the CPUC of all past-due amounts.
- Develop and maintain a reliable record of active carriers that are providing services subject to the surcharge.
- Rewrite its transmittal instructions in explicit detail, ensuring consistency among carriers.
- Enforce late-payment penalties.
- Conduct periodic audits of DDTP surcharge remittances.
- Adhere to its newly revised internal control procedures that define allowable expenses.
- Obtain the CPUC's approval for employee salaries.
- Develop additional procedures to prevent the potential for personal car use among employees with DDTP-leased vehicles.
- Include specific provisions in its contracts that require contractors to comply with state laws, regulations, and policies related to reimbursable expenses.
- Include specific performance standards in its contracts and monitor whether the contractors are meeting those standards.
- Include provisions in its contracts that will allow it to collect damages from nonperforming contractors.
The CPUC and the DDTP agree with our recommendations. However, the DDTP disagreed with how we characterized some of its imprudent expenditures. In addition, the DDTP took exception to our comparison of the salaries and benefits of DDTP employees with comparable state positions. However, it outlined what it will do or has done to implement each of our recommendations. Finally, the CPUC plans to adopt all of our recommendations and detailed how it would implement each one.
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