City of Orinda 01/07

CITY OF ORINDA Audit Report GAS TAX FUND AND TRAFFIC CONGESTION RELIEF FUND July 1, 2004, through June 30, 2005 J C OHN HIANG California State Controller January 2007 J C OHN HIANG California State Controller January 26, 2007 Rhada Wood Administrative Services Director City of Orinda P.O. Box 2000 Orinda, CA 94563 Dear Ms. Wood: The State Controller’s Office audited the City of Orinda’s Gas Tax Fund for the period of July 1, 2004, through June 30, 2005. We also audited the Traffic Congestion Relief Fund (TCRF) for the period of July 1, 2000, through June 30, 2005. The city accounted for and expended its Gas Tax Fund in compliance with Article XIX of the California Constitution and the Streets and Highways Code. If you have any questions, please contact Paul R. Criss, Chief, Financial-Related Audits Bureau, at (916) 322-4941. Sincerely, Original signed by JEFFREY V. BROWNFIELD Chief, Division of Audits JVB/vb City of Orinda Gas Tax Fund and Traffic Congestion Relief Fund Contents Audit Report Summary .................................................................................................................................... 1 Background ................................................................................................................................ 1 Objective, Scope, and Methodology ........................................................................................ 1 Conclusion .................................................................................................................................. 2 Views of Responsible Official ................................................................................................... 2 Restricted Use ............................................................................................................................ 2 Schedule 1—Reconciliation of Fund Balance ............................................................................ 3 Findings and Recommendations .................................................................................................. 4 City of Orinda Gas Tax Fund and Traffic Congestion Relief Fund Audit Report Summary The State Controller’s Office (SCO) audited the City of Orinda’s Gas Tax Fund for the period of July 1, 2004, through June 30, 2005. We also audited the Traffic Congestion Relief Fund (TCRF) for the period of July 1, 2000, through June 30, 2005. The last day of fieldwork was March 15, 2006. Our audit disclosed that no adjustment to the Gas Tax Fund or TCRF Fund is required. Background The State apportions funds monthly from the highway users tax account in the transportation tax fund to cities and counties for the construction, maintenance, and operation of local streets and roads. The highway users taxes are derived from state taxes on the sale of motor vehicle fuels. In accordance with Streets and Highways Code Section 2101 and Article XIX of the California Constitution, a city must deposit all apportionments of highway users taxes in its Gas Tax Fund (also known as the Special Gas Tax Street Improvement Fund). A city must expend gas tax funds only for street-related purposes. We conducted our audit of the city’s Gas Tax Fund under the authority of Government Code Section 12410. Chapter 91, Statutes of 2000 (Assembly Bill 2928), as amended by Chapter 656, Statutes of 2000 (Senate Bill 1662), established a Traffic Congestion Relief Fund in the State Treasury for allocating funds quarterly to cities and counties for street or road maintenance, reconstruction, and storm damage repair. Cities must deposit funds received into the city account designated for the receipt of state funds allocated for transportation purposes. We conducted our audit of the city’s TCRF under the authority of Streets and Highways Code Sections 2182 and 2182.1. Objective, Our audit objective was to determine whether the city accounted for and expended the Gas Tax Fund and TCRF in compliance with Article XIX Scope, and of the California Constitution and the Streets and Highways Code. To Methodology meet the audit objective, we determined whether the city: • Properly deposited highway users tax apportionments and other appropriate revenues in the Gas Tax Fund; • Properly deposited TCRF allocations into an account designated for the receipt of State funds allocated for transportation purposes; • Expended funds exclusively for authorized street-related purposes; and • Made available unexpended funds for future expenditures. -1- City of Orinda Gas Tax Fund and Traffic Congestion Relief Fund We conducted our audit according to Government Auditing Standards, issued by the Comptroller General of the United States. We did not audit the city’s financial statements. We limited our audit scope to planning and performing the audit procedures necessary to obtain reasonable assurance that the city accounted for and expended the Gas Tax Fund and the TCRF in accordance with the requirements of the Streets and Highways Code. Accordingly, we examined transactions, on a test basis, to determine whether the city expended funds for street purposes. We considered the city’s internal controls only to the extent necessary to plan the audit. Conclusion Our audit disclosed that the city accounted for and expended its Gas Tax Fund in compliance with Article XIX of the California Constitution and the Streets and Highways Code for the period of July 1, 2004, through June 30, 2005. Our audit also disclosed that the city accounted for and expended its TCRF in compliance with Article XIX of the California Constitution and the Streets and Highways Code for the period of July 1, 2000, through June 30, 2005. Views of We issued a draft audit report dated September 15, 2006. Radha Wood, Administrative Services Director, responded by preparing correcting Responsible journal entries to reclassify expenditures from the Capital Improvement Official Fund to the TCRF. Restricted Use This report is intended for the information and use of city management and the SCO; it is not intended to be and should not be used by anyone other than these specified parties. This restriction is not intended to limit distribution of this report, which is a matter of public record. Original signed by JEFFREY V. BROWNFIELD Chief, Division of Audits -2- City of Orinda Gas Tax Fund and Traffic Congestion Relief Fund Schedule 1— Reconciliation of Fund Balance July 1, 2004, through June 30, 2005 Traffic Gas Tax Congestion Fund 1 Relief Fund 2 Beginning fund balance per city $ 27,321 $ 63,879 Revenues 351,012 2,060 Total funds available 378,333 65,939 Expenditures (102,267) (65,939) Ending fund balance per city 276,066 — SCO adjustment — — Ending fund balance per audit $ 276,066 $ — ___________________________ 1 The city receives apportionments from the state highway users tax account, pursuant to Streets and Highways Code Sections 2105, 2106, 2107, and 2107.5. The basis of the apportionments for Sections 2105, 2106, and 2107 varies, but the money may be used for any street purpose. Streets and Highways Code Section 2107.5 apportionments are restricted to administration and engineering expenditures, except for cities with populations of fewer than 10,000 inhabitants. Those cities may use the funds for rights-of-way and for the construction of street systems. 2 Chapter 91, Statutes of 2000 (Assembly Bill 2928), as amended by Chapter 656, Statutes of 2000 (Senate Bill 1662), established the State Traffic Congestion Relief Fund (TCRF), which allocates funds to cities and counties for street or road maintenance and reconstruction. -3- City of Orinda Gas Tax Fund and Traffic Congestion Relief Fund Findings and Recommendations FINDING 1— The city did not expend its allocations of the Traffic Congestion Relief TCRF expenditure Fund (TCRF) within the fiscal year following the fiscal year in which the requirements not met allocations were made as required by Streets and Highways Code Section 2182.1(g). The unexpended allocation subject to the spending requirements as of June 30, 2005, is $62,432. The Streets and Highways Code further states, “. . . funds not expended within that period shall be returned to the Controller. . . .” Recommendation The city should return the unexpended TCRF allocations and interest earned on the funds, in the amount of $62,432, to the State Controller’s Office, Attention: Bill Byall, P.O. Box 942850, Sacramento, CA 94250. Additionally, the city should review its TCRF expenditure levels to ensure compliance with program requirements. City’s Response Upon receipt and review of the SCO’s draft audit report relating to the TCRF, the city has made correcting journal entries to reclassify qualifying TCRF expenditures from the Capital Improvement Fund #700 to the TCRF #016. Additionally, the city will ensure that future TCRF allocations are expended in a timely manner. SCO’s Comment We reviewed the correcting adjustments made by the city relating to the TCRF allocations, and we withdraw the audit finding. FINDING 2— As of June 30, 2005, the city’s recorded fund balance in the TCRF was Deficit fund balance $0. However, as the city did not meet the TCRF expenditure requirements and must return $62,432 (see Finding 1) from the TCRF to the SCO, the city’s TCRF balance will be in a deficit of $62,432. Pursuant to the California Government Code Section 12440, warrants may only be drawn from an unexhausted specific appropriation provided by law. As a result of the SCO’s adjustment, the city’s TCRF will be exhausted and no funds will be available in the TCRF to meet those warrants. Additionally, the city may not carry forward a deficit fund balance to the subsequent fiscal year. Recommendation The city should eliminate the deficit fund balance in the TCRF. In the future, the city should adopt a balanced budget that limits expenditures to the funds available. -4- City of Orinda Gas Tax Fund and Traffic Congestion Relief Fund City’s Response By reclassifying expenditures from the Capital Improvement Fund #700 to the TCRF #016, the city has eliminated the deficit fund balance. SCO’s Comment We reviewed the correcting adjustments made by the city relating to the TCRF allocations, and we withdraw the audit finding. -5- State Controller’s Office Division of Audits Post Office Box 942850 Sacramento, CA 94250-5874 http://www.sco.ca.gov S06-GTA-020