City of El Paso De Robles 02/08

CITY OF EL PASO DE ROBLES Audit Report SPECIAL GAS TAX STREET IMPROVEMENT FUND July 1, 2005, through June 30, 2006 TRAFFIC CONGESTION RELIEF FUND ALLOCATIONS July 1, 2002, through June 30, 2006 J C OHN HIANG California State Controller February 2008 J C OHN HIANG California State Controller February 6, 2008 Jennifer Sorenson Finance Manager City of El Paso de Robles 1000 Spring Street Paso Robles, CA 93446 Dear Ms. Sorenson: The State Controller’s Office audited the City of El Paso de Robles’ Special Gas Tax Street Improvement Fund—highway users tax and Surface Transportation Program allocations—for the period of July 1, 2005, through June 30, 2006. We also audited the Traffic Congestion Relief Fund (TCRF) allocations recorded in the AB 2928 Fund for the period of July 1, 2002, through June 30, 2006. Our audit disclosed that the city accounted for and expended in compliance with requirements its Special Gas Tax Street Improvement Fund and TCRF allocations recorded in the AB 2928 Fund, and that no adjustments to the funds are required. If you have any questions, please contact Steven Mar, Chief, Local Government Audits Bureau, at (916) 324-7226. Sincerely, Original signed by JEFFREY V. BROWNFIELD Chief, Division of Audits JVB/sk cc: Grace Kong, Chief Local Program Accounting Department of Transportation City of El Paso de Robles Special Gas Tax Street Improvement Fund and Traffic Congestion Relief Fund Allocations Contents Audit Report Summary .................................................................................................................................... 1 Background ................................................................................................................................ 1 Objective, Scope, and Methodology ........................................................................................ 1 Conclusion .................................................................................................................................. 2 Follow-Up on Prior Audit Findings ........................................................................................ 2 Views of Responsible Official ................................................................................................... 2 Restricted Use ............................................................................................................................ 3 Schedule 1—Reconciliation of Fund Balance ............................................................................ 4 Findings and Recommendations .................................................................................................. 5 City of El Paso de Robles Special Gas Tax Street Improvement Fund and Traffic Congestion Relief Fund Allocations Audit Report Summary The State Controller’s Office audited the City of El Paso de Robles’ Special Gas Tax Street Improvement Fund for the period of July 1, 2005, through June 30, 2006. In addition, we audited Surface Transportation Program (STP) exchange funds in the Special Gas Tax Street Improvement Fund and the Traffic Congestion Relief Fund (TCRF) allocations recorded in the AB 2928 Fund for the period of July 1, 2002, through June 30, 2006. Our audit disclosed that the city accounted for and expended in compliance with the requirements its Special Gas Tax Street Improvement Fund and TCRF allocations recorded in AB 2928 Fund in compliance with requirements, and that no adjustments to the funds are 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 derive 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 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 Special Gas Tax Street Improvement Fund under the authority of Government Code section 12410. The Surface Transportation Program is part of a federal program designed to increase flexibility in federal funding for transportation purposes by shifting the funding responsibility to state and local agencies. The funds are restricted to expenditures made in compliance with Article XIX of the California Constitution and the Streets and Highways Code. The California Department of Transportation (Caltrans) requested that we audit these expenditures to ensure the city’s compliance. Government Code section 14556.5 created 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. The city recorded its TCRF allocations in the AB 2928 Fund. We conducted our audit of the city’s TCRF allocations under the authority of Streets and Highways Code section 2182 for FY 2002-03, and Revenue and Taxation Code section 7104 for fiscal years thereafter. -1- City of El Paso de Robles Special Gas Tax Street Improvement Fund and Traffic Congestion Relief Fund Allocations Objective, Scope, Our audit objective was to determine whether the city accounted for and and Methodology expended the Special Gas Tax Street Improvement Fund and the TCRF allocations recorded in the AB 2928 Fund in compliance with Article XIX of the California Constitution, Streets and Highways Code, and Revenue and Taxation Code. To meet the audit objective, we determined whether the city: • Properly deposited highway users tax apportionments and other appropriate revenues in the Special Gas Tax Street Improvement 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. 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 Special Gas Tax Street Improvement Fund and the TCRF allocations in the AB 2928 Fund in accordance with the requirements of the Streets and Highways Code and Revenue and Taxation 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 Special Gas Tax Street Improvement Fund—highway users tax and Surface Transportation Program allocations—in compliance with Article XIX of the California Constitution and the Streets and Highways Code for the period of July 1, 2005, through June 30, 2006. Our audit also disclosed that the city accounted for and expended its TCRF allocations recorded in the AB 2928 Fund in compliance with Article XIX of the California Constitution, Streets and Highways Code, and Revenue and Taxation Code for the period of July 1, 2002, through June 30, 2006. Follow-Up on Prior Our prior audit report, issued on October 3, 2003, disclosed no findings. Audit Findings Views of We issued a draft audit report on October 5, 2007. Jennifer Sorenson, Finance Director, responded by letter dated December 6, 2007, Responsible acknowledging the audit results with explanations. After reviewing the Official city’s response and additional documentation provided, we concur that the city made an accounting error. By correcting the accounting error, the city is in compliance with Streets and Highways Code sections 2182 and 2182.1 and Revenue and Taxation Code section 7104. Therefore, we have reversed our findings. The city’s response is included in this final audit report as an attachment. -2- City of El Paso de Robles Special Gas Tax Street Improvement Fund and Traffic Congestion Relief Fund Allocations 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 February 6, 2008 -3- City of El Paso de Robles Special Gas Tax Street Improvement Fund and Traffic Congestion Relief Fund Allocations Schedule 1— Reconciliation of Fund Balance July 1, 2005, through June 30, 2006 Special Gas Tax Street Improvement Fund Surface Traffic Highway Transportatio Congestion Users Tax n Program Relief Fund Allocation 1 Allocation 2 Totals Allocation 3 Beginning fund balance per city $ 198,868 $ — $ 198,868 $ — Revenues 1,575,908 65,523 1,641,431 126,225 Total funds available 1,774,776 65,523 1,840,299 126,225 Expenditures (801,688) (65,523) (867,211) — Ending fund balance per city 973,088 — 973,088 126,225 SCO adjustment — — — — Ending fund balance per audit $ 973,088 $ — $ 973,088 $ 126,225 ___________________________ 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 restricts apportionments 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 The city received Surface Transportation Program funds, pursuant to Streets and Highways Code section 182.6. These funds were apportioned to the city by the regional transportation planning agency to be used for transportation projects. 3 Government Code section 14556.5 created a Traffic Congestion Relief Fund (TCRF) in the State Treasury for allocating funds quarterly to cities and counties for street and road maintenance, reconstruction, and storm damage repair. The TCRF allocations were recorded in the AB 2928 Fund. The audit period was July 1, 2002, through June 30, 2006. -4- City of El Paso de Robles Special Gas Tax Street Improvement Fund and Traffic Congestion Relief Fund Allocations Findings and Recommendations FINDING 1— The city did not expend all of the fiscal year (FY) 2002-03 Traffic TCRF expenditure Congestion Relief Fund (TCRF) allocations received by June 30, 2004. The unexpended balance totaled $24,809. As a result, the city did not requirement not met meet the TCRF’s expenditure requirement for FY 2002-03 as required by Streets and Highways Code section 2182(g). Section 2182(g) states that apportionments: Shall be expended not later than the end of the fiscal year following the fiscal year in which the allocations was made, and any funds not expended within the period shall be returned to the Controller. Recommendation The city must return all unexpended Traffic Congestion Relief Program funds received in FY 2002-03 and not expended by June 30, 2004. The amount of unexpended TCRF allocations total $24,809. Therefore, this amount must be returned to: State Controller’s Office, Attention: Bill Byall, P.O. Box 942850, Sacramento, CA 94250. Additionally, the city should review its TCRF requirements to ensure future compliance with the program. City’s Response The city has examined their detail transaction reports for those time periods reviewed by the audit and discovered an accounting error. The TCRF funds were deposited to an incorrect revenue account and consequently spent from an incorrect expenditure account. SCO’s Comment After reviewing the city’s response to our draft audit report and additional documentation provided by the city, we concluded that the city made errors. Correction of an accounting error may be made after the error is discovered. The city’s correction of the accounting error renders the city in compliance with Streets and Highways Code section 2182(g). The finding is reversed. -5- City of El Paso de Robles Special Gas Tax Street Improvement Fund and Traffic Congestion Relief Fund Allocations FINDING 2— The city did not meet its expenditure requirement during FY 2002-03, as Ineligible TCRF noted in Finding 1. Consequently, the expenditure of these funds totaling $24,809 was not eligible. expenditure Recommendation The city must reimburse the TCRF allocations by $24,809 to eliminate the ineligible expenditures. City’s Response See the city’s response to Finding 1. SCO’s Comment The city’s correction of the accounting error referred to in Finding 1 renders the expenditure eligible. The finding is reversed. -6- City of El Paso de Robles Special Gas Tax Street Improvement Fund and Traffic Congestion Relief Fund Allocations Attachment— City’s Response to Draft Audit Report State Controller’s Office Division of Audits Post Office Box 942850 Sacramento, CA 94250-5874 http://www.sco.ca.gov C07-GTA-023