City of Imperial 04/08

CITY OF IMPERIAL Audit Report SPECIAL GAS TAX STREET IMPROVEMENT FUND July 1, 2004, through June 30, 2005 TRAFFIC CONGESTION RELIEF FUND July 1, 2001, through June 30, 2005 J C OHN HIANG California State Controller April 2008 J C OHN HIANG California State Controller April 23, 2008 Geoff Dale, Mayor City of Imperial 420 South Imperial Avenue Imperial, CA 92251 Dear Mr. Dale: The State Controller’s Office audited the City of Imperial’s Special Gas Tax Street Improvement Fund for the period of July 1, 2004, through June 30, 2005. We also audited the Traffic Congestion Relief Fund for the period of July 1, 2001, through June 30, 2005. Our audit disclosed that the city understated the fund balance in the Traffic Congestion Relief Fund (TCRF) in fiscal year (FY) 2004-05 because it did not expend $4,400 of the FY 2002-03 TCRF allocations within the required time period. Additionally, the city overstated the fund balance in the Traffic Congestion Relief Fund by $5,856 as of June 30, 2005. This overstatement occurred because the city did not meet the TCRF expenditure requirement for FY 2002-03. 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/vb cc: Laura Gutierrez Administrative Services Director City of Imperial City of Imperial Special Gas Tax Street Improvement Fund and Traffic Congestion Relief Fund 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 Imperial Special Gas Tax Street Improvement Fund and Traffic Congestion Relief Fund Audit Report Summary The State Controller’s Office (SCO) audited the City of Imperial’s Special Gas Tax Street Improvement Fund for the period of July 1, 2004, through June 30, 2005. We also audited the Traffic Congestion Relief Fund for the period of July 1, 2001, through June 30, 2005. Our audit disclosed that the city accounted for and expended its Special Gas Tax Street Improvement Fund in compliance with requirements, and that no adjustments to the fund are required. Our audit disclosed that the city understated the fund balance in the Traffic Congestion Relief Fund (TCRF) in fiscal year (FY) 2004-05 because it did not expend $4,400 of the FY 2002-03 TCRF allocations within the required time period. Additionally, the city overstated the fund balance in the Traffic Congestion Relief Fund by $5,856 as of June 30, 2005. This overstatement occurred because the city did not meet the TCRF expenditure requirement for FY 2002-03. 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 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. 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. The city recorded its TCRF allocations in the Traffic Congestion Relief Fund. We conducted our audit of the city’s TCRF allocations under the authority of Streets and Highways Code sections 2182 and 2182.1. Objective, Scope, Our audit objective was to determine whether the city accounted for and expended the Special Gas Tax Street Improvement Fund and the Traffic and Methodology Congestion Relief Fund in compliance with Article XIX of the California Constitution and the Streets and Highways 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; -1- City of Imperial Special Gas Tax Street Improvement Fund and Traffic Congestion Relief 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 Traffic Congestion Relief Fund 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 Special Gas Tax Street Improvement 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 Traffic Congestion Relief Fund in compliance with Article XIX of the California Constitution and the Streets and Highways Code for the period of July 1, 2001, through June 30, 2005, except as noted in Schedule 1 and described in the Findings and Recommendations section of this report. The findings require that the city reimburse $4,400 to the Traffic Congestion Relief Fund for failing to expend its TCRF allocations within the required time period, and return $5,856 to the SCO for failing to meet the expenditure requirement. Follow-Up on Prior Our prior audit report, issued on February 19, 1997, disclosed no Audit Findings findings. Views of We issued a draft audit report on August 29, 2007, to Laura Gutierrez, Administrative Services Director/Finance Officer. We have not received Responsible a response from the city. Additionally, Ms. Gutierrez has not returned Official any of our telephone calls and voice messages. -2- City of Imperial Special Gas Tax Street Improvement Fund and Traffic Congestion Relief Fund 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 April 23, 2008 -3- City of Imperial Special Gas Tax Street Improvement Fund and Traffic Congestion Relief Fund Schedule 1— Reconciliation of Fund Balance July 1, 2004, through June 30, 2005 Special Gas Tax Street Traffic Improvement Congestion Fund 1 Relief Fund 2 Beginning fund balance per city $ 9,533 $ 5,819 Revenues 171,258 37 Total funds available 180,791 5,856 Expenditures (66,000) (4,400) Ending fund balance per city 114,791 1,456 Timing adjustment: Accrual of June 2005 highway users tax apportionment (Governmental Accounting Standards Board Statement No. 34) 16,684 — SCO adjustments: 3 Finding 1—Failure to expend TCRF allocations — 4,400 Finding 2—TCRF expenditure requirement not met — (5,856) Total SCO adjustments 16,684 (1,456) Ending fund balance per audit $ 131,475 $ — ___________________________ 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. The TCRF allocations were recorded in the Traffic Congestion Relief Fund. 3 See the Findings and Recommendations section. -4- City of Imperial Special Gas Tax Street Improvement Fund and Traffic Congestion Relief Fund Findings and Recommendations FINDING 1— The city incurred $4,400 in Traffic Congestion Relief Fund (TCRF) Failure to expend TCRF expenditures during fiscal year (FY) 2004-05. These were allocations within the apportionments from FY 2002-03 carried over to FY 2004-05. According to Streets and Highways Code section 2182.1(g), these funds should have required time period been expended within the fiscal year following the fiscal year in which the allocations were made—no later than June 30, 2004. Therefore, the city did not expend these expenditures within the applicable time period. Streets and Highways Code section 2182.1(g) states: The allocation made under Section 2182 shall be expended no later than the end of the fiscal year following the fiscal year in which the allocation was made, and any funds not expended within that period shall be returned to the Controller and shall be reallocated to the other cities and counties pursuant to the allocation formulas set forth in Section 2182. Recommendation The city must reimburse the Traffic Congestion Relief Fund in the amount of $4,400 for its failure to expend the allocations within the required time period. City’s Response The city did not respond to our draft audit report. FINDING 2— The city did not expend its FY 2002-03 TCRF allocations in a timely TCRF expenditure manner as required by the Streets and Highways Code section 2182.1(g). requirement not met In addition to the $4,400 disclosed in Finding 1, the city did not expend an additional $1,456. The total amount that was not in compliance is $5,856. Streets and Highways Code section 2182.1(g) states: The allocation made under Section 2182 shall be expended no later than the end of the fiscal year following the fiscal year in which the allocation was made, and any funds not expended within that period shall be returned to the Controller and shall be reallocated to the other cities and counties pursuant to the allocation formulas set forth in Section 2182. Recommendation The city should return $5,856 of TCRF allocations that was not expended within the required time period to the State Controller’s Office, Attn: 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 The city did not respond to our draft audit report. -5- State Controller’s Office Division of Audits Post Office Box 942850 Sacramento, CA 94250-5874 http://www.sco.ca.gov C06-GTA-027