City of Santa Fe Springs 08/08

CITY OF SANTA FE SPRINGS Audit Report SPECIAL GAS TAX STREET IMPROVEMENT FUND July 1, 2006, through June 30, 2007 TRAFFIC CONGESTION RELIEF FUND ALLOCATIONS July 1, 2000, through June 30, 2007 J C OHN HIANG California State Controller August 2008 J C OHN HIANG California State Controller August 22, 2008 The Honorable Gustavo R. Velasco Mayor of the City of Santa Fe Springs 11710 Telegraph Road Santa Fe Springs, CA 90670-3670 Dear Mayor Velasco: The State Controller’s Office audited the City of Santa Fe Springs’ Special Gas Tax Street Improvement Fund for the period of July 1, 2006, through June 30, 2007. We also audited the Traffic Congestion Relief Fund (TCRF) allocations recorded in the Street Maintenance Fund for the period of July 1, 2000, through June 30, 2007. Our audit disclosed that the city accounted for and expended its Special Gas Tax Street Improvement Fund and TCRF allocations recorded in the Street Maintenance Fund in compliance with requirements, and that no adjustment to the funds is 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/vb cc: Si Lau, Auditor State Controller’s Office Grace Kong, Chief Local Program Accounting Department of Transportation City of Santa Fe Springs 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 .................................................................................................................... 2 Schedule 1—Reconciliation of Fund Balance ...................................................................... 3 Findings and Recommendations ........................................................................................... 4 Attachment—City’s Response to Draft Audit Report City of Santa Fe Springs Special Gas Tax Street Improvement Fund and Traffic Congestion Relief Fund Allocations Audit Report Summary The State Controller’s Office audited the City of Santa Fe Springs’ Special Gas Tax Street Improvement Fund for the period of July 1, 2006, through June 30, 2007. We also audited the Traffic Congestion Relief Fund (TCRF) allocations recorded in the Street Maintenance Fund for the period of July 1, 2000, through June 30, 2007. Our audit disclosed that the city accounted for and expended its Special Gas Tax Street Improvement Fund and TCRF allocations recorded in the Street Maintenance Fund in compliance with requirements. 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 Article XIX of the California Constitution and Streets and Highways Code section 2101, 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. 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 Street Maintenance Fund. We conducted our audit of the city’s TCRF allocations under the authority of Revenue and Taxation Code section 7104. 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 Street Maintenance 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; • 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 Santa Fe Springs Special Gas Tax Street Improvement Fund and Traffic Congestion Relief Fund Allocations 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 recorded in the Street Maintenance Fund in accordance with the requirements of the Streets and Highways Code and Revenue and Taxation Code section 7104. 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 of Santa Fe Springs 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, 2006, through June 30, 2007. Our audit also disclosed that the city accounted for and expended its TCRF allocations recorded in the Street Maintenance Fund in compliance with Article XIX of the California Constitution, the Streets and Highways Code, and Revenue and Taxation Code section 7104 for the period of July 1, 2000, through June 30, 2007. Follow-Up on Prior Our prior audit report, issued on September 23, 1999, disclosed no Audit Findings findings. Views of We issued a draft audit report on June 13, 2008. Jose Gomez, Director of Finance and Administrative Services, responded by letter dated July 18, Responsible 2008 agreeing with the audit results with an explanation. The city’s Official response is included in this final audit report as an attachment. 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 August 22, 2008 -2- City of Santa Fe Springs Special Gas Tax Street Improvement Fund and Traffic Congestion Relief Fund Allocations Schedule 1— Reconciliation of Fund Balance July 1, 2006, through June 30, 2007 Special Gas Traffic Tax Street Congestion Improvement Relief Fund Fund 1 Allocation 2 Beginning fund balance per city $ 3,667 $ — Revenues 327,987 155,742 Total funds available 331,654 155,742 Expenditures (331,654) — Ending fund balance per city — 155,742 SCO adjustment 3 — — Ending fund balance per audit $ — $ 155,742 ___________________________ 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 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 Street Maintenance Fund. The audit period was July 1, 2000, through June 30, 2007. 3 See the Findings and Recommendations section. -3- City of Santa Fe Springs Special Gas Tax Street Improvement Fund and Traffic Congestion Relief Fund Allocations Findings and Recommendations FINDING 1— The city did not expend its TCRF allocations for fiscal year (FY) 2001-02 within the fiscal year following the fiscal year in which the TCRF allocations allocations were made, as required by Streets and Highways Code expenditure section 2182.1(g). The unexpended allocations subject to the spending requirement not met requirement total $31,262 as of June 30, 2003. The code states, “. . . funds not expended within that period shall be returned to the Controller. . . .” Recommendation The city must refund the unexpended TCRF allocations in the amount of $31,262, to the State Controller’s Office, Attention: Bill Byall, P.O. Box 942850, Sacramento, CA 94250. Additionally, the city should review its TCRF allocation expenditure level to ensure compliance with program requirements. City’s Response We have carefully reviewed our accounting records for the time periods cited above. Unfortunately, we have found an internal accounting error during our review of FY 2002-03. We certainly incurred more than sufficient TCRF-eligible expenditures to cover the indicated $31,262 fund balance. We, however, coded these expenditures to the General Fund instead of the TCRF. As evidenced in our Annual Street Reports, we routinely spend significant amounts of General Fund monies on TCRF-eligible street expenditures. This was certainly the case in FY 2002-03. SCO’s Comment After reviewing the city’s response to our draft report, we concluded that accounting errors were made by the city. Correction of an accounting error may be made anytime after the error is discovered. The city’s correction of the accounting error allows the city to be in compliance with Streets and Highways Code section 2182 and 2182.5 and Revenue and Taxation Code section 7104. The finding is reversed. -4- City of Santa Fe Springs 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 noted in Finding 1. Consequently, the expenditure of these funds, Ineligible totaling $31,262, was not eligible. expenditures Recommendation The city must reimburse the TCRF allocations recorded in the Street Maintenance Fund by $31,262 to eliminate the ineligible expenditures. City’s Response No response. SCO’s Comment The city’s correction of the accounting error referred to in Finding 1 invalidates this finding. The finding is reversed. -5- City of Santa Fe Springs 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 C08-GTA-025