Siskiyou County 04/09

SISKIYOU COUNTY Audit Report ROAD FUND July 1, 2006, through June 30, 2007 J C OHN HIANG California State Controller April 2009 J C OHN HIANG California State Controller April 22, 2009 The Honorable Michael Kobseff, Chair Board of Supervisors Siskiyou County P.O. Box 750 Yreka, CA 96097 Dear Mr. Kobseff: The State Controller’s Office (SCO) audited Siskiyou County’s Road Fund for the period of July 1, 2006, through June 30, 2007. We also reviewed road-purpose revenues, expenditures, and changes in fund balances for the period of July 1, 2001, through June 30, 2006. The results of this review are included in our audit report. The county accounted for and expended Road Fund moneys in compliance with Article XIX of the California Constitution, the Streets and Highways Code, and the SCO’s Accounting Standards and Procedures for Counties manual, except for a procedural finding identified in this report. The county accounted for and expended fiscal year (FY) 2001-02 through FY 2006-07 Transportation Equity Act of the 21st Century Matching and Exchange moneys in compliance with Article XIX of the California Constitution and Streets and Highways Code section 182.6. 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:vb The Honorable Michael Kobseff -2- April 22, 2009 cc: The Honorable Leanna Dancer, Auditor-Controller-Recorder Siskiyou County Brian McDermott, Director of Public Works Siskiyou County Scott Sumner, Director of Public Works Siskiyou County Grace Kong, Chief Local Program Accounting Branch Department of Transportation Siskiyou County Road Fund Contents Audit Report Summary ........................................................................................................................... 1 Background ....................................................................................................................... 1 Objectives, Scope, and Methodology .............................................................................. 2 Conclusion ......................................................................................................................... 3 Follow-Up on Prior Audit Findings ................................................................................ 3 Views of Responsible Official .......................................................................................... 3 Restricted Use ................................................................................................................... 4 Schedule 1—Reconciliation of Road Fund Balance ............................................................ 5 Schedule 2—Reconciliation of TEA-21 Balance ................................................................. 6 Finding and Recommendation .............................................................................................. 7 Attachment—County’s Response to Draft Audit Report Siskiyou County Road Fund Audit Report Summary The State Controller’s Office (SCO) audited Siskiyou County’s Road Fund for the period of July 1, 2006, through June 30, 2007. We also reviewed road-purpose revenues, expenditures, and changes in fund balances for the period of July 1, 2001, through June 30, 2006. This review was limited to performing inquiries and analytical procedures to ensure that (1) highway users tax apportionments and road-purpose revenues were properly accounted for and recorded in the Road Fund; (2) expenditure patterns were consistent with the period audited; and (3) unexpended fund balances were carried forward properly. Our audit disclosed that the county accounted for and expended Road Fund moneys in compliance with Article XIX of the California Constitution, the Streets and Highways Code, and the SCO’s Accounting Standards and Procedures for Counties manual, except for a procedural finding identified in this report. In addition, we audited Transportation Equity Act of the 21st Century (TEA-21) Matching and Exchange moneys for FY 2001-02 through FY 2006-07, at the request of the California Department of Transportation (Caltrans). The TEA-21-funded projects have been verified to be for road-related purposes and are eligible expenditures. The TEA-21 moneys received by the county were accounted for and expended in compliance with Article XIX of the California Constitution. Background We conducted an audit of the county’s Road Fund in accordance with Government Code section 12410. The Road Fund was established by county boards of supervisors in 1935, in accordance with Streets and Highways Code section 1622, for all amounts paid to the county out of moneys derived from the highway users tax fund. A portion of the Federal Forest Reserve revenue received by a county is also required to be deposited into the Road Fund (Government Code section 29484). In addition, a county board of supervisors may authorize the deposit of other sources of revenue into the Road Fund. Once moneys are deposited into the Road Fund, it is restricted to expenditures made in compliance with Article XIX of the California Constitution and Streets and Highways Code Sections 2101 and 2150. The Intermodal Surface Transportation Efficiency Act (ISTEA) of 1991 created a federal program designed to increase flexibility in federal funding for transportation purposes by shifting the funding responsibility to state and local agencies. The TEA-21 is a continuation of this program. The funds are restricted to expenditures made in compliance with Article XIX of the California Constitution. Caltrans requested that we audit these expenditures to ensure the county’s compliance. -1- Siskiyou County Road Fund Objectives, Scope, The objectives of our audit of the Road Fund and TEA-21 Matching and and Methodology Exchange moneys were to determine whether: • Highway users tax apportionments and TEA-21 Matching and Exchange moneys received by the county were accounted for in the Road Fund, a special revenue fund; • Expenditures were made exclusively for authorized purposes or safeguarded for future expenditure; • Reimbursements of prior Road Fund expenditures were identified and properly credited to the Road Fund; • Non-road-related expenditures were reimbursed in a timely manner; • The Road Fund cost accounting is in conformance with the SCO’s Accounting Standards and Procedures for Counties manual, Chapter 9, Appendix A; and • Expenditures for indirect overhead support service costs were within the limits formally approved in the Countywide Cost Allocation Plan. Our audit objectives were derived from the requirements of Article XIX of the California Constitution, the Streets and Highways Code, the Government Code, and the SCO’s Accounting Standards and Procedures for Counties manual. To meet the objectives, we: • Gained a basic understanding of the management controls that would have an effect on the reliability of the accounting records of the Road Fund by interviewing key personnel and testing the operating effectiveness of the controls; • Verified whether all highway users tax apportionments and TEA-21 Matching and Exchange moneys received were properly accounted for in the Road Fund by reconciling the county’s records to the State Controller’s and Caltrans’ payment records; • Analyzed the system used to allocate interest and determined whether the interest revenue allocated to the Road Fund was fair and equitable by interviewing key personnel and testing a sample of interest calculations; • Verified that unauthorized borrowing of Road Fund cash had not occurred by interviewing key personnel and examining the Road Fund cash account entries; and • Determined, through testing, whether Road Fund expenditures were in compliance with Article XIX of the California Constitution and with the Streets and Highways Code, and whether indirect cost allocation plan charges to the Road Fund were within the limits approved by the SCO’s Division of Accounting and Reporting, County Cost Plan Unit. -2- Siskiyou County Road Fund We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We did not audit the county’s financial statements. Our scope was limited to planning and performing audit procedures necessary to obtain reasonable assurance concerning the allowability of expenditures claimed for reimbursement. Accordingly, we examined transactions on a test basis to determine whether they complied with applicable laws and regulations and were properly supported by accounting records. We considered the county’s internal controls only to the extent necessary to plan the audit. Conclusion Our audit disclosed that the county accounted for and expended Road Fund moneys in compliance with Article XIX of the California Constitution, the Streets and Highways Code, and the SCO’s Accounting Standards and Procedures for Counties manual, except for the item described in the Finding and Recommendation section of this report. We verified that the TEA-21-funded projects were for road-related purposes, and are eligible expenditures. The TEA-21 moneys received by the county were accounted for and expended in compliance with Article XIX of the California Constitution and the Streets and Highways Code. Follow-up on Prior Findings noted in our prior audit report, issued on April 9, 2002, have Audit Findings been satisfactorily resolved by the county. Views of We issued a draft audit report on February 25, 2009. Laurie Gripp, the Responsible county’s Road Department Fiscal Officer, responded by letter dated March 16, 2009, stating that the county will make the necessary Official adjustments. The county’s response is included as an attachment in this final audit report. -3- Siskiyou County Road Fund Restricted Use This report is solely for the information and use of county management, the county board of supervisors, 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 22, 2009 -4- Siskiyou County Road Fund Schedule 1— Reconciliation of Road Fund Balance July 1, 2006, through June 30, 2007 Amount Beginning fund balance per county $ 6,609,390 Revenues 12,878,605 Total funds available 19,487,995 Expenditures (11,636,739) Ending fund balance per county 7,851,256 SCO adjustment — Ending fund balance per audit $ 7,851,256 -5- Siskiyou County Road Fund Schedule 2— Reconciliation of TEA-21 Balance July 1, 2001, through June 30, 2007 Amount Beginning balance per county $ — Revenues: TEA-21 Matching and Exchange funds 4,349,472 Total funds available 4,349,472 Expenditures: Maintenance (4,349,472) Ending balance per county — SCO adjustment — Ending balance per audit $ — NOTE: The TEA-21 moneys have been accounted for and expended within the Road Fund. -6- Siskiyou County Road Fund Finding and Recommendation FINDING— The fiscal year (FY) 2006-07 Siskiyou County Annual Road Report High labor, equipment, presented high year-end variances of 9.55% for labor, 34.31% for and general overhead equipment, and 49.30% for general road overhead. clearing account The SCO’s Accounting Standards and Procedures for Counties manual, variances sections 9A.14-24, prescribes the method used in the development and operation of the labor, equipment, general overhead, shop overhead, and inventory clearing accounts. Per section 24, the acceptable range for labor variances is +/-5%, and for equipment and general overhead variances, the range is +/-10%. Recommendation The county should analyze its clearing accounts to identify the cause of the high variances. In addition, the county should establish procedures for analysis of clearing accounts to ensure that the variances at year-end fall within acceptable ranges. County’s Response We have reviewed the variances that are outside the acceptable range and are making the necessary adjustments. We will review these quarterly in order to catch and adjust them sooner. -7- Siskiyou County Road Fund Attachment— County’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 S09-RFA-002