Santa Cruz County of Office Education

J C OHN HIANG California State Controller December 5, 2013 Michael C. Watkins, County Superintendent of Schools Santa Cruz County Office of Education 400 Encinal Street Santa Cruz, CA 95060 Dear Mr. Watkins: The State Controller’s Office reviewed the costs claimed by the Santa Cruz County Office of Education (SCCOE) for the legislatively mandated Collective Bargaining Program (Chapter 961, Statutes of 1975; and Chapter 1213, Statutes of 1991) for the period of July 1, 2008, through June 30, 2012. We conducted our review under the authority of Government Code sections 12410, 17558.5, and 17561. Our review was limited to ensuring that direct and indirect costs were properly reported in accordance with program requirements. The SCCOE claimed $56,194 for the mandated program. Our review found that $2,002 is allowable ($2,010 less a $8 penalty for filing a late claim) and $54,192 is unallowable. The costs are unallowable because the SCCOE did not report any Winton Act base-year costs, as described in the attached Summary of Program Costs and the Finding and Recommendation. We informed Mary Hart, Associate Superintendent of Business, of the review finding via email on November 8, 2013. We did not receive a response from the SCCOE. For the fiscal year (FY) 2008-09 claim, the State paid the SCCOE $2,403. Our review found that $1,934 is allowable. The State will offset $469 from other mandated program payments due the SCCOE. Alternatively, the SCCOE may remit this amount to the State. For the FY 2009-10 claim, the State paid the SCCOE $263. Our review found that the claimed costs are unallowable. The State will offset $263 from other mandated program payments due the SCCOE. Alternatively, the SCCOE may remit this amount to the State. For the FY 2010-11 claim, the State made no payment to the SCCOE. Our review found that the entire amount is unallowable. For the FY 2011-12 claim, the State made no payment to the SCCOE. Our review found that $68 is allowable. The State will pay that amount, contingent upon available appropriations. MAILING ADDRESS P.O. Box 942850, Sacramento, CA 94250-5874 SACRAMENTO 3301 C Street, Suite 700, Sacramento, CA 95816 (916) 324-8907 LOS ANGELES 901 Corporate Center Drive, Suite 200, Monterey Park, CA 91754-7619 (323) 981-6802 Michael C. Watkins, County Superintendent -2- December 5, 2013 of Schools If you disagree with the review finding, you may file an Incorrect Reduction Claim (IRC) with the Commission on State Mandates (CSM). The IRC must be filed within three years following the date that we notify you of a claim reduction. You may obtain IRC information at the CSM’s website at www.csm.ca.gov/docs/IRCForm.pdf. If you have any questions, please contact Jim L. Spano, Chief, Mandated Cost Audits Bureau, by phone at (916) 323-5849. Sincerely, Original signed by JEFFREY V. BROWNFIELD, CPA Chief, Division of Audits JVB/nh Attachments RE: S14-MCC-919 cc: Mary Hart, Associate Superintendent of Business Santa Cruz County Office of Education Jean Gardner, Director of Fiscal Services Santa Cruz County Office Education Scott Hannan, Director, School Fiscal Services Division California Department of Education Carol Bingham, Director, Fiscal Policy Division California Department of Education Thomas Todd, Assistant Program Budget Manager Education Systems Unit, California Department of Finance Jay Lal, Manager Division of Accounting and Reporting State Controller’s Office Santa Cruz County Office of Education Collective Bargaining Program Attachment 1— Summary of Program Costs July 1, 2008, through June 30, 2012 Actual Costs Allowable Review Cost Elements Claimed per Review Adjustment 1 July 1, 2008, through June 30, 2009 Direct costs: Component activities G1 through G3: Salaries and benefits $ 16,161 $ 16,161 $ –– Materials and supplies 42 42 –– Subtotal 16,203 16,203 –– Less base-year direct costs adjusted by the implicit price deflator –– (16,963) (16,963) Subtotal 16,203 (760) (16,963) Adjustment to eliminate negative balance –– 760 760 Increased direct costs, G1 through G3 16,203 –– (16,203) Component activities G4 through G7: Salaries and benefits 1,794 1,794 –– Increased direct costs, G4 through G7 1,794 1,794 –– Total increased direct costs, G1 through G7 17,997 1,794 (16,203) Indirect costs 1,406 140 (1,266) Total program costs $ 19,403 1,934 $ (17,469) Less amount paid by the State (2,403) Allowable costs claimed in excess of (less than) amount paid $ (469) July 1, 2009, through June 30, 2010 Direct costs: Component activities G1 through G3: Salaries and benefits $ 3,150 $ 3,150 $ –– Subtotal 3,150 3,150 –– Less base-year direct costs adjusted by the implicit price deflator –– (17,151) (17,151) Subtotal 3,150 (14,001) (17,151) Adjustment to eliminate negative balance –– 14,001 14,001 Increased direct costs, G1 through G3 3,150 –– (3,150) Total increased direct costs, G1 through G7 3,150 –– (3,150) Indirect costs 216 –– (216) Total program costs $ 3,366 –– $ (3,366) Less amount paid by the State (263) Allowable costs claimed in excess of (less than) amount paid $ (263) 1 of 3 Santa Cruz County Office of Education Collective Bargaining Program Attachment 1 (continued) Actual Costs Allowable Review Cost Elements Claimed per Review Adjustment 1 July 1, 2010, through June 30, 2011 Direct costs: Component activities G1 through G3: Salaries and benefits $ 13,969 $ 13,969 $ –– Subtotal 13,969 13,969 –– Less base-year direct costs adjusted by the implicit price deflator –– (17,553) (17,553) Subtotal 13,969 (3,584) (17,553) Adjustment to eliminate negative balance –– 3,584 3,584 Increased direct costs, G1 through G3 13,969 –– (13,969) Total increased direct costs, G1 through G7 13,969 –– (13,969) Indirect costs 1,041 –– (1,041) Total program costs $ 15,010 –– $ (15,010) Less amount paid by the State –– Allowable costs claimed in excess of (less than) amount paid $ –– July 1, 2011, through June 30, 2012 Direct costs: Component activities G1 through G3: Salaries and benefits $ 17,263 $ 17,263 $ –– Subtotal 17,263 17,263 –– Less base-year direct costs adjusted by the implicit price deflator –– (18,147) (18,147) Subtotal 17,263 (884) (18,147) Adjustment to eliminate negative balance –– 884 884 Increased direct costs, G1 through G3 17,263 –– (17,263) Component activities G4 through G7: Salaries and benefits 72 72 –– Increased direct costs, G4 through G7 72 72 –– Total increased direct costs, G1 through G7 17,335 72 (17,263) Indirect costs 1,080 4 (1,076) Subtotal 18,415 76 (18,339) Less late filing penalty 2 –– (8) (8) Total program costs $ 18,415 68 $ (18,347) Less amount paid by the State –– Allowable costs claimed in excess of (less than) amount paid $ 68 2 of 3 Santa Cruz County Office of Education Collective Bargaining Program Attachment 1 (continued) Actual Costs Allowable Review Cost Elements Claimed per Review Adjustment 1 Summary: July 1, 2008, through June 30, 2012 Total increased direct costs, G1 through G7 $ 52,451 $ 1,866 $ (50,585) Indirect costs 3,743 144 (3,599) Subtotal 56,194 2,010 (54,184) Less late filing penalty — (8) (8) Total program costs $ 56,194 2,002 $ (54,192) Less amount paid by the State (2,666) Allowable costs claimed in excess of (less than) amount paid $ (664) _________________________ 1 See Attachment 2, Finding and Recommendation. 2 The SCCOE filed its fiscal year 2011-12 annual reimbursement claim after the due date specified in Government Code section 17560. Pursuant to Government Code section 17568, the State assessed a late filing penalty equal to 10% of allowable costs, not to exceed $10,000. 3 of 3 Santa Cruz County Office of Education Collective Bargaining Program Attachment 2— Finding and Recommendation July 1, 2008, through June 30, 2012 FINDING— The Santa Cruz County Office of Education (SCCOE) did not report any Winton Act direct costs on its mandated cost claims for fiscal year (FY) Unreported Winton Act 2008-09 through FY 2011-12. Specifically, the SCCOE did not offset the base-year direct costs, Winton Act base-year costs against the current-year Rodda Act costs for and related indirect components G1 through G3, thus understating the Winton Act base-year costs costs by $69,814 for the review period. Unallowable related indirect costs total $3,599. The following table summarizes the unreported Winton Act base-year cost adjustment by fiscal year: Fiscal Year 2008-09 2009-10 2010-11 2011-12 Total Winton Act base year costs, FY 1995-96 $ (3,830) $ (3,830) $ (3,830) $ ( 3,830) Implicit price deflator (IPD) × 4.429 × 4.478 × 4 .583 × 4.738 Winton Act base-year costs adjusted by the IPD (16,963) (17,151) (17,553) ( 18,147) $ (69,814) Less reported Winton Act base-year costs - - - - - Unreported Winton Act base-year costs adjusted by the IPD (16,963) (17,151) (17,553) ( 18,147) (69,814) Related indirect cost adjustment (1,266) (216) (1,041) ( 1,076) (3,599) Review adjustment $ (18,229) $ (17,367) $ (18,594) $ ( 19,223) $ (73,413) In 1975, the State enacted the Rodda Act (Chapter 961, Statutes of 1975), requiring the employer and employee to meet and negotiate, thereby creating a collective bargaining atmosphere for public school employers. The legislation created the Public Employment Relations Board to issue formal interpretations and rulings regarding collective bargaining under the Rodda Act. In addition, the legislation established organizational rights of employees and representational rights of employee organizations, and recognized exclusive representatives related to collective bargaining. On July 17, 1978, the Board of Control (now the Commission on State Mandates [CSM]) determined that the Rodda Act imposed a state mandate upon school districts reimbursable under Government Code section 17561. Chapter 1213, Statutes of 1991, added Government Code section 3547.5; this section requires school districts to publicly disclose major provisions of a collective bargaining effort before the agreement becomes binding. On August 20, 1998, the CSM determined that this legislation also imposed a state mandate upon school districts reimbursable under Government Code section 17561. 1 of 2 Santa Cruz County Office of Education Collective Bargaining Program Claimants are allowed to claim increased costs. For components G1 through G3, increased costs represent the difference between the current- year Rodda Act activities and the base-year Winton Act activities (generally, FY 1974-75), as adjusted by the implicit price deflator. For components G4 through G7, increased costs represent actual costs incurred. The program’s parameters and guidelines establish the state mandate and define the reimbursement criteria. The CSM adopted the parameters and guidelines on October 22, 1980, and amended them ten times, most recently on January 29, 2010. In compliance with Government Code section 17558, the State Controller’s Office (SCO) issues claiming instructions to assist school districts in claiming mandated program reimbursable costs. The parameters and guidelines (Section H – Supporting Data for Claims – Report Format for Submission of Claim) state: a. For component activities G1, G2, and G3: 1. Determination of the “increased costs” for each of these three components requires the costs of current year Rodda Act activities to be offset [reduced] by the cost of the base-year Winton Act activities. The Winton Act base-year is generally fiscal year 1974-75. Winton Act base-year costs are adjusted by the Implicit Price Deflator prior to offset against the current year Rodda Act costs for these three components. The Implicit Price Deflator shall be listed in the annual claiming instructions of the State Controller. The Winton Act base-year costs were obtained from the FY 1995-96 claim the SCCOE submitted to the SCO’s Division of Accounting and Reporting. The implicit price deflator (IPD) is reported in the SCO’s annual claiming instructions. Recommendation We recommend that the SCCOE ensure that all Winton Act base-year costs are adjusted by the IPD, as listed in the SCO’s annual claiming instructions, and are properly offset against the SCCOE’s current-year Rodda Act direct costs claimed. 2 of 2