Ukiah Unified School District

J C OHN HIANG California State Controller December 9, 2013 Debra Kubin, Superintendent Ukiah Unified School District 925 N. State Street Ukiah, CA 95482 Dear Ms. Kubin: The State Controller’s Office reviewed the costs claimed by the Ukiah Unified School District 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 district claimed $364,249 for the mandated program. Our review found that $322,192 is allowable and $42,057 is unallowable. The costs are unallowable because the district did not report any Winton Act base-year costs and did not claim indirect costs on contract services, as described in the attached Summary of Program Costs and the Findings and Recommendations. The State paid the district $13,524. The State will pay allowable costs claimed that exceed the amount paid, totaling $308,668, contingent upon available appropriations. We informed Sandra Harrington, Chief Business Official, of the review findings via email on November 13, 2013. We did not receive a response from the district. If you disagree with the review findings, 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 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 Debra Kubin, Superintendent -2- December 9, 2013 Attachments RE: S14-MCC-930 cc: Sandra Harrington, Chief Business Official Ukiah Unified School District Lynn Adams, Accounting Technician III Ukiah Unified School District Michael Savoca, Accounting Technician III Ukiah Unified School District Paul Tichinin, County Superintendent of Schools Mendocino County Office of 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 Ukiah Unified School District 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 Reference 1 July 1, 2008, through June 30, 2009 Direct costs: Component activities G1 through G3: Salaries and benefits $ 34,046 $ 34,046 $ –– Contract services 15,167 15,167 –– Subtotal 49,213 49,213 –– Less base-year direct costs adjusted by the implicit price deflator –– (10,191) (10,191) Finding 1 Increased direct costs, G1 through G3 49,213 39,022 (10,191) Component activities G4 through G7: Salaries and benefits 9,294 9,294 –– Contract services 830 830 –– Increased direct costs, G4 through G7 10,124 10,124 –– Total increased direct costs, G1 through G7 59,337 49,146 (10,191) Indirect costs 2,444 2,772 328 Findings 1, 2 Total program costs $ 61,781 51,918 $ (9,863) Less amount paid by the State (7,651) Allowable costs claimed in excess of (less than) amount paid $ 44,267 July 1, 2009, through June 30, 2010 Direct costs: Component activities G1 through G3: Salaries and benefits $ 38,691 $ 38,691 $ –– Contract services 16,983 16,983 –– Subtotal 55,674 55,674 –– Less base-year direct costs adjusted by the implicit price deflator –– (10,304) (10,304) Finding 1 Increased direct costs, G1 through G3 55,674 45,370 (10,304) Component activities G4 through G7: Salaries and benefits 6,428 6,428 –– Contract services 10,341 10,341 –– Increased direct costs, G4 through G7 16,769 16,769 –– Total increased direct costs, G1 through G7 72,443 62,139 (10,304) Indirect costs 2,585 3,561 976 Findings 1, 2 Total program costs $ 75,028 65,700 $ (9,328) Less amount paid by the State (5,873) Allowable costs claimed in excess of (less than) amount paid $ 59,827 1 of 3 Ukiah Unified School District Collective Bargaining Program Attachment 1 (continued) Actual Costs Allowable Review Cost Elements Claimed per Review Adjustment Reference 1 July 1, 2010, through June 30, 2011 Direct costs: Component activities G1 through G3: Salaries and benefits $ 32,048 $ 32,048 $ –– Contract services 22,868 22,868 –– Subtotal 54,916 54,916 –– Less base-year direct costs adjusted by the implicit price deflator –– (10,545) (10,545) Finding 1 Increased direct costs, G1 through G3 54,916 44,371 (10,545) Component activities G4 through G7: Salaries and benefits 12,672 12,672 –– Contract services 29,836 29,836 –– Increased direct costs, G4 through G7 42,508 42,508 –– Total increased direct costs, G1 through G7 97,424 86,879 (10,545) Indirect costs 5,699 5,083 (616) Finding 1 Total program costs $ 103,123 91,962 $ (11,161) Less amount paid by the State –– Allowable costs claimed in excess of (less than) amount paid $ 91,962 July 1, 2011, through June 30, 2012 Direct costs: Component activities G1 through G3: Salaries and benefits $ 37,325 $ 37,325 $ –– Contract services 42,204 42,204 –– Subtotal 79,529 79,529 –– Less base-year direct costs adjusted by the implicit price deflator –– (10,902) (10,902) Finding 1 Increased direct costs, G1 through G3 79,529 68,627 (10,902) Component activities G4 through G7: Salaries and benefits 6,261 6,261 –– Contract services 29,994 29,994 –– Increased direct costs, G4 through G7 36,255 36,255 –– Total increased direct costs, G1 through G7 115,784 104,882 (10,902) Indirect costs 8,533 7,730 (803) Finding 1 Total program costs $ 124,317 112,612 $ (11,705) Less amount paid by the State –– Allowable costs claimed in excess of (less than) amount paid $ 112,612 2 of 3 Ukiah Unified School District Collective Bargaining Program Attachment 1 (continued) Actual Costs Allowable Review Cost Elements Claimed per Review Adjustment Reference 1 Summary: July 1, 2008, through June 30, 2012 Total increased direct costs, G1 through G7 $ 344,988 $ 303,046 $ (41,942) Indirect costs 19,261 19,146 (115) Total program costs $ 364,249 322,192 $ (42,057) Less amount paid by the State (13,524) Allowable costs claimed in excess of (less than) amount paid $ 308,668 _________________________ 1 See Attachment 2, Findings and Recommendations. 3 of 3 Ukiah Unified School District Collective Bargaining Program Attachment 2— Findings and Recommendations July 1, 2008, through June 30, 2012 BACKGROUND The current findings are the result of our review of the mandated cost claims filed for the legislatively mandated Collective Bargaining Program for the period of July 1, 2008, through June 30, 2012. 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. 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, fiscal year [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. 1 of 3 Ukiah Unified School District Collective Bargaining Program FINDING 1–– The district did not report any Winton Act direct costs on its mandated Unreported Winton Act cost claims for FY 2008-09 through FY 2011-12. Specifically, the district did not offset the Winton Act base-year costs against the current- base-year costs, and year Rodda Act costs for components G1 through G3, thus understating related indirect costs the Winton Act base-year costs by $41,942 for the review period. Unallowable related indirect costs total $2,584. 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 $ ( 2,301) $ (2,301) $ (2,301) $ ( 2,301) Implicit price deflator (IPD) × 4.429 × 4.478 × 4.583 × 4.738 Winton Act base-year costs adjusted by the IPD ( 10,191) (10,304) (10,545) ( 10,902) $ (41,942) Less reported Winton Act base-year costs - - - - - Unreported Winton Act base-year costs adjusted by the IPD ( 10,191) (10,304) (10,545) ( 10,902) (41,942) Related indirect cost adjustment ( 575) (590) (616) ( 803) (2,584) Review adjustment $ ( 10,766) $ (10,894) $ (11,161) $ ( 11,705) $ (44,526) 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 district 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 district 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 district’s current-year Rodda Act direct costs claimed. 2 of 3 Ukiah Unified School District Collective Bargaining Program FINDING 2–– The district did not claim indirect costs on contract services for Unclaimed indirect costs FY 2008-09 and FY 2009-10, resulting in an understatement of $2,469. on contract services We determined allowable indirect costs by multiplying allowable contract services by the indirect cost rates claimed by the district. The claimed indirect cost rates agreed to the rates approved by the California Department of Education (CDE). The parameters and guidelines allow indirect cost rates provisionally approved by the CDE. The CDE indirect cost rates apply to total direct costs (salaries and benefits, materials and supplies, and contract services). The error occurred because the district followed the claiming instructions identified on Form 1 for the Collective Bargaining Program that inadvertently excluded contract services from the calculation of indirect costs. The Collective Bargaining Program claiming instructions have since been corrected. The following table summarizes the calculation of unclaimed indirect costs on contract services by fiscal year: Fiscal Year 2008-09 2009-10 Total Allowable contract services $ 15,997 $ 27,324 Claimed indirect cost rate 5.64% 5.73% Review adjustment $ 903 $ 1,566 $ 2,469 Recommendation We recommend that the district follow the updated guidance in the claiming instructions for calculating indirect costs on contract services. 3 of 3