San Francisco Community College District

SAN FRANCISCO COMMUNITY COLLEGE DISTRICT Audit Report COLLECTIVE BARGAINING PROGRAM Chapter 961, Statutes of 1975; and Chapter 1213, Statutes of 1991 July 1, 2005, through June 30, 2011 J C OHN HIANG California State Controller May 2014 J C OHN HIANG California State Controller May 22, 2014 John Rizzo, President Board of Trustees San Francisco Community College District 50 Phelan Avenue San Francisco, CA 94112 Dear Mr. Rizzo: The State Controller’s Office audited the costs claimed by the San Francisco Community College 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, 2005, through June 30, 2011. The district claimed $1,492,486 for the mandated program. Our audit found that $1,132,514 is allowable and $359,972 is unallowable. The costs are unallowable primarily because the district claimed ineligible and unsupported costs, and misstated indirect costs. The State paid the district $52,861. The State will pay allowable costs claimed that exceed the amount paid, totaling $1,079,653, contingent upon available appropriations. If you disagree with the audit 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/sk John Rizzo, President -2- May 22, 2014 cc: Arthur Q. Tyler, D.M., Chancellor San Francisco Community College District Michael Branca, Dean of Employee Relations San Francisco Community College District Christine Atalig, Specialist College Finance and Facilities Planning California Community Colleges Chancellor’s Office Mollie Quasebarth, Principal Program Budget Analyst Education Systems Unit California Department of Finance Mario Rodriguez, Finance Budget Analyst Education Systems Unit California Department of Finance Jay Lal, Manager Division of Accounting and Reporting State Controller’s Office San Francisco Community College District Collective Bargaining Program Contents Audit Report Summary ............................................................................................................................ 1 Background ........................................................................................................................ 1 Objective, Scope, and Methodology ................................................................................. 2 Conclusion .......................................................................................................................... 2 Views of Responsible Official ........................................................................................... 3 Restricted Use .................................................................................................................... 3 Schedule 1—Summary of Program Costs ........................................................................... 4 Findings and Recommendations ........................................................................................... 8 San Francisco Community College District Collective Bargaining Program Audit Report Summary The State Controller’s Office (SCO) audited the costs claimed by the San Francisco Community College 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, 2005, through June 30, 2011. The district claimed $1,492,486 for the mandated program. Our audit found that $1,132,514 is allowable and $359,972 is unallowable. The costs are unallowable primarily because the district claimed ineligible and unsupported costs, and misstated indirect costs. The State paid the district $52,861. The State will pay allowable costs claimed that exceed the amount paid, totaling $1,079,653, contingent upon available appropriations. Background 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 Act. In addition, the legislation established organizational rights of employees and representational rights of employee organizations, and recognized exclusive representatives relating 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, requiring 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. Costs of publicly disclosing major provisions of collective bargaining agreements that districts incurred after July 1, 1996, are allowable. 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 1974-75), as adjusted by the implicit price deflator. For components G4 through G7, increased costs represent actual costs incurred. The seven components are as follows: G1 - Determining bargaining units and exclusive representatives G2 - Election of unit representatives G3 - Costs of negotiations -1- San Francisco Community College District Collective Bargaining Program G4 - Impasse proceedings G5 - Collective bargaining agreement disclosure G6 - Contract administration G7 - Unfair labor practice costs 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 SCO issues claiming instructions to assist local agencies and school districts in claiming mandated program reimbursable costs. Objective, Scope, We conducted the audit to determine whether costs claimed represent increased costs resulting from the Collective Bargaining Program for the and Methodology period of July 1, 2005, through June 30, 2011. Our audit scope included, but was not limited to, determining whether costs claimed were supported by appropriate source documents, were not funded by another source, and were not unreasonable and/or excessive. We conducted this performance audit under the authority of Government Code sections 12410, 17558.5, and 17561. We did not audit the district’s financial statements. We conducted the 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 limited our review of the district’s internal controls to gaining an understanding of the transaction flow and claim preparation process as necessary to develop appropriate auditing procedures. Conclusion Our audit found instances of noncompliance with the requirements outlined above. These instances are described in the accompanying Summary of Program Costs (Schedule 1) and in the Findings and Recommendations section of this report. For the audit period, the San Francisco Community College District claimed $1,492,486 for costs of the Collective Bargaining Program. Our audit found that $1,132,514 is allowable and $359,972 is unallowable. The State paid the district $52,861. The State will pay allowable costs claimed that exceed the amount paid, totaling $1,079,653, contingent upon available appropriations. -2- San Francisco Community College District Collective Bargaining Program Views of We issued a draft audit report on May 8, 2014. The district requested sixty days in which to respond. We informed the district that if it did not Responsible provide a response within the ten-day response period, we would issue Official the final report in May of 2014. However, we also informed the district that we would revise the final report in June of 2014 if it provides documentation supporting additional allowable costs by June 23, 2014. Restricted Use This report is solely for the information and use of the San Francisco Community College District, the California Community Colleges Chancellor’s Office, the California Department of Finance, 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, CPA Chief, Division of Audits May 22, 2014 -3- San Francisco Community College District Collective Bargaining Program Schedule 1— Summary of Program Costs July 1, 2005, through June 30, 2011 Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustments Reference 1 July 1, 2005, through June 30, 2006 Direct costs: Component activities G1 through G3: Salaries and benefits $ 17 9,849 $ 123,729 $ (56,120) Findi ng 1 Contract services 80,224 80,224 — Subtotal 260,073 203,953 (56,120) Winton Act base-year direct costs adjusted by the implicit price deflator (123,938) (123,938) — Increased direct costs, G1 through G3 136,135 80,015 (56,120) Component activities G4 through G7: Salaries and benefits 52,130 52,130 — Contract services 27,223 26,575 (648) Findi ng 2 Increased direct costs, G4 through G7 79,353 78,705 (648) Total increased direct costs, G1 through G7 215,488 158,720 (56,768) Indirect costs 28,549 64,012 35,463 Findi ng 3 Total program costs $ 244,037 222,732 $ (21,305) Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 222,732 July 1, 2006, through June 30, 2007 Direct costs: Component activities G1 through G3: Salaries and benefits $ 20 1,299 $ 127,279 $ (74,020) Findi ng 1 Contract services 104,025 95,318 (8,707) Finding 2 Subtotal 305,324 222,597 (82,727) Winton Act base-year direct costs adjusted by the implicit price deflator (128,794) (128,794) — Increased direct costs, G1 through G3 176,530 93,803 (82,727) Component activities G4 through G7: Salaries and benefits 45,948 45,948 — Contract services 18,873 17,597 (1,276) Findi ng 2 Increased direct costs, G4 through G7 64,821 63,545 (1,276) Total increased direct costs, G1 through G7 241,351 157,348 (84,003) Indirect costs 36,255 72,097 35,842 Findi ng 3 Total program costs $ 277,606 229,445 $ (48,161) Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 229,445 -4- San Francisco Community College District Collective Bargaining Program Schedule 1 (continued) Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustments Reference 1 July 1, 2007, through June 30, 2008 Direct costs: Component activities G1 through G3: Salaries and benefits $ 19 7,068 $ 120,300 $ (76,768) Findi ng 1 Contract services 82,179 82,179 — Subtotal 279,247 202,479 (76,768) Winton Act base-year direct costs adjusted by the implicit price deflator (137,869) (137,869) — Increased direct costs, G1 through G3 141,378 64,610 (76,768) Component activities G4 through G7: Salaries and benefits 55,433 55,433 — Contract services 32,155 24,892 (7,263) Findi ng 2 Increased direct costs, G4 through G7 87,588 80,325 (7,263) Total increased direct costs, G1 through G7 228,966 144,935 (84,031) Indirect costs 38,780 49,209 10,429 Findi ng 3 Total program costs $ 267,746 194,144 $ (73,602) Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 194,144 July 1, 2008, through June 30, 2009 Direct costs: Component activities G1 through G3: Salaries and benefits $ 17 0,040 $ 100,295 $ (69,745) Findi ng 1 Contract services 76,680 76,680 — Subtotal 246,720 176,975 (69,745) Winton Act base-year direct costs adjusted by the implicit price deflator (141,511) (141,511) — Increased direct costs, G1 through G3 105,209 35,464 (69,745) Component activities G4 through G7: Salaries and benefits 65,163 65,163 — Contract services 28,620 26,676 (1,944) Findi ng 2 Increased direct costs, G4 through G7 93,783 91,839 (1,944) Total increased direct costs, G1 through G7 198,992 127,303 (71,689) Indirect costs 30,225 42,370 12,145 Findi ng 3 Total program costs $ 229,217 169,673 $ (59,544) Less amount paid by the State (26,769) Allowable costs claimed in excess of (less than) amount paid $ 142,904 -5- San Francisco Community College District Collective Bargaining Program Schedule 1 (continued) Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustments Reference 1 July 1, 2009, through June 30, 2010 Direct costs: Component activities G1 through G3: Salaries and benefits $ 18 0,811 $ 99,770 $ (81,041) Findi ng 1 Contract services 89,802 89,802 — Subtotal 270,613 189,572 (81,041) Winton Act base-year direct costs adjusted by the implicit price deflator (143,077) (143,077) — Increased direct costs, G1 through G3 127,536 46,495 (81,041) Component activities G4 through G7: Salaries and benefits 64,773 64,773 — Contract services 51,489 47,736 (3,753) Findi ng 2 Increased direct costs, G4 through G7 116,262 112,509 (3,753) Total increased direct costs, G1 through G7 243,798 159,004 (84,794) Indirect costs 33,366 44,590 11,224 Findi ng 3 Total program costs $ 277,164 203,594 $ (73,570) Less amount paid by the State (26,092) Allowable costs claimed in excess of (less than) amount paid $ 177,502 July 1, 2010, through June 30, 2011 Direct costs: Component activities G1 through G3: Salaries and benefits $ 16 8,546 $ 78,094 $ (90,452) Findi ng 1 Contract services 56,106 56,106 — Subtotal 224,652 134,200 (90,452) Winton Act base-year direct costs adjusted by the implicit price deflator (146,431) (146,431) — Increased direct costs, G1 through G3 78,221 (12,231) (90,452) Component activities G4 through G7: Salaries and benefits 61,749 61,749 — Contract services 30,429 28,958 (1,471) Findi ng 2 Increased direct costs, G4 through G7 92,178 90,707 (1,471) Total increased direct costs, G1 through G7 170,399 78,476 (91,923) Indirect costs 26,317 34,450 8,133 Findi ng 3 Total program costs $ 196,716 112,926 $ (83,790) Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 112,926 -6- San Francisco Community College District Collective Bargaining Program Schedule 1 (continued) Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustments Reference 1 Summary: July 1, 2005, through June 30, 2011 Total increased direct costs, G1 through G7 $ 1,298,994 $ 825,786 $ (473,208) Indirect costs 193,492 306,728 113,236 Total program costs $ 1,492,486 1,132,514 $ (359,972) Less amount paid by the State (52,861) Allowable costs claimed in excess of (less than) amount paid $ 1,079,653 _________________________ 1 See the Findings and Recommendations section. -7- San Francisco Community College District Collective Bargaining Program Findings and Recommendations FINDING 1— The district claimed $1,442,809 in salaries and benefits for the audit period. We found that $994,663 is allowable and $448,146 is Unallowable salaries unallowable. The costs are unallowable because the district claimed and benefits ineligible costs and double-claimed costs. The following table summarizes the unallowable salaries and benefits by reimbursable component for the audit period: Reimbursable Fiscal Year Component 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Total G3 - Cost of negotiations: Ineligible costs: Individual negotiation preparation $ ( 54,482) $ (73,692) $ (76,297) $ ( 69,129) $ ( 80,758) $ (89,721) $ (444,079) Substitute costs ( 808) - (318) ( 185) ( 129) (125) (1,565) More than 5 representatives per negotiation - (57) (153) - ( 154) (419) (783) Unrepresented employees ( 641) - - - - - (641) Total ineligible costs ( 55,931) (73,749) (76,768) ( 69,314) ( 81,041) (90,265) (447,068) Double-claimed costs ( 189) (271) - ( 431) - (187) (1,078) Audit adjustment $ ( 56,120) $ (74,020) $ (76,768) $ ( 69,745) $ ( 81,041) $ (90,452) $ (448,146) Component G3 – Cost of Negotiations The district claimed $1,096,720 for the audit period. We found that $648,574 is allowable and $448,146 is unallowable. The costs are unallowable because the district claimed ineligible costs totaling $447,068 and double-claimed costs totaling $1,078. The district claimed ineligible costs of $444,079 for time spent on individual negotiation preparation, $1,565 for substitute costs claimed on a day when negotiations did not occur, $783 in reimbursement for more than five representatives per negotiation session, and $641 for time spent on issues related to unrepresented employees. Individual negotiation preparation The district overstated costs by $444,079 because it claimed reimbursement for district staff to individually prepare for negotiations. The parameters and guidelines do not identify negotiation preparation as an allowable cost. However, the parameters and guidelines do allow reimbursement for negotiation planning sessions. The use of the term “sessions” is indicative of a meeting or gathering of more than one person. An example of a negotiation planning session is when district employees meet to strategize for an upcoming negotiation. A negotiation planning session is distinct from an individual employee’s use of time to review files or otherwise prepare for negotiations. The parameters and guidelines (section G, subsection (3)(b)) state: Show the costs of salaries and benefits for employer representatives and employees participating in negotiation planning sessions…. -8- San Francisco Community College District Collective Bargaining Program Substitute costs The district overstated substitute costs by $1,565 because it claimed reimbursement for substitute costs on a day when table negotiations did not occur. Reimbursement is limited to days when a unit representative is unable to teach because of their involvement in table negotiations. The parameters and guidelines (section G, subsection (3)(b)) state: Indicated the cost of substitutes for the release time of exclusive bargaining unit representatives during negotiations. Give the job classification of the bargaining representative that required a substitute and dates the substitute worked. Substitute costs for a maximum of five representatives per unit, per negotiation session will be reimbursed… More than five representatives claimed per negotiation The district overstated costs by $783 because it claimed reimbursement for more than five representatives per negotiation session. Reimbursement is limited to five public school employer unit representatives per negotiation session. The parameters and guidelines (section G, subsection (3)(a)) state: …Costs for maximum of five public school employer representatives per unit, per negotiation session will be reimbursed… Unrepresented employees For FY 2005-06, the district overstated costs by $641 because it claimed reimbursement for time spent on issues related to unrepresented employees. The parameters and guidelines allow reimbursement for district staff to participate in negotiations, develop the initial contract proposal; and reproduce and distribute the final contract agreement. None of the time claimed by the district was spent on these activities. Double-claimed costs The district overstated costs by $1,078 because of mathematical errors resulting in costs claimed twice. First, the district double-claimed costs by $889 for time spent at table negotiations. For example, if a negotiation lasted from 11:00 am to 12:30 pm, the district mistakenly claimed 3.0 hours instead of 1.5 hours. Secondly, the district double-claimed costs of $189 for substitutes to backfill for unit representatives. The district claimed reimbursement twice for a substitute to work on the same day at the same time. -9- San Francisco Community College District Collective Bargaining Program Recommendation Commencing in FY 2012-13, the district elected to participate in a block grant program, pursuant to Government Code section 17581.7, in lieu of filing annual mandated cost claims. If the district chooses to opt out of the block grant program, we recommend that the district ensure that all costs claimed are reimbursable according to the parameters and guidelines and are mathematically accurate. FINDING 2— The district claimed $677,805 in contract services for the audit period. We found that $652,743 is allowable and $25,062 is unallowable. The Unallowable contract costs are unallowable because the district claimed unsupported and services ineligible costs. The following table summarizes the unallowable contract services by reimbursable component for the audit period: Reimbursable Fiscal Year Component 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Total G3 - Cost of negotiations: Unsupported costs $ - $ (8,707) $ - $ - $ - $ - $ (8,707) Total cost of negotiations - (8,707) - - - - (8,707) G6 - Contract administration: Ineligible grievances (648) (675) (5,670) ( 1,944) (3,753) ( 1,471) (14,161) Unsupported grievances - (601) (1,593) - - - (2,194) Total contract administration (648) (1,276) (7,263) ( 1,944) (3,753) ( 1,471) (16,355) Audit adjustment $ (648) $ (9,983) $ (7,263) $ ( 1,944) $ (3,753) $ ( 1,471) $ (25,062) Component G3 – Cost of Negotiations The district claimed $488,557 for the audit period. We found that $479,850 is allowable and $8,707 is unallowable. The costs are unallowable because the district claimed unsupported costs. For FY 2006-07, the district claimed reimbursement of $104,025 for its attorneys to participate in negotiations. However, the district provided attorney logs supporting only $95,318 in costs, resulting in an overstatement of $8,707. The overstatement occurred primarily because the district mistakenly typed 80 hours into its database instead of 0.80 hours when recording an attorney’s time. The parameters and guidelines (section G) state: To be eligible for mandated cost reimbursement for any fiscal year, only actual costs may be claimed. Actual costs are those costs actually incurred to implement the mandated activities. Actual costs must be traceable and support by source documentation that show the validity of such costs, when they were incurred, and their relationship to the reimbursable activities. -10- San Francisco Community College District Collective Bargaining Program Component G6 – Contract Administration The district claimed $188,789 for the audit period. We found that $172,434 is allowable and $16,355 is unallowable. The costs are unallowable because the district claimed unsupported and ineligible costs. Ineligible Activities The district claimed $14,161 for time spent by its attorneys on grievances that are not related to collective bargaining. A grievance is a dispute involving the interpretation, application, or a violation of a collective bargaining agreement. A disciplinary action against an employee is a voluntary action on the part of the district, and therefore, not related to collective bargaining. During audit fieldwork, we selected a sample of 34 grievance files to test. Of that sample, we found that six grievances claimed were related to personnel actions and not to collective bargaining. We found that none of the case files documented that an employee filed a grievance against the district stating that his or her collective bargaining rights had been violated. In addition, one of the case files showed that the district pursued adverse action against an employee, which is not a mandated cost because it was the district’s decision to initiate such action. The parameters and guidelines (section G, subsection (6)(a)) state: Salaries and benefits of employer personnel involved in adjudication of contract disputes. Contract services will be reimbursed… Unsupported Costs The district did not provide documentation supporting one grievance file, totaling $2,194. As a result, the district did not support that the costs claimed are the result of a collective bargaining violation. The parameters and guidelines (section G) state: To be eligible for mandated cost reimbursement for any fiscal year, only actual costs may be claimed. Actual costs are those costs actually incurred to implement the mandated activities. Actual costs must be traceable and support by source documentation that show the validity of such costs, when they were incurred, and their relationship to the reimbursable activities. Recommendation Commencing in FY 2012-13, the district elected to participate in a block grant program, pursuant to Government Code section 17581.7, in lieu of filing annual mandated cost claims. If the district chooses to opt out of the block grant program, we recommend that the district ensure that all costs claimed are reimbursable according to the parameters and guidelines and are properly supported. -11- San Francisco Community College District Collective Bargaining Program FINDING 3— The district claimed $193,492 in indirect costs for the audit period. We Misstated indirect found that $306,728 is allowable. The district understated indirect costs cost rates by $113,236 because it applied the indirect cost rate to unallowable direct costs (see Findings 1 and 2), incorrectly calculated the FAM-29C indirect cost rates, and did not apply the FAM-29C indirect cost rates to the proper direct cost base. For FY 2005-06 through FY 2010-11, the district claimed indirect costs using the FAM-29C methodology outlined in the SCO’s claiming instructions. The FAM-29C is calculated using information contained in the California Community College Annual Financial and Budget Report (CCFS-311) and the notes to the basic financial statements (for depreciation information). We adjusted the FAM-29C rates for the following reasons:  For FY 2005-06 and FY 2006-07, the district double-claimed the expenditures reported on the CCFS-311, misclassified direct and indirect costs, did not exclude “other outgo” for Other Student Services (Account 6400), incorrectly included Physical Property Acquisitions (Account 7100) as an indirect cost, and did not include the depreciation expense identified in the notes to the basic financial statements.  For FY 2007-08 through FY 2010-11, the district used the wrong FAM-29C formula. In FY 2007-08, the FAM-29C formula changed from a direct cost base of total direct costs to a direct cost base of only salaries and benefits. The district did not calculate the FAM- 29C using the new formula. Instead, it continued to calculate the indirect cost rate using the FAM-29C formula used for FY 2005-06 and FY 2006-07. The following table summarizes the FAM-29C indirect cost rate adjustment for each fiscal year in the audit period: Fiscal Year 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Claimed indirect cost rate 26.42% 30.61% 33.83% 32.26% 32.55% 31.38% Allowable indirect cost rate 40.33% 45.82% 51.01% 50.38% 54.19% 55.79% Difference 13.91% 15.21% 17.18% 18.12% 21.64% 24.41% In addition, for FY 2005-06 and FY 2006-07, the district applied the FAM-29C to only salaries and benefits. The district should have applied the indirect cost rate to total direct costs, including contract services. The error occurred because the district followed the claiming instructions for the Collective Bargaining Program (Form CB-1 and related instructions) that inadvertently excluded contract services from the calculation of indirect costs. These instructions have since been updated. -12- San Francisco Community College District Collective Bargaining Program The following table summarizes the claimed, allowable, and audit adjustment amounts by fiscal year for the audit period: Fiscal Year 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Total Allowable increased direct costs 1 $ 1 58,720 $ 1 57,348 Allwoable indirect salaries and benefits 2 $ 9 6,471 $ 8 4,102 $ 8 2,286 $ 6 1,749 Allowable indirect cost rate 40.33% 45.82% 51.01% 50.38% 54.19% 55.79% Allowable indirect costs 6 4,012 7 2,097 4 9,209 4 2,370 4 4,590 3 4,450 $ 3 06,728 Less indirect costs claimed (28,549) (36,255) (38,780) (30,225) (33,366) (26,317) (193,492) Audit adjustment $ 3 5,463 $ 3 5,842 $ 1 0,429 $ 1 2,145 $ 1 1,224 $ 8 ,133 $ 1 13,236 1 The FY 2005-06 and FY 2006-07 FAM-29C rates are applied to increased direct costs. 2 The FY 2007-08 through FY 2010-11 FAM-29C rates are applied to increased salaries and benefits. The parameters and guidelines (section H(6)) state: Community College Districts must use one of the following three alternatives:  A federally-approved rate based on OMB Circular A-21;  The State Controller’s FMA-29C which uses the CCFS-311; or  Seven percent (7%). Recommendation Commencing in FY 2012-13, the district elected to participate in a block grant program, pursuant to Government Code section 17581.7, in lieu of filing annual mandated cost claims. If the district chooses to opt out of the block grant program, we recommend that the district calculated indirect costs in the manner prescribed in the claiming instructions and apply the indirect cost rates to allowable direct costs. -13- State Controller’s Office Division of Audits Post Office Box 942850 Sacramento, CA 94250-5874 http://www.sco.ca.gov S12-MCC-040