Monterey Peninsula Community College District

J C OHN HIANG California State Controller June 5, 2014 Steve Ma, Vice President of Administrative Services Monterey Peninsula Community College District 980 Fremont Street Monterey, CA 93940 Dear Mr. Ma: The State Controller’s Office reviewed the costs claimed by the Monterey Peninsula Community College District for the legislatively mandated Integrated Waste Management (IWM) Program (Chapter 1116, Statutes of 1992; and Chapter 764, Statutes of 1999) for the period of July 1, 2006, through June 30, 2010. We conducted our review under the authority of Government Code sections 12410, 17558.5, and 17561. Our review was limited to ensuring that offsetting savings were properly reported in accordance with program requirements. The district claimed $121,760 for the mandated program. Our review found that $72,845 is allowable ($73,911 less a $1,066 penalty for filing a late claim) and $48,915 is unallowable. The costs are unallowable because the district did not report any offsetting savings realized as a result of implementing its IWM plan, as described in the attached Summary of Program Costs (Attachment 1), Summary of Offsetting Savings Calculations (Attachment 2), and the Finding and Recommendation (Attachment 3). The State made no payments to the district. The State will pay $72,845, contingent upon available appropriations. 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/kw Attachments RE: S14-MCC-932 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 Steve Ma, Vice President of Administrative Services -2- June 5, 2014 cc: Earl Davis, Interim Vice President of Administrative Services Monterey Peninsula Community College District Pete Olsen, Grounds, Shipping, and Receiving Supervisor Monterey Peninsula 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 Monterey Peninsula Community College District Integrated Waste Management Program Attachment 1— Summary of Program Costs July 1, 2006, through June 30, 2010 Actual Costs Allowable Review Cost Elements Claimed per Review Adjustment 1 July 1, 2006, through June 30, 2007 Direct costs: Salaries and benefits $ 16,025 $ 16,025 $ — Materials and supplies 600 600 — Contract services 380 380 — Total direct costs 17,005 17,005 — Indirect costs 4,544 4,544 — Total direct and indirect costs 21,549 21,549 — Less offsetting savings 2 — (10,894) (10,894) Subtotal 21,549 10,655 (10,894) Less late filing penalty 3 — (1,066) (1,066) Total program costs $ 21,549 9,589 $ (11,960) Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 9,589 July 1, 2007, through June 30, 2008 Direct costs: Salaries and benefits $ 16,436 $ 16,436 $ — Materials and supplies 759 759 — Contract services 78 78 — Total direct costs 17,273 17,273 — Indirect costs 4,698 4,698 — Total direct and indirect costs 21,971 21,971 — Less offsetting savings 2 — (11,578) (11,578) Total program costs $ 21,971 10,393 $ (11,578) Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 10,393 July 1, 2008, through June 30, 2009 Direct costs: Salaries and benefits $ 33,957 $ 33,957 $ — Indirect costs 12,496 12,496 — Total direct and indirect costs 46,453 46,453 — Less offsetting savings 2 — (12,396) (12,396) Total program costs $ 46,453 34,057 $ (12,396) Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 34,057 1 of 2 Monterey Peninsula Community College District Integrated Waste Management Program Attachment 1 (continued) Actual Costs Allowable Review Cost Elements Claimed per Review Adjustment 1 July 1, 2009, through June 30, 2010 Direct costs: Salaries and benefits $ 23,536 $ 23,536 $ — Indirect costs 8,251 8,251 — Total direct and indirect costs 31,787 31,787 — Less offsetting savings 2 — (12,981) (12,981) Total program costs $ 31,787 18,806 $ (12,981) Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 18,806 Summary: July 1, 2006, through June 30, 2010 Direct costs: Salaries and benefits $ 89,954 $ 89,954 $ — Materials and supplies 1,359 1,359 — Contract services 458 458 — Total direct costs 91,771 91,771 — Indirect costs 29,989 29,989 — Total direct and indirect costs 121,760 121,760 — Less offsetting savings — (47,849) (47,849) Subtotal 121,760 73,911 (47,849) Less late filing penalty — (1,066) (1,066) Total program costs $ 121,760 72,845 $ (48,915) Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 72,845 _________________________ 1 See Attachment 3, Finding and Recommendation. 2 See Attachment 2, Summary of Offsetting Savings Calculations. 3 The district filed its fiscal year (FY) 2006-07 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 (for claims filed on or after August 24, 2007). 2 of 2 Monterey Peninsula Community College District Integrated Waste Management Program Attachment 2— Summary of Offsetting Savings Calculations July 1, 2006, through June 30, 2010 Offsetting Offsetting Savings Realized Savings July - January - Review Cost Elements Reported December June Total Adjustment 1 July 1, 2006, through June 30, 2007 Maximum required diversion percentage 50.00% 50.00% Actual diversion percentage ÷ 54.26% ÷ 55.11% Allocated diversion percentage 92.15% 90.73% Tonnage diverted × (124.55) × (128.90) Statewide average landfill fee per ton × $46.00 × $48.00 Offsetting savings, FY 2006-07 $ — $ (5,280) $ (5,614) $ (10,894) $ (10,894) July 1, 2007, through June 30, 2008 Maximum required diversion percentage 50.00% 50.00% Actual diversion percentage ÷ 55.11% ÷ 55.11% Allocated diversion percentage 90.73% 90.73% Tonnage diverted × (128.90) × (128.90) Statewide average landfill fee per ton × $48.00 × $51.00 Offsetting savings, FY 2007-08 $ — $ (5,614) $ (5,964) $ (11,578) $ (11,578) July 1, 2008, through June 30, 2009 Maximum required diversion percentage 50.00% 50.00% Actual diversion percentage ÷ 55.11% ÷ 55.11% Allocated diversion percentage 90.73% 90.73% Tonnage diverted × (128.90) × (128.90) Statewide average landfill fee per ton × $51.00 × $55.00 Offsetting savings, FY 2008-09 $ — $ (5,964) $ (6,432) $ (12,396) $ (12,396) July 1, 2009, through June 30, 2010 Maximum required diversion percentage 50.00% 50.00% Actual diversion percentage ÷ 55.11% ÷ 55.11% Allocated diversion percentage 90.73% 90.73% Tonnage diverted × (128.90) × (128.90) Statewide average landfill fee per ton × $55.00 × $56.00 Offsetting savings, FY 2009-10 $ — $ (6,432) $ (6,549) $ (12,981) $ (12,981) Summary: July 1, 2006, through June 30, 2010 $ — $ (23,290) $ (24,559) $ (47,849) $ (47,849) _________________________ 1 See Attachment 3, Finding and Recommendation. 1 of 1 Monterey Peninsula Community College District Integrated Waste Management Program Attachment 3— Finding and Recommendation July 1, 2006, through June 30, 2010 FINDING— The district did not report any offsetting savings on its mandated cost claims for the review period. We found that the district realized savings Unreported offsetting of $47,849 from implementation of its integrated waste management savings (IWM) plan. We informed Steve Ma, Vice President of Administrative Services, of the review finding via email on May 15, 2014. We did not receive a response from the district. The following table summarizes the unreported offsetting savings by fiscal year: Offsetting Offsetting Fiscal Savings Savings Review Year Reported Realized Adjustment 2006-07 $ — $ (10,894) $ (10,894) 2007-08 — (11,578) (11,578) 2008-09 — (12,396) (12,396) 2009-10 — (12,981) (12,981) Total $ — $ (47,849) $ (47,849) On March 25, 2004, the Commission on State Mandates (CSM) adopted the statement of decision for the IWM Program. The CSM determined that Chapter 1116, Statutes of 1992; and Chapter 764, Statutes of 1999, imposed upon community college districts a state mandate reimbursable under Government Code section 17561, commencing July 1, 1999. The program’s parameters and guidelines establish the state mandate and define the reimbursement criteria. The CSM adopted the parameters and guidelines on March 30, 2005. In March 2007, the Department of Finance and the IWM Board filed a petition for a Writ of Mandate requesting the CSM to issue new parameters and guidelines that give full consideration to the community colleges’ cost savings (e.g., avoided landfill disposal fees) and revenues (from recyclables) by complying with the test claim statutes. The Judgment and a Writ of Mandate were issued on June 30, 2008, ordering the CSM to amend the parameters and guidelines to require community college districts to identify and offset from their claims cost savings realized as a result of implementing their plan. On September 26, 2008, the CSM amended the parameters and guidelines to the original period of reimbursement because the court’s decision interprets the test claim statutes as a question of law. 1 of 3 Monterey Peninsula Community College District Integrated Waste Management Program In compliance with Government Code section 17558, the State Controller’s Office issues claiming instructions to assist community college districts in claiming mandated-program reimbursable costs. The parameters and guidelines (section VIII. Offsetting Cost Savings) state: Reduced or avoided costs realized from implementation of the community college districts’ Integrated Waste Management Plans shall be identified and offset from this claim as cost savings, consistent with the direction for revenue in Public Contract Code sections 12167 and 12167.1. Public Contract Code sections 12167 and 12167.1 require agencies in state-owned and state-leased buildings to deposit all revenues from the sale of recyclables into the IWM Account in the IWM Fund. The revenues are to be continuously appropriated to the Board for the purpose of offsetting recycling program costs. For the review period, the district did not remit to the State the savings realized from implementation of its IWM plan. Offsetting Savings Calculation The CSM’s Final Staff Analysis of the proposed amendments to the parameters and guidelines (Item #8–CSM hearing of September 26, 2008) states: . . . cost savings may be calculated from the annual solid waste disposal reduction or diversion rates that community colleges must annually report to the Board pursuant to Public Resources Code section 42926, subdivision (b) (1). To compute the savings amount, we multiplied the allocated diversion percentage by the tonnage diverted, and then multiplied the total by the avoided landfill disposal fee, as follows: Allocated Diversion % Maximum Avoided Offsetting Required Landfill Savings = Diversion % x Tonnage x Disposal Fee Realized Actual Diverted (per Ton) Diversion % This calculation determines the cost that the district did not incur for solid waste disposal as a result of implementing its IWM plan. The offsetting savings calculation is presented in Attachment 2 – Summary of Offsetting Savings Calculations. Allocated Diversion Percentage Public Resource Code 42921 requires districts to achieve a solid waste diversion percentage of 25% beginning January 1, 2002, and a 50% diversion percentage by January 1, 2004. The parameters and guidelines 2 of 3 Monterey Peninsula Community College District Integrated Waste Management Program state that districts will be reimbursed for all mandated costs incurred to achieve these levels, without reduction when they fall short of stated goals, but not for amounts that exceed these state-mandated levels. Therefore, we allocated the offsetting savings to be consistent with the requirements of the mandated program. For calendar years 2006 and 2007, we used the actual diversion percentage reported by the district to CalRecycle (formerly the IWM Board) pursuant to Public Resources Code section 42926, subdivision (b)(1). In 2008, CalRecycle began focusing on “per-capita disposal” instead of a “diversion percentage.” As a result, CalRecycle stopped requiring community college districts to report the actual amount of tonnage diverted, and the annual reports no longer identify a “diversion percentage.” Therefore, we used the 2007 diversion percentage to calculate the offsetting savings for fiscal year (FY) 2007-08 through FY 2009-10. The district did not provide any documentation supporting a different diversion percentage. Tonnage Diverted The tonnage diverted is solid waste that the district recycled, composted, and kept out of a landfill. For calendar years 2006 and 2007, we used the actual tonnage diverted, as reported by the district to CalRecycle pursuant to Public Resources Code section 42926, subdivision (b)(1). As previously noted, in 2008, CalRecycle stopped requiring community college districts to report the actual amount of tonnage diverted. Therefore, we used the tonnage diverted in 2007 to calculate the offsetting savings for FY 2007-08 through FY 2009-10. The district did not provide any documentation supporting a different amount of diverted tonnage. Avoided Landfill Disposal Fee (per Ton) The avoided landfill disposal fee is used to calculate realized savings because the district no longer incurs a cost to dispose of the diverted tonnage at a landfill. For each fiscal year in the review period, we used the statewide average disposal fee provided by CalRecycle. The district did not provide any documentation supporting a different disposal fee. Recommendation The IWM Program was suspended in the FY 2011-12 through FY 2013-14 Budget Acts. Further, 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 program becomes active and if the district chooses to opt out of the block grant program, we recommend that the district offset all savings realized from implementation of its IWM plan. 3 of 3