Redondo Beach Unified School District

J C OHN HIANG California State Controller June 13, 2014 Steven E. Keller, Ed.D, Superintendent Redondo Beach Unified School District 1401 Inglewood Avenue Redondo Beach, CA 90278 Dear Dr. Keller: The State Controller’s Office reviewed the costs claimed by Redondo Beach 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 $90,604 for the mandated program. Our review found that $39,516 is allowable ($40,448 less a $932 penalty for filing a late claim) and $51,088 is unallowable. The costs are unallowable because the district did not offset its Winton Act base-year costs against its current-year Rodda Act direct costs for fiscal year (FY) 2008-09 through FY 2011-12, and did not claim indirect costs on contract services for FY 2008-09 and FY 2009-10, as described in the attached Summary of Program Costs and the Finding and Recommendation. For the fiscal year (FY) 2008-09 claim, the State paid the district $3,751. Our review found that $15,024 is allowable. The State will pay allowable costs claimed that exceed the amount paid, totaling $11,273, contingent upon available appropriations. For the FY 2009-2010 claim, the State paid the district $2,404. Our review found that $15,631 is allowable. The State will pay allowable costs claimed that exceed the amount paid, totaling $13,227, contingent upon available appropriations. For the FY 2010-11 claim, the State made no payment to the district. Our review found that $475 is allowable. The State will pay that amount, contingent upon available appropriations. For the FY 2011-12 claim, the State made no payment to the district. Our review found that $8,386 is allowable. The State will pay that amount, contingent upon available appropriations. We informed Janet Redella, Chief Business Official, of the review adjustment via email on June 3, 2014. We did not receive a response from the district. 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 Steven E. Keller, Ed.D, Superintendent -2- June 13, 2014 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/mh Attachments RE: S14-MCC-941 cc: Janet Redella, Chief Business Official Redondo Beach Unified School District Marlene Dunn, Director Business Advisory Services Los Angeles County Office of Education Peter Foggiato, Director School Fiscal Services Division California Department of Education Carol Bingham, Senior Fiscal Policy Advisor Government Affairs 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 Redondo Beach 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 $ 24 ,667 $ 24,667 $ — Contract services 122 122 — Subtotal 24,789 24,789 — Less base-year direct costs adjusted by the implicit price deflator — (14,611) (14,611) Finding 1 Increased direct costs, G1 through G3 24,789 10,178 (14,611) Component activities G4 through G7: Salaries and benefits 4,124 4,124 — Contract services 67 67 — Increased direct costs, G4 through G7 4,191 4,191 — Total increased direct costs, G1 through G7 28,980 14,369 (14,611) Indirect costs 1,313 655 (658) Findi ng 2 Total program costs $ 30,293 15,024 $ (15,269) Less amount paid by the State (3,751) Allowable costs claimed in excess of (less than) amount paid $ 11,273 July 1, 2009, through June 30, 2010 Direct costs: Component activities G1 through G3: Salaries and benefits $ 27,438 $ 27,438 $ — Contract services 621 621 — Subtotal 28,059 28,059 — Less base-year direct costs adjusted by the implicit price deflator — (14,773) (14,773) Finding 1 Increased direct costs, G1 through G3 28,059 13,286 (14,773) Component activities G4 through G7: Salaries and benefits 1,874 1,874 — Contract services 135 135 — Increased direct costs, G4 through G7 2,009 2,009 — Total increased direct costs, G1 through G7 30,068 15,295 (14,773) Indirect costs 645 336 (309) Findi ng 2 Total program costs $ 30,713 15,631 $ (15,082) Less amount paid by the State (2,404) Allowable costs claimed in excess of (less than) amount paid $ 13,227 1 of 3 Redondo Beach 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 $ 6 ,840 $ 6,840 $ — Contract services 729 729 — Subtotal 7,569 7,569 — Less base-year direct costs adjusted by the implicit price deflator — (15,119) (15,119) Finding 1 Subtotal 7,569 (7,550) (15,119) Adjustment to eliminate negative balance — 7,550 7,550 Increased direct costs, G1 through G3 7,569 — (7,569) Component activities G4 through G7: Salaries and benefits 452 452 — Increased direct costs, G4 through G7 452 452 — Total increased direct costs, G1 through G7 8,021 452 (7,569) Indirect costs 407 23 (384) Findi ng 2 Total program costs $ 8,428 475 $ (7,953) Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 475 July 1, 2011, through June 30, 2012 Direct costs: Component activities G1 through G3: Salaries and benefits $ 6 ,774 $ 6,774 $ — Contract services 4,524 4,524 — Subtotal 11,298 11,298 — Less base-year direct costs adjusted by the implicit price deflator — (15,631) (15,631) Finding 1 Subtotal 11,298 (4,333) (15,631) Adjustment to eliminate negative balance — 4,333 4,333 Increased direct costs, G1 through G3 11,298 — (11,298) Component activities G4 through G7: Salaries and benefits 6,749 6,749 — Contract Services 2,134 2,134 — Increased direct costs, G4 through G7 8,883 8,883 — Total increased direct costs, G1 through G7 20,181 8,883 (11,298) Indirect costs 989 435 (554) Findi ng 2 Subtotal 21,170 9,318 (11,852) Less late filing penalty — (932) (932) 2 of 3 Redondo Beach Unified School District Collective Bargaining Program Attachment 1 (continued) Actual Costs Allowable Review Cost Elements Claimed per Review Adjustment Reference 1 July 1, 2011, through June 30, 2012 (continued) Total program costs $ 21,170 8,386 $ (12,784) Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 8,386 Summary: July 1, 2008, through June 30, 2012 Total increased direct costs, G1 through G7 $ 87,250 $ 38,999 $ (48,251) Indirect costs 3,354 1,449 (1,905) Total direct and indirect costs 90,604 40,448 (50,156) Less late filing penalty 2 — (932) (932) Total program costs $ 90,604 39,516 $ (51,088) Less amount paid by the State (6,155) Allowable costs claimed in excess of (less than) amount paid $ 33,361 _________________________ 1 See Attachment 2, Finding and Recommendation. 2 The district filed its FY 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 Redondo Beach 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 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 seven components are as follows:  G1–Determining Bargaining Units and exclusive representatives  G2–Election of unit representatives  G3–Cost of negotiations  G4–Impasse proceedings  G5–Collective bargaining agreement disclosure  G6–Contract administration  G7–Unfair labor practice charges 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. 1 of 3 Redondo Beach Unified School District Collective Bargaining Program In compliance with Government Code section 17558, the State Controller’s Office issues claiming instructions to assist school districts in claiming mandated program reimbursable costs. FINDING 1— The district did not report any Winton Act direct costs on its mandated cost claims for FY 2008-09 through FY 2011-12. Specifically, the Unreported Winton Act district did not offset the Winton Act base-year costs against the current- base-year direct costs, year Rodda Act costs for components G1 through G3, thus understating and related indirect the Winton Act base-year costs by $60,134 for the review period. costs The following table summarizes the unreported Winton Act base-year cost adjustment by fiscal year: Fiscal Year Winton Act Base Year Costs 2008-09 2009-10 2010-11 2011-12 Total Winton Act base-year costs, FY 1995-96 $ (3,299) $ (3,299) $ (3,299) $ (3,299) Implicit price deflator (IPD) x 4 .429 x 4 .478 x 4 .583 x 4 .738 Winton Act base-year costs adjusted by the IPD1 (14,611) (14,773) (15,119) (15,631) (60,134) Less reported Winton Act base-year costs - - - - - Review Adjustment $ (14,611) $ (14,773) $ (15,119) $ (15,631) $ (60,134) 1 The Winton Act base-year costs exceeded the direct costs by $7,550 for FY 2010-11 and $4,333 for FY 2011-12. As direct costs cannot be negative, adjustments were made to eliminate the negative balances. 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 Commencing in FY 2012-13, the district elected to participate in a block grant program, pursuant to Government Code section 17581.6, 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 Winton Act base-year costs are adjusted by the IPD, as listed in the 2 of 3 Redondo Beach Unified School District Collective Bargaining Program SCO’s annual claiming instructions, and are properly offset against the district’s current-year Rodda Act costs claimed. FINDING 2— The district overstated indirect costs by $1,905 for the review period. Misstated indirect costs The overstatement occurred because the district:  did not claim indirect costs on contract services for FY 2008-09 and FY 2009-10, totaling $24; and  did not report any Winton Act direct costs on its mandated cost claims for FY 2008-09 through FY 2011-12, resulting in an overstatement of $1,929. The unclaimed indirect costs on contract services occurred because the district followed the claiming instructions identified on Form 1 for the Collective Bargaining Program, which inadvertently excluded contract services from the calculation of indirect costs. The Collective Bargaining Program claiming instructions have since been corrected. We determined allowable indirect costs by multiplying allowable contract services by the indirect cost rates claimed by the district, which agreed to the indirect cost 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 following table summarizes the calculation of unclaimed indirect costs on contract services for the review period: Fiscal Year Description 2008-09 2009-10 2010-11 2011-12 Total Allowable increased direct costs $ 14,369 $ 1 5,295 $ 452 $ 8,883 Claimed indirect cost rate 4.56% 2.20% 5.08% 4.90% Allowable indirect costs $ 655 $ 3 36 $ 23 $ 435 $ 1,449 Less: claimed indirect costs 1,313 645 407 989 3,354 Review adjustment $ ( 658) $ (309) $ (384) $ (554) $ (1,905) Recommendation Commencing in FY 2012-13, the district elected to participate in a block grant program, pursuant to Government Code section 17581.6, 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 follow the updated guidance in the claiming instructions for calculating indirect costs on contract services. 3 of 3