Sweetwater Union High School District

BETTY T. YEE California State Controller August 1, 2016 Karen Janney, Ed.D., Superintendent Sweetwater Union High School District 1130 Fifth Avenue Chula Vista, CA 91911-2896 Dear Dr. Janney: The State Controller’s Office performed a desk review of costs claimed by the Sweetwater Union High School District for the legislatively mandated High School Exit Examination (HSEE) Program (Chapter 1, Statutes of 1999x; and Chapter 135, Statutes of 1999) for the period of July 1, 2006, through June 30, 2008; and July 1, 2010, through June 30, 2011. We did not review the costs claimed for the period of July 1, 2008, through June 30, 2010, as the statute of limitations to adjust the claims has expired. We conducted our review under the authority of Government Code sections 12410, 17558.5, and 17561. Our review was limited to ensuring that the California Department of Education HSEE Program apportionment was properly offset on the district’s claims. The district claimed $429,076 for the mandated program. Our review found that $335,126 is allowable and $93,950 is unallowable. The costs are unallowable because the district did not offset the funding provided in the State Budget for the HSEE Program, as described in the attached Summary of Program Costs and the Review Results. The State made no payments to the district. The State will pay $335,126, contingent upon available appropriations. This final letter report contains an adjustment to costs claimed by the district. If you disagree with the review finding, you may file an Incorrect Reduction Claim (IRC) with the Commission on State Mandates (Commission). Pursuant to Section 1185, subdivision (c), of the Commission’s regulations (California Code of Regulations, Title 3), an IRC challenging this adjustment must be filed with the Commission no later than three years following the date of this report, regardless as to whether this report is subsequently supplemented, superseded or otherwise amended. You may obtain IRC information on the Commission’s website at www.csm.ca.gov/forms/IRCForm.pdf. P.O. Box 942850, Sacramento, CA 94250  (916) 445-2636 3301 C Street, Suite 700, Sacramento, CA 95816  (916) 324-8907 901 Corporate Center Drive, Suite 200, Monterey Park, CA 91754  (323) 981-6802 Karen Janney, Ed.D., Superintendent -2- August 1, 2016 If you have any questions, please contact Jim L. Spano, Chief, Mandated Cost Audits Bureau, by telephone at (916) 323-5849. Sincerely, Original signed by JEFFREY V. BROWNFIELD, CPA Chief, Division of Audits JVB/ls Attachments RE: S16-MCC-9028 cc: Moises Aguirre, Assistant Superintendent Business Services Sweetwater Union High School District Karen Michel, Chief Financial Officer Fiscal Services Sweetwater Union High School District Doug Martens, Director Financial Services Sweetwater Union High School District Shawna Alford, Accounting Technician Sweetwater Union High School District Lora Duzyk, Assistant Superintendent Business Services San Diego County Office of Education Brent Watson, Executive Director Business Advisory Services San Diego County Office of Education Peter Foggiato, Director School Fiscal Services Division California Department of Education Amy Tang-Paterno, Education Fiscal Services Consultant 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 Sweetwater Union High School District High School Exit Examination Program Attachment 1— Summary of Program Costs July 1, 2006, through June 30, 2008; and July 1, 2010, through June 30, 2011 Actual Costs Allowable Review Cost Elements Claimed per Review Adjustment 1 July 1, 2006, through June 30, 2007 Direct costs: HSEE administration $ 202,684 $ 2 02,684 $ - Total direct costs 202,684 2 02,684 - Indirect costs 9,413 9 ,413 - Total direct and indirect costs 212,097 2 12,097 - Less offsetting revenues and reimbursements (35,219) (46,698) (11,479) Total program costs $ 176,878 1 65,399 $ (11,479) Less amount paid by the State - Allowable costs claimed in excess of (less than) amount paid $ 1 65,399 July 1, 2007, through June 30, 2008 Direct costs: HSEE administration $ 143,478 $ 1 43,478 $ - Test security 20,692 2 0,692 - Total direct costs 164,170 1 64,170 - Indirect costs 8,816 8 ,816 - Total direct and indirect costs 172,986 1 72,986 - Less offsetting revenues and reimbursements - (46,530) (46,530) Total program costs $ 172,986 1 26,456 $ (46,530) Less amount paid by the State - Allowable costs claimed in excess of (less than) amount paid $ 1 26,456 July 1, 2010, through June 30, 2011 Direct costs: HSEE administration $ 63,273 $ 6 3,273 $ - Test security 11,867 1 1,867 - Total direct costs 75,140 7 5,140 - Indirect costs 4,072 4 ,072 - Total direct and indirect costs 79,212 7 9,212 - Less offsetting revenues and reimbursements - (35,941) (35,941) Total program costs $ 79,212 4 3,271 $ (35,941) Less amount paid by the State - Allowable costs claimed in excess of (less than) amount paid $ 4 3,271 1 of 2 Sweetwater Union High School District High School Exit Examination Program Attachment 1 (continued) Actual Costs Allowable Review Cost Elements Claimed per Review Adjustment 1 Summary: July 1, 2006, through June 30, 2008; and July 1, 2010, through June 30, 2011 Direct costs: HSEE administration $ 409,435 $ 4 09,435 $ - Test security 32,559 3 2,559 - Total direct costs 441,994 4 41,994 - Indirect costs 22,301 2 2,301 - Total direct and indirect costs 464,295 4 64,295 - Less offsetting revenues and reimbursements (35,219) (129,169) (93,950) Total program costs $ 429,076 3 35,126 $ (93,950) Less amount paid by the State - Allowable costs claimed in excess of (less than) amount paid $ 3 35,126 _________________________ 1 See Attachment 2, Review Results. 2 of 2 Sweetwater Union High School District High School Exit Examination Program Attachment 2— Review Results July 1, 2006, through June 30, 2008; and July 1, 2010, through June 30, 2011 BACKGROUND— On March 25, 2004, the Commission on State Mandates (Commission) adopted a Statement of Decision for the High School Exit Examination (HSEE) Program finding that Education Code sections 60850, 60851, 60853, and 60855 as added in 1999, along with California Code of Regulations, Title 5, sections 1200-1225 that became effective in 2001 and 2003, constitutes a new program or higher level of service and imposes a reimbursable state-mandated program upon school districts. The program’s parameters and guidelines establish the state mandate and define the reimbursement criteria. The Commission adopted the parameters and guidelines on April 26, 2006. The parameters and guidelines categorize reimbursable activities into the following six components: adequate notice, documentation of adequate notice, determining English language skills, high school exit examination administration, test security/cheating, and reporting data to the Superintendent of Public Instruction. In compliance with Government Code section 17558, the State Controller’s Office issues claiming instructions to assist local agencies, school districts, and community college district in claiming mandated program reimbursable costs. Senate Bill 172 was signed on October 7, 2015 suspending administration of the California HSEE Program and the requirement that students completing Grade 12 successfully pass the high school exit exam as a condition of receiving a diploma for the 2015-16 through 2017-18 school years. FINDING— The district reported $35,219 in offsetting revenue received for the HSEE Program from the California Department of Education (CDE) for the Under-reported period of July 1, 2006, through June 30, 2008; and July 1, 2010, through offsetting revenue June 30, 2011. We found that the district should have offset $129,169, resulting in an understatement of $93,950. Education Code section 60851, subdivision (a), specifies that the State Superintendent of Public Instruction apportion funds to school districts to enable them to administer the HSEE Program. The CDE establishes the amount of funding to be apportioned per test administered, based on a review of the cost per test. For the review period, the district received $129,169 from the CDE. 1 of 3 Sweetwater Union High School District High School Exit Examination Program The following table summarizes the under-reported offsetting revenue for the review period: Fiscal Year 2006-07 2007-08 2010-11 Total HSEE apportionment $ (46,698) $ (46,530) $ (35,941) $ (129,169) Less offset apportionment ( 35,219) - - ( 35,219) Review finding $ (11,479) $ (46,530) $ (35,941) $ (93,950) The parameters and guidelines (Section VII. Offsetting Savings and Reimbursements) state that “Reimbursement shall be offset by funding provided in the State Budget for the HSEE Program.” Recommendation The HSEE Program was suspended in the fiscal year (FY) 2015-16 Budget Act. Further, 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 HSEE Program becomes active and if the district chooses to opt out of the block grant program, we recommend that the district ensure that all applicable reimbursements are offset against mandated program costs. District’s Response The district’s response letter, dated June 22, 2016, is included in its entirety in Attachment 3. The district responded that the amount of offsetting revenues reported on its claim forms differed from what the SCO determined it should have reported because it reported offsetting reimbursements in the fiscal years the funds were received rather than the fiscal year for which the funds were intended. The district also noted that for its FY 2005-06 HSEE claim, it erred by offsetting funds received for a different activity. The district requested that we consider this error when reviewing other fiscal years’ claims, though it did acknowledge that we previously told it we could not do so. SCO’s Comment The district should have reported offsetting revenues in the fiscal years for which they were intended. Government Code section 17560, subsection (a), states, “an annual reimbursement claim that details the costs actually incurred for that fiscal year.” The district informed us of its practice of offsetting reimbursements in the fiscal years the funds were received, rather than the fiscal year for which the funds were intended, because it was not aware of the funding amount. We disagree. While the FY 2006-07 HSEE program apportionment of $46,698 was not actually paid to the district until March 14, 2008, the CDE informed the district of this amount in early September 2007, many months before the claims were filed with the SCO in February 2008. 2 of 3 Sweetwater Union High School District High School Exit Examination Program Additionally, we noted that the district did not consistently offset revenues provided from the CDE on subsequent claims, as it said was its practice. In its claims for FY 2007-08 and FY 2010-11, the district did not report any offsetting revenues, even though it received funds for the prior years’ activities. With respect to the district’s FY 2005-06 claim, although we acknowledge that the district did report an excessive offset, we are unable to assist the district with resolving this matter because the time to amend this claim has passed. Government Code section 17560, as effective on the date the claiming instructions were issued for this mandate, states, “a local agency or school district may, by January 15 following the fiscal year in which costs are incurred, file an annual reimbursement claim.” Government Code section 17568 states, “in no case shall a reimbursement claim be paid that is submitted more than one year after the deadline specified in Section 17560.” Therefore, the deadline for the district to amend its FY 2005-06 expired on January 15, 2008. 3 of 3 Sweetwater Union High School District High School Exit Examination Program Attachment 3— District’s Response to Finding