Redwoods Community College District

BETTY T. YEE California State Controller August 10, 2018 Lee Lindsey, Vice President of Administrative Services Redwoods Community College District 7351 Tompkins Hill Road Eureka, CA 95501 Dear Mr. Lindsey: The State Controller’s Office (SCO) reviewed the costs claimed by the Redwoods Community College District for the legislatively mandated Integrated Waste Management (IWM) Program for the period of July 1, 1999, through June 30, 2001; and July 1, 2003, through June 30, 2006. We did not include the costs claimed for the period of July 1, 2001, through June 30, 2003, in the review period because the statute of limitations to initiate a review has expired. We conducted our review under the authority of Government Code (GC) sections 12410, 17558.5, and 17561. Our review was limited to ensuring that offsetting savings were properly reported in accordance with program requirements. This reissued letter report updates our previous letter report, dated April 11, 2014. The previous letter report identified $38,247 in unreported offsetting savings for fiscal year (FY) 1999-2000 through FY 2000-01 and FY 2003-04 through FY 2005-06. On May 25, 2018, the Commission on State Mandates (Commission) issued a decision in response to an Incorrect Reduction Claim filed by the district for the IWM Program. In its decision, the Commission concluded that our reduction of costs claimed for the first half of FY 2003-04 (which was based on a diversion rate of 50% rather than 25%) was incorrect and that the difference of $2,431 had been incorrectly reduced. In compliance with the Commission’s decision, we reinstated $2,431 for FY 2003-04. As a result, allowable costs increased by $2,431, from $192,741 to $195,172. We advised you of the revision to this letter report via email on June 21, 2018. The district claimed $230,988 for the mandated program. Our review found that $195,172 is allowable and $35,816 is unallowable. The costs are unallowable because the district understated the offsetting savings realized as a result of implementing its IWM plans, as described in the Revised Attachment 1—Summary of Program Costs, Revised Attachment 2—Summary of Offsetting Savings Calculations, and Revised Attachment 3—Finding and Recommendation. The State paid the district $192,741. The State will pay allowable claimed costs that exceed the amount paid, totaling $2,431, contingent upon available appropriations. Following issuance of this letter report, the SCO’s Local Government Programs and Services Division will notify the district of the reinstatement adjustment via a system-generated letter for FY 2003-04. 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 Lee Lindsey, Vice President -2- August 10, 2018 of Administrative Services If you have any questions, please contact Lisa Kurokawa, Chief, Compliance Audits Bureau, by telephone at (916) 327-3138. Sincerely, Original signed by JEFFREY V. BROWNFIELD, CPA Chief, Division of Audits JVB/as Attachments RE: S14-MCC-916R cc: Christian Osmeña, Vice Chancellor College Finance and Facilities Planning California Community Colleges Chancellor’s Office Frances Parmelee, Assistant Vice Chancellor College Finance and Facilities Planning California Community Colleges Chancellor’s Office Wrenna Finche, Director of Fiscal Standards and Accountability College Finance and Facilities Planning California Community Colleges Chancellor’s Office Chris Ferguson, Assistant Program Budget Manager Education Systems Unit California Department of Finance Keith Nezaam, Staff Finance Budget Analyst Education Systems Unit California Department of Finance Anita Dagan, Manager Local Government Programs and Services Division State Controller’s Office Redwoods Community College District Integrated Waste Management Program Revised Attachment 1— Summary of Program Costs July 1, 1999, through June 30, 2001; and July 1, 2003, through June 30, 2006 Actual Costs Allowable Review Cost Elements Claimed per Review Adjustment1 July 1, 1999, through June 30, 2000 Direct costs: Salaries and benefits $ 16,624 $ 16,624 $ - Indirect costs 6,557 6,557 - Total direct and indirect costs 23,181 23,181 - Less offsetting savings2 (76) (3,708) (3,632) Total program costs $ 23,105 19,473 $ (3,632) Less amount paid by the State3 (19,473) Allowable costs claimed in excess of amount paid $ - July 1, 2000, through June 30, 2001 Direct costs: Salaries and benefits $ 33,989 $ 33,989 $ - Indirect costs 14,078 14,078 - Total direct and indirect costs 48,067 48,067 - Less offsetting savings2 (916) (10,056) (9,140) Total program costs $ 47,151 38,011 $ (9,140) Less amount paid by the State3 (38,011) Allowable costs claimed in excess of amount paid $ - July 1, 2003, through June 30, 2004 Direct costs: Salaries and benefits $ 45,543 $ 45,543 $ - Indirect costs 17,598 17,598 - Total direct and indirect costs 63,141 63,141 - Less offsetting savings2 (1,327) (7,521) (6,194) Total program costs $ 61,814 55,620 $ (6,194) Less amount paid by the State3 (53,189) Allowable costs claimed in excess of amount paid $ 2,431 1 of 3 Redwoods Community College District Integrated Waste Management Program Revised Attachment 1 (continued) Actual Costs Allowable Review Cost Elements Claimed per Review Adjustment1 July 1, 2004, through June 30, 2005 Direct costs: Salaries and benefits $ 43,273 $ 43,273 $ - Indirect costs 16,400 16,400 - Total direct and indirect costs 59,673 59,673 - Less offsetting savings2 (2,811) (9,687) (6,876) Total program costs $ 56,862 49,986 $ (6,876) Less amount paid by the State3 (49,986) Allowable costs claimed in excess of amount paid $ - July 1, 2005, through June 30, 2006 Direct costs: Salaries and benefits $ 31,738 $ 31,738 $ - Materials and supplies 1,244 1,244 - Total direct costs 32,982 32,982 - Indirect costs 11,885 11,885 - Total direct and indirect costs 44,867 44,867 - Less offsetting revenues and reimbursements (2,811) (2,811) - Less offsetting savings2 - (9,974) (9,974) Total program costs $ 42,056 32,082 $ (9,974) Less amount paid by the State3 (32,082) Allowable costs claimed in excess of amount paid $ - 2 of 3 Redwoods Community College District Integrated Waste Management Program Revised Attachment 1 (continued) Actual Costs Allowable Review Cost Elements Claimed per Review Adjustment1 Summary: July 1, 1999, through June 30, 2001; and July 1, 2003, through June 30, 2006 Direct costs: Salaries and benefits $ 171,167 $ 171,167 $ - Materials and supplies 1,244 1,244 - Total direct costs 172,411 172,411 - Indirect costs 66,518 66,518 - Total direct and indirect costs 238,929 238,929 - Less offsetting revenues and reimbursements (2,811) (2,811) - Less offsetting savings2 (5,130) (40,946) (35,816) Total program costs $ 230,988 195,172 $ (35,816) Less amount paid by the State3 (192,741) Allowable costs claimed in excess of amount paid $ 2,431 _________________________ 1 See Revised Attachment 3—Finding and Recommendation. 2 See Revised Attachment 2—Summary of Offsetting Savings Calculations. 3 Payment information current as of June 4, 2018. 3 of 3 Redwoods Community College District Integrated Waste Management Program Revised Attachment 2— Summary of Offsetting Savings Calculations July 1, 1999, through June 30, 2001; and July 1, 2003, through June 30, 2006 Offsetting Offsetting Savings Realized Savings July through January Review Cost Elements Reported December through June Total Adjustment1 July 1, 1999, through June 30, 2000 Maximum allowable diversion percentage — 25.00% Actual diversion percentage ÷ — ÷ 73.14% Allocated diversion percentage — 34.18% Tonnage diverted × — × (298.15) Statewide average landfill fee per ton × — × $36.39 Offsetting savings, FY 1999-2000 $ (76) $ — $ (3,708) $ (3,708) $ (3,632) July 1, 2000, through June 30, 2001 Maximum allowable diversion percentage 25.00% 25.00% Actual diversion percentage ÷ 73.14% ÷ 83.99% Allocated diversion percentage 34.18% 29.77% Tonnage diverted × (298.15) × (585.95) Statewide average landfill fee per ton × $36.39 × $36.39 Offsetting savings, FY 2000-01 $ (916) $ (3,708) $ (6,348) $ (10,056) $ (9,140) July 1, 2003, through June 30, 2004 Maximum allowable diversion percentage 25.00% 50.00% Actual diversion percentage ÷ 57.68% ÷ 57.85% Allocated diversion percentage 43.34% 86.43% Tonnage diverted × (152.25) × (153.30) Statewide average landfill fee per ton × $36.83 × $38.42 Offsetting savings, FY 2003-04 $ (1,327) $ (2,430) $ (5,091) $ (7,521) $ (6,194) July 1, 2004, through June 30, 2005 Maximum allowable diversion percentage 50.00% 50.00% Actual diversion percentage ÷ 57.85% ÷ 52.61% Allocated diversion percentage 86.43% 95.04% Tonnage diverted × (153.30) × (124.00) Statewide average landfill fee per ton × $38.42 × $39.00 Offsetting savings, FY 2004-05 $ (2,811) $ (5,091) $ (4,596) $ (9,687) $ (6,876) July 1, 2005, through June 30, 2006 Maximum allowable diversion percentage 50.00% 50.00% Actual diversion percentage ÷ 52.61% ÷ 52.22% Allocated diversion percentage 95.04% 95.75% Tonnage diverted × (124.00) × (122.10) Statewide average landfill fee per ton × $39.00 × $46.00 Offsetting savings, FY 2005-06 $ — $ (4,596) $ (5,378) $ (9,974) $ (9,974) Summary: July 1, 1999, through June 30, 2001; and July 1, 2003, through June 30, 2006 $ (5,130) $ (15,825) $ (25,121) $ (40,946) $ (35,816) _________________________ 1 See Revised Attachment 3—Finding and Recommendation. 1 of 1 Redwoods Community College District Integrated Waste Management Program Revised Attachment 3— Finding and Recommendation July 1, 1999, through June 30, 2001; and July 1, 2003, through June 30, 2006 BACKGROUND— On March 25, 2004, the Commission adopted its statement of decision, finding that Public Resources Code (PRC) sections 40148, 40196.3, 42920 through 42928; Public Contract Code (PCC) sections 12167 and 12167.1; and the State Agency Model Integrated Waste Management Plan (February 2000) require new activities which constitute new programs or higher levels of service for community college districts within the meaning of Article XIII B, section 6, of the California Constitution, and impose costs mandated by the State pursuant to GC section 17514. Specifically, the Commission approved the test claim for the increased costs of performing the following specific activities:  Complying with the model plan (PRC section 42920(b)(3) and the State Agency Model Integrated Waste Management Plan, February 2000);  Designating a solid waste reduction and recycling coordinator (PRC section 42920(c));  Diverting solid waste (PRC sections 42921 and 42922(i));  Reporting to the Integrated Waste Management Board (Board) (PRC sections 42926(a) and 42922(i)); and  Submitting recycled material reports (PCC section 12167.1). In March 2007, the California Department of Finance and the Board filed a petition for a Writ of Mandate requesting that the Commission 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) generated by complying with the test claim statutes. The Judgment and a Writ of Mandate were issued on June 30, 2008, ordering the Commission to amend the parameters and guidelines to require that community college districts identify, and offset from their claims, cost savings realized as a result of implementing their IWM plans. On September 26, 2008, the Commission amended the parameters and guidelines for the original period of reimbursement because the court’s decision interprets the test claim statutes as a question of law. In compliance with GC section 17558, the SCO issues claiming instructions to assist community college districts in claiming mandated- program reimbursable costs. 1 of 4 Redwoods Community College District Integrated Waste Management Program REVISED FINDING— The district reported $5,130 in offsetting savings. We determined that the Understated offsetting district realized savings of $40,946 from implementation of its IWM plans. savings Therefore, the district understated its offsetting savings by $35,816. The following table summarizes the understated offsetting savings amounts by fiscal year: Offsetting Offsetting Fiscal Savings Savings Review Year Reported Realized Adjustment 1999-00 $ (76) $ ( 3,708) $ ( 3,632) 2000-01 (916) ( 10,056) (9,140) 2003-04 (1,327) (7,521) (6,194) 2004-05 (2,811) (9,687) (6,876) 2005-06 - (9,974) (9,974) Total $ ( 5,130) $ ( 40,946) $ ( 35,816) Section VIII. (Offsetting Cost Savings) of the amended parameters and guidelines states, in part: 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. PCC 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, which is continuously appropriated to the Board for the purposes of offsetting recycling program costs. For the review period, the district did not deposit any revenue into the IWM Account in the IWM Fund. Our review found that the district realized reduced costs or avoided costs through implementation of its IWM plans that it did not identify and offset from its claims as cost savings. Offsetting Savings Calculation The Commission’s Final Staff Analysis of the Proposed Amendments to the Parameters and Guidelines (Item No. 8 – Commission hearing of September 26, 2008) states, in part: 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). 2 of 4 Redwoods Community College District Integrated Waste Management Program To compute the savings amount, we multiplied the allocated diversion percentage by the tonnage diverted, and then by the avoided landfill disposal fee, as follows: Allocated Diversion % Maximum Avoided Allowable Landfill Offsetting = Diversion % x Tonnage x Disposal Fee Savings Actual Diverted (per Ton) Diversion % This calculation determines the costs that the district did not incur for solid waste disposal as a result of implementing its IWM plans. The offsetting savings calculations are presented in Revised Attachment 2—Summary of Offsetting Savings Calculations. Allocated Diversion Percentage PRC section 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 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 used to exceed these state-mandated levels. Therefore, we allocated the offsetting savings to be consistent with the requirements of the mandated program. For calendar years 2000 through 2006, we used the actual diversion percentage reported by the district to the Board pursuant to PRC section 42926, subdivision (b)(1). Tonnage Diverted The tonnage diverted is solid waste that the district recycled, composted, and kept out of the landfill. For calendar years 2000 through 2006, we used the actual tonnage diverted, as reported by the district to the Board pursuant to PRC section 42926, subdivision (b)(1). Avoided Landfill Disposal Fee (per Ton) The avoided landfill disposal fee is used to calculate realized savings, as the district no longer incurs a cost to dispose of the diverted tonnage at the landfill. For each fiscal year in the review period, we used the statewide average disposal fee provided by the California Department of Resources Recycling and Recovery, which was established in 2010 to replace the Board. The district did not provide documentation supporting a different disposal fee. 3 of 4 Redwoods Community College District Integrated Waste Management Program Recommendation The IWM Program was suspended in the FY 2011-12 through FY 2017-18 Budget Acts. Furthermore, commencing in FY 2012-13, the district elected to receive block grant funding pursuant to GC section 17581.7, in lieu of filing annual mandated cost claims. If the IWM Program becomes active again and if the district chooses to opt out of receiving block grant funds, we recommend that the district:  Follow the mandated program claiming instructions and the parameters and guidelines when filing its reimbursement claims; and  Offset all savings realized from implementation of the community college district’s IWM plans. 4 of 4