South Pasadena City

CITY OF SOUTH PASADENA Audit Report MUNICIPAL STORM WATER AND URBAN RUNOFF DISCHARGES PROGRAM Los Angeles Regional Water Quality Control Board, Order No. 01-182, Permit CAS004001, Part 4F5c3 July 1, 2002, through June 30, 2009 BETTY T. YEE California State Controller September 2018 BETTY T. YEE California State Controller September 28, 2018 The Honorable Richard D. Schneider, M.D., Mayor City of South Pasadena 1414 Mission Street South Pasadena, CA 91030 Dear Mayor Schneider: The State Controller’s Office (SCO) audited the costs claimed by the City of South Pasadena for the legislatively mandated Municipal Storm Water and Urban Runoff Discharges Program for the period of July 1, 2002, through June 30, 2009. The city claimed $273,881 for the mandated program. Our audit found that $199,985 is allowable and $73,896 is unallowable because the city overstated the number of annual trash collections and did not offset the Proposition A Local Return funds used to pay for the mandated activities. The State made no payments to the city. The State will pay $199,985, contingent upon available appropriations. Following issuance of this audit report, the SCO’s Local Government Programs and Services Division will notify the city of the adjustment to its claims via a system- generated letter for each fiscal year in the audit period. 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 The Honorable Richard D. Schneider, -2- September 28, 2018 M.D., Mayor cc: Craig Koehler, Finance Director City of South Pasadena Mariam Lee Ko, Human Resources Manager City of South Pasadena Chris Hill, Principal Program Budget Analyst Local Government Unit California Department of Finance Steven Pavlov, Finance Budget Analyst Local Government Unit California Department of Finance Anita Dagan, Manager Local Government Programs and Services Division State Controller’s Office City of South Pasadena Municipal Storm Water and Urban Runoff Discharges Program Contents Audit Report Summary ............................................................................................................................ 1 Background ........................................................................................................................ 1 Objective, Scope, and Methodology ................................................................................. 1 Conclusion .......................................................................................................................... 3 Follow-up on Prior Audit Findings .................................................................................. 3 Views of Responsible Officials .......................................................................................... 3 Restricted Use .................................................................................................................... 3 Schedule—Summary of Program Costs .............................................................................. 4 Findings and Recommendations ........................................................................................... 7 City of South Pasadena Municipal Storm Water and Urban Runoff Discharges Program Audit Report Summary The State Controller’s Office (SCO) audited the costs claimed by the City of South Pasadena for the legislatively mandated Municipal Storm Water and Urban Runoff Discharges Program for the period of July 1, 2002, through June 30, 2009. The city claimed $273,881 for the mandated program. Our audit found that $199,985 is allowable and $73,896 is unallowable because the city overstated the number of annual trash collections and did not offset the Proposition A Local Return funds used to pay for the mandated activities. The State made no payments to the city. The State will pay $199,985, contingent upon available appropriations. Background The California Regional Water Quality Control Board, Los Angeles Region (Board), adopted a 2001 storm water permit (Permit CAS004001) that requires local jurisdictions to: Place trash receptacles at all transit stops within its jurisdiction that have shelters no later than August 1, 2002, and at all other transit stops within its jurisdiction no later than February 3, 2003. All trash receptacles shall be maintained as necessary. On July 31, 2009, the Commission on State Mandates (Commission) determined that Part 4F5c3 of the permit imposes a state mandate reimbursable under Government Code (GC) section 17561 and adopted the Statement of Decision. The Commission further clarified that each local agency subject to the permit and not subject to a trash total maximum daily load (TMDL) is entitled to reimbursement. The Commission also determined that the period or reimbursement for the mandated activities begins July 1, 2002, and continues until a new National Pollutant Discharge Elimination System (NPDES) permit issued by the Board is adopted. On November 8, 2012, the Board adopted a new NPDES permit, Order No. R4-2014-0175, which became effective on December 28, 2012. As such, the reimbursement period for the legislatively mandated Municipal Storm Water and Urban Runoff Discharges Program ended on December 27, 2012. The program’s parameters and guidelines establish the state mandate and define the reimbursement criteria. The Commission adopted the parameters and guidelines on March 24, 2011. In compliance with GC section 17558, the SCO issues claiming instructions to assist local agencies in claiming mandated program reimbursable costs. Objective, Scope, The objective of our audit was to determine whether costs claimed represent increased costs resulting from the legislatively mandated and Methodology Municipal Storm Water and Urban Runoff Discharges Program. Specifically, we conducted this audit to determine whether costs claimed were supported by appropriate source documents, were not funded by another source, and were not unreasonable and/or excessive. -1- City of South Pasadena Municipal Storm Water and Urban Runoff Discharges Program The audit period was July 1, 2002, through June 30, 2009. To achieve our audit objective, we:  Reviewed the annual mandated cost claims filed by the city for the audit period and identified the material cost components of each claim as the annual number of trash collections and the unit cost rates: o Determined whether there were any errors or any unusual or unexpected variances from year to year; and o Reviewed the claimed activities to determine whether they adhered to the SCO’s claiming instructions and the program’s parameters and guidelines;  Completed an internal control questionnaire by interviewing key city staff, and discussed the claim preparation process with city staff to determine what information was obtained, who obtained it, and how it was used;  Researched the city’s location with the Los Angeles River Watershed and gained an understanding of the trash TMDL effective date to determine the city’s eligibility;  Traced the unit cost rate claimed for each fiscal year in the audit period to the SCO’s claiming instructions to ensure proper application of the rate;  Reviewed the city’s contract with its waste hauler to support the calculation of the annual number of trash collections claimed for each fiscal year in the audit period (see Finding 1); and  Traced the ongoing maintenance costs claimed to source documentation for FY 2003-04 through FY 2008-09 to determine whether costs claimed were funded by another source. Errors noted were applied to FY 2002-03, as the city was unable to provide source documentation for this fiscal year (see Finding 2). GC sections 12410, 17558.5, and 17561 provide the legal authority to conduct this audit. We conducted this performance 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 objective. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objective. We limited our review of the city’s internal controls to gaining an understanding of the transaction flow and claim preparation process as necessary to develop appropriate auditing procedures. Our audit scope did not assess the efficiency or effectiveness of program operations. We did not audit the city’s financial statements. -2- City of South Pasadena Municipal Storm Water and Urban Runoff Discharges Program Conclusion Our audit found instances of noncompliance with the requirements outlined in the Objective, Scope, and Methodology section. These instances are quantified in the accompanying Schedule (Summary of Program Costs) and described in the Findings and Recommendations section of this report. For the audit period, the City of South Pasadena claimed $273,881 for costs of the legislatively mandated Municipal Storm Water and Urban Runoff Discharges Program. Our audit found that $199,985 is allowable and $73,896 is unallowable. The State made no payments to the city. The State will pay $199,985, contingent upon available appropriations. Following issuance of this audit report, the SCO’s Local Government Programs and Services Division will notify the city of the adjustment to its claims via a system-generated letter for each fiscal year in the audit period. Follow-up on We have not previously conducted an audit of the city’s legislatively mandated Municipal Storm Water and Urban Runoff Discharges Program. Prior Audit Findings Views of We issued a draft audit report on August 8, 2018. We contacted Mariam Responsible Lee Ko, Human Resources Manager, by email on August 23, 2018. We did not receive a response from the city regarding the draft audit report Officials findings. Restricted Use This report is solely for the information and use of the City of South Pasadena, 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 audit report, which is a matter of public record. Original signed by JEFFREY V. BROWNFIELD, CPA Chief, Division of Audits September 28, 2018 -3- City of South Pasadena Municipal Storm Water and Urban Runoff Discharges Program Schedule— Summary of Program Costs July 1, 2002, through June 30, 2009 Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustment Reference1 July 1, 2002, through June 30, 2003 Ongoing activities: Unit cost rate $ 6 .74 $ 6.74 Annual number of trash collections2 × 5,547 × 4,988 Total ongoing activities 37,387 3 3,619 $ (3,768) Finding 1 Less offsetting revenues and reimbursements - (12,380) ( 12,380) Finding 2 Total program costs $ 37,387 2 1,239 $ ( 16,148) Less amount paid by the State3 - Allowable costs claimed in excess of amount paid $ 2 1,239 July 1, 2003, through June 30, 2004 Ongoing activities: Unit cost rate $ 6 .74 $ 6.74 Annual number of trash collections2 × 6,708 × 6,032 Total ongoing activities 45,212 4 0,656 $ (4,556) Finding 1 Less offsetting revenues and reimbursements - (15,398) ( 15,398) Finding 2 Total program costs $ 45,212 2 5,258 $ ( 19,954) Less amount paid by the State3 - Allowable costs claimed in excess of amount paid $ 2 5,258 July 1, 2004, through June 30, 2005 Ongoing activities: Unit cost rate $ 6 .74 $ 6.74 Annual number of trash collections2 × 6,708 × 6,032 Total ongoing activities 45,212 4 0,656 $ (4,556) Finding 1 Less offsetting revenues and reimbursements - (15,837) ( 15,837) Finding 2 Total program costs $ 45,212 2 4,819 $ ( 20,393) Less amount paid by the State3 - Allowable costs claimed in excess of amount paid $ 2 4,819 -4- City of South Pasadena Municipal Storm Water and Urban Runoff Discharges Program Schedule (continued) Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustment Reference1 July 1, 2005, through June 30, 2006 Ongoing activities: Unit cost rate $ 6 .74 $ 6.74 Annual number of trash collections2 × 6,708 × 6,032 Total ongoing activities 45,212 4 0,656 $ (4,556) Finding 1 Less offsetting revenues and reimbursements - (2,681) (2,681) Finding 2 Total program costs $ 45,212 3 7,975 $ (7,237) Less amount paid by the State3 - Allowable costs claimed in excess of amount paid $ 3 7,975 July 1, 2006, through June 30, 2007 Ongoing activities: Unit cost rate $ 6 .74 $ 6.74 Annual number of trash collections2 × 6,708 × 6,032 Total ongoing activities 45,212 4 0,656 $ (4,556) Finding 1 Less offsetting revenues and reimbursements - - - Total program costs $ 45,212 4 0,656 $ (4,556) Less amount paid by the State3 - Allowable costs claimed in excess of amount paid $ 4 0,656 July 1, 2007, through June 30, 2008 Ongoing activities: Unit cost rate $ 6 .74 $ 6.74 Annual number of trash collections2 × 6,708 × 6,032 Total ongoing activities 45,212 4 0,656 $ (4,556) Finding 1 Less offsetting revenues and reimbursements - - - Total program costs $ 45,212 4 0,656 $ (4,556) Less amount paid by the State3 - Allowable costs claimed in excess of amount paid $ 4 0,656 -5- City of South Pasadena Municipal Storm Water and Urban Runoff Discharges Program Schedule (continued) Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustment Reference1 July 1, 2008, through June 30, 2009 Ongoing activities: Unit cost rate $ 6 .74 $ 6.74 Annual number of trash collections2 × 1,548 × 1,392 Total ongoing activities 10,434 9,382 $ (1,052) Finding 1 Less offsetting revenues and reimbursements - - - Total program costs $ 10,434 9,382 $ (1,052) Less amount paid by the State3 - Allowable costs claimed in excess of amount paid $ 9,382 Summary: July 1, 2002, through June 30, 2009 Ongoing activities $ 2 73,881 $ 246,281 $ ( 27,600) Finding 1 Less offsetting revenues and reimbursements - (46,296) ( 46,296) Finding 2 Total program costs $ 2 73,881 199,985 $ ( 73,896) Less amount paid by the State3 - Allowable costs claimed in excess of amount paid $ 199,985 _________________________ 1 See the Findings and Recommendations section. 2 The annual number of trash collections is the number of city-wide transit-stop trash receptacles multiplied by the number of annual trash collections for each receptacle. 3 Payment information current as of September 11, 2018. -6- City of South Pasadena Municipal Storm Water and Urban Runoff Discharges Program Findings and Recommendations FINDING 1— The city claimed $273,881 for the ongoing maintenance of transit stop trash receptacles during the audit period. During testing, we found that Overstated ongoing $246,281 is allowable and $27,600 is unallowable. The costs are maintenance costs unallowable because the city overstated the annual number of transit-stop trash collections. The city claimed reimbursement for ongoing maintenance costs using the Commission-adopted reasonable reimbursement methodology (RRM). Under the RRM, the unit cost rate (which is $6.74 during the period of July 1, 2002, through June 30, 2009) is multiplied by the number of city- wide transit-stop trash receptacles and the number of annual trash collections for each receptacle. The following table summarizes the audit adjustment by fiscal year: Annual Number of Trash Collections1 Unit Fiscal Amount Amount Cost Audit Year Claimed Allowable Difference Rate Adjustment 2002-03 5,547 4,988 ( 559) $ 6.74 $ ( 3,768) 2003-04 6,708 6,032 ( 676) 6 .74 (4,556) 2004-05 6,708 6,032 ( 676) 6 .74 (4,556) 2005-06 6,708 6,032 ( 676) 6 .74 (4,556) 2006-07 6,708 6,032 ( 676) 6 .74 (4,556) 2007-08 6,708 6,032 ( 676) 6 .74 (4,556) 2008-09 1,548 1,392 ( 156) 6 .74 (1,052) Total 40,635 36,540 (4,095) $ (27,600) 1 The annual number of trash collections is the number of city-wide transit-stop trash receptalces multiplied by the number of annual trash collections for each receptacle. Overstated annual number of trash collections The city claimed 40,635 annual trash collections for the audit period. We found that 36,450 collections are allowable and 4,095 are unallowable. On December 18, 1997, the city entered into an agreement with Avalon Building Maintenance (Contractor) for janitorial services and bus stop maintenance, including bus bench cleaning and trash removal. The city provided maps of four trash collection routes. Based on these maps, we found that the 13 trash receptacles located on Huntington Drive were maintained once per week; however, the city claimed that these receptacles were maintained twice per week. -7- City of South Pasadena Municipal Storm Water and Urban Runoff Discharges Program Section 3. (Trash Removal) of the Technical Specifications portion of the contract with the Contractor states: 3.) Trash Removal …Trash shall be removed according to the following schedule: (a.) Twice per week – All RTD Bus Stops located along Mission Street and Fair Oaks Avenue in the downtown business district. Mission Street between Milan Avenue and Palm Avenue; Fair Oaks Avenue between Mound Avenue and Bank Street. (b.) Once per Week – All remaining RTD Bus Stops. The following table summarizes the over-stated annual trash collections along Huntington Drive by fiscal year: Huntington Drive Overstated Number of Overstated No. of No. of Reimbursable Annual Fiscal Trash Weekly Trash Weeks in the No. of Trash Year Receptacles Collections Fiscal Year Collections 2002-03 13 1 43 1 ( 559) 2003-04 13 1 52 ( 676) 2004-05 13 1 52 ( 676) 2005-06 13 1 52 ( 676) 2006-07 13 1 52 ( 676) 2007-08 13 1 52 ( 676) 2008-09 13 1 12 2 ( 156) Total ( 4,095) 1 The reimbursement period for FY 2002-03 is 43 weeks from August 28, 2002, through June 30, 2003. 2 The reimbursement period for FY 2008-09 is 12 weeks from July 1, 2008, through September 22, 2008. Section IV. (Reimbursable Activities) of the parameters and guidelines states, in part: The claimant is only allowed to claim and be reimbursed for increased costs for reimbursable activities identified below. Increased cost is limited to the cost of an activity that the claimant is required to incur as a result of the mandate. Recommendation No recommendation is applicable for this finding as the period of reimbursement expired on December 27, 2012, with the adoption of a new NPDES permit. When claiming reimbursement for other mandated programs, we recommend that the city:  Follow the mandated program’s claiming instructions and parameters and guidelines when preparing its mandated cost claims; and  Ensure that claimed costs include only actual costs that are eligible for reimbursement. -8- City of South Pasadena Municipal Storm Water and Urban Runoff Discharges Program FINDING 2— The city did not offset any revenues or reimbursements on its claim forms for the audit period. During testing, we found that the city should have Unreported offsetting offset $46,296 in Proposition A Local Return funds that were used to pay revenues for ongoing maintenance activities of the transit-stop trash receptacles. The following table summarizes the unreported offsetting revenues for the audit period: Fiscal Offset Unreported Audit Year Reported Offset Adjustment 2002-03 $ - $ (12,380) $ (12,380) 2003-04 - (15,398) (15,398) 2004-05 - (15,837) (15,837) 2005-06 - ( 2,681) ( 2,681) 2006-07 - - - 2007-08 - - - 2008-09 - - - Total $ - $ (46,296) $ (46,296) We reviewed the city’s Accounts Payable Report for FY 2003-04 through FY 2008-09, and determined that the city funded $33,916 ($15,398 in FY 2003-04; $15,837 in FY 2004-05; and $2,681 in FY 2005-06) of its bus stop maintenance expenditures from the Proposition A Fund (Fund 205). Fund 205 is a special revenue fund type, where proceeds of specific revenue sources are legally restricted to expenditures for specified purposes. Proposition A Local Return Program Proposition A is a half-cent sales tax measure approved by Los Angeles County voters in 1980 to finance transit programs. Twenty-five percent of the sales tax revenues is dedicated to the Local Return Program to be used by cities for developing and/or improving public transit and related transportation infrastructure. Section II. (Project Eligibility) of the Proposition A and Proposition C Local Return Guidelines identifies reimbursement for ongoing trash receptacle maintenance as follows: 2. BUS STOP IMPROVEMENTS AND MAINTENANCE (Codes 150, 160, & 170) Examples of eligible Bus Stop Improvement and Maintenance projects include installation/replacement and/or maintenance of:  Concrete landings – in street for buses and at sidewalk for passengers  Bus turn-outs  Benches  Shelters  Trash receptacles  Curb cuts  Concrete or electrical work directly associated with the above items -9- City of South Pasadena Municipal Storm Water and Urban Runoff Discharges Program As the city used Proposition A Local Return funds to pay for the mandated activities, it did not have to rely on the use of discretionary funds to pay for the mandated activities. Moreover, when a local agency raises revenues outside its appropriation limit to cover the cost of mandated activities, funds thus expended are not reimbursable. The city was unable to provide the Accounts Payable Report for FY 2002-03; therefore, we assumed that the city also used Proposition A Local Return funds to pay for the ongoing maintenance of the transit-stop trash receptacles in FY 2002-03, as it did for FY 2003-04 through FY 2005-06. To calculate the offset, we determined that the Proposition A Local Return funds increased by 2.851% from FY 2003-04 to FY 2004-05. We deflated this rate to FY 2002-03 and pro-rated the result to 43 reimbursable weeks, which yielded an offset of $12,380 ([($15,398 ÷ 1.02851) ÷ 52] × 43). Section VIII. (Offsetting Revenues and Reimbursements) of the parameters and guidelines states: Any offsetting revenue the claimant experiences in the same program as a result of the same statutes or executive orders found to contain the mandate shall be deducted from the costs claimed. In addition, reimbursement for this mandate received from any federal, State or non- local source shall be identified and deducted from this claim. Recommendation No recommendation is applicable for this finding as the period of reimbursement expired on December 27, 2012, with the adoption of a new NPDES permit. When claiming reimbursement for other mandated programs, we recommend that the city:  Follow the mandated program’s claiming instructions and parameters and guidelines when preparing its mandated cost claims; and  Ensure that it offsets all revenues raised outside its appropriation limit that are used to fund mandated activities. -10- State Controller’s Office Division of Audits Post Office Box 942850 Sacramento, CA 94250 http://www.sco.ca.gov S17-MCC-0033