Los Angeles County

LOS ANGELES COUNTY Audit Report OPEN MEETINGS ACT/BROWN ACT REFORM PROGRAM Chapter 641, Statutes of 1986; and Chapters 1136 through 1138, Statutes of 1993 July 1, 2005, through June 30, 2012 BETTY T. YEE California State Controller November 2018 BETTY T. YEE California State Controller November 13, 2018 The Honorable John Naimo, CPA, Auditor-Controller Los Angeles County 500 West Temple Street, Suite 525 Kenneth Hahn Hall of Administration Los Angeles, CA 90012 Dear Mr. Naimo: The State Controller’s Office (SCO) audited the costs claimed by Los Angeles County for the legislatively mandated Open Meetings Act/Brown Act Reform Program for the period of July 1, 2005, through June 30, 2012. The county claimed $1,505,966 for the mandated program. Our audit found that $1,075,123 is allowable and $430,843 is unallowable because the county overstated costs claimed under the actual-time option and related indirect costs by claiming costs for agenda software, ineligible activities, unsupported agendas, and agendas posted after the meeting dates, and overstated costs claimed under the standard-time option by misstating the number of eligible agenda items and applying incorrect blended productive hourly rates to eligible agenda items. The State made no payments to the county. The State will pay $1,075,123, contingent upon available appropriations. Following issuance of this audit report, the SCO’s Local Government Programs and Services Division will notify the county 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/ls The Honorable John Naimo, CPA, -2- November 13, 2018 Auditor-Controller cc: The Honorable Sheila Kuehl, Chair Los Angeles County Board of Supervisors Hasmik Yaghobyan, J.D., Program Specialist Accounting Division, Auditor-Controller Los Angeles County 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 Los Angeles County Open Meetings Act/Brown Act Reform Program Contents Audit Report Summary ............................................................................................................................ 1 Background ........................................................................................................................ 1 Objective, Scope, and Methodology ................................................................................. 2 Conclusion .......................................................................................................................... 4 Follow-up on Prior Audit Findings .................................................................................. 4 Views of Responsible Officials .......................................................................................... 4 Restricted Use .................................................................................................................... 4 Schedule—Summary of Program Costs .............................................................................. 5 Findings and Recommendations ........................................................................................... 8 Los Angeles County Open Meetings Act/Brown Act Reform Program Audit Report Summary The State Controller’s Office (SCO) audited the costs claimed by Los Angeles County for the legislatively mandated Open Meetings Act/Brown Act Reform Program for the period of July 1, 2005, through June 30, 2012. The county claimed $1,505,966 for the mandated program. Our audit found that $1,075,123 is allowable and $430,843 is unallowable because the county overstated costs claimed under the actual-time option and related indirect costs by claiming costs for agenda software, ineligible activities, unsupported agendas, and agendas posted after the meeting dates, and overstated costs claimed under the standard-time option by misstating the number of eligible agenda items and applying incorrect blended productive hourly rates (PHRs) to eligible agenda items. The State made no payments to the county. The State will pay $1,075,123, contingent upon available appropriations. Background Chapter 641, Statutes of 1986, added Government Code (GC) sections 54954.2 and 54954.3. Section 54954.2 requires the legislative body of a local agency, or its designee, to post an agenda containing a brief general description of each item or business to be transacted or discussed at the regular meeting, subject to exceptions stated therein, specifying the time and location of the regular meeting. It also requires that the agenda be posted at least 72 hours before the meeting in a location freely accessible to the public. Section 54954.3 requires members of the public to be provided an opportunity to address the legislative body on specific agenda items or items of interest that are within the subject matter jurisdiction of the legislative body. The legislation requires that this opportunity be stated on the posted agenda. Open Meetings Act/Brown Act Reform Program Chapters 1136 through 1138, Statutes of 1993, amended GC sections 54952, 54954.2, 54957.1, and 54957.7, expanding the types of legislative bodies that are required to comply with the notice and agenda requirements of sections 54954.2 and 54954.3. These sections also require all legislative bodies to perform additional activities related to the closed session requirements of the Brown Act. The Commission on State Mandates (Commission) determined that the Open Meetings Act Program (October 22, 1987) and the Open Meetings Act/Brown Act Reform Program (June 28, 2001) resulted in state- mandated costs that are reimbursable under GC section 17561. The program’s parameters and guidelines establish the state mandate and define the reimbursement criteria. The Commission adopted parameters and guidelines on September 22, 1988 (last amended on November 30, 2000) for the Open Meetings Act Program, and on April 25, 2002, for the Open Meetings Act/Brown Act Reform Program. In compliance with GC section 17558, the SCO issues claiming instructions to assist local agencies and schools in claiming mandated program reimbursable costs. -1- Los Angeles County Open Meetings Act/Brown Act Reform Program The Open Meetings Act Program was effective August 29, 1986. Commencing in fiscal year (FY) 1997-98, local agencies may claim costs using the actual-time reimbursement option, the standard-time reimbursement option, or the flat-rate reimbursement option as specified in the program’s parameters and guidelines. The Open Meetings Act/Brown Act Reform Program was effective for FY 2001-02. Based on the passage of Proposition 30, adopted by the voters on November 7, 2012, the Department of Finance filed a request for redetermination of the Open Meetings Act/Brown Act Reform Program. On January 23, 2015, the Commission found that the Open Meetings Act/Brown Act Reform Program no longer constitutes a reimbursable state-mandated program, effective November 7, 2012. Objective, Scope, The objective of our audit was to determine whether costs claimed represent increased costs resulting from the legislatively mandated Open and Methodology Meetings Act/Brown Act Reform 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. The audit period was July 1, 2005, through June 30, 2012. To achieve our objective, we:  Reviewed the annual mandated cost claims filed by the county for the audit period and identified that the material cost components of each claim for actual-time option costs are the actual PHRs and actual hours devoted to reimbursable activities for actual-time costs; for standard- time option costs, the number of agenda items, the minutes per agenda item, and the blended PHRs; and, for flat-rate costs, the number of agenda items and uniform cost allowance. Determined whether there were any mathematical errors or any unusual or unexpected variances from year to year, and whether the claims adhered to the SCO’s claiming instructions and the program’s parameters and guidelines;  Completed an internal control questionnaire by interviewing key county staff, and discussed the claim preparation process with county staff to determine what information was obtained, who obtained it, and how it was used;  Inquired whether the county realized any offsetting savings or reimbursements from the statutes that created the legislatively mandated program; Actual-time option  Determined whether the costs claimed under the actual-time option are eligible activities defined by the program’s parameters and guidelines; -2- Los Angeles County Open Meetings Act/Brown Act Reform Program Standard-time option  Selected a judgmental non-statistical sample of meeting agenda items claimed, ranging from 10.80% to 15.66% for each fiscal year of the audit period: o Counted the number of eligible agenda items identified on the sampled meeting agendas, compared the results to the number of agenda items claimed for that meeting, and determined an error percentage for each fiscal year of the audit period; o Consistent with the American Institute of Certified Public Accountants’ (AICPA) Audit Sampling Guide, we projected the results from the sample by applying each fiscal year’s error rate to the total population for that fiscal year;  Held discussions with county representatives to determine which employee classifications performed the reimbursable activities and the extent of the mandated activities: o Recalculated the PHR calculations for FY 2005-06 through FY 2011-12 for all county employee classifications that performed the mandated activities using documentation from the county’s payroll system; Flat-rate option  Selected a judgmental non-statistical sample of meeting agendas claimed, ranging from 10.10% to 13.60% for each fiscal year of the audit period: o Determined the existence of the meeting agendas claimed and compared the number of supported meetings to the number claimed; and o Developed error rates for each fiscal year based on the number of eligible meeting agendas. Consistent with the AICPA Audit Sampling Guide, we applied the error rate to the total costs claimed for that fiscal year. 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 county’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 county’s financial statements. -3- Los Angeles County Open Meetings Act/Brown Act Reform Program Conclusion Our audit found instances of noncompliance with the requirements outlined in the Objective, Scope, and Methodology section. We found that the county did not claim costs that were funded by other sources; however, it did claim unsupported and ineligible costs, as quantified in the accompanying Schedule and described in the Findings and Recommendations section of this report. For the audit period, Los Angeles County claimed $1,505,966 for costs of the legislatively mandated Open Meetings Act/Brown Act Reform Program. Our audit found that $1,075,123 is allowable and $430,843 is unallowable. The State made no payments to the county. The State will pay $1,075,123, contingent upon available appropriations. Following issuance of this audit report, the SCO’s Local Government Programs and Services Division will notify the county 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 county’s legislatively mandated Open Meetings Act/Brown Act Reform Program. Prior Audit Findings Views of We discussed our audit results with the county’s representative during an Responsible exit conference conducted on September 7, 2018. Hasmik Yaghobyan, J.D., Program Specialist, agreed with the audit results. Ms. Yaghobyan Officials declined a draft audit report and agreed that we could issue the audit report as final. Restricted Use This audit report is solely for the information and use of Los Angeles County, 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 November 13, 2018 -4- Los Angeles County Open Meetings Act/Brown Act Reform Program Schedule— Summary of Program Costs July 1, 2005, through June 30, 2012 Actual Costs Allowable per Audit Cost Elements Claimed Audit Adjustment Reference1 July 1, 2005, through June 30, 2006 Direct costs: Actual-time option $ 36,808 $ - $ (36,808) Finding 1 Standard-time option 82,231 6 4,447 ( 17,784) Finding 2 Flat-rate option 73,120 7 3,120 - Total direct costs 192,159 137,567 ( 54,592) Indirect costs 890 - (890) Finding 1 Total program costs $ 1 93,049 137,567 $ (55,482) Less amount paid by the State 2 - Allowable costs claimed in excess of amount paid $ 137,567 July 1, 2006, through June 30, 2007 Direct costs: Actual-time option $ 48,516 $ - $ (48,516) Finding 1 Standard-time option 86,163 6 5,535 ( 20,628) Finding 2 Flat-rate option 79,649 7 9,649 - Total direct costs 214,328 145,184 ( 69,144) Indirect costs 921 - (921) Finding 1 - Total program costs $ 2 15,249 145,184 $ (70,065) Less amount paid by the State 2 - Allowable costs claimed in excess of amount paid $ 145,184 July 1, 2007, through June 30, 2008 Direct costs: Actual-time option $ 56,069 $ - $ (56,069) Finding 1 Standard-time option 81,642 6 3,658 ( 17,984) Finding 2 Flat-rate option 84,354 8 4,354 - Total direct costs 222,065 148,012 ( 74,053) Indirect costs 1,039 - (1,039) Finding 1 Total program costs $ 2 23,104 148,012 $ (75,092) Less amount paid by the State 2 - Allowable costs claimed in excess of amount paid $ 148,012 - - - -5- Los Angeles County Open Meetings Act/Brown Act Reform Program Schedule (continued) Actual Costs Allowable per Audit Cost Elements Claimed Audit Adjustment Reference1 July 1, 2008, through June 30, 2009 Direct costs: Actual-time option $ 89,746 $ - $ (89,746) Finding 1 Standard-time option 90,452 7 0,319 ( 20,133) Finding 2 Flat-rate option 89,056 8 9,056 - Total direct costs 269,254 159,375 (109,879) Indirect costs 1,003 - (1,003) Finding 1 Total program costs $ 2 70,257 159,375 $ (110,882) Less amount paid by the State 2 - Allowable costs claimed in excess of amount paid $ 159,375 July 1, 2009, through June 30, 2010 Direct costs: Actual-time option $ 50,088 $ - $ (50,088) Finding 1 Standard-time option 88,879 6 8,477 ( 20,402) Finding 2 Flat-rate option 83,584 8 3,584 - Total direct costs 222,551 152,061 ( 70,490) Indirect costs 2,226 - (2,226) Finding 1 Total program costs $ 2 24,777 152,061 $ (72,716) Less amount paid by the State 2 - Allowable costs claimed in excess of amount paid $ 152,061 July 1, 2010, through June 30, 2011 Direct costs: Actual-time option $ 20,057 $ - $ (20,057) Finding 1 Standard-time option 76,082 6 9,636 (6,446) Finding 2 Flat-rate option 91,286 9 1,286 - Total direct costs 187,425 160,922 ( 26,503) Indirect costs 1,324 - (1,324) Finding 1 Total program costs $ 1 88,749 160,922 $ (27,827) Less amount paid by the State 2 - Allowable costs claimed in excess of amount paid $ 160,922 -6- Los Angeles County Open Meetings Act/Brown Act Reform Program Schedule (continued) Actual Costs Allowable per Audit Cost Elements Claimed Audit Adjustment Reference1 July 1, 2011, through June 30, 2012 Direct costs: Actual-time option $ 16,171 $ - $ (16,171) Finding 1 Standard-time option 78,671 7 7,138 (1,533) Finding 2 Flat-rate option 94,864 9 4,864 - Total direct costs 189,706 172,002 ( 17,704) Indirect costs 1,075 - (1,075) Finding 1 Total program costs $ 1 90,781 172,002 $ (18,779) Less amount paid by the State 2 - Allowable costs claimed in excess of amount paid $ 172,002 Summary: July 1, 2005, through June 30, 2012 Direct costs: Actual-time option $ 3 17,455 $ - $ (317,455) Finding 1 Standard-time option 584,120 479,210 (104,910) Finding 2 Flat-rate option 595,913 595,913 - Total direct costs 1,497,488 1,075,123 (422,365) Indirect costs 8,478 - (8,478) Finding 1 #REF! #REF! Total program costs $ 1,505,966 1,075,123 $ (430,843) Less amount paid by the State 2 - Allowable costs claimed in excess of amount paid $ 1 ,075,123 _________________________ 1 See the Findings and Recommendations section. 2 Payment amount current as of October 2, 2018. -7- Los Angeles County Open Meetings Act/Brown Act Reform Program Findings and Recommendations FINDING 1— The county claimed $325,933 (direct costs totaling $317,455 and related indirect costs totaling $8,478) under the actual-time option for the Overstated actual- preparation and posting of agenda items for the Open Meetings Act/Brown time and related Act Reform Program for the audit period. The county claimed salary, indirect costs benefit, and related indirect costs for the operation and maintenance of its agenda software (Legistar), as well as costs for the Board of Supervisors (Board) and two county departments to prepare and post meeting agenda items. These costs were based on the employee classifications that performed the reimbursable activities. During testing, we found that the entire amount claimed is unallowable. The unallowable costs occurred because the county claimed costs for activities that are not reimbursable under the mandated program, and for agenda items that were either unsupported or not supported by contemporaneous time logs. The county claimed these costs because it misinterpreted the claiming requirements contained in the parameters and guidelines. The following table summarizes the overstated direct and related indirect costs claimed under the actual-time cost option: Fiscal Year 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Total Claimed Software-related costs $ 23,527 $ 34,664 $ 40,385 $ 74,745 $ 26,208 $ - $ - 199,529 Health Services Department agendas 13,281 13,852 15,684 15,001 15,958 20,057 16,171 110,004 Public Health Department agendas - - - - 5,963 - - 5,963 Board of Supervisors agendas - - - - 1,959 - - 1,959 Total direct costs 36,808 48,516 56,069 89,746 50,088 20,057 16,171 317,455 Related indirect costs 890 921 1,039 1,003 2,226 1,324 1,075 8,478 Total claimed costs $ 37,698 $ 49,437 $ 57,108 $ 90,749 $ 52,314 $ 21,381 $ 17,246 $ 325,933 Allowable Software-related costs - - - - - - - - Health Services Department agendas - - - - - - - - Public Health Department agendas - - - - - - - - Board of Supervisors agendas - - - - - - - - Total direct costs - - - - - - - - Related indirect costs - - - - - - - - Total allowable costs $ - $ - $ - $ - $ - $ - $ - $ - Audit adjustment $ (37,698) $ (49,437) $ ( 57,108) $ (90,749) $ (52,314) $ ( 21,381) $ (17,246) $ ( 325,933) Unallowable Activities The county claimed $199,529 for the maintenance and operation of Legistar. In addition to annual maintenance costs, the county also claimed costs for installation, training, testing, planning, technical support, and other software-related items. These costs are not reimbursable under the mandated program. The county could have used widely available word processing software to perform the mandated activities. Instead, the county chose to develop Legistar to maintain its agendas. The mandated program requires only the preparation and posting of an agenda, as outlined in the program’s parameters and guidelines. There is no requirement that agenda software be developed and maintained to comply with the Open Meetings Act Program. Therefore, the county was not required to incur the costs associated with Legistar. -8- Los Angeles County Open Meetings Act/Brown Act Reform Program Unsupported Costs The county claimed $110,004 for the Health Services Department. The county provided time logs listing the activities performed, the employee classifications that carried out the activities, and the time that it took to do so. However, the time logs included ineligible activities and were dated after the meeting dates; therefore, the costs claimed are unsupported and unallowable. The county requested, and we agreed to reclassify, the eligible agendas of the Health Services Department under the flat-rate option for further analysis there. For FY 2009-10, the county claimed $5,963 for the Public Health Department. Department representatives stated that its commissions were not active that year; therefore, the costs claimed are unsupported and unallowable. For FY 2009-10, the county claimed $1,959 for the Board. The county did not disclose the specific commissions or meetings with which the claimed costs were associated; therefore, the costs claimed are unsupported and unallowable. Criteria Section IV. (A) (Reimbursable Activities – Agenda Preparation and Posting Activities) of the parameters and guidelines states, in part, that reimbursable activities include “Prepare a single agenda for a regular meeting of a legislative body of a local agency” and “Post a single agenda 72 hours before a meeting.” Section V. (A) (1) (Claim Preparation and Submission – Reimbursement Options for Agenda Preparation and Posting, Including Closed Session Agenda Items – Actual Time Option) of the parameters and guidelines states: List the meeting names and dates. Report each employee implementing the reimbursable activities by name, job classification, and productive hourly rate (total wages and related benefits divided by productive hours). Describe the specific reimbursable activities performed and the hours devoted to each reimbursable activity performed. Section VI. (A) (Supporting Data – Source Documents) of the parameters and guidelines require that “all incurred costs claimed must be traceable to source documents that show evidence of their validity and relationship to the reimbursable activities.” Recommendation No recommendation is applicable for this finding, as the period of reimbursement for this mandated program expired on November 7, 2012, due to the passage of Proposition 30, approved by voters on November 6, 2012. For other mandated programs, we recommend that the county:  Follow the mandated program’s parameters and guidelines and claiming instructions when filing reimbursement claims; and  Ensure that claimed costs include only eligible costs, are based on actual costs, and are properly supported. -9- Los Angeles County Open Meetings Act/Brown Act Reform Program FINDING 2— The county claimed $584,120 under the standard-time option for the preparation and posting of agenda items for the Open Meetings Act/Brown Overstated standard- Act Reform Program for the audit period. The costs claimed were based time option costs on the number of Board meeting agenda items multiplied by the standard- time allowance of 30 minutes per agenda item multiplied by the blended PHR. The blended PHR calculation includes related benefits and indirect costs for the employee classifications that performed the reimbursable activity. During testing, we found that $479,210 is allowable and $104,910 is unallowable. The unallowable costs occurred because the county misstated the number of eligible agenda items ($35,371) and applied incorrect blended PHRs to eligible agenda items ($69,539). The county misstated the number of eligible agenda items by a net of 1,463 items (overstated by 1,518 and understated by 55) and overstated the blended PHRs for the entire audit period. The county misstated the elements of the blended PHR calculations (employee annual salaries and benefits, productive hours, and the percentage of involvement by various employee classifications in the reimbursable activities). In addition, the county did not include any indirect costs in its calculations of PHRs related to the standard-time option costs claimed. Therefore, we included an indirect cost rate of 10% for direct labor, excluding fringe benefits, which is an allowable option for this mandated program. These errors occurred because the county misinterpreted the claiming requirements contained in the parameters and guidelines. The following table summarizes the claimed, allowable, and audit adjustment amounts for the standard-time option costs by fiscal year: Fiscal Year 2005-06 2006-07 1 2007-08 2008-09 1 2009-10 1 2010-11 2011-12 Total Number of claimed agenda items 3,731 3,821 3,234 3,403 3,301 2,821 2,917 Standard time (hour) per agenda × 0.5 × 0.5 × 0.5 × 0.5 × 0.5 × 0.5 × 0.5 Total claimed hours 1,865.5 1,910.5 1,617.0 1,701.5 1,650.5 1,410.5 1,458.5 Claimed PHR × 44.08 × 45.10 × 50.49 × 53.16 × 53.85 × 53.94 × 53.94 Total claimed costs $ 82,231 $ 86,163 $ 81,642 $ 90,452 $ 88,879 $ 76,082 $ 78,671 $ 584,120 Number of allowable agenda items 3,400 3,379 3,007 3,154 3,032 2,821 2,972 Standard time (hour) per agenda × 0.5 × 0.5 × 0.5 × 0.5 × 0.5 × 0.5 × 0.5 Total allowable hours 1,700.0 1,689.5 1,503.5 1,577.0 1,516.0 1,410.5 1,486.0 Allowable blended PHR × 37.91 × 38.79 × 42.34 × 44.59 × 45.17 × 49.37 × 51.91 Total allowable costs $ 64,447 $ 65,535 $ 63,658 70,319 $ 68,477 $ 69,636 $ 77,138 $ 479,210 Audit adjustment $ (17,784) $ (20,628) $ (17,984) $ (20,133) $ (20,402) $ (6,446) $ (1,533) $ (104,910) 1Minor calcualtion variances due to rounding. Misstated Agenda Items The county claimed costs for preparing 23,228 agenda items for its Board meetings during the audit period. We found that 21,765 are allowable, and that the county overstated the number of eligible agenda items by a net of 1,463 items (overstated by 1,518 and understated by 55) during the audit period. We judgmentally sampled agendas for Board meetings during each year of the audit period, which comprised agenda items ranging from 10.80% to 15.66% of the number of agenda items claimed per year. We reviewed the Board meeting agendas to determine the number of eligible items. -10- Los Angeles County Open Meetings Act/Brown Act Reform Program Following the requirements of the parameters and guidelines, our testing strategy was as follows:  We did not count miscellaneous items, such as additions to the agenda posted more than 72 hours in advance of the meeting, items not on the posted agenda, supervisor recommendations related to cash rewards for information concerning crimes, opportunities for members of the public to address the Board, and recommendations to adjourn the meeting in memory of deceased persons and/or commemoration of ceremonial occasions; and  We did not count items from previous discussions, such as “continuing local emergencies” and conferences regarding “potential threats to public services or facilities,” as these were frequently recurring items. We followed guidance contained in the AICPA Audit Sampling Guide (May 1, 2017 edition) to apply audit sampling in accordance with AU-C Section 530 (Audit Sampling). The objective of our testing was to determine whether the claimed counts of eligible agenda items (23,228) under the Standard Time option were correct. Deviations are defined as agenda items that are ineligible for reimbursement per the parameters and guidelines. The population consisted of 23,228 agendas claimed for the Board meetings during the audit period. We determined that the Board was the only county agency eligible to claim costs under the standard-time option. We judgmentally selected approximately 12.76% of standard rate agendas for testing, which equaled 2,965 agenda items. As the number of claimed agenda items remained fairly constant throughout the audit period (ranging from 2,821 to 3,731), we selected 315 to 533 agenda items per year for testing. The tolerable misstatement, or error variance, is an error rate of ineligible agenda items within 15%. Our initial testing revealed error rates within those limits, from -11.57% to 1.9%. Therefore, we concluded that the amount of testing performed for each fiscal year provided a reasonable estimate of the variance percentage of the population as a whole. Our initial testing results are summarized in the following table: Number of Number of Agenda Agenda Fiscal Agenda Items Agenda Items Tested Items Variance Year Claimed Items Tested Percentage Variance Percentage 2005-06 3 ,731 440 11.79% (39) -8.86% 2006-07 3 ,821 432 11.31% (50) -11.57% 2007-08 3 ,234 399 12.34% (28) -7.02% 2008-09 3 ,403 533 15.66% (39) -7.32% 2009-10 3 ,301 430 13.03% (35) -8.14% 2010-11 2 ,821 416 14.75% - 0.00% 2011-12 2 ,917 315 10.80% 6 1.90% Totals 2 3,228 2,965 12.76% (185) -6.24% -11- Los Angeles County Open Meetings Act/Brown Act Reform Program We then applied the variance percentages that we computed for sampled items during each year of the audit period to the number of agenda items claimed to determine the overall audit adjustment. The following table presents the calculation of the audit adjustment for the misstated number of agenda items: Number of Tested Overall Time Overall Audit Fiscal Agenda Items Variance Variance- Allowance Claimed Adjustment- Year Claimed Percentage Agenda Items (hr) PHR Agenda Items 2005-06 3,731 -8.86% ( 331) 0.50 44.08 $ ( 7,295) 2006-07 3,821 -11.57% ( 442) 0.50 45.10 ( 9,967) 2007-08 3,234 -7.02% ( 227) 0.50 50.49 ( 5,731) 2008-09 3,403 -7.32% ( 249) 0.50 53.16 ( 6,618) 2009-10 3,301 -8.14% ( 269) 0.50 53.85 ( 7,243) 2010-11 2,821 0.00% - 0.50 53.94 - 2011-12 2,917 1.90% 55 0.50 53.94 1,483 Totals 23,228 -6.24% ( 1,463) $ ( 35,371) Overstated Productive Hourly Rates The county claimed blended PHRs based on the average salary of the following three Board job classifications for each fiscal year of the audit period:  Chief, Board Services  Intermediate Board Specialist  Head Board Specialist The county computed an average salary amount and divided it by annual productive hours to determine the blended PHRs. However, this methodology assumes that each of the three employee classifications perform the reimbursable activities to the same extent, which is not reasonable. To validate who performed the reimbursable activities and the extent of their involvement, we met with representatives of the Fiscal Services Department and the County Executive Office to obtain this information. Based on information provided by the county, we adjusted the percentage involvement of the employee classifications involved in the reimbursable activities during the audit period. We also requested actual payroll information from the Payroll Office for the staff performing the reimbursable activities during the audit period. The county could not provide the actual payroll for FY 2005-06 through FY 2009-10; therefore, we accepted the claimed salaries and benefits for the classifications involved. For FY 2010-11 and FY 2011-12, we used the actual cost information to compute blended PHRs. We found that the county overstated the claimed rates for all years of the audit period. In addition, the county did not properly claim blended PHRs, as it did not complete the required blended PHR calculation forms. -12- Los Angeles County Open Meetings Act/Brown Act Reform Program The following table summarizes the actual percentages that county staff spent performing the reimbursable activities during the audit period: Fiscal Year Classification 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Actual percentages: Intermediate Board Specialist 60% 60% 60% 60% 60% 60% 60% Head Board Specialist 40% 40% 40% 40% 40% 40% 40% We used the claimed salary and benefit information to compute PHRs for FY 2005-06 through FY 2009-10, and actual salary and benefit information for FY 2010-11 and 2011-12. The county did not include indirect costs in its calculations of PHRs for the audit period. Therefore, we included 10% of direct labor, excluding fringe benefits in our PHR calculations, as permitted by the parameters and guidelines. We then multiplied the PHRs by the actual participation percentages to compute blended PHRs for the audit period. For example, the following table shows the calculation of the blended PHR used to calculate allowable costs for FY 2006-07: Salary Benefit Indirect Indirect Participation Blended Rate Rate Benefits Rate Costs Total PHR Percentage PHR Employee Classification (a) (b) c = (a*b) (d) e = (a*d) f = (a+c+e) (g) (f) × (g) Intermediate Board Specialist $ 23.44 37.23% $ 8.72 10.00% $ 2.34 $ 34.50 60% $ 20.70 Head Board Specialist 30.72 37.23% 11.44 10.00% 3.07 45.23 40% 18.09 Totals 100% $ 38.79 We performed a similar calculation for all of the other fiscal years in the audit period. The following table summarizes the blended PHRs claimed, allowable, and the audit adjustments made for standard-time activities by fiscal year: Claimed Audited Fiscal Blended Blended Audit Year PHR PHR Adjustment 2005-06 $ 4 4.08 $ 3 7.91 $ ( 6.17) 2006-07 4 5.10 3 8.79 ( 6.31) 2007-08 5 0.49 4 2.34 ( 8.15) 2008-09 5 3.16 4 4.59 ( 8.57) 2009-10 5 3.85 4 5.17 ( 8.68) 2010-11 5 3.94 4 9.37 ( 4.57) 2011-12 5 3.94 5 1.91 ( 2.03) -13- Los Angeles County Open Meetings Act/Brown Act Reform Program The table below presents the audit adjustment due to PHR variances by fiscal year based on the allowable number of agenda items: Allowable Standard Fiscal Agenda Time PHR Audit Year Items Allowance Variance Adjustment1 2005-06 3,400 0.5 $ (6.17) $ (10,489) 2006-07 3,379 0.5 (6.31) (10,661) 2007-08 3,007 0.5 (8.15) (12,253) 2008-09 3,154 0.5 (8.57) (13,515) 2009-10 3,032 0.5 (8.68) (13,159) 2010-11 2,821 0.5 (4.57) (6,446) 2011-12 2,972 0.5 (2.03) (3,016) 21,765 $ (69,539) Criteria Section IV. (A) (Reimbursable Activities – Agenda Preparation and Posting Activities) of the parameters and guidelines, states, in part, that reimbursable activities include “Prepare a single agenda for a regular meeting of a legislative body of a local agency” and to “Post a single agenda 72 hours before a meeting.” Section V. (A) (2) (a) (Claim Preparation and Submission – Reimbursement Options for Agenda Preparation and Posting, Including Closed Session Agenda Items – Standard Time Option) of the parameters and guidelines states: List the meeting name and dates. For each meeting, multiply the number of agenda items, excluding standard agenda items [emphasis added] such as ‘adjournment’, ‘call to order’, ‘flag salute’, and ‘public comments’, by 30 minutes and then by the blended productive hourly rate of the involved employees. Section VI. (A) (Supporting Data – Source Documents) of the parameters and guidelines states that “all incurred costs claimed must be traceable to source documents that show evidence of their validity and relationship to the reimbursable activities.” Section VI. (A) also states: For those entities that elect reimbursement pursuant to the standard time methodology, option 2 in section V.A, documents showing the calculation of the blended productive hourly rate and copies of agendas shall be sufficient evidence. Section V. (C) (Indirect Cost Rates – Cities, Counties and Special Districts) of the parameters and guidelines states that: “Claimants have the option of using 10% [emphasis added] of direct labor, excluding fringe benefits.” -14- Los Angeles County Open Meetings Act/Brown Act Reform Program Recommendation No recommendation is applicable for this finding, as the period of reimbursement expired on November 7, 2012, due to the passage of Proposition 30, approved by voters on November 6, 2012. For other mandated programs, we recommend that the county:  Follow the mandated program’s parameters and guidelines and claiming instructions when filing its reimbursement claims; and  Ensure that claimed costs include only eligible costs, are based on actual costs, and are properly supported. -15- State Controller’s Office Division of Audits Post Office Box 942850 Sacramento, CA 94250 http://www.sco.ca.gov S17-MCC-0037