Orange County

ORANGE COUNTY Audit Report IDENTITY THEFT PROGRAM Chapter 956, Statutes of 2000 July 1, 2002, through June 30, 2013 BETTY T. YEE California State Controller January 2020 BETTY T. YEE California State Controller January 23, 2020 CERTIFIED MAIL—RETURN RECEIPT REQUESTED Frank Davies, CPA, Auditor-Controller Orange County 12 Civic Center Plaza, Room 200 Santa Ana, CA 92702 Dear Mr. Davies: The State Controller’s Office (SCO) audited the costs claimed by Orange County for the legislatively mandated Identity Theft Program for the period of July 1, 2002, through June 30, 2013. The county claimed $3,177,007 for costs of the mandated program. Our audit found that $1,236,867 is allowable and $1,940,140 is unallowable because the county understated the number of identity theft cases and overstated the time increments required to perform the reimbursable activities. The State made no payments to the county. The State will pay $1,236,867, 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 JIM L. SPANO, CPA Chief, Division of Audits JLS/as 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 Frank Davies, CPA, Auditor-Controller -2- January 23, 2020 cc: Noma M. Crook, Director Financial/Administrative Services Orange County Sheriff’s Department Kirk Wilkerson, Director Support Services Orange County Sheriff’s Department Robert Beaver, Senior Director Administrative Services Orange County Sheriff’s Department Brian Wayt, Executive Director Administrative Services Orange County Sheriff’s Department Lisa Bartlett, Chairwoman Orange County Board of Supervisors 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 Debra Morton, Manager Local Government Programs and Services Division State Controller’s Office Orange County Identity Theft Program Contents Audit Report Summary ............................................................................................................................ 1 Background ........................................................................................................................ 1 Objective, Scope, and Methodology ................................................................................. 2 Conclusion .......................................................................................................................... 3 Follow-up on Prior Audit Findings .................................................................................. 4 Views of Responsible Officials .......................................................................................... 4 Restricted Use .................................................................................................................... 4 Schedule—Summary of Program Costs .............................................................................. 5 Finding and Recommendation .............................................................................................. 9 Attachment—County’s Response to the Draft Audit Report Orange County Identity Theft Program Audit Report Summary The State Controller’s Office (SCO) audited the costs claimed by Orange County for the legislatively mandated Identity Theft Program for the period of July 1, 2002, through June 30, 2013. The county claimed $3,177,007 for costs of the mandated program. Our audit found that $1,236,867 is allowable and $1,940,140 is unallowable because the county understated the number of identity theft cases and overstated the time increments required to perform the reimbursable activities. The State made no payments to the county. The State will pay $1,236,867, contingent upon available appropriations. Background Penal Code (PC) section 530.6, subdivision (a), as added by the Statutes of 2000, Chapter 956, requires local law enforcement agencies to take a police report and begin an investigation when a complainant residing within their jurisdiction reports suspected identity theft. On March 27, 2009, the Commission on State Mandates (Commission) found that this legislation mandates a new program or higher level of service for local law enforcement agencies within the meaning of Article XIII B, section 6 of the California Constitution, and imposes costs mandated by the State pursuant to Government Code (GC) section 17514. The Commission determined that each claimant is allowed to claim and be reimbursed only for the following ongoing activities identified in the parameters and guidelines (Section IV., Reimbursable Activities): 1. Either a) or b) below: a) Take a police report supporting a violation of Penal Code section 530.5 which includes information regarding the personal identifying information involved and any uses of that personal identifying information that were non-consensual and for an unlawful purpose, including, if available, information surrounding the suspected identity theft, places where the crime(s) occurred, and how and where the suspect obtained and used the personal identifying information. This activity includes drafting, reviewing, and editing the identity theft police report; or b) Reviewing the identity theft report completed online by the identity theft victim. 2. Begin an investigation of the facts, including the gathering of facts sufficient to determine where the crime(s) occurred and what pieces of personal identifying information were used for an unlawful purpose. The purpose of the investigation is to assist the victims in clearing their names. Reimbursement is not required to complete the investigation for purposes of criminal prosecution. The Commission also determined that providing a copy of the report to the complainant and referring the matter to the law enforcement agency where the suspected crime was committed for further investigation are not reimbursable activities. -1- Orange County Identity Theft Program The program’s parameters and guidelines establish the state mandate and define the reimbursement criteria. 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 Identity Theft 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, 2002, through June 30, 2013. To achieve our objective, we:  Analyzed the annual mandated cost claims filed by the county during the audit period and identified the significant cost components of each claim as salaries, benefits, and indirect costs. Determined whether there were any errors or unusual or unexpected variances from year to year. Determined whether the activities claimed adhered to the SCO’s claiming instructions and the program’s parameters and guidelines;  Completed an internal control questionnaire by interviewing key county staff. Discussed the claim preparation process with county staff to determine what information was obtained, who obtained it, and how it was used;  Obtained system-generated lists of identity theft cases from the county’s Vision Air/TriTech Computer Aided Dispatch and Records Management System (CAD/RMS) to verify the existence, completeness, and accuracy of unduplicated case counts for each fiscal year in the audit period;  Designed a statistical sampling plan to test approximately 50% of claimed salary costs. Judgmentally selected three of the county’s filed claims during the audit period (fiscal year [FY] 2005-06, FY 2011-12, and FY 2012-13), which comprised salary costs totaling $730,009, or 53%, of the $1,393,082 claimed. The sampling plan is described in the Finding and Recommendation section;  Used a random number table to select 372 identity theft cases out of 2,751 from the three years sampled. Tested the identity theft cases as follows: o Determined whether a contemporaneously prepared and approved police report supported that a violation of PC section 530.5 had occurred. o Calculated the average time required to gather facts sufficient to determine where the identity theft occurred and what pieces of personal information were used for an unlawful purpose (begin an investigation) using data obtained from the county’s CAD/RMS, and compared the results to the time increments claimed by the county. -2- Orange County Identity Theft Program o Compared the employee classifications that performed the mandated activities, as identified in the county’s CAD/RMS, to the employee classifications claimed by the county. Calculated weighted average productive hourly rates (PHRs) for the employee classifications that actually performed the activities.  Interviewed sworn officers at the Orange County Sheriff’s Department (OCSD), which revealed that time spent drafting, editing, reviewing, and approving a police report (taking a police report supporting a violation of PC section 530.5) is not included in the contemporaneous time increments recorded in the county’s CAD/RMS. We concluded that the claimed time increments for these reimbursable activities were reasonable based on the results of these interviews;  Projected the audit results of the three years tested by multiplying the actual case counts by the actual average time increments to perform the activities and then multiplying the product by the weighted average PHRs of the employees who performed them. As the population was homogeneous, we applied a weighted three-year average of the sampling results to the remaining eight years of the audit period;  Traced the county’s claimed benefit and indirect cost rates to supporting documentation for each fiscal year in the audit period and determined that the rates claimed were not unreasonable or excessive; and  Analyzed the county’s Single Audit Reports to identify any offsetting savings or reimbursements from federal or pass-through programs applicable to the Identity Theft Program. We also obtained an email from the county confirming that it did not receive any offsetting revenues applicable to this mandated program. 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 examination 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. Conclusion As a result of performing the audit procedures, we found instances of noncompliance with the requirements described in our audit objective. We did not find that the county claimed costs that were funded by other sources; however, we did find that it claimed unsupported costs, as quantified in the Schedule and described in the Finding and Recommendation section of this audit report. To the extent that the county claimed unsupported costs, such costs are also unreasonable and excessive. -3- Orange County Identity Theft Program For the audit period, Orange County claimed $3,177,007 for costs of the legislatively mandated Identity Theft Program. Our audit found that $1,236,867 is allowable and $1,940,140 is unallowable. The State made no payments to the county. The State will pay $1,236,867, 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 Identity Theft Program claims. Prior Audit Findings Views of We issued a draft audit report on December 11, 2019. Noma M. Crook, Responsible Director, Financial/Administrative Services, responded by letter dated December 19, 2019 (Attachment), agreeing with the audit results. This Officials final audit report includes the county’s response. Restricted Use This audit report is solely for the information and use of Orange 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 report, which is a matter of public record and is available on the SCO website at www.sco.ca.gov. Original signed by JIM L. SPANO, CPA Chief, Division of Audits January 23, 2020 -4- Orange County Identity Theft Program Schedule— Summary of Program Costs July 1, 2002, through June 30, 2013 Cost Actual Costs Allowable Audit Elements Claimed per Audit Adjustments1 July 1, 2002, through June 30, 2003 Direct costs: Salaries Taking police report on violation of PC section 530.5 $ 1 0,978 $ 4,858 $ ( 6,120) Begin an investigation of facts 2 6,132 11,798 ( 14,334) Total salaries 3 7,110 16,656 ( 20,454) Benefits 1 6,490 7,400 ( 9,090) Total direct costs 5 3,600 24,056 ( 29,544) Indirect costs 1 3,480 4,189 ( 9,291) Total program costs $ 6 7,080 28,245 $ ( 38,835) Less amount paid by the State2 - Allowable costs claimed in excess of amount paid $ 28,245 July 1, 2003, through June 30, 2004 Direct costs: Salaries Taking police report on violation of PC section 530.5 $ 1 0,153 $ 4,028 $ ( 6,125) Begin an investigation of facts 2 1,624 8,995 ( 12,629) Total salaries 3 1,777 13,023 ( 18,754) Benefits 1 8,195 7,456 ( 10,739) Total direct costs 4 9,972 20,479 ( 29,493) Indirect costs 1 5,671 4,084 ( 11,587) Total program costs $ 6 5,643 24,563 $ ( 41,080) Less amount paid by the State2 - Allowable costs claimed in excess of amount paid $ 24,563 July 1, 2004, through June 30, 2005 Direct costs: Salaries Taking police report on violation of PC section 530.5 $ 5 ,001 $ 2,872 $ ( 2,129) Begin an investigation of facts 1 8,608 8,121 ( 10,487) Total salaries 2 3,609 10,993 ( 12,616) Benefits 1 4,357 6,686 ( 7,671) Total direct costs 3 7,966 17,679 ( 20,287) Indirect costs 1 2,050 3,489 ( 8,561) Total program costs $ 5 0,016 21,168 $ ( 28,848) Less amount paid by the State2 - Allowable costs claimed in excess of amount paid $ 21,168 -5- Orange County Identity Theft Program Schedule (continued) Cost Actual Costs Allowable Audit Elements Claimed per Audit Adjustments1 July 1, 2005, through June 30, 2006 Direct costs: Salaries Taking police report on violation of PC section 530.5 $ 2 6,914 $ 10,458 $ ( 16,456) Begin an investigation of facts 5 8,428 24,115 ( 34,313) Total salaries 8 5,342 34,573 ( 50,769) Benefits 5 3,285 21,585 ( 31,700) Total direct costs 1 38,627 56,158 ( 82,469) Indirect costs 4 2,808 10,676 ( 32,132) Total program costs $ 1 81,435 66,834 $ ( 114,601) Less amount paid by the State2 - Allowable costs claimed in excess of amount paid $ 66,834 July 1, 2006, through June 30, 2007 Direct costs: Salaries Taking police report on violation of PC section 530.5 $ 4 1,092 $ 18,025 $ ( 23,067) Begin an investigation of facts 9 3,852 37,298 ( 56,554) Total salaries 1 34,944 55,323 ( 79,621) Benefits 8 2,867 33,974 ( 48,893) Total direct costs 2 17,811 89,297 ( 128,514) Indirect costs 7 2,074 18,306 ( 53,768) Total program costs $ 2 89,885 107,603 $ ( 182,282) Less amount paid by the State2 - Allowable costs claimed in excess of amount paid $ 107,603 July 1, 2007, through June 30, 2008 Direct costs: Salaries Taking police report on violation of PC section 530.5 $ 2 9,889 $ 18,623 $ ( 11,266) Begin an investigation of facts 6 5,285 36,266 ( 29,019) Total salaries 9 5,174 54,889 ( 40,285) Benefits 5 8,980 34,012 ( 24,968) Total direct costs 1 54,154 88,901 ( 65,253) Indirect costs 4 9,021 17,455 ( 31,566) Total program costs $ 2 03,175 106,356 $ ( 96,819) Less amount paid by the State2 - Allowable costs claimed in excess of amount paid $ 106,356 -6- Orange County Identity Theft Program Schedule (continued) Cost Actual Costs Allowable Audit Elements Claimed per Audit Adjustments1 July 1, 2008, through June 30, 2009 Direct costs: Salaries Taking police report on violation of PC section 530.5 $ 3 0,991 $ 28,778 $ ( 2,213) Begin an investigation of facts 6 7,014 46,956 ( 20,058) Total salaries 9 8,005 75,734 ( 22,271) Benefits 5 9,409 45,907 ( 13,502) Total direct costs 1 57,414 121,641 ( 35,773) Indirect costs 6 2,588 30,112 ( 32,476) Total program costs $ 2 20,002 151,753 $ ( 68,249) Less amount paid by the State2 - Allowable costs claimed in excess of amount paid $ 151,753 July 1, 2009, through June 30, 2010 Direct costs: Salaries Taking police report on violation of PC section 530.5 $ 4 1,587 $ 34,369 $ ( 7,218) Begin an investigation of facts 9 2,388 46,150 ( 46,238) Total salaries 1 33,975 80,519 ( 53,456) Benefits 7 9,935 51,324 ( 28,611) Total direct costs 2 13,910 131,843 ( 82,067) Indirect costs 7 8,120 29,406 ( 48,714) Total program costs $ 2 92,030 161,249 $ ( 130,781) Less amount paid by the State2 - Allowable costs claimed in excess of amount paid $ 161,249 July 1, 2010, through June 30, 2011 Direct costs: Salaries Taking police report on violation of PC section 530.5 $ 3 2,698 $ 29,004 $ ( 3,694) Begin an investigation of facts 7 5,781 42,534 ( 33,247) Total salaries 1 08,479 71,538 ( 36,941) Benefits 7 5,447 49,754 ( 25,693) Total direct costs 1 83,926 121,292 ( 62,634) Indirect costs 7 0,462 27,406 ( 43,056) Total program costs $ 2 54,388 148,698 $ ( 105,690) Less amount paid by the State2 - Allowable costs claimed in excess of amount paid $ 148,698 -7- Orange County Identity Theft Program Schedule (continued) Cost Actual Costs Allowable Audit Elements Claimed per Audit Adjustments1 July 1, 2011, through June 30, 2012 Direct costs: Salaries Taking police report on violation of PC section 530.5 $ 7 9,317 $ 34,417 $ ( 44,900) Begin an investigation of facts 1 82,929 50,372 ( 132,557) Total salaries 2 62,246 84,789 ( 177,457) Benefits 1 82,922 59,146 ( 123,776) Total direct costs 4 45,168 143,935 ( 301,233) Indirect costs 1 77,043 33,721 ( 143,322) Total program costs $ 6 22,211 177,656 $ ( 444,555) Less amount paid by the State2 - Allowable costs claimed in excess of amount paid $ 177,656 July 1, 2012, through June 30, 2013 Direct costs: Salaries Taking police report on violation of PC section 530.5 $ 1 14,367 $ 50,358 $ ( 64,009) Begin an investigation of facts 2 68,054 63,176 ( 204,878) Total salaries 3 82,421 113,534 ( 268,887) Benefits 2 80,408 83,249 ( 197,159) Total direct costs 6 62,829 196,783 ( 466,046) Indirect costs 2 68,313 45,959 ( 222,354) Total program costs $ 9 31,142 242,742 $ ( 688,400) Less amount paid by the State2 - Allowable costs claimed in excess of amount paid $ 242,742 Summary: July 1, 2002, through June 30, 2013 Direct costs: Salaries $ 1 ,393,082 $ 611,571 $ ( 781,511) Benefits 9 22,295 400,493 ( 521,802) Total direct costs 2 ,315,377 1,012,064 ( 1,303,313) Indirect costs 8 61,630 224,803 ( 636,827) Total program costs $ 3 ,177,007 1,236,867 $ ( 1,940,140) Less amount paid by the State2 - Allowable costs claimed in excess of amount paid $ 1,236,867 _________________________ 1 See the Finding and Recommendation section. 2 Payment amount current as of December 24, 2019. -8- Orange County Identity Theft Program Finding and Recommendation FINDING— The county claimed $3,177,007 ($1,393,082 in salaries, $922,295 in benefits, and $861,630 in related indirect costs) for the Identity Theft Overstated Identity Program. We found that $1,236,867 is allowable and $1,940,140 is Theft Program costs unallowable. Salary costs are determined by multiplying the number of identity theft police reports by the time required to perform the reimbursable activities by the weighted average PHR of the employee classifications that performed the reimbursable activities. The costs are unallowable because the county misinterpreted the program’s parameters and guidelines, which resulted in an understated number of identity theft reports and overstated time increments required to perform the reimbursable activities. The following table summarizes the claimed and allowable amounts, and the audit adjustments by fiscal year: Salaries Related Related Total Fiscal Amount Amount Audit Benefit Indirect Cost Audit Year Claimed Allowable Adjustment Adjustment Adjustment Adjustment 2002-03 $ 37,110 $ 1 6,656 $ (20,454) $ (9,090) $ (9,291) $ (38,835) 2003-04 31,777 13,023 (18,754) (10,739) (11,587) (41,080) 2004-05 23,609 10,993 (12,616) (7,671) (8,561) (28,848) 2005-06 85,342 34,573 (50,769) (31,700) (32,132) (114,601) 2006-07 134,944 55,323 (79,621) (48,893) (53,768) (182,282) 2007-08 95,174 54,889 (40,285) (24,968) (31,566) (96,819) 2008-09 98,005 75,734 (22,271) (13,502) (32,476) (68,249) 2009-10 133,975 80,519 (53,456) (28,611) (48,714) (130,781) 2010-11 108,479 71,538 (36,941) (25,693) (43,056) (105,690) 2011-12 262,246 84,789 (177,457) (123,776) (143,322) (444,555) 2012-13 382,421 113,534 (268,887) (197,159) (222,354) (688,400) Total $ 1,393,082 $ 6 11,571 $ (781,511) $ (521,802) $ (636,827) $ (1,940,140) Understated counts of identity theft police reports The county reported costs incurred for taking police reports related to 5,528 identity theft cases. We interviewed OCSD Support Services Division (SSD) staff to assess the reliability of available computer-processed data relevant to the county’s claims. SSD staff members informed us that they could provide unduplicated identity theft case numbers by jurisdiction from the CAD/RMS. The county provided us with detailed system-generated lists of identity theft cases originating in the county’s unincorporated area for the entire 11-year audit period. These lists provided sufficient and appropriate data to obtain complete, accurate, and unduplicated populations of identity theft police reports to support the county’s claimed costs. -9- Orange County Identity Theft Program The unduplicated lists of cases by fiscal year supported 8,110 identity theft cases during the audit period. Our initial review of the case lists disclosed a significant number of cases with no time increments reported because OCSD did not perform the mandated activities. Instead, Police or Sheriff’s Department personnel from other local governments performed the activities at no cost to the county. These cases appeared in the CAD/RMS because the other local agencies forwarded them to OCSD for further investigation. We adjusted the population to remove all cases forwarded by law enforcement agencies other than the OCSD. The adjusted population of unduplicated police cases applicable only to Orange County totaled 6,949 during the audit period. This adjusted case count constitutes 1,421 police reports (or 26%) more than the county claimed, a material difference. We verified the accuracy of OCSD’s CAD/RMS by:  Verifying that each identity theft case was supported by a contemporaneously prepared and approved police report; and  Verifying that the police report supported a violation of PC section 530.5. We developed a statistical sampling plan and generated statistical samples of identity theft cases for these two procedures so that we could project sample results to the population of identity theft cases. We selected statistical samples of identity theft cases originating from the county based on a 95% confidence level, a sampling error of +/-8%, and an expected (true) error rate of 50%. We judgmentally selected FY 2005-06, FY 2011-12, and FY 2012-13 for testing. Our testing (based on the above plan) disclosed the following:  For FY 2005-06, we selected 106 cases from the population of 359 cases. We found that 3.77% of the cases were unallowable because they did not support a violation of PC section 530.5 (four instances);  For FY 2011-12, we selected 130 cases from the population of 953 cases. We found that 0.77% of the cases were unallowable because they did not support a violation of PC section 530.5 (one instance); and  For FY 2012-13, we selected 136 cases from the population of 1,439 cases. We found that 1.47% of the cases were unallowable because they did not support a violation of PC section 530.5 (two instances). We extrapolated and projected the results of our substantive tests of statistical samples to determine the number of allowable and unallowable identity theft incident reports for the entire 11-year audit period. As shown in the table on the next page, we found that 6,824 incident reports are allowable (6,949 less a 2% average error rate), because 1,296 incident reports for the audit period did not support violations of PC section 530.5. -10- Orange County Identity Theft Program The following table summarizes the counts of claimed, supported, and allowable identity theft cases, and the difference by fiscal year: Fiscal Per Year Claimed CAD/RMS Allowable Difference 2002-03 1 79 174 1 71 (8) 2003-04 1 43 140 1 37 (6) 2004-05 1 26 102 1 00 (26) 2005-06 3 73 359 3 45 (28) 2006-07 5 63 569 5 58 (5) 2007-08 3 75 562 5 51 1 76 2008-09 3 77 841 8 24 4 47 2009-10 5 10 994 9 74 4 64 2010-11 4 11 816 8 00 3 89 2011-12 9 85 953 9 46 (39) 2012-13 1,486 1 ,439 1,418 (68) Total 5,528 6 ,949 6,824 1,296 Case Counts for Beginning Investigations at Contract Cities Subsequent to the audit exit conference, OCSD representatives informed us that its Investigators and Investigative Assistants spent time on the reimbursable activity of Beginning an investigation (Activity 2) for identity theft cases originating in its contract cities. The county provided documentation showing that it offered these investigative services at no charge. The county also provided case counts to calculate the time spent by Investigators and Investigative Assistants on reimbursable Activity 2 based on identity theft cases originating within its contract cities. The following table summarizes the case counts of these identity theft cases for which Investigators and Investigative Assistants performed reimbursable Activity 2: Fiscal Investigative Year Investigators Assistants Total 2002-03 232 287 519 2003-04 169 175 344 2004-05 227 135 362 2005-06 511 540 1,051 2006-07 384 1,119 1,503 2007-08 188 1,157 1,345 2008-09 122 1,163 1,285 2009-10 59 604 663 2010-11 88 748 836 2011-12 49 716 765 2012-13 55 350 405 Total 2,084 6,994 9,078 -11- Orange County Identity Theft Program Overstated time increments Claimed Time Increments The county claimed salary costs during the audit period for OCSD staff to perform the reimbursable activities of:  Taking a police report (drafting, reviewing, and editing) (Activity 1a); and  Beginning an investigation (Activity 2). The county’s claims divide reimbursable Activity 1a into three parts, which we will identify as Activity 1a.1 (Writing a police report), Activity 1a.2 (Reviewing a police report), and Activity 1a.3 (Interview victim, gather information, and obtain documents). We determined that time claimed for Activity 1a.3 should be part of reimbursable Activity 2 (Beginning an investigation). The county’s claims during the audit period included time estimates to perform reimbursable Activity 1a ranging from 86 minutes to 100 minutes, and a time estimate of 200 minutes to perform reimbursable Activity 2. The county provided two declarations to support the time increments claimed, one prepared during FY 2011-12 and the second prepared during FY 2012-13. Both declarations provided the same estimates for the time required by OCSD employees to perform the reimbursable activities. The county did not support either declaration with a time study or any other contemporaneously prepared documentation. Therefore, we determined that these time increments were estimated and unsupported. Both declarations identified the following activities, employee classifications, and estimated time increments: Reimbursable Employee Minutes Activity Classification Description Required 1a.1 Take a police report Deputy II Review notes, write report, impound evidence 30 1a.2 Take a police report Sergeant Review, edit, and approve report 10 1a.3 Take a police report Deputy II Interview victim, gather information, obtain documents 45 Total Activity 1a 85 2 Begin an investigation Investigator Review report, contact victim and witnesses 20 2 Begin an investigation Investigator Contact financial institutions and businesses 30 2 Begin an investigation Investigator Obtain documents, statements, and videos 30 2 Begin an investigation Investigator Obtain search warrants, conduct photo line-ups, and book evidence 60 2 Begin an investigation Investigator Write report, submit packet to DA's Office 60 Total Activity 2 200 Allowable Time Increments We found that the county overstated the time increments that it claimed to perform the reimbursable activities because it did not use available contemporaneous time increments from its CAD/RMS. The county also misinterpreted the program’s parameters and guidelines by claiming time spent by Investigators on activities that are not reimbursable. -12- Orange County Identity Theft Program Beginning an Investigation During our audit, OCSD SSD staff members informed us that they could download contemporaneous timestamps for case numbers from the CAD/RMS. The CAD/RMS has one call log per case; to differentiate initial reports from supplemental reports, the report date must be verified. SSD staff stated that PDF copies of approved police reports are available at OCSD Headquarters, as these reports are retained permanently. We received CAD/RMS time reports for the years that we tested (FY 2005-06, FY 2011-12, and FY 2012-13). The CAD/RMS time reports included the following information:  DR # (Case No.);  Incident Date (Includes Time);  Complaint (530.5-ID Theft);  How Received (Phone, Radio, 911);  Time Transmitted;  Time Dispatched;  Time Enroute;  Time OnScene; and  Time Complete. Time OnScene is the time of day that the Deputy Sheriff arrives at the victim’s residence or business and Time Complete is the time of day that the Deputy Sheriff leaves the victim’s residence or business. We concluded that Time Enroute is drive time, which is not a reimbursable activity. Based on our calculations of time from Time OnScene to Time Complete, we determined the following average time increments for reimbursable Activity 2:  33 minutes for 106 sampled identity theft cases for FY 2005-06;  39 minutes for 130 sampled identity theft cases for FY 2011-12; and  36 minutes for 136 sampled identity theft cases for FY 2012-13. Based on these results, we calculated the average time increment for the three-year period as 36 minutes spent by Deputy Sheriffs to begin an investigation for the 372 identity theft cases that we tested. We applied the average time increment of 36 minutes for the years that we did not test, which included FY 2002-03 through FY 2010-11 (excluding FY 2005-06). OCSD representatives stated that, in addition to Deputy Sheriffs, OCSD Investigators also worked on identity theft cases after receiving police reports from the originating OCSD patrol stations. OCSD representatives stated that an approved initial police report is forwarded to the Sergeant of the Economic Crimes Detail. The Sergeant then assigns the case to either an Investigator or an Investigative Assistant to obtain additional information from the victim that was not provided to the Deputy Sheriff when the report was taken. As Sergeants did not forward all identity theft -13- Orange County Identity Theft Program cases for follow-up, we requested and the county provided the number of cases forwarded to Investigators and Investigative Assistants during the audit period. Based on this additional information provided by the county, we determined that Investigators spent an additional 20 minutes working on 830 cases and Investigative Assistants spent an additional 20 minutes working on 5,696 cases during the audit period. Therefore, we determined that the county spent a total of 56 minutes on reimbursable Activity 2: 36 minutes for Deputy Sheriffs and 20 minutes for Investigators and/or Investigative Assistants. Taking a Police Report and Reviewing Police Reports In order to understand what reimbursable activities OCSD’s CAD/RMS was unable to capture in the contemporaneous time increments recorded, we interviewed OCSD Deputy Sheriffs and Sergeants. We found that time spent by Deputy Sheriffs writing a police report (reimbursable Activity 1a.1) and time spent by Sergeants reviewing and approving police reports (reimbursable Activity 1a.2) are reimbursable activities that the CAD/RMS did not capture. Based on our interviews, we concluded that the county’s claim of 30 minutes for time spent by Deputy Sheriffs reviewing notes, writing reports, and impounding evidence, and 10 minutes for time spent by Sergeants reviewing and approving a police report were reasonable and allowable. Based on our audit, we applied the following time increments (in minutes) for each allowable police report for the unincorporated areas of the county:  Activity 1a.1 – Take a police report supporting a violation of Penal Code section 530.5: 30 minutes;  Activity 1a.2 – Reviewing the identity theft report: 10 minutes; and  Activity 2 – Beginning an investigation: 36 minutes for Deputy Sheriffs and 20 minutes for Investigators or Investigative Assistants. The following table summarizes the time claimed and allowable in minutes for reimbursable Activities 1a and 2 by fiscal year: Claimed Time Increments Allowable Time Increments Activity 1a.1 Activity 1a.2 Activity 1a.3 Activity 2 Activity 1a.1 Activity 1a.2 Activity 2 Interview victim Review notes Review and and Fiscal and write approve police gather Beginning an Writing a Reviewing a Beginning an Year police report report information investigation police report police report investigation 2002-03 30 10 49 200 30 10 36 + 20 2003-04 30 10 60 200 30 10 36 + 20 2004-05 30 10 46 200 30 10 36 + 20 2005-06 30 10 58 200 30 10 33 + 20 2006-07 30 10 53 200 30 10 36 + 20 2007-08 30 10 57 200 30 10 36 + 20 2008-09 30 10 58 200 30 10 36 + 20 2009-10 30 10 56 200 30 10 36 + 20 2010-11 30 10 51 200 30 10 36 + 20 2011-12 30 10 52 200 30 10 39 + 20 2012-13 30 10 50 200 30 10 36 + 20 -14- Orange County Identity Theft Program Time Increments for Beginning Investigations at Contract Cities As stated previously, OCSD Investigators and Investigative Assistants also spent time on reimbursable Activity 2 for identity theft cases originating in OCSD’s contract cities. We verified that the county assigned 2,084 of these cases to Investigators and 6,994 of these cases to Investigative Assistants during the audit period. The calculations of allowable costs include 20 minutes per case for this activity. Allowable salary costs The county claimed $1,393,082 for employee salaries. We determined that $611,571 is allowable and $781,511 is unallowable. The county overstated salaries because it overstated the time increments required to perform the reimbursable activities and understated its counts of identity theft cases. We determined allowable salaries by multiplying the allowable time increments by the number of allowable identity theft cases and then multiplying the product by the PHRs of county employees who performed the reimbursable activities. Actual Employee Classifications To verify which employee classifications actually performed the mandated activities, we:  Obtained the employee numbers from the sampled police reports and employee names from OCSD’s CAD/RMS;  Requested information supporting the actual employee classifications and PHRs of the employees identified; and  Calculated the percentage of involvement for the OCSD employees who performed the mandated activities. We found that Deputy Sheriffs performed all of the mandated activities captured by the CAD/RMS time records (reimbursable Activities 1a.1 and 2). We also noted, from viewing copies of the filed police reports, that Sergeants approved all of the reports (reimbursable Activity 1a.2). The county identified Economic Crimes Detail Investigators and Investigative Assistants who spent additional time on reimbursable Activity 2 after receiving initial police reports approved by Patrol Station Sergeants. Investigators and Investigative Assistants also spent time to begin investigations for identity theft cases originating in the county’s contract cities during the audit period. PHRs The county provided calculations of its annual productive hours and PHRs for the audit period. We reviewed the county’s Employer Roster Listing (human resources and payroll records) at OCSD Headquarters to verify the PHRs for the authors of the sampled and approved police reports. The county proposed and we agreed to use OCSD’s top step rates to compute the weighted average PHR in our computation of allowable salary costs. -15- Orange County Identity Theft Program The following table summarizes the PHRs claimed and allowable for the audit period: PHRs Claimed PHRs Allowable Fiscal Deputy Deputy Investigative Year Sheriff II Investigator Sergeant Sheriff II Sergeant Investigator Assistant 2002-03 $ 40.17 $ 43.84 $ 49.83 $ 40.20 $ 49.87 $ 43.87 $ 23.46 2003-04 4 1.60 4 5.41 5 1.61 4 1.60 5 1.61 4 5.41 2 4.86 2004-05 40.63 4 4.35 5 0.41 40.63 5 0.41 4 4.35 24.84 2005-06 43.13 4 7.04 5 2.52 42.89 5 3.20 4 6.81 24.84 2006-07 46.14 5 0.06 5 5.96 45.71 5 6.69 4 9.88 26.54 2007-08 48.19 5 2.28 5 8.97 47.82 5 9.33 5 2.20 29.92 2008-09 49.12 5 3.38 5 9.98 49.42 6 1.29 5 3.93 30.97 2009-10 49.83 5 4.40 6 0.85 49.93 6 1.93 5 4.49 31.08 2010-11 51.30 5 5.37 6 1.80 51.30 6 3.63 5 5.98 32.04 2011-12 51.48 5 5.77 6 3.06 51.48 6 3.85 5 6.18 32.10 2012-13 50.23 5 4.17 6 0.93 50.25 6 2.33 5 4.84 31.40 Using this salary rate information, the corrected number of case counts, the corrected time increments, and the employee classifications that performed the reimbursable activities during the audit period, we determined allowable salaries for each fiscal year. For example, the following table shows the calculation of allowable salary costs for FY 2012-13: [1] [2] [3] [4] [5] [6] [7] [8] Time Allowable Costs 1 Reimbursable Employee Number Increment Minutes Hours PHR ($) Activity Classification of Cases (Minutes) (cols. [3] × [4]) (col. [5] ÷ 60) ($) (cols. [6] × [7]) 1a.1 Deputy Sheriff II 1 ,418 30 42,540 709.00 $ 50.25 $ 3 5,627 1a.2 Sergeant 1 ,418 10 14,180 236.33 $ 62.33 1 4,731 2 Deputy Sheriff II 1 ,418 36 51,048 850.80 $ 50.25 4 2,753 2 Investigator 1 02 20 2,040 34.00 $ 54.84 1 ,865 2 Investigative Assistant 1 ,327 20 26,540 442.34 $ 31.40 1 3,890 2 Investigator2 5 5 20 1,100 18.33 $ 54.84 1 ,005 2 Investigative Assistant2 3 50 20 7,000 116.67 $ 31.40 3 ,663 Total $ 1 13,534 1 Immaterial differences due to rounding. 2Time spent on cases from contract cities. Allowable related employee benefits The county claimed $922,295 for related employee benefits. We determined that $400,493 is allowable and $521,802 is unallowable. The county overstated related employee benefits because it overstated salary costs by $781,511. Benefits costs are determined by multiplying allowable salary costs by each year’s benefit rate. Employee benefits related to allowable salaries are allowable. The county provided the employee benefit rates from its indirect cost rate proposals (ICRPs) for the audit period. Using this information, we calculated allowable benefit costs. -16- Orange County Identity Theft Program The following table summarizes the allowable related employee benefit costs by fiscal year: Allowable Allowable Fiscal Allowable Benefit Benefit Year Salaries Rate Costs 2002-03 $ 16,656 44.430% $ 7,400 2003-04 13,023 57.250% 7,456 2004-05 10,993 60.820% 6,686 2005-06 34,573 62.433% 21,585 2006-07 55,323 61.410% 33,974 2007-08 54,889 61.965% 34,012 2008-09 75,734 60.616% 45,907 2009-10 80,519 63.742% 51,324 2010-11 71,538 69.549% 49,754 2011-12 84,789 69.757% 59,146 2012-13 113,534 73.325% 83,249 Total $ 6 11,571 $ 4 00,493 Allowable related indirect costs The county claimed $861,630 for related indirect costs. We determined that $224,803 is allowable and $636,827 is unallowable. The county overstated indirect costs because it overstated salary costs by $781,511. Indirect costs are determined by multiplying each year’s salary costs by each year’s indirect cost rate. The program’s parameters and guidelines offer two options for claiming indirect costs: (1) use 10% of labor, excluding fringe benefits; or (2) prepare an ICRP for each year of the audit period. The county provided ICRPs to support its claimed indirect costs for the audit period. We reviewed the supporting documentation that the county provided for its ICRPs and determined that the indirect cost rates were properly supported, reasonable, and not excessive. The following table summarizes the related indirect cost audit adjustment by fiscal year: Allowable Allowable Fiscal Allowable Indirect Indirect Year Salaries Cost Rates Costs 2002-03 $ 16,656 25.15% $ 4 ,189 2003-04 13,023 31.36% 4,084 2004-05 10,993 31.74% 3,489 2005-06 34,573 30.88% 1 0,676 2006-07 55,323 33.09% 1 8,306 2007-08 54,889 31.80% 1 7,455 2008-09 75,734 39.76% 3 0,112 2009-10 80,519 36.52% 2 9,406 2010-11 71,538 38.31% 2 7,406 2011-12 84,789 39.77% 3 3,721 2012-13 113,534 40.48% 4 5,959 Total $ 6 11,571 $ 224,803 -17- Orange County Identity Theft Program Criteria The parameters and guidelines (section III. – Period of Reimbursement) state, in part, “Actual costs for one fiscal year shall be included in each claim.” The parameters and guidelines (section IV. – Reimbursable Activities) state, in part: To be eligible for mandated cost reimbursement for any given fiscal year, only actual costs may be claimed. Actual costs are those costs actually incurred to implement the mandated activities. Actual costs must be traceable to and supported by source documents that show the validity of such costs, when they were incurred, and their relationship to the reimbursable activities. A source document is a document created at or near the same time the actual cost was incurred for the event or activity in question. Source documents may include, but are not limited to, employee time records or time logs, sign-in sheet, invoices, and receipts. The parameters and guidelines (section IV. – Reimbursable Activities) state: For each eligible claimant, the following ongoing activities are eligible for reimbursement: 1. Either a) or b) below: a) Take a police report supporting a violation of Penal Code section 530.5 which includes information regarding the personal identifying information involved and any uses of that personal information that were non-consensual and for an unlawful purpose, including, if available, information surrounding the suspected identity theft, places where the crime(s) occurred, and how and where the suspect obtained and used the personal identifying information. This activity includes drafting, reviewing, and editing the identity theft police report; or b) Reviewing the identity theft report completed on-line by the identity theft victim. 2. Begin an investigation of the facts, including the gathering of facts sufficient to determine where the crime(s) occurred and what pieces of personal identifying information were used for an unlawful purpose. The purpose of the investigation is to assist the victims in clearing their names. Reimbursement is not required to complete the investigation for purposes of criminal prosecution. The parameters and guidelines (section V.I. – Claim Preparation and Submission – salaries and benefits) state: 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. -18- Orange County Identity Theft Program Recommendation The State Legislature suspended the Identity Theft Program in the FY 2013-14 through FY 2019-20 Budget Acts. If the program becomes active again, we recommend that the county:  Follow the program’s parameters and guidelines and the SCO’s claiming instructions when preparing its mandated cost claims; and  Ensure that claimed costs include only eligible costs, are based on actual costs, and are properly supported. County’s Response The OCSD filed claims for these mandated activities based on the time spent to accomplish those tasks; however, the Program Parameters and Guidelines are vague, and therefore, some of the work performed and time spent to complete the mandated tasks was disallowed by the State. OCSD has gained better clarity of the Parameters and Guidelines as a result of this audit. OCSD will ensure that claimed costs include only eligible costs that are based on properly supported actual costs. -19- Orange County Identity Theft Program Attachment— County’s Response to Draft Audit Report State Controller’s Office Division of Audits Post Office Box 942850 Sacramento, CA 94250 http://www.sco.ca.gov S18-MCC-0019