Berkeley, City of

CITY OF BERKELEY Audit Report OPEN MEETINGS ACT/BROWN ACT REFORM PROGRAM Chapter 641, Statutes of 1986; and Chapter 1136 through 1138, Statutes of 1993 July 1, 2005, through June 30, 2012 BETTY T. YEE California State Controller September 2020 BETTY T. YEE California State Controller September 23, 2020 CERTIFIED MAIL—RETURN RECEIPT REQUESTED Henry Oyekanmi, Director of Finance City of Berkeley Finance Department 2180 Milvia Street Berkeley, CA 94704 Dear Mr. Oyekanmi: The State Controller’s Office audited the costs claimed by the City of Berkeley for the legislatively mandated Open Meetings Act/Brown Act Reform Program for the period of July 1, 2005, through June 30, 2012. The city claimed $658,311 for costs of the mandated program. Our audit found that $618,061 is allowable and $40,250 is unallowable because the city overstated its standard-time costs by applying incorrect blended productive hourly rates to eligible agenda items and claiming unsupported indirect costs; and overstated its flat-rate costs by claiming unsupported and ineligible meeting agendas. The State made no payments to the city. The State will pay $618,061, contingent upon available appropriations. Following issuance of this audit report, the Local Government Programs and Services Division of the State Controller’s Office will notify the city of the adjustment to its claims via a system- generated letter for each fiscal year in the audit period with the exception of FY 2008-09, for which we determined that all costs claimed are allowable. 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/ac Henry Oyekanmi, Finance Director -2- September 23, 2020 cc: Leslie Harris, Administrative Secretary City of Berkeley Finance Department The Honorable Jesse Arreguin, Mayor City of Berkeley 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 Reimbursements Section State Controller’s Office City of Berkeley 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 1—Summary of Program Costs ........................................................................... 5 Schedule 2—Summary of Agenda Costs .............................................................................. 7 Findings and Recommendations ........................................................................................... 10 Attachment—City’s Comments Regarding the Audit Results City of Berkeley Open Meetings Act/Brown Act Reform Program Audit Report Summary The State Controller’s Office (SCO) audited the costs claimed by the City of Berkeley for the legislatively mandated Open Meetings Act/Brown Act Reform Program for the period of July 1, 2005, through June 30, 2012. The city claimed $658,311 for costs of the mandated program. Our audit found that $618,061 is allowable and $40,250 is unallowable because the city overstated its standard-time costs by applying incorrect blended productive hourly rates (PHRs) to eligible agenda items and claiming unsupported indirect costs; and overstated its flat-rate costs by claiming unsupported and ineligible meeting agendas. The State made no payments to the city. The State will pay $618,061, contingent upon available appropriations. Background Open Meetings Act Program Chapter 641, Statutes of 1986, added Government Code (GC) sections 54954.2 and 54954.3. GC 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. GC section 54954.3 requires members of the public to be provided an opportunity to address the legislative body on specific agenda items or an item of interest that is 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 by 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 GC 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. The Open Meetings Act Program became effective August 29, 1986. -1- City of Berkeley Open Meetings Act/Brown Act Reform Program Commencing in fiscal year (FY) 1997-98, a local agency may claim costs using the actual-time reimbursement option, the standard-time reimbursement option, or the flat-rate reimbursement option as specified in the parameters and guidelines. The Open Meetings Act/Brown Act Reform Program became effective in 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.1 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 city for the audit period and identified the material cost components claimed. For standard-time option costs, material cost components included the number of agenda items, the minutes per agenda item, and the blended PHRs for the employees who performed the reimbursable activities. For flat-rate costs, material cost components included the number of agenda items and the program’s 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 city staff members. Discussed the claim preparation process with city staff to determine what information was obtained, who obtained it, and how it was used; Standard-time option • Selected judgmental non-statistical samples of meeting agendas, representing the population of 4,523 meeting agenda items claimed for the City Council, ranging from 28% to 36% of claimed agenda items for each fiscal year of the audit period; 1 Unreasonable and/or excessive costs include ineligible costs that are not identified in the program’s parameters and guidelines as reimbursable costs. -2- City of Berkeley Open Meetings Act/Brown Act Reform Program • 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 year of the audit period; • Consistent with the American Institute of Certified Public Accountants’ (AICPA) Audit Sampling Guide, 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 city representatives to determine which employee classifications performed the reimbursable activities and the extent of their involvement; • Calculated blended PHRs for FY 2005-06 through FY 2011-12 for all city employee classifications that performed the mandated activities, using documentation form the city’s payroll system; • Determined whether indirect costs claimed separately were already included in the blended PHRs for FY 2005-06 through FY 2008-09 and were supported; Flat-rate option • Selected judgmental non-statistical samples of meeting agendas from the population of 3,007 agendas for various city departments, ranging from 33% to 40% of meeting agendas claimed for each fiscal year of the audit period; • Determined the existence of meeting agendas claimed and compared the number of supported meetings to the number claimed (we excluded from consideration meetings that did not include a provision for public comment); and • 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 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. -3- City of Berkeley Open Meetings Act/Brown Act Reform Program Conclusion As a result of performing the audit procedures, we found instances of noncompliance with the requirements described in our audit objective. We found that the city did not claim costs funded by another source; however, the unallowable claimed costs are ineligible and unsupported, as quantified in Schedule 1 and described in the Findings and Recommendations section of this audit report. For the audit period, the City of Berkeley claimed $658,311 for costs of the legislatively mandated Open Meetings Act/Brown Act Reform Program. Our audit found that $618,061 is allowable and $40,250 is unallowable. The State made no payments to the city. The State will pay $618,061, 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 with the exception of FY 2008-09, for which we determined that all costs claimed are allowable. Follow-up on We have not previously conducted an audit of the city’s legislatively mandated Open Meetings Act/Brown Act Reform Program. Prior Audit Findings Views of We discussed our audit results with the city’s representatives during a Responsible status meeting conducted on May 26, 2020. Henry Oyekanmi, Director of Finance, responded by letter dated July 21, 2020 (Attachment). Officials Mr. Oyekanmi stated that the city concurs with the findings, waived an exit conference, and requested that we issue the final audit report. The city’s complete response is included as an attachment to this audit report. Restricted Use This audit report is solely for the information and use of the City of Berkeley, the California Department of Finance, and 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 and is available on the SCO website at www.sco.ca.gov. Original signed by JIM L. SPANO, CPA Chief, Division of Audits September 23, 2020 -4- City of Berkeley Open Meetings Act/Brown Act Reform Program Schedule 1— Summary of Program Costs July 1, 2005, through June 30, 2012 Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustment Reference1 July 1, 2005, through June 30, 2006 Standard time $ 23,444 $ 24,429 $ 985 Finding 1 Flat rate 6 4,981 5 7,113 (7,868) Finding 2 Total direct costs 8 8,425 8 1,542 (6,883) Indirect costs2 2,538 - (2,538) Finding 1 Total program costs $ 90,963 8 1,542 $ ( 9,421) Less amount paid by the State3 - Allowable costs claimed in excess of amount paid $ 81,542 July 1, 2006, through June 30, 2007 Standard time $ 17,446 $ 22,070 $ 4,624 Finding 1 Flat rate 7 5,842 6 4,282 ( 11,560) Finding 2 Total direct costs 9 3,288 8 6,352 (6,936) Indirect costs2 2,149 - (2,149) Finding 1 Total program costs $ 95,437 8 6,352 $ ( 9,085) Less amount paid by the State3 - Allowable costs claimed in excess of amount paid $ 86,352 July 1, 2007, through June 30, 2008 Standard time $ 20,060 $ 24,371 $ 4,311 Finding 1 Flat rate 6 4,888 5 9,907 (4,981) Finding 2 Total direct costs 8 4,948 8 4,278 (670) Indirect costs2 2,668 - (2,668) Finding 1 Total program costs $ 87,616 8 4,278 $ ( 3,338) Less amount paid by the State3 - Allowable costs claimed in excess of amount paid $ 84,278 July 1, 2008, through June 30, 2009 Standard time $ 18,839 $ 30,203 $ 11,364 Finding 1 Flat rate 7 0,160 6 4,430 (5,730) Finding 2 Total direct costs 8 8,999 9 4,633 5 ,634 Indirect costs2 3,255 - (3,255) Finding 1 Total direct and indirect costs 9 2,254 9 4,633 2 ,379 Less allowable costs that exceed costs claimed4 - (2,379) (2,379) Total program costs $ 92,254 $ 92,254 $ - Less amount paid by the State3 - Allowable costs claimed in excess of amount paid $ 92,254 -5- City of Berkeley Open Meetings Act/Brown Act Reform Program Schedule 1 (continued) Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustment Reference1 July 1, 2009, through June 30, 2010 Standard time $ 41,955 $ 39,020 $ (2,935) Finding 1 Flat rate 6 9,550 6 8,614 (936) Finding 2 Total direct costs 111,505 107,634 ( 3,871) Indirect costs - - - Total program costs $ 111,505 107,634 $ (3,871) Less amount paid by the State3 - Allowable costs claimed in excess of amount paid $ 107,634 July 1, 2010, through June 30, 2011 Standard time $ 35,938 $ 28,998 $ (6,940) Finding 1 Flat rate 5 3,463 5 2,984 (479) Finding 2 Total direct costs 8 9,401 8 1,982 ( 7,419) Indirect costs - - - Total program costs $ 89,401 8 1,982 $ (7,419) Less amount paid by the State3 - Allowable costs claimed in excess of amount paid $ 81,982 July 1, 2011, through June 30, 2012 Standard time $ 37,352 $ 32,215 $ (5,137) Finding 1 Flat rate 5 3,783 5 1,804 ( 1,979) Finding 2 Total direct costs 9 1,135 8 4,019 ( 7,116) Indirect costs - - - Total program costs $ 91,135 8 4,019 $ (7,116) Less amount paid by the State3 - Allowable costs claimed in excess of amount paid $ 84,019 Summary: July 1, 2005, through June 30, 2012 Standard time $ 195,034 $ 201,306 $ 6,272 Finding 1 Flat rate 452,667 419,134 (33,533) Finding 2 Total direct costs 647,701 620,440 (27,261) Indirect costs2 1 0,610 - (10,610) Finding 1 Total direct and indirect costs 658,311 620,440 (37,871) Less allowable costs that exceed costs claimed4 - (2,379) ( 2,379) Total program costs $ 658,311 618,061 $ (40,250) Less amount paid by the State3 - Allowable costs claimed in excess of amount paid $ 618,061 _________________________ 1 See the Findings and Recommendations section. 2 Indirect costs were claimed separately from standard-time salaries. 3 Payment amount current as of September 17, 2020. 4 GC section of 17568 stipulates that the State will not reimburse any claim more than one year after the filing deadline specified in SCO’s claiming instructions. That deadline has expired for FY 2008-09. -6- City of Berkeley Open Meetings Act/Brown Act Reform Program Schedule 2— Summary of Agenda Costs July 1, 2005, through June 30, 2012 Allowable Claimed Agenda Variance Allowable Unallowable Audit City Department Agendas (%) Agendas Agendas Flat Rate Adjustment1 July 1, 2005, through June 30, 2006 Health and Human Services 72 100.00% 7 2 - $ 135.66 $ - City Manager 70 91.30% 6 4 (6) 135.66 (814) Planning and Development 149 73.17% 1 09 (40) 135.66 (5,426) Public Works 31 90.91% 2 8 (3) 135.66 (407) Transportation 18 66.67% 1 2 (6) 135.66 (814) Housing and Community Services 67 100.00% 6 7 - 135.66 - City Attorney 5 100.00% 5 - 135.66 - Mental Health 12 100.00% 1 2 - 135.66 - Parks and Waterfront 34 91.67% 3 1 (3) 135.66 (407) Police and Fire 21 100.00% 2 1 - 135.66 - Total 479 4 21 (58) $ (7,868) July 1, 2006, through June 30, 2007 Health and Human Services 85 100.00% 8 5 - $ 140.97 $ - City Manager 67 86.36% 6 1 (6) 140.97 (846) Planning and Development 132 68.52% 9 0 (42) 140.97 (5,921) Public Works 32 100.00% 3 2 - 140.97 - Transportation 22 50.00% 1 1 (11) 140.97 (1,551) Housing and Community Services 78 85.71% 6 7 (8) 140.97 (1,128) City Attorney 7 100.00% 7 - 140.97 - Mental Health 32 72.73% 2 3 (9) 140.97 (1,269) Parks and Waterfront 33 90.00% 3 0 (3) 140.97 (423) Police and Fire 50 94.12% 4 7 (3) 140.97 (423) Rounding adjustment - - - 1 Total 538 4 53 (82) $ (11,560) July 1, 2007, through June 30, 2008 Health and Human Services 65 100.00% 6 5 - $ 150.90 $ - City Manager 49 88.89% 4 4 (5) 150.90 (755) Planning and Development 85 90.63% 7 7 (8) 150.90 (1,207) Public Works 33 90.91% 3 0 (3) 150.90 (453) Transportation 23 85.71% 2 0 (3) 150.90 (453) Housing and Community Services 56 95.00% 5 3 (3) 150.90 (453) City Attorney 8 100.00% 8 - 150.90 - Mental Health 22 50.00% 1 1 (11) 150.90 (1,660) Parks and Waterfront 39 100.00% 3 9 - 150.90 - Police and Fire 50 100.00% 5 0 - 150.90 - Total 430 3 97 (33) $ (4,981) -7- City of Berkeley Open Meetings Act/Brown Act Reform Program Schedule 2 (continued) Allowable Claimed Agenda Variance Allowable Unallowable Audit City Department Agendas (%) Agendas Agendas Flat Rate Adjustment1 July 1, 2008, through June 30, 2009 Health and Human Services 57 95.45% 5 4 (3) $ 154.88 $ (465) City Manager 69 95.83% 6 6 (3) 154.88 (465) Planning and Development 81 100.00% 8 1 - 154.88 - Public Works 32 81.82% 2 6 (6) 154.88 (929) Transportation 20 100.00% 2 0 - 154.88 - Housing and Community Services 77 88.89% 6 8 (9) 154.88 (1,394) City Attorney 8 100.00% 8 - 154.88 - Mental Health 22 85.71% 1 9 (3) 154.88 (465) Parks and Waterfront 41 83.33% 3 4 (7) 154.88 (1,084) Police and Fire 46 86.67% 4 0 (6) 154.88 (929) Total 453 4 16 (37) $ (5,731) July 1, 2009, through June 30, 2010 Health and Human Services 55 100.00% 5 5 - $ 155.94 $ - City Manager 63 100.00% 6 3 - 155.94 - Planning and Development 89 100.00% 8 9 - 155.94 - Public Works 33 100.00% 3 3 - 155.94 - Transportation 16 100.00% 1 6 - 155.94 - Housing and Community Services 76 96.15% 7 3 (3) 155.94 (468) City Attorney 5 100.00% 5 - 155.94 - Mental Health 28 100.00% 2 8 - 155.94 - Parks and Waterfront 39 100.00% 3 9 - 155.94 - Police and Fire 42 92.86% 3 9 (3) 155.94 (468) Total 446 4 40 (6) $ (936) July 1, 2010, through June 30, 2011 Health & Human Services 46 100.00% 4 6 - $ 159.59 $ - Health and Human Services 46 100.00% 4 6 - 159.59 - Planning and Development 63 100.00% 6 3 - 159.59 - Public Works 29 90.00% 2 6 (3) 159.59 (479) Transportation 9 100.00% 9 - 159.59 - Housing and Community Services 66 100.00% 6 6 - 159.59 - City Attorney 9 100.00% 9 - 159.59 - Mental Health 10 100.00% 1 0 - 159.59 - Parks and Waterfront 30 100.00% 3 0 - 159.59 - Police and Fire 27 100.00% 2 7 - 159.59 - Total 335 3 32 (3) (479) -8- City of Berkeley Open Meetings Act/Brown Act Reform Program Schedule 2 (continued) Allowable Claimed Agenda Variance Allowable Unallowable Audit City Department Agendas (%) Agendas Agendas Flat Rate Adjustment1 July 1, 2011, through June 30, 2012 Health and Human Services 38 100.00% 3 8 - $ 164.98 $ - City Manager 45 100.00% 4 5 - 164.98 - Planning and Development 69 100.00% 6 9 - 164.98 - Public Works 27 100.00% 2 7 - 164.98 - Transportation 11 75.00% 8 (3) 164.98 (495) Housing and Community Services 58 100.00% 5 8 - 164.98 - City Attorney 10 100.00% 1 0 - 164.98 - Mental Health 10 100.00% 1 0 - 164.98 - Parks and Waterfront 28 66.67% 1 9 (9) 164.98 (1,485) Police and Fire 30 100.00% 3 0 - 164.98 - Rounding Adjustment - - - 1 Total - - - 1 Grand Total 3,007 2 ,776 (231) $ (33,533) _________________________ 1 See Finding 2 – Overstated flat rate costs. -9- City of Berkeley Open Meetings Act/Brown Act Reform Program Findings and Recommendations FINDING 1— The city claimed $205,644 under the standard-time option for the Open Meetings Act/Brown Act Reform Program for the audit period. Claimed Overstated standard-time costs include $195,034 for the preparation and posting of standard-time agenda items, and $10,610 of related indirect costs. option and related indirect costs The city calculated standard-time costs by multiplying the number of Berkeley City Council meeting agenda items by the standard time allowance of 30 minutes per agenda item , then multiplying the product by the blended PHR. The blended PHR includes related benefits and indirect costs for the employee classifications that performed the reimbursable activity. During testing, we found that $201,306 is allowable and $4,338 is unallowable. The costs are unallowable because the city applied incorrect PHRs to eligible agenda items and claimed unsupported indirect costs. Testing Methodology We used non-statistical sampling to test meeting agendas claimed during the audit period under the standard-time option. This included:  Determining that the population of items for testing included 4,523 agenda items;  Judgmentally selecting claimed meeting agendas as follows: o FY 2005-06: 199 out of 714 agenda items o FY 2006-07: 221 out of 611 agenda items o FY 2007-08: 221 out of 666 agenda items o FY 2008-09: 202 out of 606 agenda items o FY 2009-10: 203 out of 679 agenda items o FY 2010-11: 178 out of 629 agenda items o FY 2011-12: 195 out of 618 agenda items;  Reviewing as many of these meeting agendas as possible, available on the city’s website or requested from the city;  Counting the number of eligible agenda items for meeting agendas provided under the standard-time option based on the requirements of the parameters and guidelines. Compared the testing results to the number of agenda items claimed per fiscal year; and  Projecting the results from the samples selected from each year by applying each year’s error percentage to the total population for that year. -10- City of Berkeley Open Meetings Act/Brown Act Reform Program City Council The city claimed $203,106 under the standard-time option for preparing and posting 4,523 agenda items, and $10,610 of related indirect costs for the City Council during the audit period. We found that $201,306 is allowable and $4,338 is unallowable. The costs are unallowable because the city understated the number of eligible agenda items by 312 items and overstated the blended PHRs for the entire audit period. The city misstated the elements of the blended PHR calculations (employee annual salaries and benefits, productive hours, and the percentage of various staff members’ involvement in the reimbursable activities). Furthermore, the city claimed related indirect costs of $10,610 for FY 2005-06 through FY 2008-09, although the city already included a component for indirect costs in its blended PHR calculations. The following table summarizes the claimed, allowable, and audit adjustment amounts for the City Council for the standard-time option costs claimed by fiscal year: Fiscal Year 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Total Number of claimed agenda items 714 6 11 666 6 06 679 629 618 Standard time (hour) per agenda x 0.50 x 0 .50 x 0.50 x 0 .50 x 0.50 x 0.50 x 0.50 Total claimed hours 3 57.00 305.50 333.00 303.00 3 39.50 314.50 309.00 Claimed PHR x 65.67 x 64.14 x 68.25 x 72.92 x 1 23.58 x 114.27 x 120.88 Total direct costs $ 23,444 $ 1 9,595 $ 22,727 $ 2 2,095 $ 41,955 $ 35,938 $ 37,352 $ 203,106 Claim Error Adjustment - (2,149) (2,668) (3,255) - - - (8,072) Total direct costs claimed $ 23,444 $ 1 7,446 $ 20,059 $ 1 8,840 $ 41,955 $ 35,938 $ 37,352 $ 195,034 Related indirect costs1 2 ,538 2,149 2,668 3,255 - - - 10,610 Total claimed costs $ 25,982 $ 1 9,595 $ 22,727 $ 2 2,095 $ 41,955 $ 35,938 $ 37,352 $ 205,644 Number of allowable agenda items 745 6 55 675 6 75 729 678 678 Standard time (hour) per agenda x 0.50 x 0 .50 x 0.50 x 0 .50 x 0.50 x 0.50 x 0.50 Total allowable hours 3 72.50 327.50 337.50 337.50 3 64.50 339.00 339.00 Allowable blended PHR x 65.58 x 67.39 x 72.21 x 89.49 x 1 07.05 x 8 5.54 x 95.03 Total allowable direct costs $ 24,429 $ 2 2,070 $ 24,371 $ 3 0,203 $ 39,020 $ 28,998 $ 32,215 $ 201,306 Allowable related indirect costs1 - - - - - - - - Total allowable costs $ 24,429 $ 2 2,070 $ 24,371 $ 3 0,203 $ 39,020 $ 28,998 $ 32,215 $ 201,306 Audit adjustment2 $ ( 1,553) $ 2,475 $ 1 ,644 $ 8,108 $ ( 2,935) $ (6,940) $ (5,137) $ ( 4,338) 1 Indirect costs for FY 2005-06 through FY 2008-09 claimed separate from Blended PHRs are unsupported . 2 Claimed amounts do not reconcile with claimed agenda items and blended PHRs due to claiming error. Misstated Agenda Items The city claimed costs for preparing 4,523 agenda items for its City Council meetings during the audit period. We found that 4,835 are allowable and the city understated the number of eligible agenda items by 312 during the audit period. We judgmentally selected agendas from City Council meetings during each year of the audit period, which comprised agenda items ranging from 28% to 36% of the number of agenda items claimed per year. We reviewed the board meeting agendas to determine the number of eligible items. Following the requirements of the parameters and guidelines, we did not count items such as “public comments,” “next meeting,” “adjournment,” and general discussion matters, as these are regular repetitive items. -11- City of Berkeley Open Meetings Act/Brown Act Reform Program We followed guidance contained in the AICPA’s 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 count of eligible agenda items (4,267) claimed under the standard-time option were correct. We defined deviations as agenda items ineligible for reimbursement per the parameters and guidelines. The population consisted of the 4,523 agenda items claimed for the City Council meetings during the seven-year audit period. We determined that the City Council was an eligible city agency to claim costs under the standard-time option. We judgmentally selected approximately 31% of City Council standard-time agendas for testing, which comprised 1,419 agenda items. The number of claimed agenda items remained constant throughout the audit period (ranging from 606 to 714). Therefore, we selected 178 to 221 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 and discussions with city staff members revealed that the claimed agenda items were reasonable and not excessive; therefore; we accepted the count of claimed agenda items. In addition, we counted and included an additional 326 agenda items that the city did not initially claim. Overstated Productive Hourly Rates The city claimed blended PHRs and applied them to the following employee job classifications for all years of the audit period:  City Clerk  Assistant City Clerk  Office Specialist III  Assistant Management Analyst  City Manager  Deputy City Managers We met with representatives of the City Clerk’s Office and, based on these discussions, we determined which employee classifications performed the reimbursable activities and the extent of their involvement. We also requested actual payroll information from the Payroll Office for the staff performing the reimbursable activities during the audit period, and used this information to re-calculate blended PHRs. We found that the city overstated the claimed rates for all years of the audit period. -12- City of Berkeley Open Meetings Act/Brown Act Reform Program The following table summarizes the actual participation percentages for city staff members performing the reimbursable activities during the audit period: Employee Fiscal Year Classification 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Actual percentages: City Clerk A 5% 2% 5% 40% 40% 5% 3% City Clerk B 0% 3% 0% 0% 0% 0% 2% IS Specialist A 75% 75% 0% 0% 0% 0% 0% IS Specialist B 20% 20% 0% 0% 0% 0% 0% Assistant City Clerk 0% 0% 35% 0% 0% 35% 35% Office Specialist III 0% 0% 25% 25% 25% 25% 25% Assistant Management Analyst 0% 0% 35% 35% 35% 35% 35% We used salary, benefit, and indirect cost information that the city provided to re-calculate its PHRs. We then multiplied the PHRs by the actual participation percentages to compute blended PHRs for the audit period. The following table shows the calculation of the blended PHR used to calculate allowable costs for FY 2008-09: Annual Productive Indirect Total Activity Blended Employee Salary Hours PHR Costs Rate Benefits PHR % PHR Classification [a] [b] [c=(a/b)] [d=(c x 22.9%)] [e] [f=(c+d+e)] [g] [f x g] City Clerk $ 1 32,107.02 1 ,738.0 $ 76.01 $ 17.41 $ 37.32 $ 130.74 40% $ 5 2.30 Asistant Management Analyst 60,955.51 1 ,777.0 3 4.30 7 .85 20.95 63.10 35% 22.09 Office Specialist III 60,055.71 1 ,727.0 3 4.77 7 .96 17.67 60.40 25% 15.10 Totals $ 8 9.49 We performed a similar calculation for all of the other years of the audit period. We then applied allowable blended PHRs to allowable agenda items for each fiscal year. The following table presents the calculation of total allowable costs under the standard-time option during the audit period by fiscal year: Allowable Standard Claimed Audited / Total Allowable Fiscal Agenda Time Blended Allowable Costs Year Items Allowance PHR Blended PHR [a] [b] [c] [a] x [b] x [c] 2005-06 745 0.5 $ 6 5.67 $ 65.58 $ 24,429 2006-07 655 0.5 64.14 6 7.39 2 2,070 2007-08 675 0.5 68.25 7 2.21 2 4,371 2008-09 675 0.5 72.92 8 9.49 3 0,203 2009-10 729 0.5 1 23.58 107.05 3 9,020 2010-11 678 0.5 1 14.27 8 5.54 2 8,998 2011-12 678 0.5 1 20.88 9 5.03 3 2,215 Totals 4 ,835 $ 201,306 -13- City of Berkeley Open Meetings Act/Brown Act Reform Program Criteria Section IV. (A) (Reimbursable Activities – Agenda Preparation and Posting Activities) of the parameters and guidelines lists reimbursable activities including “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) (2) (a) (Claim Preparation and Submission – Reimbursement Options for Agenda Preparation and Posting, Including Closed Session Agenda Items – Standard Time – Main Legislative Body Meetings of Counties and Cities) 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 require 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. Recommendation No recommendation is applicable for this finding, as the period of reimbursement for the legislatively mandated Open Meetings Act/Brown Act Reform Program ended on November 7, 2012, with the passage of Proposition 30. For other mandated programs, we recommend that the city:  Follow the mandated program’s parameters and guidelines and claiming instructions when preparing its reimbursement claims; and  Ensure that claimed costs include only eligible costs, are based on actual costs, and are properly supported. FINDING 2— The city claimed $452,667 under the flat-rate option for the Open Meetings Act/Brown Act Reform Program for the audit period. During Overstated testing, we found that $419,134 is allowable and $33,533 is unallowable. flat-rate costs The city calculated costs under the flat-rate option by multiplying an annual uniform cost allowance by the number of Berkeley City Council meetings. The uniform cost allowance is adjusted each year by the Implicit Price Deflator, as referenced in GC section 17523. -14- City of Berkeley Open Meetings Act/Brown Act Reform Program The costs are unallowable because the city overstated the number of meetings claimed in all years of the audit period. We worked with city representatives and searched the city’s website, but neither the city nor its departments were able to locate some of the meeting agendas claimed. In addition, some meeting agendas were ineligible for claiming purposes because the meetings did not include an agenda item for public comment, were canceled, or were claimed by multiple departments. The city could not identify how these errors occurred because the city relied on a mandated-cost consultant to prepare its claims. The following table summarizes the claimed, allowable, and audit adjustment amounts for the flat-rate option by fiscal year: Fiscal Year 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Total Claimed agendas 479 538 430 453 446 335 326 3 ,007 Flat rate x 135.66 x 140.97 x 150.90 x 154.88 x 155.94 x 159.59 x 164.98 Totals 64,981 75,842 64,887 70,161 69,549 53,463 53,783 Claim calcualtion errors1 - - 1 ( 1) 1 - - Total claimed costs $ 64,981 $ 75,842 $ 64,888 $ 70,160 $ 69,550 $ 53,463 $ 53,783 $ 452,667 Allowable agendas 421 456 397 416 440 332 314 2 ,776 Flat rate x 135.66 x 140.97 x 150.90 x 154.88 x 155.94 x 159.59 x 164.98 Total allowable costs $ 57,113 $ 64,282 $ 59,907 $ 64,430 $ 68,614 $ 52,984 $ 51,804 419,134 Audit adjustment $ (7,868) $ (11,560) $ (4,981) $ (5,730) $ (936) $ (479) $ (1,979) $ (33,533) 1Minor claim calculation variances due to rounding errors Overstated Agendas The city claimed costs for preparing 3,007 meeting agendas during the audit period. We found that 2,776 agendas are allowable and 231 are unallowable. The city claimed agendas related to 10 city departments during the audit period. We judgmentally selected 35.41% of meeting agendas for legislative bodies within those departments during the audit period for testing. We used non-statistical sampling to test meeting agendas claimed during the audit period under the flat-rate option. This included:  Determining that the population of items for testing included 3,007 meeting agendas;  Judgmentally selecting claimed meeting agendas as follows: o 192 out of 479 agendas for FY 2005-06 o 191 out of 538 agendas for FY 2006-07 o 152 out of 430 agendas for FY 2007-08 o 152 out of 453 agendas for FY 2008-09 o 156 out of 446 agendas for FY 2009-10 o 114 out of 335 agendas for FY 2010-11 o 112 out of 326 agendas for FY 2011-12 -15- City of Berkeley Open Meetings Act/Brown Act Reform Program  Reviewing as many of these meeting agendas as possible, available on the city’s website or requested from the city;  Determining the existence of meeting agendas for the meetings claimed under the flat-rate option and comparing the number of supported meetings to the number claimed. We excluded from consideration meetings that did not include a provision for public comment; and  Projecting the results from the samples selected from each year by applying each department year’s allowable agenda variance to the total population for each department for that year. Allowable agendas are for meetings that actually occurred and were supported. Unallowable agendas are for meetings that were not supported, or that were canceled, claimed by multiple departments, or lacked availability for public comment or public hearings. Based on the testing results, we developed allowable agenda variances for each of the eight departments based on the number of eligible agendas that the city provided compared to the number claimed. We applied these variance to the number of agendas claimed by each city department for each fiscal year of the audit period. Schedule 2 presents the number of agendas claimed, the allowable agenda variance percentage, the number of allowable agendas, the number of unallowable agendas, and the audit adjustment for each fiscal year during the audit period. Criteria Section I. (Summary of Mandate) of the parameters and guidelines states, in part: Statutes of 1986, chapter 641 also added Government Code section 54954.3 to provide an opportunity for members of the public to address the legislative body on specific agenda items or any item of interest that is within the subject matter jurisdiction of the legislative body, and this opportunity for comment must be stated on the posted agenda. Section IV. (A) (Reimbursable Activities – Agenda Preparation and Posting Activities) of the parameters and guidelines, lists reimbursable activities including “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) (3) (Claim Preparation and Submission – Reimbursement Options for Agenda Preparation and Posting, Including Closed Session Agenda Items – Flat Rate Option) of the parameters and guidelines states “List the meeting names and dates. Multiply the uniform cost allowance…by the number of meetings.” 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 -16- City of Berkeley Open Meetings Act/Brown Act Reform Program the reimbursable activities.” Section VI. (A) also states, “For those entities that elect reimbursement pursuant to the flat-rate methodology, option 3 in section V.A, copies of agendas shall be sufficient evidence.” Recommendation No recommendation is applicable for this finding, as reimbursement under the Open Meetings Act/Brown Act Reform Program ended on November 7, 2012, with the passage of Proposition 30. For other mandated programs, we recommend that the city:  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. -17- City of Berkeley Open Meetings Act/Brown Act Reform Program Attachment— City’s Comments Regarding the Audit Results State Controller’s Office Division of Audits Post Office Box 942850 Sacramento, CA 94250 http://www.sco.ca.gov S19-MCC-0027