SCO
Town of Apple Valley
Identity Theft
Read the report at Town of Apple Valley ↗
M M. C
ALIA OHEN
California State Controller
May 19, 2023
CERTIFIED MAIL—RETURN RECEIPT REQUESTED
Sydnie Harris, Director of Finance
Town of Apple Valley
14955 Dale Evans Parkway
Apple Valley, CA 92307
Dear Ms. Harris:
The State Controller’s Office reviewed costs claimed by the Town of Apple Valley for the
legislatively mandated Identity Theft Program (Chapter 956, Statutes of 2000) for the period of
July 1, 2002, through June 30, 2013. We conducted our review under the authority of
Government Code sections 12410, 17558.5, and 17561. Our review was limited to confirming
that the town reported the correct number of identity theft police reports taken on a violation of
Penal Code section 530.5, calculated its contract hourly rates correctly, and validated the indirect
costs claimed.
The town claimed $142,798 for costs of the mandated program. Our review found that $75,675 is
allowable ($77,045 less a $1,370 penalty for filing late claims) and $67,123 is unallowable. The
costs are unallowable because the town claimed unallowable indirect costs, as described in the
attached Summary of Program Costs and the Review Results. The State made no payments to the
town. The State will pay $75,675, contingent upon available appropriations.
Following issuance of this report, the Local Government Program and Services Division of the
State Controller’s Office will notify the town of the adjustment to its claims via a system-
generated letter for each fiscal year of the review period.
This final letter report contains an adjustment to costs claimed by the town. If you disagree with
the review finding, you may file an Incorrect Reduction Claim (IRC) with the Commission on
State Mandates (Commission). Pursuant to the Commission’s regulations, outlined in Title 2,
California Code of Regulations, section 1185.1, subdivision (c), an IRC challenging this
adjustment must be filed with the Commission no later than three years following the date of this
report, regardless of whether this report is subsequently supplemented, superseded, or otherwise
amended. IRC information is available on the Commission’s website at
www.csm.ca.gov/forms/IRCForm.pdf.
MAILING ADDRESS P.O. Box 942850, Sacramento, CA 94250
SACRAMENTO 3301 C Street, Suite 700, Sacramento, CA 95816 (916) 324-8907
LOS ANGELES 901 Corporate Center Drive, Suite 200, Monterey Park, CA 91754 (323) 981-6802
Sydnie Harris, Director of Finance -2- May 19, 2023
If you have any questions, please contact Lisa Kurokawa, Chief, Compliance Audits Bureau, by
telephone at (916) 327-3138.
Sincerely,
Original signed by
KIMBERLY TARVIN, CPA
Chief, Division of Audits
KT/ac
Attachments
RE: S23-MCC-9002
cc: The Honorable Scott Nassif, Mayor
Town of Apple Valley
Chris Hill, Principal Program Budget Analyst
Local Government Unit
California Department of Finance
Ted Doan, Finance Budget Analyst
Local Government Unit
California Department of Finance
Darryl Mar, Manager
Local Government Programs and Services Division
State Controller’s Office
Everett Luc, Supervisor
Local Government Programs and Services Division
State Controller’s Office
Town of Apple Valley Identity Theft Program
Schedule—
Summary of Program Costs
July 1, 2002, through June 30, 2013
Actual Costs Allowable Review
Cost Elements Claimed per Review Adjustment1
July 1, 2002, through June 30, 2003
Direct costs:
Salaries
Taking a police report on a violation of
Penal Code (PC) §530.5 $ 4,154 $ - $ (4,154)
Beginning an investigation of the facts 2 46 - (246)
Total salaries 4,400 - ( 4,400)
Contract services
Taking a police report on a violation of PC §530.5 - 4,582 4,582
Beginning an investigation of the facts - - -
Total contract services - 4,582 4,582
Total direct costs 4,400 4,582 182
Indirect costs 3,842 - ( 3,842)
Total direct and indirect costs 8,242 4,582 ( 3,660)
Less late filing penalty2 - (156) (156)
Total program costs $ 8,242 4,426 $ (3,816)
Less amount paid by the state3 -
Allowable costs claimed in excess of amount paid $ 4,426
July 1, 2003, through June 30, 2004
Direct costs:
Salaries
Taking a police report on a violation of PC §530.5 $ 5,036 $ - $ (5,036)
Beginning an investigation of the facts 2 97 - (297)
Total salaries 5,333 - ( 5,333)
Contract services
Taking a police report on a violation of PC §530.5 - 5,376 5,376
Beginning an investigation of the facts - 2 76 276
Total contract services - 5,652 5,652
Total direct costs 5,333 5,652 319
Indirect costs 5,349 - ( 5,349)
Total direct and indirect costs 10,682 5,652 ( 5,030)
Less late filing penalty2 - (105) (105)
Total program costs $ 1 0,682 5,547 $ (5,135)
Less amount paid by the state3 -
Allowable costs claimed in excess of amount paid $ 5,547
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Town of Apple Valley Identity Theft Program
Schedule (continued)
Actual Costs Allowable Review
Cost Elements Claimed per Review Adjustment1
July 1, 2004, through June 30, 2005
Direct costs:
Salaries
Taking a police report on a violation of PC §530.5 $ 5,392 $ - $ (5,392)
Beginning an investigation of the facts 3 18 - (318)
Total salaries 5,710 - ( 5,710)
Contract services
Taking a police report on a violation of PC §530.5 - 5,659 5,659
Beginning an investigation of the facts - 2 95 295
Total contract services - 5,954 5,954
Total direct costs 5,710 5,954 244
Indirect costs 5,722 - ( 5,722)
Total direct and indirect costs 11,432 5,954 ( 5,478)
Less late filing penalty2 - (72) (72)
Total program costs $ 1 1,432 5,882 $ (5,550)
Less amount paid by the state3 -
Allowable costs claimed in excess of amount paid $ 5,882
July 1, 2005, through June 30, 2006
Direct costs:
Salaries
Taking a police report on a violation of PC §530.5 $ 6,848 $ - $ (6,848)
Beginning an investigation of the facts 4 09 - (409)
Total salaries 7,257 - ( 7,257)
Contract services
Taking a police report on a violation of PC §530.5 - 7,445 7,445
Beginning an investigation of the facts - 3 86 386
Total contract services - 7,831 7,831
Total direct costs 7,257 7,831 574
Indirect costs 6,748 - ( 6,748)
Total direct and indirect costs 14,005 7,831 ( 6,174)
Less late filing penalty2 - (185) (185)
Total program costs $ 1 4,005 7,646 $ (6,359)
Less amount paid by the state3 -
Allowable costs claimed in excess of amount paid $ 7,646
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Town of Apple Valley Identity Theft Program
Schedule (continued)
Actual Costs Allowable Review
Cost Elements Claimed per Review Adjustment1
July 1, 2006, through June 30, 2007
Direct costs:
Salaries
Taking a police report on a violation of PC §530.5 $ 7,374 $ - $ (7,374)
Beginning an investigation of the facts 4 41 - (441)
Total salaries 7,815 - ( 7,815)
Contract services
Taking a police report on a violation of PC §530.5 - 7,701 7,701
Beginning an investigation of the facts - 4 00 400
Total contract services - 8,101 8,101
Total direct costs 7,815 8,101 286
Indirect costs 7,191 - ( 7,191)
Total direct and indirect costs 15,006 8,101 ( 6,905)
Less late filing penalty2 - (172) (172)
Total program costs $ 1 5,006 7,929 $ (7,077)
Less amount paid by the state3 -
Allowable costs claimed in excess of amount paid $ 7,929
July 1, 2007, through June 30, 2008
Direct costs:
Salaries
Taking a police report on a violation of PC §530.5 $ 8,611 $ - $ (8,611)
Beginning an investigation of the facts 5 16 - (516)
Total salaries 9,127 - ( 9,127)
Contract services
Taking a police report on a violation of PC §530.5 - 9,166 9,166
Beginning an investigation of the facts - 4 75 475
Total contract services - 9,641 9,641
Total direct costs 9,127 9,641 514
Indirect costs 9,191 - ( 9,191)
Total direct and indirect costs 18,318 9,641 ( 8,677)
Less late filing penalty2 - (146) (146)
Total program costs $ 1 8,318 9,495 $ (8,823)
Less amount paid by the state3 -
Allowable costs claimed in excess of amount paid $ 9,495
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Town of Apple Valley Identity Theft Program
Schedule (continued)
Actual Costs Allowable Review
Cost Elements Claimed per Review Adjustment1
July 1, 2008, through June 30, 2009
Direct costs:
Salaries
Taking a police report on a violation of PC §530.5 $ 7,214 $ - $ (7,214)
Beginning an investigation of the facts 4 40 - (440)
Total salaries 7,654 - ( 7,654)
Contract services
Taking a police report on a violation of PC §530.5 - 7,733 7,733
Beginning an investigation of the facts - 4 03 403
Total contract services - 8,136 8,136
Total direct costs 7,654 8,136 482
Indirect costs 7,432 - ( 7,432)
Total direct and indirect costs 15,086 8,136 ( 6,950)
Less late filing penalty2 - (275) (275)
Total program costs $ 1 5,086 7,861 $ (7,225)
Less amount paid by the state3 -
Allowable costs claimed in excess of amount paid $ 7,861
July 1, 2009, through June 30, 2010
Direct costs:
Salaries
Taking a police report on a violation of PC §530.5 $ 4,547 $ - $ (4,547)
Beginning an investigation of the facts 2 77 - (277)
Total salaries 4,824 - ( 4,824)
Contract services
Taking a police report on a violation of PC §530.5 - 4,832 4,832
Beginning an investigation of the facts - 2 51 251
Total contract services - 5,083 5,083
Total direct costs 4,824 5,083 259
Indirect costs 4,776 - ( 4,776)
Total direct and indirect costs 9,600 5,083 ( 4,517)
Less late filing penalty2 - (102) (102)
Total program costs $ 9,600 4,981 $ (4,619)
Less amount paid by the state3 -
Allowable costs claimed in excess of amount paid $ 4,981
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Town of Apple Valley Identity Theft Program
Schedule (continued)
Actual Costs Allowable Review
Cost Elements Claimed per Review Adjustment1
July 1, 2010, through June 30, 2011
Direct costs:
Salaries
Taking a police report on a violation of PC §530.5 $ 6,311 $ - $ (6,311)
Beginning an investigation of the facts 3 88 - (388)
Total salaries 6,699 - ( 6,699)
Contract services
Taking a police report on a violation of PC §530.5 - 6,542 6,542
Beginning an investigation of the facts - 3 42 342
Total contract services - 6,884 6,884
Total direct costs 6,699 6,884 185
Indirect costs 6,009 - ( 6,009)
Total direct and indirect costs 12,708 6,884 ( 5,824)
Less late filing penalty2 - (157) (157)
Total program costs $ 1 2,708 6,727 $ (5,981)
Less amount paid by the state3 -
Allowable costs claimed in excess of amount paid $ 6,727
July 1, 2011, through June 30, 2012
Direct costs:
Salaries
Taking a police report on a violation of PC §530.5 $ 6,130 $ - $ (6,130)
Beginning an investigation of the facts - - -
Total salaries 6,130 - ( 6,130)
Contract services
Taking a police report on a violation of PC §530.5 - 6,579 6,579
Beginning an investigation of the facts - - -
Total contract services - 6,579 6,579
Total direct costs 6,130 6,579 449
Indirect costs 5,455 - ( 5,455)
Total program costs $ 1 1,585 6,579 $ (5,006)
Less amount paid by the state3 -
Allowable costs claimed in excess of amount paid $ 6,579
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Town of Apple Valley Identity Theft Program
Schedule (continued)
Actual Costs Allowable Review
Cost Elements Claimed per Review Adjustment1
July 1, 2012, through June 30, 2013
Direct costs:
Salaries
Taking a police report on a violation of PC §530.5 $ 8,261 $ - $ (8,261)
Beginning an investigation of the facts - - -
Total salaries 8,261 - ( 8,261)
Contract services
Taking a police report on a violation of PC §530.5 - 8,602 8,602
Beginning an investigation of the facts - - -
Total contract services - 8,602 8,602
Total direct costs 8,261 8,602 341
Indirect costs 7,873 - ( 7,873)
Total program costs $ 1 6,134 8,602 $ (7,532)
Less amount paid by the state3 -
Allowable costs claimed in excess of amount paid $ 8,602
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Town of Apple Valley Identity Theft Program
Schedule (continued)
Actual Costs Allowable Review
Cost Elements Claimed per Review Adjustment1
Summary: July 1, 2002, through June 30, 2013
Direct costs:
Salaries
Taking a police report on a violation of PC §530.5 $ 6 9,878 $ - $ (69,878)
Beginning an investigation of the facts 3,332 - ( 3,332)
Total salaries 73,210 - (73,210)
Contract services
Taking a police report on a violation of PC §530.5 - 74,217 74,217
Beginning an investigation of the facts - 2,828 2,828
Total contract services - 77,045 77,045
Total direct costs 73,210 77,045 3,835
Indirect costs 69,588 - (69,588)
Total direct and indirect costs 1 42,798 77,045 (65,753)
Less late filing penalty2 - (1,370) ( 1,370)
Total program costs $ 142,798 75,675 $ (67,123)
Less amount paid by the state3 -
Allowable costs claimed in excess of amount paid $ 7 5,675
1 See the Finding and Recommendation section
2 The town filed its claims by the due date specified in Government Code section 17560 and amended them after the
due date. The fiscal year (FY) 2002-03 claim of $3,020 was amended to $8,242; the FY 2003-04 claim of $4,601
was amended to $10,682; FY 2004-05 claim of $5,233 was amended to $11,432; the FY 2005-06 claim of $5,982
was amended to $14,005; the FY 2006-07 claim of $6,384 was amended to $15,006; the FY 2007-08 claim of
$8,179 was amended to $18,318; the FY 2008-09 claim of $5,389 was amended to $15,086; the FY 2009-10 claim
of $4,061 was amended to $9,600; and the FY 2010-11 claim of $5,316 was amended to $12,708. Pursuant to
Government Code section 17568, the State assessed a late filing penalty equal to 10% of allowable costs that exceed
the timely filed claim amount, not to exceed $10,000 (for claims amended on or after August 24, 2007).
3 Payment amount current as of March 7, 2023.
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Town of Apple Valley Identity Theft Program
Attachment—
Review Results
July 1, 2002, through June 30, 2013
BACKGROUND— Penal Code (PC) section 530.6(a), as added by the Statutes of 2000,
Chapter 956, requires a local law enforcement agency to take a police
report and begin an investigation when a complainant residing within its
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 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 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 Commission also determined that the reimbursable activities do not
include providing a copy of the report to the complainant, or referring the
matter for further investigation to a law enforcement agency with
jurisdiction in the location where the suspected crime was committed.
The program’s parameters and guidelines establish the state mandate and
define the reimbursement criteria. In compliance with GC section 17558,
the State Controller’s Office (SCO) issues the Mandated Cost Manual for
Local Agencies (Mandated Cost Manual) to assist local agencies in
claiming mandated program reimbursable costs.
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Town of Apple Valley Identity Theft Program
FINDING— The Town of Apple Valley claimed $142,798 ($73,210 in salary costs and
Overstated Identity $69,588 in related indirect costs) for the Identity Theft Program. We found
Theft Program costs that $77,045 is allowable and $65,753 is unallowable.1 The costs are
unallowable because the town claimed unallowable indirect costs.
The town used the correct methodology to calculate its salary costs. It
multiplied the number of identity theft police reports by the time required
to perform the reimbursable activities, and it multiplied the product by the
hourly rates obtained from the town’s contract with the San Bernardino
County Sheriff’s Department (SBCSD). The SBCSD’s contracts included
costs for salaries and benefits, as well as additional administrative costs.
However, the town should have classified its salary costs as contract
services costs because no town staff members performed the reimbursable
activities. The town contracted with San Bernardino County to have the
SBCSD perform all of its law enforcement services during the review
period. Therefore, the town did not incur any salary costs—or indirect
costs related to salary costs—but rather incurred contract services costs.
We reallocated the costs to the appropriate cost category of Contract
Services.
The following table summarizes the claimed, allowable, and review
adjustment amounts by fiscal year:
(A) (B) (C) (D)=(A)+(B)+(C)
Salaries Related Contract Total
Fiscal Amount Amount Audit Indirect Cost Services Audit
Year Claimed Allowable Adjustment Adjustment Adjustment Adjustment
2002-03 $ 4 ,400 $ - $ ( 4,400) $ (3,842) $ 4,582 $ (3,660)
2003-04 5,333 - (5,333) (5,349) 5 ,652 (5,030)
2004-05 5,710 - (5,710) (5,722) 5 ,954 (5,478)
2005-06 7,257 - (7,257) (6,748) 7 ,831 (6,174)
2006-07 7,815 - (7,815) (7,191) 8 ,101 (6,905)
2007-08 9,127 - (9,127) (9,191) 9 ,641 (8,677)
2008-09 7,654 - (7,654) (7,432) 8 ,136 (6,950)
2009-10 4,824 - (4,824) (4,776) 5 ,083 (4,517)
2010-11 6,699 - (6,699) (6,009) 6 ,884 (5,824)
2011-12 6,130 - (6,130) (5,455) 6 ,579 (5,006)
2012-13 8,261 - (8,261) (7,873) 8 ,602 (7,532)
Total $ 73,210 $ - $ (73,210) $ (69,588) $ 77,045 $ ( 65,753)
Contract Services Costs
The town contracted with San Bernardino County to have the SBCSD
provide all of its law enforcement services during the review period. These
services included the reimbursable activities claimed for the mandated
1 Our review found that $65,753 in claimed costs is unallowable and $77,045 is allowable. The town filed amended claims for
fiscal year (FY) 2002-03 through FY 2010-11; however, it filed all its amended claims after the filing deadline specified in the
Mandated Cost Manual. Late claims, amended or otherwise, are subject to late filing penalties pursuant to GC section 17568.
We calculated late filing penalties based on 10% of the difference between allowable costs and the originally claimed amount for
FY 2002-03 through FY 2010-11, not to exceed $10,000 per fiscal year.
Therefore, allowable costs for the review period total $75,675 ($77,045 less $1,370 in late filing penalties).
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Town of Apple Valley Identity Theft Program
program. The town contracted for various SBCSD staff positions each
fiscal year, and paid the SBCSD annual contract rates for the positions.
These positions included, but were not limited to, Deputy Sheriffs,
Sheriff’s Service Specialists, Sergeants, and Detectives. No town staff
members performed any of the reimbursable activities under this program;
therefore, the town did not incur salary and related indirect costs as
claimed, but rather incurred contract services costs. We reallocated the
costs to the appropriate cost category of Contract Services.
Identity Theft Incident Reports
The town stated in its claims that it took 1,131 identity theft incident
reports during the review period. We found that the town understated the
number of reports taken by five, and that allowable reports totaled 1,136
reports.
For each fiscal year, the SBCSD provided Excel spreadsheets generated
from its Computer-aided dispatch system to support the claimed number
of initial police reports on violations of PC section 530.5. This list of police
reports identified the county jurisdiction code, the year of the report, and
the report number. The SBCSD also provided a Jurisdiction Reference
Chart, which disclosed county jurisdiction codes and jurisdiction codes for
the entities that contracted with the county for law enforcement services.
The spreadsheets supported 1,136 identity theft incident reports filed for
the Town of Apple Valley during the review period.
The following table summarizes the counts of claimed and allowable
identity theft cases, and the review adjustment by fiscal year:
(A) (B) (C)=(B)-(A)
Fiscal Claimed Allowable Review
Year Reports Reports Adjustment
2002-03 92 9 4 2
2003-04 104 104 -
2004-05 100 101 1
2005-06 116 120 4
2006-07 117 116 (1)
2007-08 128 130 2
2008-09 107 108 1
2009-10 69 6 9 -
2010-11 89 8 7 (2)
2011-12 91 9 2 1
2012-13 118 115 (3)
Total 1,131 1,136 5
Time Increments
The parameters and guidelines identify the following reimbursable
activities:
Activity 1a – Taking a police report on a violation of PC section 530.5;
Activity 1b – Reviewing an online identity theft report completed by
a victim; and
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Town of Apple Valley Identity Theft Program
Activity 2 – Beginning an investigation.
The parameters and guidelines specify that Activity 1a includes “drafting,
reviewing, and editing” a police report.
For convenience, we separated Activity 1a into two sub-activities:
Activity 1a.1 – Taking a police report; and
Activity 1a.2 – Reviewing, editing, and approving a police report.
The town claimed the following time increments for Activity 1a.1 during
the review period:
44.80 minutes for a Deputy Sheriff for FY 2002-03 through
FY 2010-11,
38.40 minutes for a Deputy Sheriff for FY 2011-12 through
FY 2012-13,
Six minutes for a Sheriff’s Service Specialist for FY 2002-03 through
FY 2010-11, and
Eight minutes for a Sheriff’s Service Specialist for FY 2011-12
through FY 2012-13.
The town claimed seven minutes for a Sergeant to perform Activity 1a.2
during the review period.
The town claimed 2.70 minutes for a Detective to perform Activity 2 for
FY 2002-03 through FY 2010-11. The town did not claim any time to
perform Activity 2 for FY 2011-12 and FY 2012-13.
We determined that the time increments are allowable as claimed.
Contract Hourly Rates
The town’s claims included copies of the annual contracts that it
negotiated with the SBCSD for each year of the review period. Each
contract specifies the level of service provided to the town, indicating the
number of employees (the level of service) in various law enforcement
classifications and the county’s cost for providing these employees. The
county uses this contract to indicate the authorized SBCSD staffing level
for each year of the review period.
We used this information to determine the contract hourly billing rates for
various employee classifications by using the total contract cost for each
employee classification divided by the number of personnel that the
county provided. For example, the town’s contract for FY 2012-13
indicates that 37 Deputy Sheriffs and seven Sergeants provided law
enforcement for the town during the year.
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Town of Apple Valley Identity Theft Program
The following table shows the contract hourly rate calculation for Deputy
Sheriffs and Sergeants during FY 2012-13:
Employee Annual Level of Cost per Productive Hourly
Classification Cost Service Employee Hours Rate
Deputy Sheriff $ 5,488,591 37.00 $ 148,340 1,800 $ 82.41
Sergeant 1,312,529 7 .00 187,504 1,800 $ 104.17
As a result of recalculating contract hourly rates, we determined that the
town used 1,800 annual productive hours for all SBCSD employees in its
claims for all years of the review period, as specified in the SCO’s
Mandated Cost Manual.
The SCO’s Mandated Cost Manual states that the cost of contract services
is allowable. Costs for contract services can be claimed using an hourly
billing rate. However, the Manual does not provide specific guidance on
how to calculate an hourly billing rate. Generally speaking, an hourly rate
for a specific employee classification would be determined by dividing the
contract cost for an individual employee who performs reimbursable
activities by 1,800 annual productive hours. However, this approach does
not allow claimants to recover any additional contract costs, such as
administrative costs, that could be reimbursable.
For additional guidance, we reviewed law enforcement contracts for cities
contracting with Los Angeles County. We noted that the county’s billing
rates also included costs for various employee classifications. However,
the total costs for those classifications included salaries and benefits plus
an additional “liability percentage” which was added to the contract hourly
rate at a specific percentage amount. It is our understanding that this
liability percentage covers costs for administrative items, such as various
forms of insurance and amounts for central services costs. Although we
audited a number of the contracting cities, we did not audit these billing
rates.
San Bernardino County does not structure its contracts the same way as
Los Angeles County. Instead, San Bernardino County includes
administrative costs and indirect costs as separately billed line items in its
contracts for law enforcement services. In order to be equitable with other
California cities contracting for law enforcement services, we concluded
that it was appropriate to allow the city to claim its administrative costs as
an addition to the contract hourly rate for employee classifications
included in its contracts with the SBCSD.
We calculated an administrative cost percentage for each fiscal year of the
review period based on the town’s contracts with the SBCSD. To calculate
the percentage, we divided the cost of the following line items by the total
contract cost:
Administrative support
Office Automation
Services and supplies
Vehicle insurance (all years except for FY 2004-05)
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Town of Apple Valley Identity Theft Program
Personnel liability and bonding
County administrative costs (countywide cost allocation plan
[COWCAP])
COWCAP subsidy (FY 2012-13 only)
Telephone reporting unit (FY 2002-03 and FY 2003-04 only), and
Startup costs (FY 2002-03 and FY 2004-05 through FY 2008-09
only).
The following table shows the allowable administrative cost percentage
that we calculated for each fiscal year of the review period:
Allowable
Fiscal Administrative
Year Percentage
2002-03 7.86%
2003-04 6.67%
2004-05 5.30%
2005-06 5.02%
2006-07 5.26%
2007-08 5.86%
2008-09 6.11%
2009-10 6.19%
2010-11 5.97%
2011-12 6.13%
2012-13 6.80%
As previously mentioned, we added all of the items within each contract
that we determined were clearly administrative in nature and divided the
total by each year’s total contract cost to determine the extent that
administrative costs were represented within each year’s contract. The
following table shows how we made this calculation for FY 2012-13:
Cost Contract
Category Amount
Administrative support $ 43,470
Office automation 3 8,785
Services and supplies 7 5,600
Vehicle insurance 3 3,508
Personnel liability & bonding 152,594
Countywide administrative cost (COWCAP) 480,798
COWCAP subsidy (one-time) (96,160)
Total administrative costs $ 728,595
Divided by total contract amount 1 0,718,888
Administrative cost percentage 6.80%
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Town of Apple Valley Identity Theft Program
Therefore, claimed hourly rates for Deputy Sheriffs, Sheriff’s Service
Specialists, and Sergeants increased as follows for FY 2012-13:
Employee Hourly Administrative Revised
Classification Rate Percentage Rate
Deputy Sheriff $ 8 2.41 6.80% $ 8 8.01
Sheriff Service Specialists $ 3 8.34 6.80% $ 4 0.95
Sergeant $ 104.17 6.80% $ 111.25
To calculate the average contract hourly rate for each fiscal year, we
divided the annual unit cost for the Deputy Sheriff classification by the
1,800 annual productive hours per service unit, and multiplied the product
by the appropriate administrative cost percentage. We applied a similar
calculation to the Sheriff’s Service Specialists, Sergeants, and Detectives.
While performing these calculations, we noted the following errors:
For FY 2002-03, the town’s annual contracts did not include positions
at the Detective level, but the town claimed costs for Detectives.
For FY 2003-04 through FY 2010-11, the town used the annual unit
cost of the Sergeant classification to calculate contract hourly rates for
Detectives.
For FY 2004-05 and FY 2007-08, the town overstated contract hourly
rates for the Sheriff’s Service Specialist classification.
The following table summarizes the claimed and allowable contract hourly
rates for Deputy Sheriffs and Sheriff’s Service Specialists during the
review period, and the difference between those rates:
Deputy Sheriff Sheriff's Service Specialist
Claimed Allowable Claimed Allowable
Fiscal Hourly Hourly Rate Fiscal Hourly Hourly Rate
Year Rate Rate Difference Year Rate Rate Difference
2002-03 $ 47.72 $ 5 1.47 $ 3 .75 2002-03 $ 25.81 $ 27.84 $ 2 .03
2003-04 51.14 54.55 3.41 2003-04 2 8.25 3 0.13 1.88
2004-05 56.09 59.06 2.97 2004-05 3 7.82 3 1.86 (5.96)
2005-06 62.39 65.52 3.13 2005-06 3 3.13 3 4.79 1.66
2006-07 66.65 70.16 3.51 2006-07 3 4.80 3 6.63 1.83
2007-08 70.31 74.43 4.12 2007-08 4 3.34 3 8.24 (5.10)
2008-09 71.31 75.67 4.36 2008-09 3 5.18 3 7.33 2.15
2009-10 69.60 73.92 4.32 2009-10 3 4.87 3 7.03 2.16
2010-11 75.03 79.51 4.48 2010-11 3 5.73 3 7.86 2.13
2011-12 78.98 83.82 4.84 2011-12 3 7.16 3 9.44 2.28
2012-13 82.41 88.01 5.60 2012-13 3 8.34 4 0.95 2.61
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Town of Apple Valley Identity Theft Program
The following table summarizes the claimed and allowable contract hourly
rates for Sergeants during the review period, and the difference between
those rates:
Sergeant
Claimed Allowable
Fiscal Hourly Hourly Rate
Year Rate Rate Difference
2002-03 $ 59.50 $ 64.18 $ 4.68
2003-04 6 3.52 67.76 4 .24
2004-05 7 0.77 74.52 3 .75
2005-06 7 8.31 82.24 3 .93
2006-07 8 3.83 88.24 4 .41
2007-08 8 9.52 94.77 5 .25
2008-09 9 1.35 96.93 5 .58
2009-10 8 9.44 94.98 5 .54
2010-11 9 6.99 102.78 5 .79
2011-12 101.63 107.86 6 .23
2012-13 104.17 111.25 7 .08
The following table summarizes the claimed and allowable contract hourly
rates for Detectives during the review period, and the difference between
those rates:
Detective
Claimed Allowable
Fiscal Hourly Hourly Rate
Year Rate Rate Difference
2002-03 $ 59.50 $ - $ (59.50)
2003-04 6 3.52 58.92 (4.60)
2004-05 7 0.77 64.85 (5.92)
2005-06 7 8.31 71.54 (6.77)
2006-07 8 3.83 76.61 (7.22)
2007-08 8 9.52 81.28 (8.24)
2008-09 9 1.35 82.84 (8.51)
2009-10 8 9.44 80.75 (8.69)
2010-11 9 6.99 87.19 (9.80)
For each fiscal year of the review period, we calculated allowable contract
services costs based on the allowable counts of PC section 530.5 identity
theft reports, claimed time increments, and allowable contract hourly rates.
For example, the following table shows the calculation of allowable
contract services costs for FY 2007-08:
(A) (B) (C) (D)=(A)×(B)×(C)
Allowable Allowable
Total Time Contract
Reimbursable SBCSD Allowable Increment Hourly Allowable
Activity Staff Reports (in hours) Rate Costs
1a.1 Deputy Sheriff 130 0 .747 $ 74.43 $ 7 ,228
1a.1 Sheriff's Service Specialist 130 0 .100 $ 38.24 497
1a.2 Sergeant 130 0 .117 $ 94.77 1,441
2 Detective 130 0 .045 $ 81.28 475
Total allowable contract services costs $ 9 ,641
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Town of Apple Valley Identity Theft Program
Indirect Costs
For all fiscal years of the review period, the town included copies of its
Indirect Cost Rate Proposals with its mandated cost claims. The town
claimed related indirect costs totaling $69,588 for the review period based
on $73,210 in claimed salaries. We found that the entire amount is
unallowable, because no town staff member performed any of the
reimbursable activities under this program during the review period.
Instead, the town contracted with the county to have the SBCSD perform
all of its law enforcement services during the review period. Therefore, the
town did not incur any direct salary costs or related indirect costs.
However, the town calculated its indirect costs based on claimed salary
and wage costs related to implementing the Identity Theft Program. As the
town incurred contract services costs instead of salary and wage costs,
there are no related indirect costs.
Furthermore, none of the costs that the town incurred for law enforcement
services provided by the SBCSD were indirect costs. The parameters and
guidelines (Section V.B., “Indirect Cost Rates”) provide that indirect costs
are “incurred for a common or joint purpose, benefiting more than one
program, and . . . not directly assignable to a particular department or
program.” In this instance, there is only one program (law enforcement
services provided by a contractor) and there are no town departments.
The following table summarizes the claimed, allowable, and review
adjustment amounts for indirect costs by fiscal year:
(A) (B) (C)=(B)-(A)
Claimed Indirect
Fiscal Salaries Indirect Indirect Costs Audit
Year Claimed Cost Rate Costs1 Allowed Adjustment
2002-03 $ 4 ,400 87.30% $ 3,842 $ - $ (3,842)
2003-04 5,333 100.30% 5 ,349 - (5,349)
2004-05 5,710 100.20% 5 ,722 - (5,722)
2005-06 7,257 93.00% 6 ,749 - (6,749)
2006-07 7,815 92.00% 7 ,190 - (7,190)
2007-08 9,127 100.70% 9 ,191 - (9,191)
2008-09 7,654 97.10% 7 ,432 - (7,432)
2009-10 4,824 99.00% 4 ,776 - (4,776)
2010-11 6,699 89.70% 6 ,009 - (6,009)
2011-12 6,130 89.00% 5 ,455 - (5,455)
2012-13 8,261 95.30% 7 ,873 - (7,873)
Total $ 73,210 $ 69,588 $ - $ ( 69,588)
1 Differences are due to rounding errors.
Criteria
Item 1 of Section III, “Period of Reimbursement,” of the parameters and
guidelines states, “Actual costs for one fiscal year shall be included in each
claim.”
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Town of Apple Valley Identity Theft Program
Section IV, “Reimbursable Activities,” of the parameters and guidelines
begins:
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.
Section IV continues:
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.
Providing a copy of the report to the complainant is not reimbursable
under this program.
Referring the matter to the law enforcement agency where the
suspected crime was committed for further investigation of the facts
is also not reimbursable under this program.
Section V.A.1, “Salaries and Benefits,” of the parameters and guidelines
states:
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 these
activities.
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Town of Apple Valley Identity Theft Program
Section V.B, “Indirect Cost Rates,” of the parameters and guidelines
begins:
Indirect costs are costs that are incurred for a common or joint purpose,
benefitting more than one program, and are not directly assignable to a
particular department or program without efforts disproportionate to the
results achieved. Indirect costs may include: (1) the overhead costs of
the unit performing the mandate; and (2) the costs of the central
government services distributed to the other departments based on a
systematic and rational basis through a cost allocation plan.
Compensation for indirect costs is eligible for reimbursement utilizing
the procedure provided in 2 CFR Part 225 (Office of Management and
Budget [OMB] Circular A-87). Claimants have the option of using 10%
of labor, excluding fringe benefits, or preparing an Indirect Cost Rate
Proposal (ICRP) if the indirect cost rate exceeds 10%.
Part 7.3, “Contract Services” of the “Filing a Claim” section of the SCO’s
Mandated Cost Manual, dated July 1, 2013 states:
The cost of contract services is allowable if the local agency lacks the
staff resources or necessary expertise, or it is economically feasible to
hire a contractor to perform the mandated activity. The claimant must
keep documentation on hand to support the name of the contractor,
explain the reason for having to hire a contractor, describe the mandated
activities performed, give the dates when the activities were performed,
the number of hours spent performing the mandate, the hourly billing
rate, and the total cost. The hourly billing rate must not exceed the rate
specified in the P’s & G’s for the mandated program. The contractor's
invoice or statement must include an itemized list of costs for activities
performed. A copy of the contract must be included with the
submitted claim.
Recommendation
The State Legislature suspended the Identity Theft Program in the
FY 2013-14 through FY 2022-23 Budget Acts. If the program becomes
active again, we recommend that the town:
Adhere to the program’s parameters and guidelines and the SCO’s
Mandated Cost Manual when claiming reimbursement for mandated
costs; and
Ensure that claimed costs include only eligible costs, are based on
actual costs, and are properly supported.
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