SCO
City of Chino Hills
Identity Theft
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CITY OF CHINO HILLS
Audit Report
IDENTITY THEFT PROGRAM
Chapter 956, Statutes of 2000
July 1, 2002, through June 30, 2013
M M. C
ALIA OHEN
California State Controller
September 2023
MALIA M. COHEN
CALIFORNIA STATE CONTROLLER
September 25, 2023
CERTIFIED MAIL—RETURN RECEIPT REQUESTED
Christa Buhagiar, Finance Director
City of Chino Hills
14000 City Center Drive
Chino Hills, CA 91709
Dear Ms. Buhagiar:
The State Controller’s Office audited the costs claimed by the City of Chino Hills for the
legislatively mandated Identity Theft Program for the period of July 1, 2002, through June 30,
2013.
The city claimed $252,355 for costs of the mandated program. Our audit found that $140,040 is
allowable; and $112,315 is unallowable because the city misclassified costs, understated the
number of allowable identity theft reports taken, overstated the time required to perform the
reimbursable activities, and claimed unallowable indirect costs. The State made no payments to
the city. The State will pay $140,040, 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.
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/rs
300 Capitol Mall, Suite 1850, Sacramento, CA 95814 | P.O. Box 942850, Sacramento, CA 94250 | Fax: 916.322.4404
sco.ca.gov
Ms. Christa Buhagiar
September 25, 2023
Page 2 of 2
cc: The Honorable Peter Rogers, Mayor
City of Chino Hills
Nicole Lugotoff, Accounting Supervisor
Finance Department
City of Chino Hills
Chris Hill, Principal Program Budget Analyst
Local Government Unit
California Department of Finance
Ted Doan, Finance Budget Analyst
Local Government Unit
Department of Finance
Darryl Mar, Manager
Local Reimbursements Section
State Controller's Office
Everett Luc, Supervisor
Local Reimbursements Section
State Controller's Office
300 Capitol Mall, Suite 1850, Sacramento, CA 95814 | P.O. Box 942850, Sacramento, CA 94250 | Fax: 916.322.4404
sco.ca.gov
City of Chino Hills Identity Theft Program
Contents
Audit Report
Summary ............................................................................................................................ 1
Background ........................................................................................................................ 1
Audit Authority .................................................................................................................. 2
Objective, Scope, and Methodology ................................................................................. 2
Conclusion .......................................................................................................................... 4
Follow-up on Prior Audit Findings .................................................................................. 4
Views of Responsible Officials .......................................................................................... 4
Restricted Use .................................................................................................................... 4
Schedule—Summary of Program Costs .............................................................................. 5
Finding and Recommendation .............................................................................................. 11
Attachment—City’s Response to Draft Audit Report
City of Chino Hills Identity Theft Program
Audit Report
Summary The State Controller’s Office (SCO) audited the costs claimed by the City
of Chino Hills for the legislatively mandated Identity Theft Program for
the period of July 1, 2002, through June 30, 2013.
The city claimed $252,355 for costs of the mandated program. Our audit
found that $140,040 is allowable; and $112,315 is unallowable because
the city misclassified costs, understated the number of identity theft reports
taken, overstated the time required to perform the reimbursable activities,
and claimed unallowable indirect costs. The State made no payments to
the city. The State will pay $140,040, contingent upon available
appropriations.
Background Penal Code (PC) section 530.6(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 of 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.
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.
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City of Chino Hills 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 the Mandated Cost Manual for Local Agencies (Mandated
Cost Manual) to assist local agencies in claiming mandated program
reimbursable costs.
Audit Authority We conducted this performance audit in accordance with GC
sections 17558.5 and 17561, which authorize the SCO to audit the city’s
records to verify the actual amount of the mandated costs. In addition, GC
section 12410 provides the SCO with general authority to audit the
disbursement of state money for correctness, legality, and sufficient
provisions of law for payment.
Objective, Scope, The objective of our audit was to determine whether claimed costs
represent increased costs resulting from the legislatively mandated
and Methodology
Identity Theft Program. Specifically, we conducted this audit to determine
whether claimed costs were supported by appropriate source documents,
were not funded by another source, and were not unreasonable and/or
excessive.
Unreasonable and/or excessive costs include ineligible costs that are not
identified in the program’s parameters and guidelines as reimbursable
costs.
The audit period was July 1, 2002, through June 30, 2013.
To achieve our objective, we performed the following procedures:
We analyzed the annual mandated cost claims filed by the city for the
audit period and identified the significant cost components of each
claim as salaries and indirect costs.
We determined whether there were any errors, or unusual or
unexpected variances from year to year. We reviewed the activities
claimed to determine whether they adhered to the SCO’s Mandated
Costs Manual and the program’s parameters and guidelines.
We completed an internal control questionnaire by interviewing key
city staff. We discussed the claim preparation process with city staff
to determine what information was obtained, who obtained it, and how
it was used.
We obtained system-generated lists of identity-theft cases with
jurisdiction codes for the City of Chino Hills from the San Bernardino
County Sheriff’s Department (SBCSD) computer-aided dispatch
(CAD) system to verify the existence, completeness, and accuracy of
unduplicated case counts for each fiscal year in the audit period. We
recalculated the costs based on the allowable number of cases for each
of the reimbursable activities.
We designed a statistical sampling plan to test approximately 25-50%
of claimed costs, based on a moderate level of detection (audit) risk.
We judgmentally selected the city’s filed claims for fiscal year
(FY) 2006-07, FY 2011-12, and FY 2012-13 for testing, which
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City of Chino Hills Identity Theft Program
comprised claimed costs totaling $67,128 (or 26.6%) of the total costs
claimed ($252,355). The sampling plan is described in the Finding and
Recommendation section.
We used a random number table to select 198 of 359 identity theft
reports from the three fiscal years sampled. We tested the identity theft
report as follows:
o We determined whether a contemporaneously prepared and
approved police report supported that a violation of PC
section 530.5 had occurred.
o We determined whether the initial police reports were courtesy
reports from other law enforcement agencies that had been
forwarded to SBCSD’s Chino Hills Patrol Station for further
investigation.
o We determined whether the victim of identity theft contacted the
SBCSD to initiate the law enforcement investigation.
As the city did not support its claimed time increments, we used the
allowable time increments (ATIs) from our June 22, 2022 audit report
on San Bernardino County’s Identity Theft Program claims for
FY 2002-03 through FY 2010-11. To determine the ATIs for that
audit, we interviewed sworn and non-sworn SBCSD employees; and
we reviewed CAD system records for 398 police reports filed for
violations of PC section 530.5 to gather information about time spent
performing the reimbursable activities.
As no city staff members performed the reimbursable activities, we
used copies of the city’s annual law enforcement services contracts
with the county during the audit period to determine the annual
contract services costs incurred by the city. The contract services costs
included salary and benefit costs for various employee classifications,
administrative costs, and other costs related to providing law
enforcement services for the city.
We projected the audit results of the three years tested by multiplying
the allowable case counts by the audited average time increments
needed to perform the reimbursable activities, and multiplying the
product by the contract hourly rates of county employees who
performed them. Due to the homogeneity of the population, we
applied the weighted three-year average error rate that we derived
from testing our samples to the remaining eight years of the audit
period.
We reviewed the city’s single audit reports to identify potential
sources of offsetting savings or reimbursements from federal or pass-
through programs applicable to the Identity Theft Program. We did
not identify any applicable offsetting revenues. The city certified in its
claims that it did not receive such offsetting revenues applicable to this
mandated program.
We did not audit the city’s financial statements.
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
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City of Chino Hills Identity Theft Program
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.
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 city claimed costs that were funded by other sources;
however, we did find that it claimed unsupported and ineligible costs, as
quantified in the Schedule and described in the Finding and
Recommendation section.
For the audit period, the City of Chino Hills claimed $252,355 for costs of
the legislatively mandated Identity Theft Program. Our audit found that
$140,040 is allowable and $112,315 is unallowable. The State made no
payments to the city. The State will pay $140,040, contingent upon
available appropriations.
Following issuance of this audit report, the SCO’s Local Government
Programs and Services Division will notify the city of the adjustment to
its claims via a system-generated letter for each fiscal year in the audit
period.
Follow-up on We have not previously conducted an audit of the city’s legislatively
mandated Identity Theft Program.
Prior Audit
Findings
Views of We issued a draft audit report on June 27, 2023. The City of Chino Hills’
Responsible representative responded by letter dated July 6, 2023, agreeing with the audit
results. This final audit report includes the city’s response as an attachment.
Officials
Restricted Use This audit report is solely for the information and use of the City of Chino
Hills, 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 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
KIMBERLY TARVIN, CPA
Chief, Division of Audits
September 25, 2023
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City of Chino Hills Identity Theft Program
Schedule—
Summary of Program Costs
July 1, 2002, through June 30, 2013
Actual Costs Allowable Audit
Cost Elements Claimed per Audit Adjustment1
July 1, 2002, through June 30, 2003
Direct costs:
Salaries
Taking police report in violation of PC § 530.5 $ 1 2,304 $ - $ (12,304)
Beginning an investigation of facts - - -
Total Salaries 12,304 - (12,304)
Contract services
Taking police report in violation of PC § 530.5 - 6,257 6,257
Beginning an investigation of facts - 5,011 5,011
Total contract services - 11,268 11,268
Total direct costs 12,304 11,268 (1,036)
Indirect costs 11,726 - (11,726)
Total program costs $ 2 4,030 11,268 $ (12,762)
Less amount paid by the state2 -
Allowable costs claimed in exces of amount paid $ 1 1,268
July 1, 2003, through June 30, 2004
Direct costs:
Salaries
Taking police report in violation of PC § 530.5 $ 1 3,531 $ - $ (13,531)
Beginning an investigation of facts - - -
Total Salaries 13,531 - (13,531)
Contract services
Taking police report in violation of PC § 530.5 - 6,858 6,858
Beginning an investigation of facts - 5,497 5,497
Total contract services - 12,355 12,355
Total direct costs 13,531 12,355 (1,176)
Indirect costs 13,369 - (13,369)
Total program costs $ 2 6,900 12,355 $ (14,545)
Less amount paid by the state2 -
Allowable costs claimed in exces of amount paid $ 1 2,355
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City of Chino Hills Identity Theft Program
Schedule (continued)
July 1, 2004, through June 30, 2005
Direct costs:
Salaries
Taking police report in violation of PC § 530.5 $ 1 7,199 $ - $ (17,199)
Beginning an investigation of facts - - -
Total Salaries 17,199 - (17,199)
Contract services
Taking police report in violation of PC § 530.5 - 8,875 8,875
Beginning an investigation of facts - 7,113 7,113
Total contract services - 15,988 15,988
Total direct costs 17,199 15,988 (1,211)
Indirect costs 15,977 - (15,977)
Total program costs $ 3 3,176 15,988 $ (17,188)
Less amount paid by the state2 -
Allowable costs claimed in exces of amount paid $ 1 5,988
July 1, 2005, through June 30, 2006
Direct costs:
Salaries
Taking police report in violation of PC § 530.5 $ 1 7,861 $ - $ (17,861)
Beginning an investigation of facts - - -
Total Salaries 17,861 - (17,861)
Contract services
Taking police report in violation of PC § 530.5 - 9,278 9,278
Beginning an investigation of facts - 7,277 7,277
Total contract services - 16,555 16,555
Total direct costs 17,861 16,555 (1,306)
Indirect costs 15,771 - (15,771)
Total program costs $ 3 3,632 16,555 $ (17,077)
Less amount paid by the state2 -
Allowable costs claimed in exces of amount paid $ 1 6,555
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City of Chino Hills Identity Theft Program
Schedule (continued)
July 1, 2006, through June 30, 2007
Direct costs:
Salaries
Taking police report in violation of PC § 530.5 $ 1 6,751 $ - $ (16,751)
Beginning an investigation of facts - - -
Total Salaries 16,751 - (16,751)
Contract services
Taking police report in violation of PC § 530.5 - 8,999 8,999
Beginning an investigation of facts - 7,185 7,185
Total contract services - 16,184 16,184
Total direct costs 16,751 16,184 (567)
Indirect costs 14,054 - (14,054)
Total program costs $ 3 0,805 16,184 $ (14,621)
Less amount paid by the state2 -
Allowable costs claimed in exces of amount paid $ 1 6,184
July 1, 2007, through June 30, 2008
Direct costs:
Salaries
Taking police report in violation of PC § 530.5 $ 1 0,352 $ - $ (10,352)
Beginning an investigation of facts - - -
Total Salaries 10,352 - (10,352)
Contract services
Taking police report in violation of PC § 530.5 - 5,624 5,624
Beginning an investigation of facts - 4,472 4,472
Total contract services - 10,096 10,096
Total direct costs 10,352 10,096 (256)
Indirect costs 8,727 - (8,727)
Total program costs $ 1 9,078 10,096 $ (8,983)
Less amount paid by the state2 -
Allowable costs claimed in exces of amount paid $ 1 0,096
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City of Chino Hills Identity Theft Program
Schedule (continued)
July 1, 2008, through June 30, 2009
Direct costs:
Salaries
Taking police report in violation of PC § 530.5 $ 1 0,142 $ - $ (10,142)
Beginning an investigation of facts - - -
Total Salaries 10,142 - (10,142)
Contract services
Taking police report in violation of PC § 530.5 - 5,736 5,736
Beginning an investigation of facts - 4,552 4,552
Total contract services - 10,288 10,288
Total direct costs 10,142 10,288 1 46
Indirect costs 7,819 - (7,819)
Total program costs $ 1 7,961 10,288 $ (7,673)
Less amount paid by the state2 -
Allowable costs claimed in exces of amount paid $ 1 0,288
July 1, 2009, through June 30, 2010
Direct costs:
Salaries
Taking police report in violation of PC § 530.5 $ 6,204 $ - $ (6,204)
Beginning an investigation of facts - - -
Total Salaries 6,204 - (6,204)
Contract services
Taking police report in violation of PC § 530.5 - 5,038 5,038
Beginning an investigation of facts - 3,995 3,995
Total contract services - 9,033 9,033
Total direct costs 6,204 9,033 2,829
Indirect costs 5,354 - (5,354)
Total program costs $ 1 1,559 9,033 $ (2,525)
Less amount paid by the state2 -
Allowable costs claimed in exces of amount paid $ 9,033
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City of Chino Hills Identity Theft Program
Schedule (continued)
July 1, 2010, through June 30, 2011
Direct costs:
Salaries
Taking police report in violation of PC § 530.5 $ 1 0,086 $ - $ (10,086)
Beginning an investigation of facts - - -
Total Salaries 10,086 - (10,086)
Contract services
Taking police report in violation of PC § 530.5 - 6,882 6,882
Beginning an investigation of facts - 5,455 5,455
Total contract services - 12,337 12,337
Total direct costs 10,086 12,337 2,251
Indirect costs 8,805 - (8,805)
Total program costs $ 1 8,891 12,337 $ (6,554)
Less amount paid by the state2 -
Allowable costs claimed in exces of amount paid $ 1 2,337
July 1, 2011, through June 30, 2012
Direct costs:
Salaries
Taking police report in violation of PC § 530.5 $ 9,102 $ - $ (9,102)
Beginning an investigation of facts - - -
Total Salaries 9,102 - (9,102)
Contract services
Taking police report in violation of PC § 530.5 - 6,443 6,443
Beginning an investigation of facts - 5,107 5,107
Total contract services - 11,550 11,550
Total direct costs 9,102 11,550 2,448
Indirect costs 7,946 - (7,946)
Total program costs $ 1 7,048 11,550 $ (5,498)
Less amount paid by the state2 -
Allowable costs claimed in exces of amount paid $ 1 1,550
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City of Chino Hills Identity Theft Program
Schedule (continued)
July 1, 2012, through June 30, 2013
Direct costs:
Salaries
Taking police report in violation of PC § 530.5 $ 1 0,197 $ - $ (10,197)
Beginning an investigation of facts - - -
Total Salaries 10,197 - (10,197)
Contract services
Taking police report in violation of PC § 530.5 - 8,005 8,005
Beginning an investigation of facts - 6,381 6,381
Total contract services - 14,386 14,386
Total direct costs 10,197 14,386 4,189
Indirect costs 9,078 - (9,078)
Total program costs $ 1 9,275 14,386 $ (4,889)
Less amount paid by the state2 -
Allowable costs claimed in exces of amount paid $ 1 4,386
Summary: July 1, 2002, through June 30, 2013
Direct costs:
Salaries
Taking police report in violation of PC § 530.5 $ 133,729 $ - $ ( 133,729)
Beginning an investigation of facts - - -
Total Salaries 1 33,729 - (133,729)
Contract services
Taking police report in violation of PC § 530.5 - 77,995 77,995
Beginning an investigation of facts - 62,045 62,045
Total contract services - 1 40,040 1 40,040
Total direct costs 1 33,729 1 40,040 6,311
Indirect costs 1 18,626 - (118,626)
Total program costs $ 252,355 1 40,040 $ ( 112,315)
Less amount paid by the state2 -
Allowable costs claimed in exces of amount paid $ 140,040
_________________________
1 See the Finding and Recommendation section.
2 Payment amount current as of July 25, 2023.
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City of Chino Hills Identity Theft Program
Finding and Recommendation
FINDING— The City of Chino Hills claimed $252,355 ($133,729 in salaries and
$118,626 in related indirect costs) for the Identity Theft Program. We
Overstated Identity
found that $140,040 is allowable and $112,315 is unallowable. The costs
Theft Program costs
are unallowable because the city misclassified costs, understated the
number of identity theft reports taken, overstated the time required to
perform the reimbursable activities, and claimed unallowable indirect
costs.
The city 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 city’s contracts with the SBCSD. The
SBCSD’s contracts included costs for salaries and benefits, as well as
additional administrative costs.
However, the city should have classified its salary costs as contract
services costs, because no city staff members performed the reimbursable
activities. The city contracted with San Bernardino County to have the
SBCSD perform all of its law enforcement services during the audit
period. Therefore, the city did not incur any 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 and allowable amounts, and
the audit adjustments by fiscal year:
Salaries Contract Indirect Total
Fiscal Amount Amount Audit Services Cost Audit
Year Claimed1 Allowable Adjustment Adjustment Adjustment Adjustment
2002-03 $ 1 2,304 $ - $ ( 12,304) $ 11,268 $ (11,726) $ (12,762)
2003-04 1 3,531 - ( 13,531) 12,355 (13,369) (14,545)
2004-05 1 7,199 - ( 17,199) 15,988 (15,977) (17,188)
2005-06 1 7,861 - ( 17,861) 16,555 (15,771) (17,077)
2006-07 1 6,751 - ( 16,751) 16,184 (14,054) (14,621)
2007-08 1 0,352 - ( 10,352) 10,096 (8,727) (8,983)
2008-09 1 0,142 - ( 10,142) 10,288 (7,819) (7,673)
2009-10 6 ,204 - ( 6,204) 9,033 (5,354) (2,525)
2010-11 1 0,086 - ( 10,086) 12,337 (8,805) (6,554)
2011-12 9 ,102 - ( 9,102) 11,550 (7,946) (5,498)
2012-13 1 0,197 - ( 10,197) 14,386 (9,078) (4,889)
Total $ 1 33,729 $ - $ ( 133,729) $ 140,040 $ (118,626) $ (112,315)
1 Amounts claimed for FY 2004-05 and FY 2007-08 are adjusted by $1 due to claim rounduing
errors.
Contract Services Costs
The city contracted with San Bernardino County to have the SBCSD
provide all of its law enforcement services during the audit period. These
services included reimbursable activities claimed for the mandated
program. The city contracted for various SBCSD staff positions each fiscal
year and paid the SBCSD annual contract billing rates for the positions.
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City of Chino Hills Identity Theft Program
These positions included, but were not limited to, Deputy Sheriffs and
Sergeants. No city staff members performed any of the reimbursable
activities under this program; therefore, the city 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 city stated in its claims that it took 1,304 identity theft incident reports
during the audit period. We found that the city understated the number of
reports taken by 27, and that allowable reports totaled 1,331.
The following table summarizes the counts of claimed, supported, and
allowable identity theft cases and the audit adjustment by fiscal year:
(A) (B) (C ) (D)= (C )-(A)
Fiscal Claimed Audited Allowable Audit
Year Reports Population Reports Adjustment
2002-03 1 51 149 143 (8)
2003-04 1 55 155 148 (7)
2004-05 1 72 175 168 (4)
2005-06 1 76 180 172 (4)
2006-07 1 47 152 150 3
2007-08 86 92 88 2
2008-09 83 92 88 5
2009-10 52 82 79 27
2010-11 78 104 100 22
2011-12 1 05 94 89 ( 16)
2012-13 99 113 106 7
Total 1,304 1 ,388 1,331 27
For each fiscal year, the SBCSD provided Excel spreadsheets from its
CAD system to support the claimed number of initial police reports for
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 cities that contract
with the county for law enforcement services. The spreadsheets supported
1,388 identity theft police reports filed for the City of Chino Hills during
the audit period.
We verified the accuracy of the unduplicated counts of initial police
reports recorded in the CAD system by determining whether:
Each identity theft case is supported by a contemporaneously prepared
and approved police report; and
The police report supported a violation of PC section 530.5.
Our audit plan called for testing 25% of claimed salary costs at a
minimum. We selected FY 2006-07, FY 2011-12, and FY 2012-13 for
testing purposes, as claimed costs for these three fiscal years totaled
$67,128 (or 26.6%) of the total costs claimed ($252,355).
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City of Chino Hills Identity Theft Program
For the three years, we selected a statistical sample of the documented
number of identity theft reports (the population) based on a 95%
confidence level, a precision rate of ±8%, and an expected error rate of
50%. We used statistical samples in order to project the results to the
population for each fiscal year. We randomly selected 198 out of 359
identity theft incident reports for review.
Our review of sample incident reports disclosed the following:
For FY 2006-07, we found that one of the 76 identity theft incident
reports selected was unallowable because it did not meet the PC
section 530.6(a) requirement that the victim(s) of identity theft initiate
the investigation by contacting the local law enforcement agency.
Therefore, we calculated an error rate of 1.32% for FY 2006-07.
For FY 2011-12, we found that three of the 58 identity theft incident
reports selected were unallowable because:
o One report was a courtesy report from another police department,
and
o Two reports did not meet the PC section 530.6(a) requirement that
the victim(s) of identity theft initiate the investigation by
contacting the local law enforcement agency.
Therefore, we calculated an error rate of 5.17% for FY 2011-12.
For FY 2012-13, we found that four of the 64 identity theft incident
reports selected were unallowable because:
o Three reports were courtesy reports from other police
departments, and
o One report did not meet the PC section 530.6(a) requirement that
the victim(s) of identity theft initiate the investigation by
contacting the local law enforcement agency.
Therefore, we calculated an error rate of 6.25% for FY 2012-13.
Using the test results for FY 2006-07, FY 2011-12 and FY 2012-13, we
calculated an average error rate of 4.25%, which we applied to the other
nine years of the audit period (FY 2002-03 through FY 2005-06 and
FY 2007-08 through FY 2010-11).
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City of Chino Hills Identity Theft Program
The following table shows the average error rates for FY 2006-07,
FY 2011-12, and FY 2012-13:
(A) (B) (C)=(A)÷(B)
Number of
Unallowable
Fiscal Cases Sample
Year Sampled Size Error Rate
2006-07 1 76 1.32%
2011-12 3 58 5.17%
2012-13 4 64 6.25%
Total 12.74%
Number of fiscal years sampled ÷ 3
Average Error Rate 4.25%
The following table shows the number of allowable and unallowable
incident reports taken by fiscal year:
(A) (B) (C)=(A)×(B) (D)=(A)-(C)
Average Total Total
Fiscal Audited Error Error Unallowable Allowable
Year Population Rate Rate Reports Reports
2002-03 1 49 N/A 4.25% 6 143
2003-04 1 55 N/A 4.25% 7 148
2004-05 1 75 N/A 4.25% 7 168
2005-06 1 80 N/A 4.25% 8 172
2006-07 1 52 1.32% N/A 2 150
2007-08 92 N/A 4.25% 4 88
2008-09 92 N/A 4.25% 4 88
2009-10 82 N/A 4.25% 3 79
2010-11 1 04 N/A 4.25% 4 100
2011-12 94 5.17% N/A 5 89
2012-13 1 13 6.25% N/A 7 106
Total 1,388 57 1 ,331
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
Activity 2 – Beginning an investigation.
The parameters and guidelines specify that Activity 1a “includes drafting,
reviewing, and editing the identity theft police report,” and that Activity 2
includes “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.”
For convenience, we separated Activity 1a into two sub-activities:
Activity 1a.1 – Taking a police report; and
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City of Chino Hills Identity Theft Program
Activity 1a.2 – Reviewing, editing, and approving a police report.
The city claimed the following time increments for each year of the audit
period:
Activity 1a.1 – an average of 84.5 minutes for a Deputy Sheriff to take
a police report; and
Activity 1a.2 – an average of 11.88 minutes for a Sergeant to review,
edit, and approve the police report.
The city did not claim costs related to Activity 2 during the audit period.
We verified the claimed time increments for each year of the audit period
by dividing the number of hours claimed per employee classification by
the number of police reports claimed. However, although we requested
timesheets and/or time logs, the city did not provide support for the
claimed time increments. Therefore, we concluded that the city had based
the claimed time increments on estimates. In addition, we determined that
it is not reasonable to conclude that SBCSD Deputy Sheriffs did not begin
investigations of the identity theft cases that occurred within the city.
Allowable Time Increments
As the city did not provide support for the claimed time increments, we
relied on the ATIs disclosed in our June 22, 2022 audit report on San
Bernardino County’s Identity Theft Program claims. The following
paragraphs explain how we determined the ATIs for that audit report.
The county’s CAD system did not record time spent on Activity 1a.1 or
on Activity 1a.2. We interviewed various SBCSD employees, who
provided testimonial evidence of the approximate time spent on
reimbursable activities not recorded by the CAD system. We found that
this information provided a reasonable representation of the time needed
to perform these reimbursable activities.
To determine ATIs for Activity 1a.1, we interviewed three Deputy
Sheriffs, three Service Specialists, and one Sergeant about drafting,
reviewing, and editing identity theft police reports taken by Officers.
Based on these interviews, we determined that SBCSD staff members
spent an average of 35 minutes drafting, reviewing, and editing identity
theft police reports taken by SBCSD Deputies.
To determine ATIs for Activity 1a.2, we interviewed three Detectives and
three Sergeants about reviewing identity theft police reports. Based on
these interviews, we determined that SBCSD staff members spent an
average of 13 minutes reviewing police reports taken at the police station
counter.
To determine ATIs for Activity 2, we reviewed CAD system records for
398 police reports filed for violations of PC section 530.5. These records
showed the time, in minutes, from when SBCSD staff arrived at a victim’s
residence or place of business or took information from a resident at the
counter of a patrol station (Time On Scene) to the time that the initial call
for service was completed (Time Complete). The time elapsed represents
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City of Chino Hills Identity Theft Program
the time that county employees spent determining where the crime
occurred and what pieces of personal identifying information were used
for an unlawful purpose (Activity 2).
The following table summarizes the total time increments claimed and
allowable for the reimbursable activities by fiscal year:
Claimed Minutes Allowable Minutes
1a 1a 2 1a.1 1a.2 2
Taking a Reviewing Beginning T a k i n g a Reviewing Beginning
Police a Police an Police a Police an
Fiscal Year Report Report Investigation Report Report Investigation
2002-03 1 05.89 1 0.00 - 3 5.00 1 3.00 4 1.00
2003-04 9 0.00 1 0.00 - 3 5.00 1 3.00 4 1.00
2004-05 9 0.00 1 0.00 - 3 5.00 1 3.00 4 1.00
2005-06 9 0.00 1 0.00 - 3 5.00 1 3.00 4 1.00
2006-07 8 9.80 1 0.00 - 3 5.00 1 3.00 4 1.00
2007-08 9 0.00 1 0.00 - 3 5.00 1 3.00 4 1.00
2008-09 9 0.00 1 0.00 - 3 5.00 1 3.00 4 1.00
2009-10 9 0.00 1 0.00 - 3 5.00 1 3.00 4 1.00
2010-11 9 0.00 1 0.00 - 3 5.00 1 3.00 4 1.00
2011-12 2 8.80 1 0.00 - 3 5.00 1 3.00 4 1.00
2012-13 7 5.00 2 8.80 - 3 5.00 1 3.00 4 1.00
Claimed Job Classifications
The city’s claims for FY 2002-03 through FY 2011-12 included costs for
Deputy Sheriffs to perform Activity 1a.1 (taking or editing a police report)
and for Sergeants to perform Activity 1a.2 (review and approve a police
report). The city’s claim for FY 2012-13 included costs for Deputy
Sheriffs to perform both Activity 1a.1 and Activity 1a.2. As stated
previously, the city did not claim any costs for Activity 2 during the audit
period.
Staff Allowable
The city claimed that Deputy Sheriffs prepared police reports (actions
included in Activity 1a.1) and that Sergeants reviewed, edited, and
approved the police reports (Activity 1a.2). We determined that these
claims were correct. Although the city did not claim costs for Activity 2,
we concluded that Deputy Sheriffs began investigations.
Contract Hourly Rates
The city’s claims included copies of the annual contract that it negotiated
with the SBCSD for each year of the audit period. Each contract specifies
the level of service performed for the city, indicating the number of various
employee classifications involved in the city’s law enforcement (the level
of service) and the county’s cost for providing these employees. The
county used this contract to indicate the authorized SBCSD staffing level
for each year of the audit period. However, none of the contracts identified
the total annual hours per service level. As a result of recalculating contract
hourly rates, we determined that the city used 1,800 annual productive
hours, as specified in the SCO’s Mandated Cost Manual, for all SBCSD
employees.
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City of Chino Hills Identity Theft Program
We used this information to determine the contract hourly billing rates for
various employee classifications: we divided the total contract cost for
each employee classification by the number of personnel that the county
provided. For example, the city’s contract for FY 2011-12 indicates that
36 Deputy Sheriffs and eight Sergeants provided law enforcement for the
city during the year.
The following table shows the contract hourly rate calculation for Deputy
Sheriffs and Sergeants during FY 2011-12:
Employee Annual Level of Cost per Productive Hourly
Classification Cost Service Employee Hours Rate
Deputy Sheriff $ 5,118,169 36.00 $ 142,171 1,800 $ 78.98
Sergeant 1,463,440 8 .00 182,930 1,800 $ 101.63
The city used this calculation of hourly billing rates for its FY 2011-12
claim. Based on our testing results, we concluded that the city properly
calculated the hourly rates that it claimed for the Deputy Sheriff and
Sergeant classifications for all years of the audit period.
The city’s contracts with the SBCSD include additional employee
classifications and items—such as vehicles, dispatch services, and
equipment—that are part of the direct costs incurred to provide law
enforcement for the city. However, the contracts also include items that
are clearly administrative in nature.
The SCO’s Mandated Cost Manual states that contract services costs are
allowable. Costs for contract services can be claimed using an hourly
billing rate. 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 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 looked at law enforcement contracts for cities
contracting with Los Angeles County. Having previously audited a
number of these cities, we noted that the county’s billing rates also
included costs for various employee classifications. Unlike the SBCSD’s
contracts, the total costs for those classifications included a “liability
percentage” in addition to salaries and benefits; the liability percentage
amount was added to each contract hourly rate. It is our understanding that
this liability percentage covers costs for administrative items, such as
various forms of insurance and charges for countywide cost allocation
plans. We did not audit these billing rates.
San Bernardino County does not structure its contracts this way; instead,
it 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 costs for line items that we
determined were clearly administrative in nature.
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City of Chino Hills Identity Theft Program
We calculated an administrative cost percentage for each fiscal year of the
audit period based on the city’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
Personnel liability and bonding
County administrative costs (countywide cost allocation plan or
COWCAP)
COWCAP subsidy (FY 2012-13 only)
Telephone reporting unit (FY 2002-03 through FY 2004-05 only)
Startup costs (FY 2003-04 through FY 2009-10 and FY 2011-12 only)
The following table shows the allowable administrative cost percentage
for each fiscal year during the review period:
Fiscal
Year Administrative Cost Rate
2002-03 7.45%
2003-04 6.30%
2004-05 5.78%
2005-06 5.04%
2006-07 5.17%
2007-08 5.81%
2008-09 6.17%
2009-10 6.33%
2010-11 5.85%
2011-12 6.32%
2012-13 6.90%
For each contract, we added the costs of all line items 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.
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City of Chino Hills Identity Theft Program
The following table shows how we made this calculation for FY 2011-12:
Cost Contract
Category Amount
Administrative support $ 41,664
Office automation 5 4,305
Services and supplies 7 5,600
Vehicle insurance 3 4,617
Personnel liability & bonding 169,598
County administrative cost 284,721
Startup costs 1,872
Total administrative costs $ 662,377
Divided by total contract amount 1 0,480,055
Administrative cost percentage 6.32%
The following table shows the claimed hourly rates for Deputy Sheriffs
and Sergeants, the administrative percentage, and the revised hourly rates
for FY 2011-12:
Employee Hourly Administrative Revised
Classification Rate Percentage Rate
Deputy Sheriff $ 78.98 6.32% $ 83.97
Sergeant $ 101.63 6.32% $ 108.05
The following table summarizes the claimed and allowable contract hourly
rates for Deputy Sheriffs and Sergeants during the audit period, and the
difference between those rates:
Deputy Sheriffs Sergeants
Claimed Allowable Revised Claimed Allowable Revised
Fiscal Hourly Hourly Rate Fiscal Hourly Hourly Rate
Year Rate Rate Difference Year Rate Rate Difference
2002-03 $ 47.72 $ 5 1.28 $ 3 .56 2002-03 $ 59.45 $ 63.88 $ 4 .43
2003-04 5 1.14 54.36 3.22 2003-04 6 3.52 6 7.52 4.00
2004-05 5 8.57 61.96 3.39 2004-05 7 2.80 77.01 4.21
2005-06 5 8.95 61.92 2.97 2005-06 7 8.31 82.26 3.95
2006-07 6 6.65 70.10 3.45 2006-07 8 3.83 88.16 4.33
2007-08 7 0.30 74.38 4.08 2007-08 8 9.52 94.72 5.20
2008-09 7 1.31 75.71 4.40 2008-09 9 1.35 96.99 5.64
2009-10 6 9.60 74.01 4.41 2009-10 8 9.44 95.10 5.66
2010-11 7 5.43 79.84 4.41 2010-11 9 6.99 102.66 5.67
2011-12 7 8.98 83.97 4.99 2011-12 101.63 108.05 6.42
2012-13 8 2.41 88.10 5.69 2012-13 - 111.36 111.36
Using the contract rate information, the corrected number of case counts,
and the corrected time increments, we determined allowable contract costs
for each fiscal year.
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City of Chino Hills Identity Theft Program
For example, the following table shows the calculation of allowable
contract services costs for FY 2011-12:
(A) (B) (C) (D) (E)= (C) x (D)
Allowable Allowable
Total Time Contract
Reimbursable LASD Allowable Increment Hours Hourly Allowable
Activity Staff Reports (in hours) [C=(A*B)/60] Rate Costs
1a.1 Deputy Sheriff 89 35 51.92 $ 8 3.97 $ 4,360
1a.2 Sergeant 89 13 19.28 1 08.05 2 ,083
2 Deputy Sheriff 89 41 60.82 83.97 5 ,107
Total allowable contract services costs $ 11,550
Indirect costs
For the audit period, the city included copies of its Indirect Cost Rate
Proposals with its mandated cost claims. The city claimed related indirect
costs totaling $118,626 for the audit period, based on $133,729 in claimed
salaries. We found that the entire amount is unallowable, because no city
staff member performed any of the reimbursable activities under this
program during the audit period. Instead, the city contracted with the
county to have the SBCSD perform all of its law enforcement services
during the audit period. Therefore, the city did not incur any direct salary
costs or related indirect costs.
Furthermore, none of the costs that the city 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 city departments.
The following table summarizes the claimed, allowable, and audit
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 Costs 1 Allowable Adjustment
2002-03 $ 12,304 95.30% $ 11,726 $ - $ (11,726)
2003-04 1 3,531 98.80% 13,369 - ( 13,369)
2004-05 1 7,199 92.90% 15,977 - ( 15,977)
2005-06 1 7,861 88.30% 15,771 - ( 15,771)
2006-07 1 6,751 83.90% 14,054 - ( 14,054)
2007-08 1 0,352 84.30% 8,727 - (8,727)
2008-09 1 0,142 77.10% 7,819 - (7,819)
2009-10 6,204 86.30% 5,354 - (5,354)
2010-11 1 0,086 87.30% 8,805 - (8,805)
2011-12 9,102 87.30% 7,946 - (7,946)
2012-13 1 0,197 89.03% 9,078 - (9,078)
Total $ 133,729 $ 1 18,626 $ - $ (118,626)
1 Differences in Indirect Costs column are due to rounding.
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City of Chino Hills Identity Theft Program
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.”
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.
Section IV concludes:
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.
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City of Chino Hills Identity Theft 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.
Section V. B, “Indirect Cost Rates,” of the parameters and guidelines
states:
Indirect costs are costs that are incurred for a common or joint purpose,
benefiting more than one program, and are not directly assignable to a
particular department or program without efforts disproportionate to the
result 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%.
The SCO’s Mandated Cost Manual (Section 2, “Filing a Claim,” page 9,
subparagraph (3), “Contract Services”), 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 [parameters and guidelines] 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 California 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 city:
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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City of Chino Hills Identity Theft Program
Attachment—
City’s Response to Draft Audit Report
State Controller’s Office
Division of Audits
Post Office Box 942850
Sacramento, CA 94250
www.sco.ca.gov
S22-MCC-0011