City of West Hollywood

MALIA M. COHEN CALIFORNIA STATE CONTROLLER June 14, 2024 Lorena Quijano, CPA, Director Finance & Technology Services City of West Hollywood 8300 Santa Monica Boulevard West Hollywood, CA 90069 Dear Ms. Quijano: The State Controller’s Office performed a review of costs claimed by the City of West Hollywood for the legislatively mandated Racial and Identity Profiling Program (Chapter 466, Statutes of 2015; and Chapter 328, Statutes of 2017) for the period of July 1, 2017, through June 30, 2023. We conducted our review under the authority of Government Code sections 12410, 17558.5, and 17561. Our review was limited to recalculating the city’s contract hourly rates and validating the claimed contract services costs. The city claimed $296,720 for costs of the mandated program. Our review found that $276,087 is allowable and $20,633 is unallowable. The costs are unallowable because the city overstated its contract hourly rates by including overhead (indirect) costs in its calculation, as quantified in the Summary of Program Costs and described in the Review Results. The State paid the city $216,828. This letter report contains an adjustment to costs claimed by the city. If you disagree with the review finding, you may file an Incorrect Reduction Claim (IRC) with the Commission on State Mandates (Commission). Pursuant to Section 1185(c) of the Commission’s regulations (Title 2, California Code of Regulations), 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than three years following the date of this report, regardless of whether this report is subsequently supplemented, superseded, or otherwise amended. You may obtain IRC information on the Commission’s website at www.csm.ca.gov/forms/IRCForm.pdf. If you have any questions regarding this report, please contact Lisa Kurokawa, Chief, Compliance Audits Bureau, by telephone at (916) 327-3138. Sincerely, Original signed by Kimberly A. Tarvin, CPA Chief, Division of Audits 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 Ms. Lorena Quijano June 14, 2024 Page 2 of 2 KAT/ac Attachments: Attachment 1—Summary of Program Costs Attachment 2—Review Results RE: S24-MCC-9026 Copy: The Honorable John M. Erickson, Mayor City of West Hollywood Chris Hill, Principal Program Budget Analyst Local Government Unit, California Department of Finance Kaily Yap, 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 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 City of West Hollywood Racial and Identity Profiling Program Attachment 1— Summary of Program Costs July 1, 2017, through June 30, 2023 Actual Costs Allowable Review Cost Elements Claimed 1 per Review Adjustment 2 July 1, 2017, through June 30, 2018 Direct costs: Contract services: Train peace officers and supervisors $ 5,053 $ 4,709 $ (344) Total program costs $ 5,053 4,709 $ (344) Less amount paid by the State 3 (5,053) Amount paid in excess of allowable costs claimed $ ( 344) July 1, 2018, through June 30, 2019 Direct costs: Contract services: Collect and report data $ 7 6,810 $ 7 1,866 $ (4,944) Audit and validate data 10,576 8,956 ( 1,620) Total program costs $ 8 7,386 80,822 $ (6,564) Less amount paid by the State 3 (87,386) Amount paid in excess of allowable costs claimed $ (6,564) July 1, 2019, through June 30, 2020 Direct costs: Contract services: Collect and report data $ 4 4,209 $ 4 1,309 $ (2,900) Audit and validate data 6,068 5,108 (960) Total program costs $ 5 0,277 46,417 $ (3,860) Less amount paid by the State 3 (50,277) Amount paid in excess of allowable costs claimed $ (3,860) July 1, 2020, through June 30, 2021 Direct costs: Contract services: Collect and report data $ 2 1,183 $ 2 0,288 $ (895) Audit and validate data 3,302 2,849 (453) Total program costs $ 2 4,485 23,137 $ (1,348) Less amount paid by the State 3 (24,485) Amount paid in excess of allowable costs claimed $ (1,348) 1 of 2 City of West Hollywood Racial and Identity Profiling Program Attachment 1 (continued) 2 of 2 J D T L A J D T L A S D T L A C o s t E le m e n t s u ly 1 , 2 0 2 1 , t h r o u g h J u n e 3 0 , 2 0 2 2 ir e c t c o s t s : C o n t r a c t s e r v ic e s : C o lle c t a n d r e p o r t d a t a A u d it a n d v a lid a t e d a t a o t a l p r o g r a m c o s t s 3 e s s a m o u n t p a id b y t h e S t a t e m o u n t p a id in e x c e s s o f a llo w a b le c o s u ly 1 , 2 0 2 2 , t h r o u g h J u n e 3 0 , 2 0 2 3 ir e c t c o s t s : C o n t r a c t s e r v ic e s : C o lle c t a n d r e p o r t d a t a A u d it a n d v a lid a t e d a t a o t a l p r o g r a m c o s t s 3 e s s a m o u n t p a id b y t h e S t a t e llo w a b le c o s t s c la im e d in e x c e s s o f a m u m m a r y : J u ly 1 , 2 0 1 7 , t h r o u g h J u n e 3 0 ir e c t c o s t s : C o n t r a c t s e r v ic e s T r a in p e a c e o f f ic e r s a n d s u p e r v is o C o lle c t a n d r e p o r t d a t a A u d it a n d v a lid a t e d a t a o t a l p r o g r a m c o s t s 3 e s s a m o u n t p a id b y t h e S t a t e llo w a b le c o s t s c la im e d in e x c e s s o f a m t s c o u , 2 0 r s o u la im n t p 2 3 n t p e a a d id id A c t u a l C C la im e $ 4 3 6 $ 4 9 $ 6 3 1 5 $ 7 9 $ 5 2 4 9 4 2 $ 2 9 6 o d ,4 ,1 ,6 ,9 ,9 ,8 ,0 ,6 ,0 ,7 s 1 7 4 2 7 1 9 5 5 1 2 t s 9 8 7 5 7 2 3 6 1 0 $ $ $ $ $ $ A llo w a b le p e r R e v ie w 4 1 ,4 2 5 ,2 7 4 6 ,7 0 ( 4 9 ,6 2 ( 2 ,9 2 6 0 ,6 9 1 3 ,6 0 7 4 ,2 9 7 4 ,2 9 4 ,7 0 2 3 5 ,5 8 3 5 ,7 9 2 7 6 ,0 8 ( 2 1 6 ,8 2 5 9 ,2 5 5 8 3 7 4 5 4 9 - 9 9 3 5 7 8 9 ) ) ) $ $ $ $ $ $ R e v ie w A d ju s t m e n ( 2 ,0 ( 8 ( 2 ,9 ( 3 ,2 ( 2 ,3 ( 5 ,5 ( 3 ( 1 4 ,0 ( 6 ,2 ( 2 0 ,6 2 t 5 7 2 8 1 9 4 7 1 3 4 0 4 0 3 3 4 3 6 3 ) ) ) ) ) ) ) ) ) ) _________________________ 1 Differences in actual costs claimed are due to rounding errors. 2 See Attachment 2—Review Results. 3 Payment amounts current as of May 9, 2024. City of West Hollywood Racial and Identity Profiling Program Attachment 2— Review Results July 1, 2017, through June 30, 2023 BACKGROUND— Government Code (GC) section 12525.5, as added and amended by the Statutes of 2015, Chapter 466 and Statutes 2017, Chapter 328; and Title 11, California Code of Regulations, sections 999.224 through 999.229 established the state-mandated Racial and Identity Profiling Program. The program requires a local law enforcement agency that employs peace officers—or that contracts for peace officers from another city or county for police protection services—to electronically report to the Attorney General, on an annual basis, data on all “stops” conducted within its jurisdiction. For purposes of the program, “peace officer” does not include probation officers and officers in custodial settings. On May 22, 2020, the Commission on State Mandates (Commission) found that GC section 12525.5 constitutes a reimbursable state-mandated program, beginning November 7, 2017, for local law enforcement agencies. The Commission determined that each claimant is allowed to claim and be reimbursed for the following activities identified in the parameters and guidelines (Section IV., “Reimbursable Activities”): A. One-Time Activities 1. One-time training per peace officer employee and supervisor assigned to perform the reimbursable activities listed in Section IV.B. of the Parameters and Guidelines. 2. One-time installation and testing of software necessary to comply with the state-mandated requirements for the collection and reporting of data on all applicable stops. B. Ongoing Activities 1. Identification of the peace officers required to report stops, and maintenance of a system to match individual officers to their Officer I.D. number. . . . 2. Collection and reporting data on all stops, as defined, conducted by that agency’s peace officers for the preceding calendar year in accordance with sections 999.226(a) and 999.227 of the regulations. . . . 3. Electronic submission of data to DOJ and retention of stop data collected. . . . 4. Audits and valuation of data collected. . . . 5. For stop data collected, ensure that the name, address, social security number, or other unique personally identifiable information of the individual stopped, searched, or subjected to property seizure, and the badge number or other unique identifying information of the peace officer involved, is not transmitted to the Attorney General in an open text field. . . . 1 of 7 City of West Hollywood Racial and Identity Profiling Program The parameters and guidelines describe the 16 types of stop data and all applicable data elements, data fields, and narrative explanation fields that peace officers must collect for every stop. The following stops are not reportable: • Interactions with passengers in a stopped vehicle who have not been observed or suspected of violating the law; • Stops made during public safety mass evacuations; • Stops made during active shooter incidents; • Stops resulting from routine security screenings to enter a building or special event; • Interactions during traffic control of vehicles due to a traffic accident or emergency, crowd control requiring pedestrians to remain in a fixed location for public safety reasons, persons detained at residences so officers can check for proof of age while investigating underage drinking, and checkpoints and roadblocks where officers detain a person as the result of regulatory activity that is general, and not based on individualized suspicion or personal characteristics; • Interactions with a person who is subject to a warrant or search condition at his or her residence; • Interactions with a person who is subject to home detention or house arrest; • Stops in a custodial setting; and • Stops that occur when an officer is off-duty. 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 issues the Mandated Cost Manual for Local Agencies to assist local agencies in claiming mandated program reimbursable costs. FINDING— The City of West Hollywood claimed $296,720 in contract services costs for the Racial and Identity Profiling Program. We found that $276,087 is Overstated Racial and allowable and $20,633 is unallowable. Identity Profiling Program costs We found that the city correctly classified its claimed costs as contract services because it contracted with Los Angeles County (the county) for municipal law enforcement services provided by the Los Angeles County Sheriff’s Department (LASD) during the audit period. The city used the correct methodology to calculate its contract services costs: it multiplied the number of stops recorded by the time required to perform the reimbursable activities, then multiplied the total by the hourly rates obtained from the city’s contract with the county. LASD based the hourly rates in its contracts on incurred costs for salaries, benefits, and indirect costs. The county identified indirect costs in its contracts as a “liability percentage.” 2 of 7 City of West Hollywood Racial and Identity Profiling Program Costs totaling $20,633 are unallowable because the city overstated its contract hourly rates. The rates were overstated because the city substituted its own contract overhead rate to calculate contract hourly rates instead of using the county’s liability percentage amount. In addition, the city’s contract overhead rate was based on indirect cost rate proposals (ICRPs) that it prepared using salaries and wages as a base. However, the city did not incur any salary or wage costs. The following table summarizes the claimed, allowable, and review adjustment amounts by fiscal year: 3 of 7 2 2 2 2 2 2 F Y 0 0 0 0 0 0 T is c a l e a r 1 7 - 1 8 1 8 - 1 9 1 9 - 2 0 2 0 - 2 1 2 1 - 2 2 2 2 - 2 3 o ta l C o n tr a A m o u n t C la im e d $ 5 ,0 5 3 8 7 ,3 8 6 5 0 ,2 7 7 2 4 ,4 8 5 4 9 ,6 2 7 7 9 ,8 9 2 $ 2 9 6 ,7 2 0 c t S e r v ic e s A m o u n A llo w a b $ 4 ,7 8 0 ,8 4 6 ,4 2 3 ,1 4 6 ,7 7 4 ,2 $ 2 7 6 ,0 t le 0 9 2 2 1 7 3 7 0 3 9 9 8 7 R e v ie w A d ju s tm e n t $ ( 3 4 4 ) ( 6 ,5 6 4 ) ( 3 ,8 6 0 ) ( 1 ,3 4 8 ) ( 2 ,9 2 4 ) ( 5 ,5 9 3 ) $ ( 2 0 ,6 3 3 ) Contract Services Costs The city contracted with LASD to provide all of its law enforcement services during the review period. These services included the reimbursable activities claimed for the mandated program. The city contracted for various LASD staff positions for each fiscal year and paid the LASD annual contract rates for the positions. 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 or related indirect costs. Contract Hourly Rates The city’s claims included copies of the annual contracts that it negotiated with the county for each year of the review period. The county uses the Service Level Authorization (SH-AD 575) form to specify the number of service units purchased for each year that a contract is in effect, and the rates billed to the city for various LASD staff. These agreements with contract cities define a “service unit” as one position of a certain classification. Each contract includes a liability percentage, which is an additional charge that the county adds to its contract rates for staff based on salaries, benefits, and overhead costs. However, the city did not use the county’s liability percentage to calculate its contract hourly rates. Instead, the city prepared an ICRP for each fiscal year for the “City of West Hollywood Sheriff,” which does not exist as a person or as an entity. In addition, the city based its indirect cost rates on salary and wage costs, which it did not incur. We applied the appropriate LASD liability percentage when we recalculated allowable contract costs for each fiscal year. City of West Hollywood Racial and Identity Profiling Program We recomputed the contract hourly rates for the Deputy Sheriff and Sergeant classifications using information from the SH-AD 575 forms. For the Deputy Sheriff classification, the city’s contracts specify a liability percentage of 10% for fiscal year (FY) 2017-18, 10.5% for FY 2018-19, and 11% for FY 2019-20 through FY 2022-23. We applied the appropriate liability percentage to the contract costs for each fiscal year. To calculate the contract hourly rate for each fiscal year, we divided the annual salary cost—including the liability percentage—for each Deputy Sheriff classification by the annual hours per service unit. The following tables summarize the claimed and allowable contract hourly rates for Deputy Sheriffs by fiscal year, and the difference between those rates: 4 of 7 F F F Y D D D D D Y D D D D Y D D D D 2 0 1 7 e p u ty e p u ty e p u ty e p u ty e p u ty 2 0 1 8 e p u ty e p u ty e p u ty e p u ty 2 0 1 9 e p u ty e p u ty e p u ty e p u ty J o b C la s - 1 8 S h e r if f ( 7 S h e r if f ( N S h e r if f ( B S h e r if f ( G M o to r - 1 9 S h e r if f ( 7 S h e r if f ( N S h e r if f ( B M o to r - 2 0 S h e r if f ( 7 S h e r if f ( N S h e r if f ( B M o to r s if ic a tio n 0 h o u r ) o n - r e lie f ) o n u s , n o r r a n t) 0 h o u r ) o n - r e lie f ) o n u s , n o r 0 h o u r ) o n - r e lie f ) o n u s , n o r e e e lie lie lie f f f ) ) ) H D e p u ty C la im e d C o n tr a c t o u r ly R a te $ 1 5 9 .7 2 1 6 9 .2 8 1 7 8 .2 4 1 1 2 .6 8 1 7 8 .2 4 1 6 4 .6 6 1 7 4 .5 2 1 8 5 .7 3 1 8 5 .7 3 1 7 3 .7 7 1 8 4 .1 7 1 9 7 .6 8 1 9 7 .6 8 S h e r if f A llo w a b C o n tr a c H o u r ly R a te $ 1 4 9 .5 1 5 8 .4 1 6 6 .8 1 0 5 .4 1 6 6 .8 1 5 4 .0 1 6 3 .2 1 7 3 .7 1 7 3 .7 1 6 2 .3 1 7 2 .0 1 8 4 .7 1 8 4 .7 le t 2 8 6 8 6 6 9 8 8 6 8 0 0 R a te D if f e r e n c $ ( 1 0 .2 ( 1 0 .8 ( 1 1 .3 ( 7 .2 ( 1 1 .3 ( 1 0 .6 ( 1 1 .2 ( 1 1 .9 ( 1 1 .9 ( 1 1 .4 ( 1 2 .0 ( 1 2 .9 ( 1 2 .9 e 0 0 8 0 8 0 3 5 5 1 9 8 8 ) ) ) ) ) ) ) ) ) ) ) ) ) City of West Hollywood Racial and Identity Profiling Program 5 of 7 F F F Y D D D D Y D D D D Y D D D D 2 0 2 0 e p u ty e p u ty e p u ty e p u ty 2 0 2 1 e p u ty e p u ty e p u ty e p u ty 2 0 2 2 e p u ty e p u ty e p u ty e p u ty J o b C la s - 2 1 S h e r if f ( 7 S h e r if f ( N S h e r if f ( B M o to r - 2 2 S h e r if f ( 7 S h e r if f ( N S h e r if f ( B M o to r - 2 3 S h e r if f ( 7 S h e r if f ( N S h e r if f ( B M o to r s if ic a tio n 0 h o u r ) o n - r e lie f ) o n u s , n o r 0 h o u r ) o n - r e lie f ) o n u s , n o r 0 h o u r ) o n - r e lie f ) o n u s , n o r e e e lie lie lie f f f ) ) ) H D e p u ty C la im e d C o n tr a c t o u r ly R a te 1 7 8 .9 6 1 8 9 .6 8 2 0 3 .5 0 2 0 3 .5 0 1 8 2 .5 1 1 9 3 .4 3 2 0 7 .1 4 1 9 3 .4 3 1 8 5 .9 1 1 9 7 .0 4 2 1 2 .7 9 1 9 7 .0 4 S h e r if f A llo w a b C o n tr a c H o u r ly R a te 1 7 1 .4 1 8 1 .6 1 9 4 .8 1 9 4 .8 1 7 3 .8 1 8 4 .3 1 9 7 .3 1 8 4 .3 1 7 6 .3 1 8 6 .9 2 0 1 .8 1 8 6 .9 le t 0 6 9 9 9 0 6 0 8 4 8 4 R a te D if f e r e n c ( 7 .5 ( 8 .0 ( 8 .6 ( 8 .6 ( 8 .6 ( 9 .1 ( 9 .7 ( 9 .1 ( 9 .5 ( 1 0 .1 ( 1 0 .9 ( 1 0 .1 e 6 2 1 1 2 3 8 3 3 0 1 0 ) ) ) ) ) ) ) ) ) ) ) ) We also re-calculated the contract hourly rates for Sergeants and a Lieutenant by dividing the contract unit cost—without any liability percentages, because the county’s rates for Sergeants and the Lieutenant do not include liability percentages—by the annual hours per service unit. 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 Contract Contract Rate Year Hourly Rate Hourly Rate Difference 2017-18 $ 1 48.43 $ 1 26.32 $ (22.11) 2018-19 155.70 131.84 (23.86) 2019-20 164.41 138.39 (26.02) 2020-21 172.04 148.44 (23.60) 2021-22 176.42 151.44 (24.98) 2022-23 182.77 156.21 (26.56) The following table summarizes the claimed and allowable contract hourly rates for the Lieutenant for FY 2017-18, and the difference between those rates: Lieutenant Claimed Allowable Contract Contract Fiscal Hourly Hourly Rate Year Rate Rate Difference 2017-18 $ 178.19 $ 151.65 $ ( 26.54) City of West Hollywood Racial and Identity Profiling Program The following table summarizes the claimed and allowable contract services costs for FY 2022-23: Claimed Allowable Position Overhead Liability Hourly Rate at Hours Percentage at Contract Rate 17.0% Billing Rate Worked Total Costs1 11.0% Hourly Rate T o t al Costs Review Job Classification [a] [b] [c] = [a] + [b] [d] [e = [c] * [d] [f] [g] = [a] + {f} [h] = [g] * [[d] Adjustment Deputy Sheriff (70 hour) $ 158.90 $ 27.01 $ 185.91 217.52 $ 40,440 $ 17.48 $ 176.38 $ 38,366 $ (2,074) Deputy Sheriff (Non-relief) 168.41 2 8.63 197.04 88.99 17,535 1 8.53 186.94 1 6,636 (899) Deputy Sheriff (Bonus, no relief) 181.87 3 0.92 212.79 9 .89 2,104 2 0.01 201.88 1,997 (107) Deputy Motor 168.41 2 8.63 197.04 19.77 3,896 1 8.53 186.94 3,696 (200) Sergeant 156.21 2 6.56 182.77 87.09 15,917 - 156.21 1 3,604 ( 2,313) Total contract services costs $ 79,892 $ 74,299 $ (5,593) 1Calculation in this column includes rounding errors. Contract Overhead Rate The city provided copies of its contract cost computations, which included a component labeled “contract overhead,” as part of its claims. The city based its contract overhead on indirect cost rates derived from ICRPs developed each year and included in its claims for FY 2017-18 through FY 2022-23. To calculate its indirect cost rates, the city used a distribution base of direct salaries and wages. That methodology is consistent with current indirect cost principles. However, as no city staff member performed any of the reimbursable activities, the city did not incur any salary or wage costs with which to calculate an indirect cost rate. Instead, the city incurred contract services costs. Claiming contract services costs as salary and wage costs is inconsistent with generally accepted accounting principles; therefore, these rates are unallowable. Criteria Section IV, “Reimbursable Activities,” of the parameters and guidelines begins: To be eligible for mandated cost reimbursement for any 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 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 created at or near the same time the actual costs 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. 6 of 7 City of West Hollywood Racial and Identity Profiling Program Section V.A.3, “Contracted Services,” of the parameters and guidelines states: Report the name of the contractor and services performed to implement the reimbursable activities. If the contractor bills for time and materials, report the number of hours spent on the activities and all costs charged. If the contract is a fixed price, report the services that were performed during the period covered by the reimbursement claim. If the contract services are also used for purposes other than the reimbursable activities, only the pro-rata portion of the services used to implement the reimbursable activities can be claimed. Submit contract consultant and attorney invoices with the claim and a description of the contract scope of services. Section V.B, “Indirect Cost Rates,” of the parameters and guidelines states, in part: 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 both: (1) 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. . . . Recommendation We recommend that the city: • Adhere to the Racial and Identity Profiling Program’s parameters and guidelines and the SCO’s Mandated Cost Manual for Local Agencies when claiming reimbursement for mandated costs; and • Ensure that claimed costs include only eligible costs, are based on actual costs, and are properly supported. 7 of 7