Orange County Flood Control District

ORANGE COUNTY FLOOD CONTROL DISTRICT Audit Report FLOOD CONTROL SUBVENTIONS PROGRAM Santa Ana River Mainstream Project July 1, 2018, through December 31, 2021 M M. C ALIA OHEN C ALIFORNIA S TATE C ONTROLLER October 2024 MALIA M. COHEN CALIFORNIA STATE CONTROLLER October 22, 2024 Mr. Eric Nichol, Assistant Division Chief Division of Flood Management Department of Water Resources 3310 El Camino Avenue, Suite 120 Sacramento, CA 95821 Dear Mr. Nichol: The State Controller’s Office audited Flood Control Subventions Program claims submitted by the Orange County Flood Control District (the district) to the Department of Water Resources (DWR). Our audit pertained to DWR claim numbers SAMO 2019-02 (119 A&B) through SAMO 2023-01 (132 A&B), for the period of July 1, 2018, through December 31, 2021. The district claimed $24,107,390 for the Santa Ana River Mainstem project for the period of July 1, 2018, through December 31, 2021. Our audit found that the entire amount is allowable. The State’s share of allowable costs is $16,875,173. The DWR reimbursed the district $15,187,656 during the audit period; therefore, the district is owed the remaining balance of $1,687,517. If you have any questions regarding this report, please contact Efren Loste, Chief, Local Government Audits Bureau, by telephone at 916-324-7226, or email at eloste@sco.ca.gov. Thank you. Sincerely, Original signed by Kimberly A. Tarvin, CPA Chief, Division of Audits KAT/am 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 Mr. Eric Nichol October 22, 2024 Page 2 of 2 Copy: Marisela Pavlenko, Manager Flood Control Subventions Program Division of Flood Management Department of Water Resources The Honorable Andrew N. Hamilton, CPA, Auditor-Controller Orange County The Honorable Donald P. Wagner, Chair Orange County Board of Supervisors James Treadaway, PE, SE, Director Orange County Public Works 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 Orange County Flood Control District Flood Control Subventions Program Contents Audit Report Summary ............................................................................................................................ 1 Background ........................................................................................................................ 1 Audit Authority.................................................................................................................. 1 Objective, Scope, and Methodology ................................................................................. 1 Conclusion .......................................................................................................................... 3 Follow-up on Prior Audit Findings .................................................................................. 3 Views of Responsible Officials .......................................................................................... 3 Restricted Use .................................................................................................................... 3 Schedule—Summary of Project Costs ................................................................................. 4 Orange County Flood Control District Flood Control Subventions Program Audit Report Summary The State Controller’s Office (SCO) audited Flood Control Subventions Program claims submitted by the Orange County Flood Control District (the district) to the Department of Water Resources (DWR). Our audit pertained to DWR claim numbers SAMO 2019-02 (119 A&B) through SAMO 2023-01 (132 A&B), for the period of July 1, 2018, through December 31, 2021. The district claimed $24,107,390 during the audit period. Our audit found that the entire amount is allowable. Water Code stipulates the percentage of state funding by project cost category. Pursuant to Water Code section 12832, the DWR reimbursed the district 90% of eligible claimed costs, with the remaining 10% to be released subject to the completion of this audit. Based on our audit, the State’s share of allowable project costs is $16,875,173. The DWR reimbursed the district $15,187,656 during the audit period; therefore, the district is owed the remaining balance of $1,687,517. Background The State of California provides financial assistance to local agencies participating in the construction of federal flood control projects. Under the Flood Control Subventions Program (California Water Code, Division 6, Part 6, Chapters 1 through 4), the California Department of Water Resources (DWR) pays a portion of the local agency’s share of flood control project costs, including the costs of rights of way, relocation, and recreation and fish and wildlife enhancements. In accordance with Water Code section 12585.5, the DWR reimburses the district for 70% of eligible costs associated with non-federal expenditures, land acquisitions, and relocations. The DWR’s Guidelines for Reimbursement on Flood Control Projects describe the compliance requirement for local agencies seeking reimbursement for the state share of federal flood control projects. Audit Authority We conducted this performance audit in accordance with Water Code section 12832, which requires the SCO to perform audits of flood control projects. In addition, Government Code 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, Our audit objective was to determine whether the costs claimed by the district, as presented in the Schedule, were allowable and in compliance and Methodology with the DWR’s Guidelines for Reimbursement on Flood Control Projects. -1- Orange County Flood Control District Flood Control Subventions Program Our audit pertained to DWR claim numbers SAMO 2019-02 (119 A&B) through SAMO 2023-01 (132 A&B), for the period of July 1, 2018, through December 31, 2021. To achieve our objective, we performed the following procedures: • We gained an understanding of the district’s internal controls that are significant to the audit objective by interviewing key personnel, by completing an internal control questionnaire, and by reviewing the district’s organization chart. • We evaluated and assessed control activities for the claim preparation process by inspecting documents and records, and by inquiring with key personnel. • We assessed the reliability of computer-processed data by reviewing existing information about the data and the system that produced it; by interviewing district officials knowledgeable about the data; and by tracing data to source documents, based on auditor judgment and non- statistical sampling. We determined that the data was sufficiently reliable for the purposes of achieving our audit objective. • We conducted a risk assessment to determine the nature, timing, and extent of substantive testing. • We reviewed the district’s prior SCO audit and single audit reports. • We reviewed the DWR’s engineering reports and/or claim evaluations pertaining to the district’s claims. • We determined whether the district received revenues that should be offset against the flood program expenditures. • We reviewed the district’s claim detail for any condemnation interest and inquired of the district whether it had received interest on condemnation deposits. • We determined whether the district received from DWR advances on its flood control project expenditures. • We verified through sampling that the claimed costs were supported by proper documentation and eligible in accordance with the applicable criteria. Based on our risk assessment, we tested all items that were equal to or greater than the significant item amount (calculated based on materiality threshold). We also tested additional items that were valued less than the individual significant item amount, based on auditor judgment and non-statistical sampling. We tested the following expenditures: o Land – We tested $2,674,200 of $5,217,692 in total land, easement, and right-of-way acquisition costs claimed. o Cash contributions – We tested all $7,018,434 in total cash contributions to the Army Corps of Engineers. o Relocation – We tested all $3,001,900 in total relocation costs claimed. -2- Orange County Flood Control District Flood Control Subventions Program o Associated project costs – We tested $67,965 of $4,519,305 in total labor costs. o Revenue – We tested $33,134 of $1,267,563 in total offset claimed. No errors were identified. We did not audit the district’s financial statements. We limited our audit scope to planning and performing audit procedures necessary to obtain reasonable assurance that claimed costs are allowable for reimbursement. We conducted the audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objective. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objective. Conclusion The district claimed $24,107,390 in project costs for the period of July 1, 2018, through December 31, 2021. Our audit found that the entire amount is allowable. Based on our audit, the State’s share of allowable project costs is $16,875,173. The DWR reimbursed the district $15,187,656 during the audit period; therefore, the district is owed the remaining balance of $1,687,517. Follow-up on Our prior audit report, issued on June 16, 2020, disclosed no findings. Prior Audit Findings Views of We discussed our audit results with the district’s representatives during an exit conference conducted on July 16, 2024. At the exit conference, the Responsible district’s representatives agreed with the audit results. Officials Restricted Use This audit report is solely for the information and use of the district, the DWR, and the SCO; it is not intended to be, and should not be, used by anyone other than these specified parties. This restriction is not intended to limit distribution of this report, which is a matter of public record, and is available on the SCO website at www.sco.ca.gov. Original signed by Kimberly A. Tarvin, CPA Chief, Division of Audits October 22, 2024 -3- Orange County Flood Control District Flood Control Subventions Program Schedule— Summary of Project Costs July 1, 2018, through December 31, 2021 -4- S S S S S S S S S S S S S S A A A A A A A A A A A A A A M M M M M M M M M M M M M M O O O O O O O O O O O O O O 2 2 2 2 2 2 2 2 2 2 2 2 2 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 P N 1 1 1 1 2 2 2 2 2 2 2 2 2 2 r C u 9 9 9 9 0 0 0 1 1 2 2 2 2 3 T o je c t la im m b e r - 0 2 ( 1 - 0 3 ( 1 - 0 4 ( 1 - 0 5 ( 1 - 0 1 ( 1 - 0 2 ( 1 - 0 3 ( 1 - 0 1 ( 1 - 0 2 ( 1 - 0 1 ( 1 - 0 2 ( 1 - 0 3 ( 1 - 0 4 ( 1 - 0 1 ( 1 o t a l 1 2 2 2 2 2 2 2 2 2 2 3 3 3 9 0 1 2 3 4 5 6 7 8 9 0 1 2 A A A A A A A A A A A A A A & & & & & & & & & & & & & & B B B B B B B B B B B B B B ) ) ) ) ) ) ) ) ) ) ) ) ) ) C la $ im $ 2 e 3 1 7 1 1 2 3 4 d ,2 ,4 ,1 ,1 8 ,4 5 9 ,5 ,2 4 2 7 ,1 C 1 8 2 6 2 2 6 5 5 7 8 3 6 2 0 3 3 9 9 9 8 2 7 4 4 0 6 7 0 7 o s ,9 ,0 ,8 ,4 ,2 ,0 ,1 ,5 ,3 ,4 ,7 ,9 ,5 ,1 ,3 ts 0 4 2 4 2 9 8 6 1 8 0 2 6 0 9 8 8 9 3 1 5 5 0 9 1 4 4 8 5 0 A $ $ 2 llo w C o 3 ,2 1 ,4 7 ,1 1 ,1 8 1 ,4 5 9 2 ,5 3 ,2 4 2 7 4 ,1 a b s ts 1 3 8 3 2 9 6 9 2 9 2 8 6 2 5 7 5 4 7 4 8 0 3 6 6 7 2 0 0 7 le ,9 ,0 ,8 ,4 ,2 ,0 ,1 ,5 ,3 ,4 ,7 ,9 ,5 ,1 ,3 0 4 2 4 2 9 8 6 1 8 0 2 6 0 9 8 8 9 3 1 5 5 0 9 1 4 4 8 5 0 A d ju s tm e n t to C la im e d C o s ts $ - - - - - - - - - - - - - - $ - S ta te S h a r e 7 0 % 7 0 % 7 0 % 7 0 % 7 0 % 7 0 % 7 0 % 7 0 % 7 0 % 7 0 % 7 0 % 7 0 % 7 0 % 7 0 % Intenitona llley ftblank $ S C $ 1 S ta te h a r e o f la im e d C o s ts 2 ,2 4 9 ,7 1 ,0 3 8 ,1 4 ,9 9 0 ,8 8 1 8 ,6 5 8 0 ,4 9 9 9 ,6 3 9 3 ,5 6 7 0 ,2 1 ,7 8 8 ,0 2 ,2 9 2 ,1 3 3 6 ,4 1 6 5 ,8 4 7 ,2 5 0 4 ,0 6 ,8 7 5 ,1 3 3 8 1 5 6 3 9 2 3 9 4 9 7 7 6 4 0 0 5 7 0 2 3 7 3 7 8 4 3 A $ S ta te S h a r e o llo w a b C o s ts $ 2 ,2 4 9 1 ,0 3 8 4 ,9 9 0 8 1 8 5 8 0 9 9 9 3 9 3 6 7 0 1 ,7 8 8 2 ,2 9 2 3 3 6 1 6 5 4 7 5 0 4 1 6 ,8 7 5 f le ,7 ,1 ,8 ,6 ,4 ,6 ,5 ,2 ,0 ,1 ,4 ,8 ,2 ,0 ,1 3 3 8 1 5 6 3 9 2 3 9 4 9 7 7 6 4 0 0 5 7 0 2 3 7 3 7 8 4 3 A d ju s tm e n t to S ta te S h a r e o f C la im e d C o s ts $ - - - - - - - - - - - - - - $ - A m o u n R e c e iv e b y th e D is tr ic $ 2 ,0 2 4 9 3 4 4 ,4 9 1 7 3 6 5 2 2 8 9 9 3 5 4 6 0 3 1 ,6 0 9 2 ,0 6 2 3 0 2 1 4 9 4 2 4 5 3 $ 1 5 ,1 8 7 t d t ,7 ,3 ,7 ,7 ,4 ,7 ,1 ,2 ,2 ,9 ,8 ,2 ,5 ,6 ,6 6 2 9 4 0 0 7 6 2 2 4 6 6 6 5 2 0 2 9 9 0 7 3 1 3 4 2 8 6 6 P A d d itio n a l A m o u n t D u e to th e D is tr ic t e n d in g A u d it $ 2 2 4 ,9 7 4 1 0 3 ,8 1 3 4 9 9 ,0 8 8 8 1 ,8 6 1 5 8 ,0 4 5 9 9 ,9 6 7 3 9 ,3 5 3 6 7 ,0 2 9 1 7 8 ,8 0 2 2 2 9 ,2 1 4 3 3 ,6 4 9 1 6 ,5 8 5 4 ,7 3 0 5 0 ,4 0 7 $ 1 ,6 8 7 ,5 1 7 State Controller’s Office Division of Audits Post Office Box 942850 Sacramento, CA 94250 www.sco.ca.gov S24-FLC-0001