Yolo County

YOLO COUNTY Audit Report CUSTODY OF MINORS – CHILD ABDUCTION AND RECOVERY PROGRAM Chapter 1399, Statutes of 1976; Chapter 162, Statutes of 1992; and Chapter 988, Statutes of 1996 July 1, 2018, through June 30, 2022 M M. C ALIA OHEN C ALIFORNIA S TATE C ONTROLLER November 2024 MALIA M. COHEN CALIFORNIA STATE CONTROLLER November 8, 2024 CERTIFIED MAIL—RETURN RECEIPT REQUESTED Mr. Tom Haynes, Chief Financial Officer Yolo County 625 Court Street Woodland, CA 95776 Dear Mr. Haynes: The State Controller’s Office audited the costs claimed by Yolo County (the county) for the legislatively mandated Custody of Minors – Child Abduction and Recovery Program for the period of July 1, 2018, through June 30, 2022. The county claimed and was paid $2,509,673 for costs of the mandated program. Our audit found that $16,805 is allowable and $2,492,868 is unallowable. The costs are unallowable because the county did not provide contemporaneous supporting documentation, did not support the amount claimed, did not claim actual costs, and did not show that claimed costs are a direct cost to the program. Following issuance of this audit report, the State Controller’s Office’s Local Government Programs and Services Division will notify the county of the adjustment to its claims via a system-generated letter for each fiscal year in the audit period. This final audit report contains an adjustment to costs claimed by the county. If you disagree with the audit findings, 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 these adjustments 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than three years following the date of this report, regardless of whether this report is subsequently supplemented, superseded, or otherwise amended.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 Mr. Tom Haynes November 8, 2024 Page 2 of 2 If you have any questions regarding this report, please contact Lisa Kurokawa, Chief, Compliance Audits Bureau, by telephone at 916-327-3138. Thank you. Sincerely, Original signed by Kimberly A. Tarvin, CPA Chief, Division of Audits KAT/rs Copy: Nikki Abaurrea, Chief Fiscal Administrative Officer Yolo County District Attorney’s Office 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 Reimbursements Section State Controller’s Office Everett Luc, Supervisor Local Reimbursements Section 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 Yolo County Custody of Minors – Child Abduction and Recovery Program Contents Audit Report Summary ............................................................................................................................ 1 Background ........................................................................................................................ 1 Audit Authority.................................................................................................................. 2 Objective, Scope, and Methodology ................................................................................. 2 Conclusion .......................................................................................................................... 3 Follow-up on Prior Audit Findings .................................................................................. 3 Views of Responsible Officials .......................................................................................... 3 Restricted Use .................................................................................................................... 3 Schedule—Summary of Program Costs .............................................................................. 4 Findings and Recommendations ........................................................................................... 6 Attachment—County’s Response to Draft Audit Report Yolo County Custody of Minors – Child Abduction and Recovery Program Audit Report Summary The State Controller’s Office (SCO) audited the costs claimed by Yolo County (the county) for the legislatively mandated Custody of Minors – Child Abduction and Recovery (CAR) Program for the period of July 1, 2018, through June 30, 2022. The county claimed and was paid $2,509,673 for costs of the mandated program. Our audit found that $16,805 is allowable and $2,492,868 is unallowable. The costs are unallowable because the county did not provide contemporaneous supporting documentation, did not support the amount claimed, did not claim actual costs, and did not show that the claimed costs are a direct cost to the program. Background Chapter 1399, Statutes of 1976, established the mandated CAR Program, based on the following laws: • Civil Code section 4600.1 (repealed and added as Family Code sections 3060 through 3064 by Chapter 162, Statutes of 1992); • Penal Code sections 278 and 278.5 (repealed and added as Penal Code sections 277, 278, and 278.5 by Chapter 988, Statutes of 1996); and • Welfare and Institutions Code section 11478.5 (repealed and added as Family Code section 17506 by Chapter 478, Statutes of 1999; last amended by Chapter 759, Statutes of 2002). These laws require the District Attorney’s (DA’s) Office to assist persons having legal custody of a child in: • Locating their children when they are unlawfully taken away; • Gaining enforcement of custody and visitation decrees and orders to appear; • Defraying expenses related to the return of an illegally detained, abducted, or concealed child; • Civil court action proceedings; and • Guaranteeing the appearance of offenders and minors in court actions. On September 19, 1979, the State Board of Control (now the Commission on State Mandates, or “the Commission”) determined that this legislation imposed a state mandate reimbursable under Government Code (GC) section 17561. The parameters and guidelines establish the state mandate and define reimbursement criteria. The Commission adopted the parameters and guidelines on January 21, 1981; they were last amended on October 30, 2009. In compliance with GC section 17558, the SCO issues the Mandated Cost Manual for Local Agencies (Mandated Cost Manual) for mandated programs to assist local agencies in claiming reimbursable costs. -1- Yolo County Custody of Minors – Child Abduction and Recovery Program Audit Authority We conducted this performance audit in accordance with GC sections 17558.5 and 17561, which authorize the SCO to audit the county’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 CAR and Methodology 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, 2018, through June 30, 2022. To achieve our objective, we performed the following procedures: • We reviewed the annual mandated cost claims filed by the county for the audit period and identified the significant cost components of each claim as salaries and benefits, materials and supplies, and indirect costs. We determined whether there were any errors or unusual or unexpected variances from year to year. We also reviewed the activities claimed to determine whether they adhered to the SCO’s Mandated Cost Manual and the program’s parameters and guidelines. • We completed an internal control questionnaire by interviewing key county staff. We discussed the claim preparation process with county staff to determine what information was obtained, who obtained it, and how it was used. • We reviewed payroll records for claimed employees. The records provided as support for the claimed costs did not meet the requirements of the program’s parameters and guidelines (see Finding 1). • We reviewed claimed materials and supplies costs and found that the county claimed costs that were not supported by source documentation. We were unable to verify that costs claimed under materials and supplies were a direct cost to the program and were for mandated activities. We also found that the county did not support the claimed costs and claimed allocated costs as direct costs. Per the program’s parameters and guidelines, only actual costs are allowable (see Finding 2). • We reviewed the county’s single audit report to identify potential sources of offsetting revenues and reimbursements from federal or pass-through programs applicable to this mandated program. The county did not claim offsetting revenues for the audit period, and we found no instances of unreported offsetting revenue. We noted no exceptions. -2- Yolo County Custody of Minors – Child Abduction and Recovery Program We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objective. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objective. Conclusion As a result of performing the audit procedures, we found that the county did not comply with the requirements described in our audit objective. We did not find that the county 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 Findings and Recommendations. For the audit period, the county claimed and was paid $2,509,673 for costs of the legislatively mandated CAR Program. Our audit found that $16,805 is allowable and $2,492,868 is unallowable. Following issuance of this audit report, the SCO’s Local Government Programs and Services Division will notify the county of the adjustment to its claims via a system-generated letter for each fiscal year in the audit period. Follow-up on Our prior audit report for the period of July 1, 2000, through June 30, 2004, issued on December 30, 2005, disclosed no findings. The prior audit Prior Audit report was conducted under the program’s previous parameters and Findings guidelines, adopted on August 26, 1999. Views of We issued a draft audit report on August 9, 2024. The county’s Responsible representative responded by letter dated August 19, 2024, disagreeing with the audit results. This final audit report includes the county’s response as Officials an attachment. Restricted Use This audit report is solely for the information and use of the county, 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 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 November 8, 2024 -3- Yolo County Custody of Minors – Child Abduction and Recovery Program Schedule— Summary of Program Costs July 1, 2018, through June 30, 2022 Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustment Reference 1 July 1, 2018, through June 30, 2019 Direct Costs: Salaries and benefits $ 528,128 - $ (528,128) Finding 1 Materials and supplies 38,643 3,957 (34,686) Finding 2 Total direct costs 566,771 3,957 (562,814) Indirect costs 75,926 - (75,926) Finding 1 Total indirect and direct costs 642,697 3,957 (638,740) Less: offsetting revenue - - - Total program costs $ 642,697 3,957 $ (638,740) Less amount paid by the State3 (642,697) Amount paid in excess of allowable costs claimed $ (638,740) July 1, 2019, through June 30, 2020 Direct Costs: Salaries and benefits $ 523,721 - $ (523,721) Finding 1 Materials and supplies 33,721 2,940 (30,781) Finding 2 Total direct costs 557,442 2,940 (554,502) Indirect costs 50,152 - (50,152) Finding 1 Total indirect and direct costs 607,594 2,940 (604,654) Less: offsetting revenue - - - Total program costs $ 607,594 2,940 $ (604,654) Less amount paid by the State3 (607,594) Amount paid in excess of allowable costs claimed $ (604,654) July 1, 2020, through June 30, 2021 Direct Costs: Salaries and benefits $ 495,676 - $ (495,676) Finding 1 Materials and supplies 85,178 4,718 (80,460) Finding 2 Total direct costs 580,854 4,718 (576,136) Indirect costs 57,974 - (57,974) Finding 1 Total indirect and direct costs 638,828 4,718 (634,110) Less: offsetting revenue - - - Total program costs $ 638,828 4,718 $ (634,110) Less amount paid by the State3 (638,828) Amount paid in excess of allowable costs claimed $ (634,110) -4- Yolo County Custody of Minors – Child Abduction and Recovery Program Schedule (continued) -5- C o s t E le m e n ts J u ly 1 , 2 0 2 1 , th ro u g h J u n e 3 0 , 2 0 2 2 D ire c t C o s ts : 2 S a la rie s a n d b e n e fits M a te ria ls a n d s u p p lie s T o ta l d ire c t c o s ts In d ire c t c o s ts T o ta l in d ire c t a n d d ire c t c o s ts L e s s : o ffs e ttin g re v e n u e T o ta l p ro g ra m c o s ts 3 L e s s a m o u n t p a id b y th e S ta te A m o u n t p a id in e x c e s s o f a llo w a b le c S u m m a ry : J u ly 1 , 2 0 1 8 , th ro u g h J u n e D ire c t C o s ts : S a la rie s a n d b e n e fits M a te ria ls a n d s u p p lie s T o ta l d ire c t c o s ts In d ire c t c o s ts T o ta l in d ire c t a n d d ire c t c o s ts L e s s : o ffs e ttin g re v e n u e T o ta l p ro g ra m c o s ts 3 L e s s a m o u n t p a id b y th e S ta te A 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 ts c 3 0 , 2 o s ts c la im 0 2 2 la im e e d d A c tu a l C o s ts C la im e d $ 4 7 5 ,9 0 3 4 6 ,4 4 8 5 2 2 ,3 5 1 9 8 ,2 0 3 6 2 0 ,5 5 4 - $ 6 2 0 ,5 5 4 $ 2 ,0 2 3 ,4 2 8 2 0 3 ,9 9 0 2 ,2 2 7 ,4 1 8 2 8 2 ,2 5 5 2 ,5 0 9 ,6 7 3 - $ 2 ,5 0 9 ,6 7 3 A llo w a b le p e r A u d it - 5 ,1 9 0 5 ,1 9 0 - 5 ,1 9 0 - 5 ,1 9 0 (6 2 0 ,5 5 4 $ (6 1 5 ,3 6 4 - 1 6 ,8 0 5 1 6 ,8 0 5 - 1 6 ,8 0 5 - 1 6 ,8 0 5 (2 ,5 0 9 ,6 7 3 $ (2 ,4 9 2 ,8 6 8 ) ) ) ) A u d it A d ju s tm e n t $ (4 7 5 ,9 0 3 (4 1 ,2 5 8 (5 1 7 ,1 6 1 (9 8 ,2 0 3 (6 1 5 ,3 6 4 - $ (6 1 5 ,3 6 4 $ (2 ,0 2 3 ,4 2 8 (1 8 7 ,1 8 5 (2 ,2 1 0 ,6 1 3 (2 8 2 ,2 5 5 (2 ,4 9 2 ,8 6 8 - $ (2 ,4 9 2 ,8 6 8 )) )) ) ) )) )) ) ) FF F FF F R inin in inin in e fe re n d in g 1 d in g 2 d in g 1 d in g 1 d in g 2 d in g 1 c e 1 _________________________ 1 See the Findings and Recommendations section. 2 Immaterial differences due to rounding. 3 Payment amount current as of July 9, 2024. Yolo County Custody of Minors – Child Abduction and Recovery Program Findings and Recommendations The county claimed $2,023,428 in salaries and benefits for the audit period. We determined that the entire amount is unallowable. The related unallowable indirect costs total $282,255, for total unallowable costs of $2,305,683. The costs are unallowable because the county did not support the amount claimed and did not provide contemporaneous source documentation to support the mandated functions performed or the actual number of hours devoted to each function. The following is a summary of the audit adjustment: -6- T T T C A o ta l u o ta l u o ta l a la im e u d it A n n u d a llo w a b le s a la r ie s u p p o r te d s a la r ie d it a d ju s tm e n t ( A in d ir e c t c o s ts d ju s tm e n t ( C + D s a n d b s a n d b + B ) ) e e n n e e f its f its A B C D 2 0 1 8 - 1 $ ( 5 1 0 ,9 ( 1 7 ,1 ( 5 2 8 ,1 ( 7 5 ,9 $ ( 6 0 4 ,0 9 7 5 2 2 5 8 0 8 6 4 ) ) ) ) ) F is c 2 0 1 9 - 2 0 $ ( 5 2 3 ,7 2 1 - ( 5 2 3 ,7 2 1 ( 5 0 ,1 5 2 $ ( 5 7 3 ,8 7 3 a ) ) ) ) l Y e a r 2 0 2 0 - 2 1 $ ( 4 9 5 ,6 7 6 - ( 4 9 5 ,6 7 6 ( 5 7 ,9 7 4 $ ( 5 5 3 ,6 5 0 ) ) ) ) 2 0 2 1 - 2 $ ( 4 4 6 ,2 ( 2 9 ,6 ( 4 7 5 ,9 ( 9 8 ,2 $ ( 5 7 4 ,1 2 2 7 0 0 0 7 6 3 3 6 ) ) ) ) ) T o $ ( 1 ,9 ( ( 2 ,0 ( 2 $ ( 2 ,3 ta 7 6 4 6 2 3 8 2 0 5 l ,6 ,8 ,4 ,2 ,6 0 2 2 5 8 2 6 8 5 3 ) ) ) ) ) FINDING 1— Unallowable and unsupported salaries, benefits, and related indirect costs The county provided income statements and labor and overhead reports for the Child Abduction accounting unit to support the salaries and benefits costs claimed. We inquired why the fiscal year (FY) 2018-19 and FY 2021-22 income statements disclosed a different amount than what was claimed, and the county’s representative stated that the county’s Department of Financial Services could not justify the difference between the claimed amounts and the source documentation. The county was unable to support $46,826 ($17,150 for FY 2018-19 and $29,676 for FY 2021-22) in salaries and benefits. For each fiscal year in the audit period, the county claimed employee classifications including Deputy DA, DA Enforcement Officer, and DA Investigator. The county claimed all salaries and benefits that were posted to the child abduction accounting unit, including allocated or adjusted salaries and benefits in addition to direct salaries and benefits. The county provided income statements and labor and overhead reports to support the claimed costs. The county did not claim costs based on hours worked, productive hourly rate, and benefit rate, but instead claimed all costs charged to the unit. The time spent by any employee on activities outside of their 100% assignment—including employees in the Child Abduction Unit (CAU) — is tracked using a functional time sheet. Employees’ related salaries and benefits are transferred in/out of the child abduction accounting unit using adjusted journal entries. The functional time sheets show the daily hours worked inside and outside the CAU, but do not provide a description of time spent on mandated activities. Yolo County Custody of Minors – Child Abduction and Recovery Program During audit fieldwork, the DA’s Office provided additional documentation, including a calendar of dates, activity logs, work-up notes on cases from the digital case system management “LawSuite,” and “CAU Case Numbers Log” printouts of cases for two DA Investigators and a DA Enforcement Officer. The DA’s Office also provided a sample Telecommuting Covid Time Card and Functional Timesheet for the Deputy DA. The additional documentation provided does not describe the mandated functions performed or specify the actual number of hours devoted to each function as required by the parameters and guidelines. In addition, the activity logs were created for the purpose of the audit, using estimated time increments and not actual time increments, and were not created at or near the same time the actual cost was incurred. Therefore, the activity logs are not considered contemporaneous source documents. Based on our walkthrough of claiming procedures, interviews with DA’s Office personnel, and documentation provided, the county has not supported the actual number of hours that its employees worked on mandated activities. We were unable to determine the mandated functions performed, the actual number of hours devoted to each function, and the validity of such costs. Without a description of the mandated functions, we were unable to determine whether the county claimed unallowable costs associated with criminal prosecution, commencing with the defendant’s first appearance in a California court, or claimed costs associated with non-mandate related activities. Section V., “Reimbursable Costs,” 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 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 sheets, invoices, and receipts. . . . Section VII.A.1, “Salaries and Employees’ Benefits,” of the parameters and guidelines states, in part: Identify the employee(s), show the classification of the employee(s) involved, describe the mandated functions performed and specify the actual number of hours devoted to each function, the productive hourly rate, and the related benefits. . . . Recommendation We recommend that the county: • Follow the SCO’s Mandated Cost Manual and the mandated program’s parameters and guidelines when preparing its reimbursement claims; and • Ensure that claimed costs are based on actual costs and are properly supported. -7- Yolo County Custody of Minors – Child Abduction and Recovery Program County Response I write on behalf of the County of Yolo (“County”) in response to the State Controller’s Office’s (“SCO”) draft audit report for the County’s claims for reimbursements for the state- mandated Custody of Minors- Child Abduction and Recovery Program (“Draft Report”). The Draft Report concludes that 99.3% of the County’s claims for a four-year period should be disallowed. The last time the SCO audited the same program in 2011 -- using the same Parameters and Guidelines adopted in 2009 -- the SCO auditors disallowed 0% of the County’s claims based on much of the same documentation. The SCO’s complete reversal of the documentation needed to substantiate the County’s claims is arbitrary and capricious. We respectfully request that the SCO reconsider its approach. The District Attorney’s Child Abduction Unit is dedicated to fulfilling the state-mandated child abduction and recovery functions (“Mandate”). Yolo County annually spends hundreds of thousands of dollars to fulfill the Mandate every year. During the four-year audit period, the Unit had 1,716 new cases (including 152 interstate cases and 4 international cases), resulting in 69 recoveries and 66 enforcements of visitation. Based on this work, the County submitted claims for payment of $642,697, $607,594, $638,828, and $620,554 for the 2018/2019 through 2021/2022 fiscal years, respectively. The County tracks the costs associated with the Mandate in the accounting unit for the Child Abduction Unit. The Child Abduction Unit has staff who dedicate nearly 100% of their time to fulfilling the Mandate, including one Deputy District Attorney and an Enforcement Officer. The dedicated staff occasionally spend time on tasks associated with other units in the D.A.’s Office, which is tracked through functional time sheets (provided to the auditors). The costs associated with these other activities are deducted from the Child Abduction Unit’s accounting unit. The Child Abduction Unit also is assisted by other staff in the D.A.’s Office, who track their time spent assisting the Unit on functional time sheets (also provided to the auditors). The costs associated with the non-dedicated staff’s time spent in support of the Unit is then added to the Unit’s accounting unit. The SCO auditors began working on their audit of Yolo County’s Child Abduction Unit in summer 2023 and concluded in May 2024. The auditors’ Draft Report did not find that the County’s costs were unreasonable or excessive. Nor did the auditors find that the mandated activities were paid for from other revenue. Rather, the Draft Report asserts simply that the County is not entitled to be reimbursed for over 99% of the costs associated with the Mandate simply because the documentation kept by the County no longer meets SCO’s interpretation of the applicable Parameters and Guidelines. When the auditors rejected the County’s accounting ledgers, functional time sheets, and hours logs as insufficient, the County offered samples of other contemporaneous documentation to show the work performed by the Child Abduction Unit. The auditors rejected these as well. When asked what documentation might satisfy the SCO auditors’ needs, the auditors merely quoted back the vague language from the Parameters and Guidelines. The auditors claim that they are merely following the Parameters and Guidelines applicable to the Child Abduction and Recovery Program. However, those have been in place since 2009 and were effective -8- Yolo County Custody of Minors – Child Abduction and Recovery Program beginning with the 2005-2006 fiscal year, and this is the first time the County has had any disallowances for the program. When the SCO audited the County in 2011 -- applying the same Parameters and Guidelines and relying on much of the same documentation -- the SCO auditors “conclude[d] that the county’s claims are reasonably supported.” The SCO auditors went so far as to cancel the audit because it would be “inefficient for us to complete the audit and process the audit report.” The cancellation was not some mistake by low-level staff; the decision was supported by the Mandated Cost Audits Bureau Chief. The SCO’s new interpretation of the Parameters and Guidelines, coupled with its failure to notify counties of SCO’s changed interpretation and its refusal to provide guidance of what contemporaneous documentation might be sufficient, makes it impossible for the County to be reimbursed for the work the County undisputedly performed. Even though the Parameters and Guidelines allow auditors to consider corroborating evidence, the County cannot, in SCO’s view, provide anything useful created after the fact, such as time studies or declarations sworn under penalty of perjury that attest the costs related to the program. The fact that this unannounced change in the documentation requirements resulted in the County going from a 0% disallowance rate in one audit to a 99.3% disallowance rate in the next audit shows the arbitrary nature of the SCO’s approach. In applying the new standard, the Draft Report states that “the county did not provide contemporaneous supporting documentation.” See Draft Report at pp. 1 & 6. This blanket assertion is false. In addition to the payroll information, accounting ledgers, and functional timesheets provided to the auditors, the County offered to provide contemporaneous case notes and hours logs to document the work performed by the Child Abduction Unit. The auditors rejected this information and were unable to identify documentation that would meet their requirements. We ask that the auditors reconsider this information, or, at a minimum, ensure the Report accurately reflects the information that was provided to the auditors. During the audit, the auditors cited the Commission on State Mandates’ decision for an Incorrect Reduction Claim filed by Santa Clara County as providing “guidance” as to “employees that claim 100% of their time as being program specific (but provide no other documentation).” The details of the audit at issue in the Santa Clara County proceedings show why the SCO’s new approach is so arbitrary and unreasonable. In the Santa Clara County audit, the SCO auditors reduced the County’s claimed costs for salaries and benefits due to a lack of documentation in support of claimed mandate-related hours and an inconsistent time study. However, the SCO made reasonable assumptions to “estimate” the hours spent on the program. The Commission noted, “[s]ince the claimant did not provide time logs or other adequate documentation supporting the time spent on the mandate in fiscal year 2003-2004, the Controller extrapolated employee hours identified on timesheets for January 2005 through June 2005 to approximate the actual hours spent on the program for the 2003-2004 fiscal year, instead of reducing costs to $0.” In other words, the SCO made reasonable assumptions to approximate the hours based on the available evidence, rather than arbitrarily reducing the claim to $0, even when full contemporaneous source documentation was not available. The SCO’s auditors are refusing similarly to use a reasonable approach for Yolo County in this audit. The contemporaneous time sheets and -9- Yolo County Custody of Minors – Child Abduction and Recovery Program functional time logs provided by the County shows the costs incurred for the Child Abduction Unit, and contemporaneously case notes made available to the auditors for review, but rejected, show the connection of the Unit’s work to the Mandate. The contemporaneous documentation can be supplemented by corroborating documentation to fill in any perceived gaps, as authorized in Section V of the Parameters and Guidelines. The County also could perform a time study to show “the average number of hours devoted to each function,” as provided in section VII.A.1 in the Parameters and Guidelines, to supplement the contemporaneous documentation the D.A.’s Office maintains showing the tasks performed for each case. Despite the availability of additional evidence, the auditors made clear that no such corroborating evidence would not suffice. We understand that the State is under financial pressure to cut costs wherever it can. But it should not do so on the backs of counties that are performing tasks mandated by the State. We respectfully request that the SCO revisit the County’s audit to review the contemporaneous and corroborating evidence the County can make available. After a full review of these materials, the auditors should make reasonable adjustments to determine the actual hours worked, consistent with their prior practice and the legal requirements. SCO Response Our finding and recommendation remain unchanged. We will address the county’s comments in the order in which they appear in the county’s response. On page 1 of its response, the county states: The last time the SCO audited the same program in 2011 -- using the same Parameters and Guidelines adopted in 2009 -- the SCO auditors disallowed 0% of the County’s claims based on much of the same documentation. The SCO’s complete reversal of the documentation needed to substantiate the County’s claims is arbitrary and capricious. We respectfully request that the SCO reconsider its approach. The aforementioned engagement was cancelled, and no audit report was issued. We did not make the determination that the costs were allowable or unallowable; rather, we concluded and stated in our email that the county’s claims were reasonably supported, and determined that it was an inefficient use of resources for the SCO to complete the audit and process the audit report. Furthermore, as was explained to the county during audit fieldwork, the Commission often issues Incorrect Reduction Claim (IRC) decisions that provide guidance to SCO, auditees, and the public on audit- related matters. Since 2011, several IRC decisions have guided our audit procedures related to documentation requirements, including the claimant’s burden to establish actual costs, and the requirement that the claimant’s documentation must clearly establish a relationship to the reimbursable activities listed in the parameters and guidelines. Our finding, and our basis for it, were neither arbitrary nor capricious. The Commissions’ IRC decisions inform and guide our findings and conclusions. An agency filing a claim for reimbursement must comply -10- Yolo County Custody of Minors – Child Abduction and Recovery Program with the parameters and guidelines for that mandated program, regardless of the result of any prior audit engagement. On page 2 of its response, the county states: Rather, the Draft Report asserts simply that the County is not entitled to be reimbursed for over 99% of the costs associated with the Mandate simply because the documentation kept by the County no longer meets SCO’s interpretation of the applicable Parameters and Guidelines. When the auditors rejected the County’s accounting ledgers, functional time sheets, and hours logs as insufficient, the County offered samples of other contemporaneous documentation to show the work performed by the Child Abduction Unit. The auditors rejected these as well. When asked what documentation might satisfy the SCO auditors’ needs, the auditors merely quoted back the vague language from the Parameters and Guidelines. As noted in our draft report, the parameters and guidelines for the CAR Program establish the state mandate and define reimbursement criteria. We do not “interpret” the parameters and guidelines. Providing other contemporaneous documentation to “show the work performed by the Child Abduction Unit” does not meet the requirements of the parameters and guidelines. The county did not claim costs based on hours worked, productive hourly rate, and benefit rate, as required by the parameters and guidelines; instead, it claimed all costs charged to the unit. County documentation also lacked descriptions of any mandated activities performed. The income statements, labor and overhead reports, and additional documentation that we reviewed did not describe the mandated functions performed or specify the actual number of hours devoted to each function, as required by the parameters and guidelines. The county states that the parameters and guidelines are “vague” regarding documentation requirements. We disagree. Section VII.A.1., “Salary and Employees’ Benefits,” of the parameters and guidelines clearly states, in part: Identify the employee(s), show the classification of the employee(s) involved, describe the mandated functions performed and specify the actual number of hours devoted to each function…[emphasis added]. On page 3 of its response, the county states: The details of the audit at issue in the Santa Clara County proceedings show why the SCO’s new approach is so arbitrary and unreasonable. In the Santa Clara County audit, the SCO auditors reduced the County’s claimed costs for salaries and benefits due to a lack of documentation in support of claimed mandate-related hours and an inconsistent time study. However, the SCO made reasonable assumptions to “estimate” the hours spent on the program. The Commission noted, “[s]ince the claimant did not provide time logs or other adequate documentation supporting the time spent on the mandate in fiscal year 2003-2004, the Controller extrapolated employee hours identified on timesheets for January 2005 through June 2005 to approximate the actual hours spent on the program for the 2003-2004 fiscal year, instead of reducing costs to $0.” In other words, the SCO made reasonable assumptions to approximate the hours based on the available evidence, rather than arbitrarily reducing the claim -11- Yolo County Custody of Minors – Child Abduction and Recovery Program to $0, even when full contemporaneous source documentation was not available. [emphasis in original] The issue discussed in the Santa Clara County IRC referenced was for FY 1999-00 through FY 2001-02, and FY 2003-04. The audit report was conducted under the program’s previous parameters and guidelines, adopted August 26, 1999. For the Yolo County engagement, we audited claims filed under the amended parameters and guidelines, adopted October 30, 2009. These parameters and guidelines became effective for CAR Program claims beginning in FY 2005-06, and include the language regarding contemporaneous source documentation. Claims applicable to this audit engagement were filed between July 1, 2018, and June 30, 2022. Section V., “Reimbursable Costs,” of the parameters and guidelines states: 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 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 sheets, invoices, and receipts. On page 3 of its response, the county states: The SCO’s new interpretation of the Parameters and Guidelines, coupled with its failure to notify counties of SCO’s changed interpretation and its refusal to provide guidance of what contemporaneous documentation might be sufficient, makes it impossible for the County to be reimbursed for the work the County undisputedly performed. The county asserts that the SCO failed to notify counties of the changes to the parameters and guidelines and refused to provide guidance on what contemporaneous documentation might be sufficient. However, page 1 of “Program No. 13” of the SCO’s Mandated Cost Manual states: “On October 30, 2009, CSM [the Commission] approved amendments to the Ps & Gs [parameters and guidelines] to clarify source documentation requirements.” The SCO’s updated Mandated Cost Manual is provided annually to all claimants. Furthermore, the Commission issued a “Notice of Draft Staff Analysis, Comment Period and Hearing Date” to all state agencies and interested parties on September 23, 2009. This notification was publicly available and allowed any interested parties to comment regarding the proposed changes to the CAR Program’s parameters and guidelines. On page 4 of its response, the county states: The contemporaneous documentation can be supplemented by corroborating documentation to fill in any perceived gaps, as authorized in Section V of the Parameters and Guidelines. -12- Yolo County Custody of Minors – Child Abduction and Recovery Program We disagree. The parameters and guidelines do not allow auditees the ability “to fill in any perceived gaps” with corroborating documentation. As stated previously, the income statements, labor and overhead reports, and additional documentation provided by the county did not describe the mandated functions performed or specify the actual number of hours devoted to each function, as required by the parameters and guidelines. Section V., “Reimbursable Costs,” of the parameters and guidelines states, in part: Evidence corroborating the source documents may include, but is not limited to, worksheets, cost allocation reports (system generated), purchase orders, contracts, agendas, training packets, and declarations. . . . Evidence corroborating the source documents may include data relevant to the reimbursable activities otherwise in compliance with local, state, and federal government requirements. However, corroborating documents cannot be substituted for source documents [emphasis added]. FINDING 2— The county claimed a total of $203,990 in materials and supplies costs for the audit period. We determined that $16,805 is allowable and $187,185 Unallowable and is unallowable. These costs are unallowable because the county did not unsupported support the costs with source documents showing that costs were a direct materials and supplies cost to the program or support the amount claimed; and claimed costs that costs were allocated to the CAR Program instead of actual costs supported by source documentation, as required by the program’s parameters and guidelines. The following table shows the materials and supplies costs claimed, the allowable, and the audit adjustment by fiscal year: Fiscal Amount Total Audit Year Claimed Allowable Adjustment 2018-19 $ 38,643 $ 3,957 $ (34,686) 2019-20 33,721 2,940 (30,781) 2020-21 85,178 4,718 (80,460) 2021-22 46,448 5,190 (41,258) Total $ 2 03,990 $ 16,805 $ (187,185) -13- Yolo County Custody of Minors – Child Abduction and Recovery Program The following table shows the materials and supplies costs by account claimed by the county and the audit adjustment by fiscal year: -14- 555555555555555 T A c c o N u m 0 1 0 2 0 0 1 0 2 1 0 1 0 5 1 0 1 0 7 0 0 1 1 1 0 0 1 1 1 1 0 1 1 1 2 0 1 1 9 0 0 1 1 9 1 0 1 2 0 5 0 1 2 1 0 0 1 2 4 9 0 1 2 5 0 0 1 2 5 2 0 3 0 7 1 o t a l m ub ne a t r t e r ia CCIMOOORRTMSTVE ls A c c o u n t N a m e o m m u n ic a t io n s o m m u n ic a t io n s - I n t e r n a l C n s u r a n c e - P u b lic L ia b ilit y a in t e n a n c e - E q u ip m e n t f f ic e E x p e n s e f f ic e E x p - P o s t a g e f f ic e E x p - P r in t in g e n t s a n d L e a s e s - E q u ip m e e n t s & L e a s e s - B u ild & I m r a in in g in o r E q u ip m e n t p e c D p t E x p - O t h e r r a n s p o r t a t io n a n d T r a v e l h e F u e l & M a in t - F le e t q u ip m e n t - V e h ic le a n d s u p p lie s c o s t s h np a tr r o g v e e m e n t T o t a l C la im e d $ 1 3 ,5 6 6 1 ,3 7 2 2 1 ,2 8 3 2 ,8 2 4 6 9 7 9 5 8 7 ,2 1 7 1 0 9 ,6 7 1 2 5 0 1 2 ,2 8 3 1 0 0 1 ,7 0 6 2 ,5 7 2 3 0 ,3 8 2 $ 2 0 3 ,9 9 0 A U n s u p p o r t e d $ ( 2 0 3 ) - ( 2 ,6 1 5 ) - - - - - - - - - - - - $ ( 2 ,8 1 8 ) u d it A d ju s t m e U n a llo w a b le $ ( 1 3 ,3 6 3 - ( 1 8 ,6 6 8 - - - - - ( 1 0 9 ,6 7 1 - ( 1 2 ,2 8 3 - - - ( 3 0 ,3 8 2 $ ( 1 8 4 ,3 6 7 n ) ) ) ) ) ) t T o t a l $ ( 1 3 ,5 6 6 - ( 2 1 ,2 8 3 - - - - - ( 1 0 9 ,6 7 1 - ( 1 2 ,2 8 3 - - - ( 3 0 ,3 8 2 $ ( 1 8 7 ,1 8 5 ) ) ) ) ) ) We judgmentally selected a total of five accounts for review, as the county claimed a material amount over the four-year audit period. The selected accounts included the following: • 501020, Communications • 501051, Insurance – Public Liability • 501191, Rents & Leases – Building & Improvement • 501210, Minor Equipment • 503071, Equipment – Vehicle Communications (Account 501020) The county claimed a total of $13,566 in Communications costs for the audit period. Costs included quarterly landline and monthly cellphone charges. For FY 2018-19, the county claimed a total of $4,411 in communication costs. The county provided an income statement that supported $4,208 in communication costs. We questioned the difference in amount claimed versus amount supported, the county’s representative explained that the Department of Financial Services had provided the income statement to the county’s consultant and that the Department of Financial Services was unable to determine the reason for the $203 difference in costs. The CAU was charged monthly for three cell phone lines by a third-party contractor. We reviewed monthly cell phone bills and determined that lines charged were for a Deputy DA, a DA Enforcement Officer, and a DA Investigator. The CAU was also charged quarterly for four to six landlines by the county’s Telecommunications Department. We reviewed invoices and journal entries for the claimed communication costs. Yolo County Custody of Minors – Child Abduction and Recovery Program The county did not support the claimed costs with source documents showing that the costs are a direct cost to the program or the validity of such costs and their relationship to the reimbursable activities. Therefore, we determined that a total of $13,566 in communication charges is unallowable. Insurance – Public Liability (Account 501051) The county claimed a total of $21,283 in Insurance – Public Liability costs for the audit period. For FY 2018-19, the county claimed a total of $4,061 in Insurance – Public Liability costs. The county provided an income statement that supported $1,446 in Insurance – Public Liability costs. We questioned the difference in amount claimed versus amount supported; the county’s representatives explained that the Department of Financial Services provided the income statement to the county’s consultant and that the Department of Financial Services was unable to determine the reason for the $2,615 difference in costs. The total Insurance – Public Liability cost is allocated to the DA’s Office by the county’s Department of Financial Services. A journal entry correction is performed to reallocate the cost to each accounting unit, including the CAU, based on the number of employees in the accounting unit. Based on the documentation provided, we determined that a total of $21,283 in allocated Insurance – Public Liability costs is unallowable. The costs are unallowable because the county claimed costs that were allocated to the CAR Program instead of actual costs supported by source documentation, as required by the program’s parameters and guidelines. Rents & Leases – Building & Improvement (Account 501191) The county claimed a total of $109,671 in Rents & Leases – Building & Improvement costs for the audit period. The CAU is billed yearly based on an amortization schedule for utilization of space within the DA’s Office building, and the amount increases by 3% annually. The CAU is allocated 7% of the obligation of the loan. Based on the documentation provided, we determined that a total of $109,671 in allocated Rents & Leases – Building & Improvement costs is unallowable. The costs are unallowable because the county claimed costs that were allocated to the CAR Program instead of actual costs supported by source documentation, as required by the program’s parameters and guidelines. Minor Equipment (Account 501210) The county claimed a total of $12,283 in Minor Equipment costs for the audit period. -15- Yolo County Custody of Minors – Child Abduction and Recovery Program The county claimed $105 in FY 2019-20 for the purchase of cell phone accessories and equipment; $10,397 in FY 2020-21 for the purchase and installation of equipment on a 2020 Toyota Sienna minivan; and $1,781 in FY 2021-22 for the purchase of a Dell laptop, case, and docking station. We reviewed invoices for all costs claimed. The county did not support the claimed Minor Equipment costs with source documents showing that the costs are a direct cost to the program or show the validity of such costs and their relationship to the reimbursable activities. Therefore, we determined that a total of $12,283 in Minor Equipment costs is unallowable. Equipment – Vehicle (Account 503071) The county claimed a total of $30,382 in Equipment – Vehicle costs for the audit period. The claimed costs are for the purchase of a 2020 Toyota Sienna minivan in FY 2020-21. We reviewed an invoice for the claimed cost. The county did not support the claimed Equipment – Vehicle costs with source documents showing that the costs are a direct cost to the program or showing the validity of such costs and their relationship to the reimbursable activities. Therefore, we determined that a total of $30,382 in Equipment – Vehicle costs is unallowable. Section V., “Reimbursable Costs,” 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 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 sheets, invoices, and receipts. . . . Section VII.A.3., “Materials and Supplies,” of the parameters and guidelines states, in part: Only expenditures which can be identified as a direct cost of the mandate such as, but not limited to, vehicles, office equipment, communication devices, memberships, subscriptions, publications, may be claimed. . . . Recommendation We recommend that the county: • Follow the SCO’s Mandated Cost Manual and the mandated program’s parameters and guidelines when preparing its reimbursement claims; and -16- Yolo County Custody of Minors – Child Abduction and Recovery Program • Ensure that claimed costs include only costs which can be identified as a direct cost of the mandate, are based on actual costs, and are properly supported. County Response The county did not directly address this finding in its response to the draft report. -17- Yolo County Custody of Minors – Child Abduction and Recovery Program Attachment— County’s Response to Draft Audit Report State Controller’s Office Division of Audits Post Office Box 942850 Sacramento, CA 94250 www.sco.ca.gov S24-MCC-0002