California Energy Commission - Program Audit of the Clean Job Energy Creation Fund

PROGRAM AUDIT OF THE CALIFORNIA CLEAN ENERGY JOBS ACT Audit Report PROPOSITION 39 PROGRAM Chapter 29, Statutes of 2013 July 1, 2017, through June 30, 2018 BETTY T. YEE California State Controller June 2019 BETTY T. YEE California State Controller June 28, 2019 Adrienne Alvord, Chair Citizens Oversight Board 1516 9th Street, MS 19 Sacramento, CA 95814 Dear Ms. Alvord: The State Controller’s Office (SCO) audited a selection of completed projects related to the California Clean Energy Jobs Act for the period of July 1, 2017, through June 30, 2018. As of June 30, 2018, 114 local educational agencies (LEAs) reported $63,057,214 in completed project costs and 37 community college districts (CCDs) reported $22,462,119 in completed project costs. From the list of completed projects, we selected for audit 16 LEAs and three CCDs, which reported expenditures of $24,233,274. Our audit found that:  Seven LEAs and three CCDs sole-sourced a portion of their project costs, resulting in unallowable costs of $3,013,770;  Ten LEAs and three CCDs did not include the projected energy savings in the awarded contracts;  One LEA and one CCD spent Proposition 39 funds on ineligible expenditures, resulting in unallowable costs of $19,579 ($27,654 less $8,075 that was also sole-sourced); and  Five LEAs submitted their final project completion reports after the deadline. We also identified an issue that is not significant to the audit objectives, but warrants the attention of management. Specifically we found that four LEAs with unused planning funds properly applied them to program implementation. However, as these funds were not included in their approved energy expenditure plans, the amount of Proposition 39 funds paid to these LEAs exceeded their approved energy expenditure plans by $26,238. This final audit report identifies seven LEAs and three CCDs that sole-sourced a portion of their project costs, in violation of Public Resources Code (PRC) section 26235(c). This final audit report also identifies one LEA and one CCD that spent Proposition 39 funds on ineligible expenditures, in violation of the California Energy Commission’s Proposition 39: California Clean Energy Jobs Act – 2013 Program Implementation Guidelines and the California Community Colleges Chancellor’s Office’s California Community Colleges Proposition 39 Implementation Guidelines. PRC section 26240(h)(1) states, “The Superintendent of Public Instruction shall require local education agencies to pay back funds if they are not used in accordance with state statute or regulations….” Adrienne Alvord, Chair -2- June 28, 2019 PRC section 26240(h)(2) states, “The Chancellor of the California Community Colleges shall require a community college to pay back funds if they are not used in accordance with state statute or regulations….” Findings 1 and 3 are both apportionment-significant for LEAs. If you disagree with either finding, you have 30 days from the date the SCO emailed this report to request a summary review of any apportionment-significant audit findings on the grounds of substantial compliance. In addition, you have 60 days from delivery of this letter—or 30 days following the conclusion of a summary review regarding the finding included in that review—to file a formal appeal of any apportionment-significant audit findings on any one or more of the grounds set forth in Education Code (EC) section 41344(d). The request for a summary review or formal appeal should be submitted to the following address: Executive Officer Education Audit Appeals Panel 770 L Street, Suite 1100 Sacramento, California 95814 If you have any questions regarding the summary review process or the appeal process, please see the Education Audit Appeals Panel (EAAP) website (www.eaap.ca.gov) or call EAAP at (916) 445-7745. LEAs working to resolve audit exceptions may request structured repayment plans under EC section 41344. To request a repayment plan, the LEA must submit a letter to the California Department of Education (CDE) within 90 days of receipt of this letter; within 30 days of withdrawing or receiving a determination of a summary review if there is no appeal; or within 30 days of withdrawing or receiving a final determination regarding an appeal pursuant to EC section 41344(a). More information on repayment plans can be found on the CDE’s website (http://www.cde.ca.gov/fg/au/ag/resolution.asp) or by contacting the CDE, School Fiscal Services Division, Categorical Allocations and Management Assistant Unit, at (916) 323-8068. In addition, Findings 1 and 3 both have a fiscal impact on the affected CCDs. If you disagree with these two findings, Title 5, section 59100, et seq. provides that the Chancellor for the California Community Colleges has the authority to review audit findings involving CCDs. The request for an appeal should be submitted to: Tracy Britten, Specialist Fiscal Accountability College Finance and Facilities Planning Division California Community Colleges Chancellor’s Office 1102 Q Street Sacramento, CA 95811 You may also call the CCCCO’s Fiscal Accountability Office at (916) 324-9794 for more information. Adrienne Alvord, Chair -3- June 28, 2019 If you have any questions about the audit findings, please contact Lisa Kurokawa, Bureau Chief, by telephone at (916) 327-3138. Sincerely, Original signed by JIM L. SPANO, CPA Chief, Division of Audits JLS/as cc: Jack Bastida, Contract Manager Citizens Oversight Board Jim Bartridge, Program and Policy Advisor Citizens Oversight Board Tony Thurmond, Superintendent of Public Instruction California Department of Education Kimberly Tarvin, Director of Audits and Investigation California Department of Education Caryn Moore, Director School Fiscal Services Division California Department of Education David Hochschild, Chair California Energy Commission Drew Bohan, Executive Director California Energy Commission Kristen Driskell, Deputy Director Efficiency Division California Energy Commission Bill Pfanner, Proposition 39 Project Manager Efficiency Division California Energy Commission Elise Ersoy, Manager Local Assistance and Finance Office Efficiency Division California Energy Commission Tom Epstein, President Board of Governors California Community Colleges Chancellor’s Office Eloy Ortiz Oakley, Chancellor California Community Colleges Christian Osmeña, Vice Chancellor College Finance and Facilities Planning Division California Community Colleges Chancellor’s Office Carlos Montoya, Director of Facilities Planning and Utilization College Finance and Facilities Planning Division California Community Colleges Chancellor’s Office Adrienne Alvord, Chair -4- June 28, 2019 Tracy Britten, Specialist College Finance and Facilities Planning Division California Community Colleges Chancellor’s Office Mary Kelly, CPA, Executive Officer California Education Audit Appeals Panel Juan M. Tafolla, President Board of Trustees Armona Union Elementary School District Xavier Piña, Ed.D., Superintendent Armona Union Elementary School District Susan Fagundes, Business Manager Armona Union Elementary School District William McGinnis, President Board of Trustees Butte-Glenn Community College District Samia Yaqub, Ph.D., Superintendent/President Butte-Glenn Community College District William Nicholas, Director Business Services Butte-Glenn Community College District Vicki Gordon, President Governing Board Contra Costa Community College District Fred E. Wood, Ph.D., Chancellor Contra Costa Community College District Jonah Nicholas, Assistant Vice Chancellor/Chief Financial Officer Finance Services Contra Costa Community College District Jennifer Cobian, President Board of Education El Monte City School District Maribel Garcia, Ed.D., Superintendent El Monte City School District José Marcelino Herrera, Assistant Superintendent Business Services El Monte City School District Bonnie Simas, President Board of Education Esparto Unified School District Christina Goennier, Ed.D., Superintendent Esparto Unified School District Rebecca Spiva, Chief Business Officer Business Services Esparto Unified School District Eric Swanson, President Board of Trustees Hesperia Unified School District Adrienne Alvord, Chair -5- June 28, 2019 David Olney, Superintendent Hesperia Unified School District Dr. George Landon, Assistant Superintendent Business Services Hesperia Unified School District Jade White, Administrator High Tech High International Charter School Amanda Wyatt, Chief Financial Officer High Tech High International Charter School Vincent Robinson, President Board of Trustees Luther Burbank School District Christopher Ortiz, Ph.D., Ed.D., Superintendent Luther Burbank School District Rudy Avalos, Chief Business Official Luther Burbank School District Wayne Forsythe, President Governing Board Mariposa County Office of Education Robin Hopper, Superintendent Mariposa County Office of Education Norma Dwyer, Chief Business Officer Business Services Mariposa County Office of Education Kierstin Wight, Business Services Officer Business Services Mariposa County Office of Education Diane Bateman, President Board of Education Mark Twain Union Elementary School District Julia Tidball, Superintendent Mark Twain Union Elementary School District Roy Blair, Director Business Services Mark Twain Union Elementary School District Charlene Metoyer, President Board of Education Newport-Mesa Unified School District Dr. Frederick Navarro, Superintendent Newport-Mesa Unified School District Jeff Trader, Executive Director/Chief Financial Officer Fiscal Services Newport-Mesa Unified School District Julia Lammatao, Financial Analyst Fiscal Services Newport-Mesa Unified School District Adrienne Alvord, Chair -6- June 28, 2019 Eleanor Juanita Evans, President Board of Education Oceanside Unified School District Julie A. Vitale, Ph.D., Superintendent Oceanside Unified School District Shannon Soto, Ed.D., Deputy Superintendent of Administrative Services Business Services Oceanside Unified School District Cindy Farley, President Board of Trustees Pine Ridge Elementary School District Christine Skinner, Superintendent/President Pine Ridge Elementary School District Peter J. Ottesen, President Board of Education San Joaquin County Office of Education James Mousalimas, County Superintendent of Schools San Joaquin County Office of Education Scott Anderson, Deputy Superintendent Business Services San Joaquin County Office of Education Leo Sheridan, President Board of Education San Leandro Unified School District Mike McLaughlin, Ed.D., Superintendent San Leandro Unified School District Kevin Collins, Ed.D., Assistant Superintendent Business and Operations San Leandro Unified School District T.J. Prendergast III, President Board of Trustees South Orange County Community College District Kathleen F. Burke, Ed.D., Chancellor South Orange County Community College District Ann-Marie Gabel, CPA, Vice Chancellor Business Services South Orange County Community College District Kim McCord, Executive Director Fiscal Services/Comptroller South Orange County Community College District Richard Kudlik, Internal Auditor South Orange County Community College District Daniel C. Monarrez, President Board of Education West Covina Unified School District Charles D. Hinman, Ed.D., Superintendent West Covina Unified School District Adrienne Alvord, Chair -7- June 28, 2019 John Ziegenhohn, Chief Fiscal Executive Business Services West Covina Unified School District Alex Bowlds, President Board of Trustees Willits Unified School District Mark Westerburg, Superintendent Willits Unified School District Nikki Agenbroad, Director of Fiscal Services Willits Unified School District Mark Ziegler, President Board of Trustees Yreka Union High School District Mark Greenfield, Superintendent Yreka Union High School District Tony Joling, Chief Business Official Yreka Union High School District Raul Parungao, Associate Superintendent Business Services Alameda County Office of Education Claudia C. Davis, Associate Superintendent Administrative Services Calaveras County Office of Education Kevin Otto, Deputy Superintendent/Chief Financial Officer Business Services Fresno County Superintendent of Schools Jamie Dail, Director Business Services Kings County Office of Education Candi Clark, Chief Financial Officer Business Services Los Angeles County Office of Education Dean West, CPA, Associate Superintendent Business Services Orange County Office of Education Richard De Nava, Assistant Superintendent Business Services San Bernardino County Superintendent of Schools Michael Simonson, Assistant Superintendent Business Services San Diego County Office of Education Megan Reilly, Chief Business Officer Business Services Santa Clara County Office of Education Deborah Pendley, Associate Superintendent Business Services Siskiyou County Office of Education Adrienne Alvord, Chair -8- June 28, 2019 Crissy Huey, Associate Superintendent Administrative Services Yolo County Office of Education Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Contents Audit Report Summary ............................................................................................................................ 1 Background ........................................................................................................................ 1 Audit Authority.................................................................................................................. 4 Objectives, Scope, and Methodology ............................................................................... 4 Conclusion .......................................................................................................................... 6 Follow-up on Prior Audit Findings .................................................................................. 7 Views of Responsible Officials .......................................................................................... 7 Restricted Use .................................................................................................................... 8 Schedule 1 – Total Completed Proposition 39 Program Costs for Local Educational Agencies .................................................................... 9 Schedule 2 – Total Completed Proposition 39 Program Costs for Community College Districts .................................................................. 11 Findings and Recommendations ........................................................................................... 12 Observation and Recommendation ...................................................................................... 17 Appendix—Audit Results by Local Educational Agencies and Community College Districts .................................................................. A1 Attachment A—Hesperia Unified School District’s Response to Audit Results Attachment B—High Tech High International Charter School’s Response to Audit Results Attachment C—Mark Twain Union Elementary School District’s Response to Audit Results Attachment D—Pine Ridge Elementary School District’s Response to Audit Results Attachment E—Venture Academy Charter School’s Response to Audit Results Attachment F—West Covina Unified School District’s Response to Audit Results Attachment G—Butte Glenn Community College District’s Response to Audit Results Attachment H—South Orange County Community College District’s Response to Audit Results Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Audit Report Summary The State Controller’s Office (SCO) audited a selection of completed projects related to the California Clean Energy Jobs Act for the period of July 1, 2017, through June 30, 2018. As of June 30, 2018, 114 local educational agencies (LEAs) reported $63,057,214 in completed project costs and 37 community college districts (CCDs) reported $22,462,119 in completed project costs. From the lists of completed projects, we selected for audit 16 LEAs and three CCDs, which reported total expenditures of $24,233,274. Our audit found that:  Seven LEAs and three CCDs sole-sourced a portion of their project costs, resulting in unallowable costs of $3,013,770;  Ten LEAs and three CCDs did not include the projected energy savings in the awarded contracts;  One LEA and one CCD spent Proposition 39 funds on ineligible expenditures, resulting in unallowable costs of $19,579 ($27,654 less $8,075 that was also sole-sourced); and  Five LEAs submitted their final project completion reports after the deadline. We also identified an issue that is not significant to the audit objectives, but warrants the attention of management. Specifically we found that four LEAs with unused planning funds properly applied them to program implementation. However, as these funds were not included in their approved energy expenditure plans (EEPs), the amount of Proposition 39 funds paid to these LEAs exceeded their approved EEPs by $26,238. A separate summary of the audit results for the 16 LEAs and three CCDs selected for audit is included as an Appendix to this report. Background The California Clean Energy Jobs Act was created with the approval of Proposition 39 (Chapter 29, Statutes of 2013) in the November 2012 statewide election. The statute changed the corporate income tax code to allocate projected revenue from the General Fund to the Clean Energy Job Creation Fund for five fiscal years, beginning with fiscal year (FY) 2013-14. Under the initiative, it is estimated that up to $550 million is available annually to be appropriated by the California State Legislature for purposes of funding eligible projects that create jobs in California while improving energy efficiency and expanding clean energy generation. Senate Bill 73 requires that 89% of the funds deposited annually into the Clean Energy Job Creation Fund be made available to LEAs for energy efficiency and clean energy projects, and 11% be made available to CCDs for energy efficiency and clean energy projects. An eligible energy project is an installation at or modification to a school site that improves energy efficiency or expands clean energy generation. -1- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Energy efficiency measures include heating, ventilation, and air conditioning (HVAC) system retrofits and various interior and exterior retrofits; clean energy generation measures include photovoltaic (solar) panels. All facilities within an LEA are eligible for Proposition 39 program funding. Citizens Oversight Board Proposition 39 also established the Citizens Oversight Board (COB) to review expenditures, audit the Clean Energy Job Creation Fund, and maintain transparency and accountability of the Fund. Members of the COB are appointed by the California Treasurer, Attorney General, and State Controller with two ex officio members from the California Energy Commission (CEC) and the California Public Utilities Commission (CPUC). California Department of Education The California Department of Education (CDE) is responsible for distributing Proposition 39 funding to LEAs that serve grade K-12 students. CDE allocates funds based on the following formula:  85% based on average daily attendance reported as of the second principal apportionment for the prior year (P-2); and  15% based on the number of students eligible for free and reduced- priced meals in the prior year. These funds may be used by LEAs for energy efficiency and clean energy projects, as well as related energy planning, energy training, and energy management. LEAs are required to submit an EEP to the CEC for consideration and approval. An EEP includes a technical description and project specifications for the proposed eligible energy measures. Funds are released to an LEA only after the CEC approves the EEP. LEAs with prior-year average daily attendance of 1,000 or lower are eligible to receive funding for both the current year and the following year in the current year. LEAs that select this option do not receive a funding allocation in the following year. LEAs whose first year of eligibility was FY 2013-14 also had the option of requesting a portion of that year’s award allocation for energy planning activities without submitting an EEP to the CEC. The energy planning funds can be spent only on the following four activities:  Energy audits and energy surveys/assessments;  Proposition 39 program assistance;  Hiring or retaining an energy manager; and  Energy-related training. Any unused energy planning funds must be applied toward implementing energy projects from an LEA’s approved EEP. -2- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program California Energy Commission The CEC is the primary state agency responsible for energy policy and planning. Public Resources Code (PRC) section 26235(a) requires the CEC to establish guidelines in consultation with the State Superintendent of Public Instruction, the Chancellor of the California Community Colleges, and the CPUC. On December 19, 2013, the CEC adopted the Proposition 39: California Clean Energy Jobs Act – 2013 Program Implementation Guidelines (Proposition 39 Program Implemenation Guidelines). These guidelines provide direction to LEAs on the types of awards and the required proposals, explain the screening and evaluation criteria, describe the standards to be used to evaluate project proposals, and outline the award process. Included in Proposition 39 Program Implemenation Guidelines is a savings-to-investment ratio (SIR) calculation. To be approved for Proposition 39 funding, the eligible energy project must achieve a SIR above 1.0. For example, for every dollar invested in the eligible energy project, the LEA must accrue over $1 in savings. The SIR calculation is based on the present value of the savings divided by project installation costs, subtracting rebates and other grant funding sources. The Proposition 39 Program Implemenation Guidelines also include a formula for estimating job creation benefits, pursuant to PRC section 26235(e)(10). The CEC also developed an Proposition 39: California Clean Energy Jobs Act – 2015 Energy Expenditure Plan Handbook (EEP Handbook), which includes step-by-step instructions to assist LEAs in completing the required forms. California Community Colleges Chancellor’s Office The California Community Colleges Chancellor’s Office (CCCCO) is the state agency that oversees the California community college system. The CCCCO is responsible for distributing Proposition 39 funding to individual CCDs. The funds may be used by CCDs for energy efficiency and alternative energy projects, along with related improvements and repairs, that contribute to reducing operating costs and improving health and safety conditions in the community college system. The CCCCO developed its Proposition 39: Clean Energy Jobs Act of 2012 – California Community Colleges Energy Project Guidance (Energy Project Guidance) to assist CCDs with implementing projects that meet the Proposition 39 requirements. Projects must be consistent with the State’s energy loading order, which guides the State’s energy policies and decisions according to the following priority order: 1) decreasing electricity demand by increasing energy efficiency and reducing energy usage in periods of high demand or cost, 2) meeting new energy supply needs with renewable resources, and 3) meeting new energy generation needs with clean fossil-fuel generation. -3- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program CCDs have been pursuing and implementing energy efficiency and renewable energy projects for many years through such programs as the CPUC-administered California Community Colleges/Investor Owned Utilities Energy Efficiency Partnership. This public-private partnership has been working on behalf of CCDs since 2006 and has aggressively reduced energy usage, resulting in over $12 million in costs savings for the community college system. Audit Authority Government Code (GC) section 12410 and PRC section 26210 provide the legal authority to conduct this audit. GC section 12410 states that the Controller shall superintend the fiscal concerns of the State and audit the disbursement of any state money for correctness, legality, and for sufficient provisions of law for payment. The SCO’s interagency agreement with the COB, pursuant to PRC section 26210(d)(2), commissions the SCO to review a selection of completed projects to assess the effectiveness of the expenditures in meeting the objectives of the California Clean Energy Jobs Act. Objectives, Scope, On June 15, 2016, we entered into an agreement with the COB to conduct an audit to assess the CEC’s control over implementation and and Methodology administration of the Clean Energy Job Creation Fund to ensure that the expenditure and accounting of funds complied with applicable statutes. Our agreement also included auditing a selection of completed projects (80% LEA projects and 20% CCD projects) to determine whether the energy projects were consistent with the Clean Energy Job Creation Fund’s program guidelines. We selected 16 LEAs and three CCDs for audit. We did not audit their financial statements. We conducted this 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 objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. To achieve our audit objectives for the LEA K-12 Proposition 39 Program, we:  Reviewed the CEC’s Proposition 39 Program Implementation Guidelines (issued in December 2014 and revised in Novemeber 2017) and the EEP Handbook (issued in June 2015) to ensure compliance with the applicable provisions of the Public Resources Code;  Reviewed the controls established by the CEC to ensure the completeness of EEPs, annual project expenditure reports, and close- out project completion forms submitted by LEAs;  Selected 16 of 114 LEAs with project costs totaling $20,158,851 and determined whether: o Planning funds were expended in accordance with program -4- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program requirements and unused planning funds were applied towards implementing eligible energy projects approved by the CEC; o The LEA submitted an EEP to the CEC consistent with the LEA’s priority of eligible projects; o The CEC approved the EEP in compliance with the CEC’s Proposition 39 Program Implementation Guidelines and EEP Handbook; o The approved EEP included:  A signed utility data release form from the LEA allowing the CEC to access both historical and future utility billing data;  A benchmarking process established by the CEC to determine a prioritized plan for implementing the eligible energy projects;  An identification of eligible energy projects according to any one of the three methods available to LEAs (these include an energy survey; an American Society of Heating, Refrigerating and Air-Conditioning Engineering Level 2 energy audit; or data analytics);  A SIR that adheres to the cost-effectiveness determination set forth by the CEC; and  A job-creation benefits estimation that adheres to the formula set forth by the CEC. o The final report to the CEC contained the information outlined in PRC section 26240(b)(1) through 26240(b)(7); o The LEA did not use a sole-source process to award funds; o The LEA had a signed contract that identified project specifications, costs, and projected energy savings; o The LEA supported project costs; and o The LEA paid back Proposition 39 funds if the project was torn down, remodeled, or deemed surplus and sold prior to the payback of the project. Errors found in the selected samples were not projected to the intended (total) population. To achieve our audit objectives for the CCD Proposition 39 Program, we:  Selected three of 37 CCDs with completed project costs totaling $4,074,423 and determined whether: o The CCD submitted a Proposition 39 Funding Application to the CCCCO, and the CCCCO approved the application consistent with its Proposition 39: Clean Energy Jobs Act of 2012 – California Community Colleges Proposition 39 Implementation Guidelines (issued in May 2013 and revised in April 2015); o The CCD submitted a Call for Projects form that identified projects as energy efficiency or renewable energy generation; o The Proposition 39 Close-out Project Completion form and the -5- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Annual Project Expenditure Report submitted to the CCCCO contained the following information:  The estimated amount of energy saved, accompanied by specific energy consumption and utility bill cost data for the individual facility where the project is located;  The nameplate rating of the new clean energy generation method installed;  The number of trainees resulting from the project;  The amount of time between awarding financial assistance and completing the project or training activities;  The entity’s energy intensity before and after project completion, as determined by an energy rating or benchmark system; and  The number of direct full-time equivalent employees created by each project and the average number of months or years of utilization of each of these employees. o The CCD did not use a sole-source process to award funds; o The CCD had a signed contract that identified project specifications, costs, and projected energy savings; o The CCD supported project costs; and o The CCD paid back the Porposition 39 Program funds if the project was torn down, remodeled, or deemed surplus and sold prior to the payback of the project. Errors found in the selected samples were not projected to the intended (total) population. Conclusion As a result of conducting the audit procedures, we found instances of noncompliance with the audit objectives outlined in the Objectives, Scope, and Methodology section. These instances are quantified in the Schedules and described in the Findings and Recommendations section of this report. We selected 16 LEAs and 3 CCDs with completed projects for audit. These 19 agencies reported total completed project costs of $24,233,274 ($20,158,851 for LEAs and $4,074,423 for CCDs). Our audit found:  Seven LEAs and three CCDs sole-sourced a portion of their project costs, resulting in unallowable costs of $3,013,770;  Ten LEAs and three CCDs did not include the projected energy savings in the awarded contracts;  One LEA and one CCD spent Proposition 39 funds on ineligible expenditures, resulting in unallowable costs of $19,579 ($27,654 less $8,075 that was also sole-sourced); and  Five LEAs submitted their final project completion reports after the deadline. -6- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program We also identified an issue that is not significant to the audit objectives, but warrants the attention of management. Specifically we found that four LEAs with unused planning funds properly applied them to program implementation. However, as these funds were not included in their approved EEPs, the amount of Proposition 39 funds paid to these LEAs exceeded their approved EEPs by $26,238. This issue is described in the Observation and Recommendation section of this report. Follow-up on We previously conducted an audit of 20 LEAs and CCDs with completed projects between December 19, 2013, and June 30, 2016, and issued an Prior Audit audit report on June 30, 2017. We conducted a second audit of another 20 Findings LEAs and CCDs with completed projects between July 1, 2016, and June 30, 2017, and issued an audit report on July 13, 2018. The report issued on July 13, 2018, found that:  Seven LEAs sole-sourced all or a portion of their project costs, totaling $557,645;  Twelve LEAs and three CCDs did not include projected energy savings in their awarded contracts;  Two LEAs applied Proposition 39 funding, totaling $277,987, toward project costs incurred prior to the eligibility period of December 19, 2013;  Four LEAs submitted their final project completion reports after the deadline; and  The CEC did not properly review one EEP out of the 16 that we reviewed. The 20 LEAs and CCDs identified in the June 30, 2017 audit report are not the same 20 LEAs and CCDs identified in the July 13, 2018 audit report, and they are not the same 19 LEAs and CCDs selected for the current audit; however, we found that all three audits identified the same issues. Views of We discussed our audit results with representatives of the 16 LEAs and three CCDs selected for testing during audit fieldwork via email at the end Responsible of the audit. All responses have been included in the Appendix and Officials Attachments A through H. -7- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Restricted Use This report is solely for the information and use of the COB, the CDE, the CEC, the CCCCO, Armona Union Elementary School District, Butte- Glenn Community College District, Contra Costa Community College District, El Monte City School District, Esparto Unified School District, Hesperia Unified School District, High Tech High International Charter School, Luther Burbank School District, Mariposa County Office of Education, Mark Twain Union Elementary School District, Newport- Mesa Unified School District, Oceanside Unified School District, Pine Ridge Elementary School District, San Leandro Unified School District, South Orange County Community College District, Venture Academy Charter School, West Covina Unified School District, Willits Unified School District, Yreka Union High School District, 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 JIM L. SPANO, CPA Chief, Division of Audits June 28, 2019 -8- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Schedule 1— Total Completed Proposition 39 Program Costs for Local Educational Agencies July 1, 2017, through June 30, 2018 Program Planning Amount Local Educational Agency Implementation Funds 1 Total Unallowable Reference 2 Completed projects selected for audit: Armona Union Elementary School District $ 287,683 $ 28,005 $ 315,688 $ - El Monte City School District 2,017,022 144,797 2,161,819 (3,819) Finding 2, 3 Esparto Unified School District 301,745 - 301,745 - Finding 2 Hesperia Unified School District 4,798,481 260,000 5,058,481 - Finding 4 High Tech High International Charter School 246,555 15,000 261,555 (50,000) Finding 1, 2 Luther Burbank School District 266,798 10,767 277,565 - Finding 2 Mariposa County Office of Education 62,563 15,919 78,482 - Finding 2, 4 Mark Twain Union Elementary School District 276,203 7,600 283,803 (16,368) Finding 1, 2 Newport-Mesa Unified School District 4,799,573 - 4,799,573 - Oceanside Unified School District 937,052 34,787 971,839 (45,449) Finding 2 Pine Ridge Elementary School District 62,028 15,507 77,535 - Finding 2, 4 San Leandro Unified School District 2,015,425 58,500 2,073,925 - Finding 4 Venture Academy Charter School (San Joaquin Office of Education) 620,039 - 620,039 4 (26,447) Finding 1 West Covina Unified School District 1,891,376 136,277 2,027,653 (2,027,653) Finding 1, 2, 3 Willits Unified School District 544,280 29,259 573,539 - Finding 2 Yreka Union High School District 255,353 20,257 275,610 (20,257) Finding 1, 2, 4 Total, completed projects selected for audit $ 19,382,176 $ 776,675 $ 20,158,851 3 $ (2,189,993) Completed projects not selected for audit: Acalanes Union High School District $ 8 97,787 $ 130,000 $ 1,027,787 Ackerman Elementary School District 2 44,314 17,500 261,814 Alexander Valley Union Elementary 1 93,000 50,000 243,000 Allensworth Elementary School District 5 8,996 4,183 63,179 Alta-Dutch Flat Union Elementary 5 4,792 15,745 70,537 Alta Loma Elementary School District 3 51,465 130,000 481,465 Anaheim Union High School District 5 35,853 17,860 553,713 Antelope Elementary School District 1 75,907 17,801 193,708 Antelope Valley Union High School District 1 ,185,286 25,000 1,210,286 Ballard Elementary School District 1 46,813 33,197 180,010 Bella Vista Elementary School District 2 15,144 53,786 268,930 Bert Corona Charter School 2 46,789 14,300 261,089 Big Pine Unified School District 2 50,000 - 250,000 Buckeye Union Elementary School District 7 24,480 - 724,480 Burnt Ranch Elementary School District 5 8,622 9,475 68,097 Caliente Union Elementary School District 7 2,191 - 72,191 Calipatria Unified School District 5 48,293 8,500 556,793 Castaic Union School District 4 92,103 60,000 552,103 Castle Rock Union Elementary School District 2 8,306 5,698 34,004 Central Union High School District 8 43,990 130,000 973,990 Chatom Union School District 2 02,795 18,823 221,618 Chicago Park Community Charter School 2 6,606 11,427 38,033 Chrysalis Charter School 1 00,243 - 100,243 Chula Vista Elementary School District 1 ,223,834 - 1,223,834 Coachella Valley Unified School District 4 ,638,411 - 4,638,411 Corona-Norco Unified School District 1 ,942,642 - 1,942,642 Crossroads Charter School 1 04,787 5,510 110,297 Cucamonga School District 1 25,009 - 125,009 Cutler-Orosi Joint Unified School District 6 92,377 41,795 734,172 Empire Union Elementary School District 5 98,381 50,232 648,613 Fresno Unified School District 1 ,294,341 14,999 1,309,340 Glendora Unified School District 7 53,682 25,000 778,682 Grant Elementary School District 3 5,986 4,652 40,638 Gridley Unified School District 5 76,122 - 576,122 Hanford Joint Union High School District 1 58,249 7,950 166,199 Hornbrook Elementary School District 2 2,289 5,700 27,989 Hughson Unified School District 9 9,399 - 99,399 Hydesville Elementary School District 1 02,990 50,633 153,623 Igo, Ono, Platina Union Elementary School District 7 8,099 - 78,099 Julian Union Elementary School District 2 42,059 52,947 295,006 Kingsburg Elementary Charter School 5 25,789 37,296 563,085 Larkspur-Corte Madera School District 3 50,000 - 350,000 Lennox School District 2 84,694 - 284,694 -9- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Schedule 1—(continued) Program Planning Amount Local Educational Agency Implementation Funds 1 Total Unallowable Reference 2 Completed projects not selected for audit: Lindsay Unified School District 4 39,980 47,315 487,295 Little Shasta Elementary School District 2 7,822 2,400 30,222 Livermore Valley Joint Unified School District 1 65,835 159,280 325,115 Los Alamitos Unified School District 1 ,291,135 101,500 1,392,635 Madera County Office of Education 8 4,587 15,535 100,123 Maple Elementary School 1 38,059 - 138,059 Mariposa County Unified School District 5 44,227 22,306 566,533 Mary Collins Charter School at Cherry Valley 2 33,011 21,463 254,474 Mid Valley Alternative Charter School 3 7,328 15,063 52,391 Monarch Learning Center 4 0,470 51,172 91,642 Monson-Sultana Joint Union Elementary School District 2 64,796 16,993 281,789 Montague Elementary School District 2 07,160 51,790 258,950 Monterey County Home Charter School 6 2,955 949 63,904 Nevada Joint Union High School District 3 65,514 - 365,514 Northern Humboldt Union High School District 1 49,391 10,802 160,192 Oak Grove Elementary School District (EEP #550) 8 50,000 75,000 925,000 Oak Grove Elementary School Districtb (EEP #1791) 1 ,486,316 153,059 1,639,375 Ocean View School District 1 07,907 65,700 173,607 One.Charter School 2 58,663 - 258,663 Orange County Educational Arts Academy 1 59,000 7,500 166,500 Oroville City Elementary School District 2 36,972 - 236,972 Palisades Charter High School (EEP #629) 1 77,261 24,845 202,106 Palisades Charter High School (EEP #1083) 1 06,619 - 106,619 Penngrove Elementary School 2 56,679 - 256,679 Petaluma City Elementary School District 4 86,742 46,784 533,526 Planada Elementary School District 9 1,376 30,000 121,376 Pollock Pines Elementary School District 1 81,034 - 181,034 Pomona Unified School District 3 06,840 404,635 711,475 Redondo Beach Unified School District 1 56,434 - 156,434 Rialto Unified School District (EEP #103) 1 ,357,000 34,000 1,391,000 Rialto Unified School District (EEP #2566) 8 82,502 34,000 916,502 Rio Bravo-Greeley Union Elementary School District 2 82,737 57,414 340,151 Roseville City Elementary School District 3 71,828 58,500 430,328 Round Valley Joint Elementary School District 2 12,181 - 212,181 San Antonio Union Elementary School District 2 55,545 - 255,545 San Joaquin Building Futures Academy 2 58,663 - 258,663 San Joaquin County Office of Education 6 95,112 - 695,112 San Jose Charter Academy 5 02,530 35,000 537,530 Santa Ynez Valley Union High School District 2 69,960 - 269,960 Savanna Elementary School District 3 89,926 13,430 403,356 Science & Technology Academy at Knights Landing 4 5,272 - 45,272 Semitropic Elementary School District 2 42,391 - 242,391 Shasta Union Elementary School District 2 49,057 5,101 254,158 Snowline Joint Unified School District 2 84,111 130,000 414,111 Solvang Elementary School District 2 17,627 - 217,627 Stellar Charter School 2 02,472 50,618 253,090 Temecula Preparatory School 6 5,762 - 65,762 Temecula Valley Charter School (EEP #619) 4 6,470 - 46,470 Temecula Valley Charter School (EEP #2613) 5 9,925 - 59,925 Trinity County Office of Education 4 5,334 15,075 60,409 Tustin Unified School District 7 09,015 - 709,015 Twin Ridges Home Study Charter School 2 5,830 2,260 28,090 University Preparatory School 2 64,000 - 264,000 Upper Lake Unified School District 1 06,055 54,594 160,649 Wheatland Charter Academy 1 4,089 15,467 29,556 Wheatland Elementary School District 4 52,819 78,054 530,873 Willits Charter School 1 25,208 10,000 135,208 Willows Unified School District 5 52,070 21,000 573,070 Woodlake Unified School District 2 75,231 32,000 307,231 Total, completed projects not selected for audit 39,877,750 3,020,612 42,898,362 Total completed projects $ 59,259,926 $ 3,797,287 $ 63,057,214 _________________________ 1 The planning funds are requested directly from CDE before an EEP is submitted. 2 See the Findings and Recommendations section. 3 We tested 100% of the costs reported, totaling $20,158,851, for the 16 LEAs selected for audit. 4 Venture Academy received apportionments totaling $573,704, $46,335 less than the total amount requested of $620,039. -10- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Schedule 2— Total Completed Proposition 39 Program Costs for Community College Districts July 1, 2017, through June 30, 2018 Program Amount Community College District Implementation Unallowable Reference 1 Completed projects selected for audit: Butte-Glenn Community College District $ 1,244,954 $ (156,130) Finding 1, 2 Contra Costa Community College District 1,253,496 (664,114) Finding 1, 2 South Orange County Community College District 1 ,575,973 ( 23,112) Finding 1, 2, 3 Total, completed projects selected for audit $ 4,074,423 2 $ (843,356) Completed projects not selected for audit: Cabrillo Community College District 145,883 Cerritos Community College District 244,173 Coast Community College District 1,459,306 Compton Community College District 156,404 Copper Mountain Community College District 34,965 Desert Community College District 615,113 El Camino Community College District 246,429 Feather River Community College District 11,816 Gavilan Joint Community College District 71,753 Grossmont-Cuyamaca Community College District 1,013,495 Imperial Community College District 76,725 Kern Community College District 110,507 Los Rios Community College District 672,433 Mt. San Jacinto Community College District 516,367 Ohlone Community College District 285,458 Palo Verde Community College District 53,638 Peralta Community College District 300,744 Rancho Santiago Community College District 1,096,152 Redwoods Community College District 90,630 Rio Hondo Community College District 295,253 Riverside Community College District 638,537 San Diego Community College District 3,275,626 San Francisco Community College District 1,184,852 San Joaquin Delta Community College District 308,189 San Jose/Evergreen Community College District 155,625 San Luis Obispo County Community College District 537,511 San Mateo County Community College District 1,047,041 Santa Monica Community College District 196,492 Shasta-Tehama-Trinity Joint Community College District 731,956 Siskiyous Community College District 189,314 Sonoma County Junior College District 432,484 Southwestern Community College District 1,745,677 Ventura County Community College District 104,490 West Valley-Mission Community College District 342,658 Total, completed projects not selected for audit $ 18,387,696 Total completed projects $ 22,462,119 ______________________ 1See the Findings and Recommendations. 2We tested 100% of the costs reported, totaling $4,074,423, for the three CCDs selected for the audit. -11- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Findings and Recommendations FINDING 1— We found that seven LEAs and three CCDs sole-sourced a portion of their project costs, totaling $3,013,770, as follows: Sole-sourced project costs El Monte City School District $ 3 ,819 High Tech High International Charter School 5 0,000 Mark Twain Union Elementary School District 1 6,368 Oceanside Unified School District 4 5,449 Venture Academy Charter School 2 6,447 West Covina Unified School District 2,027,653 1 Yreka Union High School District 2 0,257 Subtotal, Local Educational Agencies $ 2 ,189,993 Butte-Glenn Community College District $ 156,130 Contra Costa Community College District 664,114 South Orange County Community College District 3,533 Subtotal, Community College Districts $ 823,777 Total $ 3 ,013,770 _____________ 1For West Covina Unified School District, we found that of the $2,027,653 that was sole-sourced, $8,075 was also applied to ineligible expenditures (see Finding 3). These seven LEAs and three CCDs did not provide supporting documentation to show that they considered other vendors before awarding contracts. PRC section 26235(c) states, in part, “A community college district or LEA shall not use a sole source process to award funds pursuant to this chapter.” We have interpreted the requirement to “not use a sole source process to award funds” as the necessity for a competitive process. Competitive processes improve cost-effectiveness, prevent favoritism, and make the procurement process transparent. For the Proposition 39 program, LEAs and CCDs hired contractors to perform critical functions for energy upgrades. However, despite their reliance on contractors, these LEAs and CCDs used noncompetitive processes to contract for these vital services and, thus, did not ensure the cost-effectiveness of these services. Recommendation We recommend that:  The CDE take appropriate action in response to funds paid to LEAs that did not meet the sole-source requirement; and  The CCCCO take appropriate action in response to funds paid to CCDs that did not meet the sole-source requirement. -12- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program No recommendation for LEAs and CCDs is applicable to this finding, as the Proposition 39 program has ended. LEAs’ and CCDs’ Response We notified the seven LEAs and three CCDs of this finding during audit fieldwork and at the end of the audit via email. Findings and Recommendations for individual LEAs and CCDs are included in the Appendix; their complete responses are included as attachments. FINDING 2— We found that 10 LEAs and three CCDs did not include the required projected energy savings in the awarded contracts, as follows: Projected energy savings not identified Local Education Agency in awarded contracts Armona Union Elementary School District El Monte City School District High Tech High International Charter School Luther Burbank School District Mariposa County Office of Education Mark Twain Union Elementary School District Oceanside Unified School District Pine Ridge Elementary School District Willits Unified School District Yreka Union High School District Community College District Butte-Glenn Community College District Contra Costa Community College District South Orange County Community College District PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” We found that many of the awarded contracts include generic statements that energy savings will be realized; however, these contracts do not identify the amount of projected energy savings. In discussing this issue with agency representatives during audit fieldwork, many representatives commented that the approved energy plans and board documents identified the required projected energy savings amounts. We agree that these documents included the projected energy savings amounts; however, the guidelines require projected energy savings amounts to be identified in awarded contracts. Recommendation No recommendation for LEAs and CCDs is applicable to this finding, as the Proposition 39 program has ended. LEAs’ and CCDs’ Response We notified the 10 LEAs and three CCDs of this finding during audit fieldwork and at the end of the audit via email. Findings and -13- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Recommendations for individual LEAs and CCDs are included in the Appendix; their complete responses are included as attachments. FINDING 3— We found that one LEA and one CCD applied Proposition 39 funds to Proposition 39 funds project costs not approved by the CEC or by the CCCCO, resulting in applied to ineligible ineligible costs of $19,579 ($27,654 less $8,075 that was also sole- sourced). expenditures West Covina Unified School District We reviewed the invoices from Associated Environmental Management for storm water pollution prevention services, and determined that the services were not related to the approved project costs in the district’s EEP. Therefore, we found that $8,075 for storm water pollution prevention services is ineligible for Proposition 39 funding. However, we found that this amount was also sole-sourced (see Finding 1). The district self-certified in its EEP that “The LEA commits to use the funds for the eligible energy project(s) approved in its energy expenditure plan.” The CEC’s Proposition 39 Program Implementation Guidelines state, “LEAs can only use Proposition 39 funding for the eligible energy projects approved in their energy expenditure plans.” South Orange County Community College District We found that South Orange County Community College District applied Proposition 39 funds from application SOUTHO-1516-001-05 to project costs not included in the application approved by the CCCCO. The district improperly paid $19,579 to vendor Clear Blue Energy for an interior lighting project that was not identified in the application. The district signed and certified in its application that the funding would be used for the energy projects identified in its application. Recommendation We recommend that:  The CDE take appropriate action in response to ineligible project costs; and  The CCCCO take appropriate action in response to ineligible project costs. No recommendation for LEAs and CCDs is applicable to this finding, as the Proposition 39 program has already ended. LEA’s and CCD’s Response We notified the LEA and the CCD of this finding during audit fieldwork and at the end of the audit via email. Findings and Recommendations for -14- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program individual LEAs and CCDs are included in the Appendix; their complete responses are included as attachments. FINDING 4— We found that five LEAs submitted their final project completion reports Final project after the deadline. LEAs are required to submit a final project completion completion reports report to the CEC 12 to 15 months after the EEP is completed. An EEP is submitted after the considered complete when the LEA has completed all measures in the approved EEP. deadline The following table identifies the number of months the final report was submitted after the project was completed: District Months Hesperia Unified School District 26 Mariposa County Office of Education 19 Pine Ridge Elementary School District 22 San Leandro Unified School District 28 Yreka Union High School District 16 PRC section 26240(b) states, in part: As a condition of receiving funds from the Job Creation Fund, not sooner than one year but no later than 15 months after an entity completes its first eligible project with grant, loan, or other assistance from the Job Creation Fund, the entity shall submit a report of its project expenditures to the Citizens Oversight Board….To the extent practical, this report shall also contain information on any of the following: 1. The total final gross project costs before deducting any incentives or other grants and the percentage of total project costs derived from the Job Creation Fund. 2. The estimated amount of energy saved, accompanied by specified energy consumption and utility bill cost data for the individual facility where the project is located, in a format to be specified by the Energy Commission. 3. The nameplate rating of new clean energy generation installed. 4. The number of trainees. 5. The number of direct full-time equivalent employees and the average number of months or years of utilization of each of these employees. 6. The amount of time between awarding of the financial assistance and the completion of the project or training activities. 7. The entity’s energy intensity before and after project completion, as determined from an energy rating or benchmark system… Recommendation No recommendation for LEAs is applicable to this finding, as the Proposition 39 program has ended. -15- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program LEAs’ Response We notified the five LEAs of this finding during audit fieldwork and at the end of the audit via email. Findings and Recommendations for individual LEAs and CCDs are included in the Appendix; their complete responses are included as attachments. -16- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Observation and Recommendation We found that four LEAs with unused planning funds properly applied Unused planning them to program implementation. However, as these funds were not funds included in their approved EEPs, the amount of Proposition 39 funds paid to these LEAs exceeded their approved EEPs by $26,238, as follows: Program Planning Total Total Unused Local Educational Agency Implementation Funds EEP Approved CDE Apportionment Planning Funds A B C = B - A Armona Union Elementary School District $ 287,683 $ 28,005 $ 3 15,688 $ 3 17,912 $ 2,224 Luther Burbank School District 266,798 10,767 2 77,565 2 87,614 10,049 San Leandro Unified School District 2,015,425 58,500 2 ,073,925 2 ,079,178 5,253 Willits Unified School District 544,280 29,259 5 73,539 5 82,251 8,712 Total $ 3 ,114,186 $ 126,531 $ 3 ,240,717 $ 3 ,266,955 $ 26,238 We reviewed the districts’ ledgers and found that these LEAs received funds in excess of the total amounts indicated in the EEPs approved by the CEC because these LEAs applied their unused planning funds to project implementation. LEAs had the option of requesting planning funds for energy planning activities in FY 2013-14 without submitting an EEP to CEC. The funds were intended to be used for planning activities for FY 2013-14 through FY 2017-18. Any unused planning funds can be applied toward implementing energy projects that are part of an approved EEP. The four LEAs in our sample opted to use only a portion of their planning funds, and were able to apply the remaining funds toward project implementation. However, the unspent planning funds were not included in an approved EEP. CDE releases program implementation funds based solely on the amounts requested in approved EEPs; as a result, these LEAs received program implementation funds in excess of their approved EEP amount. PRC section 26235(f) states: The Superintendent of Public Instruction shall not distribute funds to an LEA unless the LEA has submitted to the Energy Commission, and the Energy Commission has approved, an expenditure plan that outline the energy projects to be funded. An LEA shall utilize a simple form expenditure plan developed by the Energy Commission. The Energy Commission shall promptly review the plan.…A portion of the funds may be distributed to an LEA upon request for energy audits and other plan development activities prior to submission of the plan. The CEC’s Proposition 39 Program Implementation Guidelines state: LEAs whose first year of eligibility was fiscal year 2013-14, the first year of the program, had the option of requesting a portion of that year’s award allocation for energy planning activities in 2013-14 without submitting an energy expenditure plan(s) to the Energy Commission. This option was available only for the fiscal year 2013-14 award allocation of the Proposition 39 program and was intended to be used for planning activities for subsequent fiscal years (2013-14 through 2017-18). The CEC’s Proposition 39 Program Implementation Guidelines also state -17- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program that “Any unused energy planning funds shall be applied toward implementing eligible energy project(s) approved as part of an LEA’s energy expenditure plan(s).” Recommendation We recommend that:  CDE take appropriate action in response to unused planning funds identified in this audit; and  CDE and CEC account for unspent planning funds that were applied to program implementation without being included in an approved EEP. CDE’s Response We initially communicated the results of our observation to a CDE representative via email on January 30, 2019. After subsequent email exchanges to further explain our observation, we received an email response on March 15, 2019, stating: I was able to vouch your numbers and agree that the 4 districts audited had unused planning funds that should be returned to the state. However, I do not consider them to be “overpaid EEP funds” per the payment process established for this program, but rather “unused planning funds” that should be returned to the state. We will proceed to bill for return of unused planning funds once a finding is issued. -18- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Appendix— Audit Results by Local Educational Agencies and Community College Districts Local Educational Agencies Armona Union Elementary School District ..................................................................................... A2 El Monte City School District ......................................................................................................... A4 Esparto Unified School District ....................................................................................................... A6 Hesperia Unified School District ..................................................................................................... A7 High Tech High International Charter School ................................................................................. A9 Luther Burbank School District ....................................................................................................... A12 Mariposa County Office of Education ............................................................................................. A14 Mark Twain Union Elementary School District .............................................................................. A16 Newport-Mesa Unified School District ........................................................................................... A19 Oceanside Unified School District................................................................................................... A20 Pine Ridge Elementary School District ........................................................................................... A22 San Leandro Unified School District ............................................................................................... A24 Venture Academy Charter School (San Joaquin County Office of Education) ............................... A26 West Covina Unified School District .............................................................................................. A29 Willits Unified School District ........................................................................................................ A33 Yreka Union High School District ................................................................................................... A35 Community College Districts Butte-Glenn Community College District ....................................................................................... A37 Contra Costa Community College District ...................................................................................... A41 South Orange County Community College District ........................................................................ A43 -A1- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Armona Union Elementary School District Proposition 39 Program Background The California Energy Commission (CEC) approved Armona Union Elementary School District’s energy expenditure plan (EEP) for $287,683, consisting of $12,000 for energy management services and $275,683 for program implementation. The district used its program implementation funds for the following energy efficiency measures: Proposition 39 Energy Reported Share Used Efficiency Annual Cost School Site at School Site Measures Savings Armona Elementary $ 4 4,804 Lighting retrofit $ 3 ,282 Parkview Middle 2 30,879 HVAC and lighting retrofit 8 ,401 Total $ 275,683 $ 1 1,683 With these energy efficiency measures, the district reported a combined savings-to-investment ratio (SIR) of 1.74 and the creation of 1.54 direct job-years. In addition, the district received $28,005 in planning funds directly from the CDE, which was used for screening and audits, and program assistance. Audit Results We audited the Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CEC’s Proposition 39: California Clean Energy Jobs Act – 2013 Program Implementation Guidelines (Proposition 39 Program Implementation Guidelines) and Proposition 39: California Clean Energy Jobs Act – 2015 Energy Expenditure Plan Handbook (EEP Handbook). We identified the following audit issue: Projected energy savings not identified in awarded contracts We reviewed the district’s contract with Indoor Environmental Services (IES) and determined that the contract does not identify the projected energy savings. Public Resource Code (PRC) section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” We also identified the following observation: Unused planning funds We found that the district applied unused planning funds to program implementation. However, these funds were not included in its approved EEP. As a result, the district received funding that exceeded its approved EEP by $2,224. We informed the CDE of our observation via email on January 30, 2019. -A2- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Recommendation We recommend that the CDE take appropriate action in response to the unused planning funds identified in this audit. No additional recommendation is applicable, as the Proposition 39 program has ended. District’s Response We informed the district of the audit finding and observation via email on February 26, 2019. We did not receive a response from the district. -A3- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program El Monte City School District Proposition 39 Program Background The CEC approved El Monte City School District’s EEP for $2,017,022, consisting of $160,000 for energy management services and $1,857,022 for program implementation. The district used its program implementation funds for the following energy efficiency measures: Proposition 39 Reported Share Used Energy Annual Cost School Site at School Site Efficiency Measures Savings Asher Facility $ 14,651 Lighting and HVAC controls $ 524 Barton Center 9,872 Lighting and HVAC controls 1,141 Byron Thompson/Durfee 156,150 Lighting and HVAC controls 12,968 Central Kitchen 22,266 Lighting and HVAC controls 1,120 Cherrylee Elementary 95,936 Lighting and HVAC controls 7,052 Child Development 9,110 Lighting and HVAC controls 383 Cleminson Elementary 79,038 Lighting and HVAC controls 5,347 Columbia Elementary 177,101 Lighting and HVAC controls 12,773 Cortada Elementary 88,254 Lighting and HVAC controls 8,793 District Office 59,462 Lighting and HVAC controls 3,694 Gidley Elementary 109,875 Lighting and HVAC controls 9,331 Legore Elementary 149,040 Lighting and HVAC controls 12,986 Loma Center 55,104 Lighting and HVAC controls 6,482 New Lexington Elementary 63,163 Lighting and HVAC controls 4,484 Potrero Elementary 133,529 Lighting and HVAC controls 13,265 Rio Hondo Elementary 148,012 Lighting and HVAC controls 8,359 Rio Vista Elementary 116,087 Lighting and HVAC controls 10,322 Shripser Elementary 117,792 Lighting and HVAC controls 9,985 Wilkerson Elementary 107,783 Lighting and HVAC controls 12,017 Wright Elementary 144,797 Lighting and HVAC controls 12,695 Total $ 1,857,022 $ 1 53,721 With these energy efficiency measures, the district reported a combined SIR of 1.22 and the creation of 10.40 direct job-years. In addition, the district received $144,797 in planning funds directly from the CDE, which it used for screening and audits, and energy management services. We audited the Proposition 39 program costs to ensure compliance with Audit Results the Job Creation Fund program guidelines, as well as the CEC’s Proposition 39 Program Implementation Guidelines and EEP Handbook. We identified the following audit issues: Sole-sourced project costs We found that the district sole-sourced its contract with Alsaleh Project Management, Inc. for construction management services for a district- wide exterior lighting fixtures maintenance project – A1803. The district did not provide supporting documentation to show that it considered other vendors before awarding the contract to Alsaleh Project Management, Inc. -A4- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Therefore, we found that the district sole-sourced its Proposition 39 contract, totaling $3,819. PRC section 26235(c) states, in part, “A community college district or LEA shall not use a sole source process to award funds pursuant to this chapter.” Projected energy savings not identified in awarded contracts We reviewed the district’s contracts with RDM Electric Co., Inc. and Anderson Air Conditioning, L.P. and determined that the contracts do not identify the projected energy savings. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” Recommendation We recommend that the CDE take appropriate action in response to funds paid that did not meet the sole-source requirement. No additional recommendation is applicable, as the Proposition 39 program has ended. District Response We informed the district of the two audit findings via email on February 14, 2019. We did not receive a response from the district. -A5- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Esparto Unified School District Proposition 39 Program Background The CEC approved Esparto Unified School District’s EEP for $301,745. The district used its implementation funds for the following renewable energy generation measure: Proposition 39 Renewable Energy Reported Share Used Generation Annual Cost School Site at School Site Measures Savings Esparto K-8 $ 301,745 Photovoltaic (solar) panels $ 8,002 $ 301,745 $ 8,002 With this renewable energy generation measure, the district reported a combined SIR of 0.25 and the creation of 1.27 direct job-years. Audit Results We audited the Proposition 39 program costs and found that all costs reported were compliance with the Job Creation Fund program guidelines, as well as the CEC’s Proposition 39 Program Implementation Guidelines and EEP Handbook. District’s Response We informed the district via email on February 26, 2019, that all costs reported for Esparto Unified School District were in compliance with the program guidelines. We did not receive a response from the district. -A6- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Hesperia Unified School District Proposition 39 Program Background The CEC approved Hesperia Unified School District’s EEP for $4,798,481. The district used its program implementation funds for the following energy efficiency measures: Proposition 39 Reported Share Used Energy Annual Cost School Site at School Site Efficiency Measures Savings Carmel Elementary $ 111,328 Interior/exterior lighting retrofit and plug loads $ 8,347 Cedar Middle 455,678 HVAC controls, interior/exterior lighting retrofit, and plug loads 27,967 Cottonwood Elementary 82,886 Exterior lighting retrofit and plug loads 5,964 Cypress School of the Arts 344,084 HVAC controls, interior/exterior lighting retrofit, and plug loads 21,712 Eucalyptus Elementary 212,585 HVAC, exterior lighting retrofit, and plug loads 12,397 Hesperia High 1,011,224 HVAC controls, interior/exterior lighting retrofit, and plug loads 61,042 Hollyvale Elementary 229,410 HVAC controls, interior/exterior lighting retrofit, and plug loads 13,092 Juniper Elementary 51,128 HVAC, exterior lighting retrofit, and plug loads 3,892 Mission Crest Elementary 53,634 Interior/exterior lighting retrofit and plug loads 5,756 Ranchero Middle 795,878 HVAC, interior/exterior lighting retrofit, and plug loads 50,958 Sultana High 1,312,181 HVAC, interior/exterior lighting retrofit, and plug loads 77,902 Topaz Preparatory Academy 138,465 Interior/exterior lighting retrofit and plug loads 9,325 Total $ 4,798,481 $ 2 98,354 With these energy efficiency measures, the district reported a combined SIR of 1.22 and the creation of 26.87 direct job-years. In addition, the district received $260,000 in planning funds directly from the CDE, which it used for screening and audits. Audit Results We audited the Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CEC’s Proposition 39 Program Implementation Guidelines and EEP Handbook. We identified the following audit issue: Final project completion reports submitted after the deadline The district’s final report was submitted on September 6, 2017, 26 months after the reported project completion date of June 24, 2015. PRC section 26240(b) states, in part: As a condition of receiving funds from the Job Creation Fund, not sooner than one year but no later than 15 months after an entity completes its first eligible project with grant, loan, or other assistance from the Job Creation Fund, the entity shall submit a report of its project expenditures to the Citizens Oversight Board …. Recommendation No recommendation is applicable, as the Proposition 39 program has ended. -A7- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program District Response We informed the district of the audit finding via email on February 14, 2019. Dr. George Landon, Assistant Superintendent of Business Services, and Virginia Gutierrez, Director of Purchasing, Facilities, and Warehouse, responded by letter dated February 14, 2019, and via email on March 6, 2019. The district’s response letter is included as Attachment A. The district’s February 14, 2019 response to this finding is as follows: The District was contracted with Climatec to administer our Prop 39 project, which included the filing of all mandatory reports with the California Energy Commission (CEC). On May 11, 2017, the California Energy Commission notified the District via email that our final report was never received and was now past due. At which point the District contacted our consultant to confirm that the final report had indeed been filed with the CEC within the required timelines. The District’s consultant confirmed that the report had been submitted a “while ago”. Ultimately, the final report was submitted on the District’s behalf on September 6, 2017. SCO Comment Our finding remains unchanged. We emailed the district on February 20, 2019, requesting that the district submit additional documentation showing that its consultant (Climatec) had submitted the final report within 15 months of the reported project completion date. On March 6, 2019, Ms. Gutierrez sent an email stating that Climatec had confirmed that it submitted the final report on the date we have on record, and that the district would not be submitting any further documentation. -A8- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program High Tech High International Charter School Proposition 39 Program Background The CEC approved High Tech High International Charter School’s EEP for $246,555, consisting of $2,083 for energy management services and $244,472 for program implementation. The district used its program implementation funds for the following energy efficiency measures: Proposition 39 Reported Share Used Energy Annual Cost School Site at School Site Efficiency Measures Savings High Tech High International $ 244,472 Lighting and HVAC controls, and spray foam roof coating $ 35,788 $ 244,472 $ 35,788 With these energy efficiency measures, the charter school reported a combined SIR of 2.86 and the creation of 1.37 direct job-years. In addition, the charter school received $15,000 in planning funds directly from the CDE, which it used for screening and audits, and energy management services. Audit Results We audited the Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CEC’s Proposition 39 Program Implementation Guidelines and EEP Handbook. We identified the following audit issues: Sole-sourced project costs We found that the charter school sole-sourced its contract with Ari-Thane for implementation of its spray foam “cool roof” project. The district did not provide supporting documentation to show that it considered other vendors before awarding the contract to Ari-Thane. Therefore, we found that the district sole-sourced its Proposition 39 contract, totaling $50,000. PRC section 26235(c) states, in part, “A community college district or LEA shall not use a sole source process to award funds pursuant to this chapter.” Projected energy savings not identified in awarded contracts We reviewed the charter school’s contracts with Fess Energy, Facility Dynamics Engineering, and Jackson and Blanc, and determined that the contracts do not identify the projected energy savings. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” -A9- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Recommendation We recommend that the CDE take appropriate action in response to funds paid to the charter school that did not meet the sole-source requirement. No additional recommendation is applicable, as the Proposition 39 program has ended. Charter School’s Response We informed the charter school of the audit finding via email on February 4, 2019. Paul Dooley, Director of Facilities, responded on February 12, 2019. The response letter is included as Attachment B. The charter school’s response is as follows: 1. Sole-sourced funds With regard to the cool roof project installed by Ari-thane Foam Products, Inc. at High Tech High International, HTH did not solicit bids from other vendors for the following reasons:  In 2007, extensive research and study was done to find a product that provided a lightweight, cool roof, which could also add R-value [heat resistance] to our new and existing buildings at an affordable price. Multiple bids and product specifications were submitted and HTH concluded that [Ari-Thane] Foam Products best demonstrated they could meet our requirements.  After testing the product on one small building, High Tech High then decided that all of its buildings, new and existing, would utilize the Ari-thane Foam so that future warranty, inspections, maintenance, and repairs could all be performed by one vendor. This approach provides economies of scale that represents best value in the utilization of HTH’s funding.  [Therefore], HTH began using [Ari-Thane] for installation of cool roofs on all of its new buildings and reroofing projects in approximately 2007.  The High Tech High International building was the last of 11 HTH buildings to be reroofed. Accordingly, Ari-thane Foam was utilized on that building so that it would match the roofs within the HTH inventory.  Our understanding is that, having demonstrated similar value to other LEAs, Ari-Thane has also been the successful bidder on several other Prop 39 roofing projects throughout Southern California. 2. Projected energy savings not included in the contracts HTH was one of the early adopters of the program and we attended several early public outreach meetings in order to fully understand the program and to establish internal best practices. High Tech High International’s EEP was among the first approved in the state and the contracts represented our nascent understanding of the program requirements at the time. While our future contracts included language related to the energy savings component, such language had no yet been developed at the time these projects were bid. -A10- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program The approved EEP for HTHI included energy savings calculated through Trace™ Energy Modeling software – an industry standard [that] exceeds the program requirements. All bidding parties were notified that projects were funded by Prop 39 Clean Energy and the energy savings component was discussed throughout the bidding and contracting processes. Purchase order documents show the reduced wattages of the proposed LED lamps, for instance, and likewise cut-sheets for the HVAC equipment show minimum efficiency ratings – both of which are directly related to energy savings. These documents were included as part of the contracts. HTH is a leader in energy efficiency across its portfolio of owned campuses, and six of our schools currently have a LEED certification. Our organization has a dedicated facilities staff and a reasonably robust operations and maintenance budget, which ensures our schools are operated as efficiently as possible. The Prop 39 program provided funding for an initiative that has been an organizational focus for HTH since our inception in 2000. We are aligned in ideology and in practice with the goals of Prop 39 and we certainly believe we participated in the program to the best of our ability. SCO Comment Our findings and recommendation remain unchanged. The charter school states, “While our future contracts included language related to the energy savings component, such language had not yet been developed at the time these projects were bid.” We disagree. The Proposition 39: California Clean Energy Jobs Act – 2013 Program Implementation Guidelines, which cite PRC section 26206(d), were formally adopted by the CEC on December 19, 2013. The charter school entered into contracts with Fess Energy, Facility Dynamics Engineering, and Jackson and Blanc in 2015, over a year after the adoption of the Proposition 39 Program Implementation Guidelines. Although we recognize that the charter school participated in the program to the best of its ability, the scope of our audit is to ensure compliance with state statutes and regulations, which require that the projected energy savings be identified in the awarded contract. -A11- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Luther Burbank School District Proposition 39 Program Background The CEC approved Luther Burbank School District’s EEP for $266,798. The district used its program implementation funds for the following energy efficiency measures: Proposition 39 Reported Share Used Energy Annual Cost School Site at School Site Efficiency Measures Savings Lighting retrofit/controls, HVAC system, plug Luther Burbank Elementary $ 266,798 loads, building envelope, domestic hot water heater $ 16,362 $ 266,798 $ 16,362 With these energy efficiency measures, the district reported a combined SIR of 1.24 and the creation of 1.49 direct job-years. In addition, the district received $10,767 in planning funds directly from the CDE, which it used for screening and audits, and program assistance. Audit Results We audited the Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CEC’s Proposition 39 Program Implementation Guidelines and EEP Handbook. We identified the following audit issue: Projected energy savings not identified in awarded contracts We reviewed the district’s contract with Highlands Energy, and determined that the contract does not identify the projected energy savings. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” We also identified the following observation: Unused planning funds We found that the district applied unused planning funds to program implementation. However, these funds were not included in its approved EEP. As a result, the district received funding that exceeded its approved EEP by $10,049. We informed the CDE of our observation via email on January 30, 2019. Recommendation We recommend that the CDE take appropriate action in response to the unused planning funds identified in this audit. No additional recommendation is applicable, as the Proposition 39 program has ended. -A12- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program District’s Response We informed the district of the audit finding and observation via email on February 14, 2019. We did not receive a response from the district. -A13- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Mariposa County Office of Education Proposition 39 Program Background The CEC approved Mariposa County Office of Education’s (COE) EEP for $62,563. Mariposa COE used its program implementation funds for the following energy efficiency measures: Proposition 39 Reported Share Used Energy Annual Cost School Site at School Site Efficiency Measures Savings Mariposa County Office of Education $ 45,995 Lighting retrofit $ 2,864 Monarch Academy 16,568 Lighting retrofit 1,945 $ 62,563 $ 4,809 With these energy efficiency measures, Mariposa COE reported a combined SIR of 1.45 and the creation of 0.35 direct job-years. In addition, Mariposa COE received $15,919 in planning funds directly from the CDE, which it used for screening and audits. Audit Results We audited the Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CEC’s Proposition 39 Program Implementation Guidelines and EEP Handbook. We identified the following audit issues: Projected energy savings not identified in awarded contracts We reviewed Mariposa COE’s contract with IES and determined that the contract does not identify the projected energy savings. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” Final project completion reports submitted after the deadline Mariposa COE submitted its final report on January 2, 2018, 19 months after the reported project completion date of June 6, 2016. PRC section 26240(b) states, in part: As a condition of receiving funds from the Job Creation Fund, not sooner than one year but no later than 15 months after an entity completes its first eligible project with grant, loan, or other assistance from the Job Creation Fund, the entity shall submit a report of its project expenditures to the Citizens Oversight Board …. Recommendation No recommendation is applicable, as the Proposition 39 program has ended. -A14- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program COE’s Response We informed Mariposa COE of the two audit findings via email on March 11, 2019. We did not receive a response from Mariposa COE. -A15- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Mark Twain Union Elementary School District Proposition 39 Program Background The CEC approved Mark Twain Union Elementary School District’s EEP for $276,203. The district used its program implementation funds for the following energy efficiency measures: Proposition 39 Reported Share Used Energy Annual Cost School Site at School Site Efficiency Measures Savings Copperopolis Elementary $ 62,064 Lighting retrofit $ 6,683 Mark Twain Elementary 214,139 Lighting retrofit 14,431 $ 276,203 $ 21,114 With these energy efficiency measures, the district reported a combined SIR of 1.47 and the creation of 1.55 direct job-years. In addition, the district received $7,600 in planning funds directly from the CDE, which it used for screening and audits, and program assistance. Audit Results We audited the Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CEC’s Proposition 39 Program Implementation Guidelines and EEP Handbook. We identified the following audit issues: Sole-sourced project costs We found that the district sole-sourced its contract with Freedom Energy Corporation for energy planning and services, and for project management and implementation services. The district did not provide supporting documentation to show that it considered other vendors before awarding the contract to Freedom Energy Corporation. Therefore, we found that the district sole-sourced its Proposition 39 contract, totaling $16,368. PRC section 26235(c) states, in part, “A community college district or LEA shall not use a sole source process to award funds pursuant to this chapter.” Projected energy savings not identified in awarded contracts We reviewed the district’s contracts with Gold Electric Inc. and EMCOR Services and found that the contracts do not identify the projected energy savings. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” -A16- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Recommendation We recommend that the CDE take appropriate action in response to funds paid to the district that did not meet the sole-source requirement. No additional recommendation is applicable, as the Proposition 39 program has ended. District’s Response We informed the district of the two audit findings via email on February 5, 2019. Roy Blair, Director of Business Services, responded by letter dated February 22, 2019. We included the district’s response as Attachment C. The district’s response related to the sole-source finding is as follows: As relayed to you during your audit the District did in fact consult with other vendors and had at least one vendor give us a proposal at the District office. All vendors contacted were at least an hour travel time from our location. We contacted other Districts in our county and finally were given a recommendation by the Calaveras County Joint Power Authority to inquire [with] Freedom Energy. Their proposal was substantially less than any we had been given and therefore we obtained their services. After your exit conference, we began a search for documentation that would substantiate our claim that “we had in fact contacted and consulted with other vendors”. We were unable to obtain the documentation you had suggested. Emails from 2014-15 were expunged from the county computer services after three years. Parties involved in the process at the time had not kept notes or could not remember contacts from three years previous. We understand that [therefore, you] could not substantiate our process for selecting a consultant. Obviously, the District is not happy about possibly having to refund the $16,838 we paid for services that we believe were the best option to obtain consulting services. I have attached an excel spreadsheet to help explain my following request. If we were to amend claims to show that the Freedom Energy [expenditures] were claimed against the Calaveras County Power Authority and not State funds, could we amend the claims and remove them from repayment? I am currently on the Governing Board of the Authority and believe this scenario would be acceptable to the Authority. The district’s response related to the lack of projected energy savings is as follows: We now understand that to include savings in the individual contracts was the requirement. We thought that including the projected savings in proposals and the project application were meeting the requirements, as we understood them for this new program. It was our understanding that this would be a finding but without monetary consequences. I sincerely request that you consider the uniqueness of this grant and the lack of experienced personnel to implement it. We appreciate the manner in which your auditor conducted the audit and the assistance she provided at its conclusion. -A17- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program SCO Comment Our finding and recommendation remain unchanged. The SCO does not have the authority to approve or deny the district’s request to reclassify funds used for consulting services to another grant program. The district should consult with its project manager at the CEC for further guidance, or consider filing an appeal with the Education Audit Appeals Panel. We describe the process for filing an appeal earlier in this report. Although we recognize that the district participated in the program to the best of its ability, the scope of our audit is to ensure compliance with state statutes and regulations. These requirements state, in part, that districts cannot use a sole-source process to award funds for energy management, planning, or implementation services and that districts must identify projected energy savings in the awarded contracts. -A18- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Newport-Mesa Unified School District Proposition 39 Program The CEC approved Newport-Mesa Unified School District’s EEP for Background $4,799,573. The district used its program implementation funds for the following renewable energy generation measures: Proposition 39 Reported Share Used Energy Annual Cost School Site at School Site Efficiency Measures Savings Abraham Lincoln Elementary $ 164,944 Photovoltaic (solar) panels $ 10,656 Adams Elementary 115,656 Photovoltaic (solar) panels 7,506 Back Bay High 117,817 Photovoltaic (solar) panels 11,233 California Elementary 115,860 Photovoltaic (solar) panels 8,687 Charles W. Tewinkle Middle 161,918 Photovoltaic (solar) panels 9,358 College Park Elementary 117,146 Photovoltaic (solar) panels 6,853 Eastbluff Elementary 162,733 Photovoltaic (solar) panels 12,795 Estancia High 1,594,903 Photovoltaic (solar) panels 119,624 Everett A. Rea Elementary 138,785 Photovoltaic (solar) panels 8,476 Harbor View Elementary 70,690 Photovoltaic (solar) panels 5,153 Harper Pre-Adult School 212,070 Photovoltaic (solar) panels 18,077 Heinz Kaiser Elementary 117,817 Photovoltaic (solar) panels 6,920 Killybrooke Elementary 117,104 Photovoltaic (solar) panels 8,775 Mariners Elementary 117,383 Photovoltaic (solar) panels 7,059 Maude B. Davis Elementary 485,753 Photovoltaic (solar) panels 34,513 Newport Coast Elementary 164,004 Photovoltaic (solar) panels 9,034 Paularino Elementary 115,656 Photovoltaic (solar) panels 11,595 Pomona Elementary 117,104 Photovoltaic (solar) panels 7,296 Roy O. Andersen Elementary 141,380 Photovoltaic (solar) panels 7,947 Victoria Elementary 117,104 Photovoltaic (solar) panels 8,353 Whittier Elementary 117,104 Photovoltaic (solar) panels 7,079 Wilson Elementary 115,656 Photovoltaic (solar) panels 7,106 Woodland Elementary 100,986 Photovoltaic (solar) panels 7,861 $ 4,799,573 $ 341,956 With these renewable energy generation measures, the district reported a combined SIR of 1.15 and the creation of 20.16 direct job-years. Audit Results We audited the Proposition 39 program costs and found that all costs reported were in compliance with the Job Creation Fund program guidelines, as well as the CEC’s Proposition 39 Program Implementation Guidelines and EEP Handbook. District’s Response We informed the district via email on February 8, 2019, that all costs reported for Newport-Mesa Unified School District were in compliance with the program guidelines. Julia Lammatao, Financial Analyst responded via email on February 13, 2019, stating that the district does not wish to provide a response. -A19- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Oceanside Unified School District Proposition 39 Program The CEC approved Oceanside Unified School District’s EEP for Background $937,052. The district used its program implementation funds for the following energy efficiency measures: Proposition 39 Reported Share Used Energy Annual Cost School Site at School Site Efficiency Measures Savings Martin Luther King Jr. Middle $ 937,052 HVAC system/controls and lighting retrofit $ 64,872 $ 937,052 $ 64,872 With these energy efficiency measures, the district reported a combined SIR of 1.29 and the creation of 5.25 direct job-years. In addition, the district received $34,787 in planning funds directly from the CDE, which it used for screening and audits, and program assistance. We audited the Proposition 39 program costs to ensure compliance with Audit Results the Job Creation Fund program guidelines, as well as the CEC’s Proposition 39 Program Implementation Guidelines and the EEP Handbook. We identified the following audit issues: Sole-sourced project costs The district contracted Ninyo & Moore for hazardous inspection services; Program Management Group for consulting services; and Ameresco for planning services. The district did not provide supporting documentation to show that it considered other vendors before awarding the contracts to Ninyo & Moore, Program Management Group, and Ameresco. Therefore, we found that the district sole-sourced these Proposition 39 contracts, totaling $45,449. PRC section 26235(c) states, in part, “A community college district or LEA shall not use a sole source process to award funds pursuant to this chapter.” Projected energy savings not identified in awarded contracts We reviewed the district’s contracts with Global Power Group and K&J Air Conditioning and determined that the contracts do not identify the projected energy savings. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” Recommendation We recommend that the CDE take appropriate action in response to funds paid to the district that did not meet the sole-source requirement. -A20- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program No additional recommendation is applicable, as the Proposition 39 program has ended. District’s Response We informed the district of the two audit findings via email on February 4, 2019. Shannon Soto, Ed.D., Deputy Superintendent, responded via email on February 14, 2019. The district’s response to these findings is as follows: Unfortunately as I’m still new to OUSD, I’m discovering gaps in our internal procedures for the Prop 39 expenditures. Moving forward we will adhere to the competitive [bidding] process and contract procedures. SCO Comment Our findings and recommendation remain unchanged. -A21- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Pine Ridge Elementary School District Proposition 39 Program Background The CEC approved Pine Ridge Elementary School District’s EEP for $62,028. The district used its program implementation funds for the following energy efficiency measures: Proposition 39 Reported Share Used Energy Annual Cost School Site at School Site Efficiency Measures Savings Pine Ridge Elementary $ 62,028 Lighting controls and retrofit $ 4,044 $ 62,028 $ 4,044 With these energy efficiency measures, the district reported a combined SIR of 1.29 and the creation of 0.35 direct job-years. In addition, the district received $15,507 in planning funds directly from the CDE, which it used for screening and audits. Audit Results We audited the Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CEC’s Proposition 39 Program Implementation Guidelines and EEP Handbook. We identified the following audit issues: Projected energy savings not identified in awarded contracts We reviewed the district’s contract with IES and determined that the contract does not identify the projected energy savings. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” Final project completion reports submitted after the deadline The district’s final report was submitted on September 29, 2017, 22 months after the reported project completion date of November 20, 2015. PRC section 26240(b) states, in part: As a condition of receiving funds from the Job Creation Fund, not sooner than one year but no later than 15 months after an entity completes its first eligible project with grant, loan, or other assistance from the Job Creation Fund, the entity shall submit a report of its project expenditures to the Citizens Oversight Board …. Recommendation No recommendation is applicable, as the Proposition 39 program has ended. -A22- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program District Response We informed the district of the two audit findings via email on February 26, 2019. Christine Skinner, Superintendent/Principal, responded by letter dated March 8, 2019. The district’s response letter is included as Attachment D. The district’s response to the findings is as follows: 1. Projected Energy Savings Not Included in the Contract The 2014-15 Energy Expenditure Plan was approved by the California Energy Commission (CEC) in July of 2015. A different administrator was assigned to the district that year. When I spoke to IES [indoor environmental services] about this finding, I was told that at the time Pine Ridge’s project was approved that Projected Energy Savings was not yet required for project approval. 2. Final Report not Submitted within 12-15 Months Following Project Completion [Date] Pine Ridge Elementary School District missed the Final Report submission due to critical administration turn over in the 2016-17 school year. The Superintendent left and an interim was installed until June 2017. When I came on to run the district in July 2017, I inquired about our Proposition 39 funds and project. Justin Payton from IES visited the campus on September 19, 2017 to collect the information that he needed to submit the final CEC report. Unfortunately, we missed the deadline. SCO Comment Our findings remain unchanged. The requirement that contracts identify projected energy savings is pursuant to PRC section 26206(d), and has been in place since the Proposition 39 program began. In addition, the CEC’s Proposition 39 Program Implementation Guidelines, and all subsequent revisions to those guidelines, include the same requirements for Proposition 39 contracts. -A23- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program San Leandro Unified School District Proposition 39 Program Background The CEC approved San Leandro Unified School District’s EEP for $2,015,425. The district used its program implementation funds for the following renewable energy generation measure: Proposition 39 Renewable Reported Share Used Energy Generation Annual Cost School Site at School Site Measure Savings San Leandro High School $ 2,015,425 Photovoltaic (solar) panels $ 218,731 $ 2,015,425 $ 218,731 With this renewable energy generation measure, the district reported a combined SIR of 1.06 and the creation of 8.46 direct job-years. In addition, the district received $58,500 in planning funds directly from the CDE, which it used for screening and audits. We audited the Proposition 39 program costs to ensure compliance with Audit Results the Job Creation Fund program guidelines, as well as the CEC’s Proposition 39 Program Implementation Guidelines and EEP Handbook. We identified the following audit issue: Final project completion reports submitted after the deadline The district submitted its final report in August 2017, 22 months after the reported project completion date of March 2015. PRC section 26240(b) states, in part: As a condition of receiving funds from the Job Creation Fund, not sooner than one year but no later than 15 months after an entity completes its first eligible project with grant, loan, or other assistance from the Job Creation Fund, the entity shall submit a report of its project expenditures to the Citizens Oversight Board …. We also identified the following observation: Unused planning funds We found that the district applied unused planning funds to program implementation. However, these funds were not included in its approved EEP. As a result, the district received funding that exceeded its approved EEP by $5,253. We informed the CDE of our observation via email on January 30, 2019. Recommendation We recommend that the CDE take appropriate action in response to the unused planning funds identified in this audit. -A24- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program No additional recommendation is applicable, as the Proposition 39 program has ended. District’s Response We informed the district of the audit finding and observation via email on February 6, 2019. Kevin Collins, Assistant Superintendent of Business and Operations, responded via email on February 6, 2019, stating that the district had no issues with the finding and observation. -A25- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Venture Academy Charter School (San Joaquin County Office of Education) Proposition 39 Program The CEC approved Venture Academy Charter School’s EEP for $620,039. Background The district used its program implementation funds for the following energy efficiency and renewable energy generation measures: Proposition 39 Energy Efficiency and Reported Share Used Renewable Energy Annual Cost School Site at School Site Generation Measures Savings Venture Academy $ 620,039 Lighting retrofit/controls and photovoltaic (solar) panels $ 4 1,625 $ 620,039 $ 41,625 With these energy efficiency and renewable energy generation measures, the charter school reported a combined SIR of 1.10 and the creation of 3.05 direct job-years. We determined that the charter school received CDE apportionments totaling of $573,704, $46,335 less than the total amount requested ($620,039) on the schools’ final project completion report. Therefore, we only audited the amount received in Proposition 39 funding, which totaled $573,704. Audit Results We audited the Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CEC’s Proposition 39 Program Implementation Guidelines and EEP Handbook. We identified the following audit issue: Sole-sourced project costs The charter school contracted with Capitol Public Finance for consulting services, Dickinson Welding & Inspection for inspection services, Iomlan Construction Services for inspection services, Terracon Consultants for materials testing services, and Odyssey Landscaping Co. for irrigation system repairs. The school did not provide supporting documentation to show that it considered other vendors before awarding contracts to Capitol Public Finance, Dickinson Welding & Inspection, Terracon Consultants and Odyssey Landscaping Co. Therefore, we found that the charter school sole-sourced these Proposition 39 contracts, totaling $26,447. PRC section 26235(c) states, in part, “A community college district or LEA shall not use a sole source process to award funds pursuant to this chapter.” Recommendation We recommend that the CDE take appropriate action in response to funds paid to the charter school that did not meet the sole-source requirement. -A26- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program No additional recommendation is applicable, as the Proposition 39 program has ended. Charter School’s Response We informed the LEA of the audit finding via email on February 5, 2019. Scott Anderson, Deputy Superintendent of Business Services, responded by letter on February 6, 2019. The LEA’s response letter is included as Attachment E. The LEA’s response to the finding, in part, is as follows: There is no definition of sole source in statute of in any Prop 39 guidance we are aware of. As such, LEA’s are left to interpret this requirement in combination with any additional guidance provided, such as the FAQ’s referenced above. The guidance in the FAQ response highlighted above indicates [that] LEA’s are to refer to their own procurement regulations in certain circumstances. If a competitive process were required for any and all contracts regardless of type or amount (which is a significant departure from normal requirements for LEA’s), that runs counter to this guidance which we relied upon. As such, we understood the sole sourcing prohibition to the aimed exclusively at Gov. Code Sec. 4217.12 which allows “sole sourcing” under certain conditions for energy services contracts. Other than the sole sourcing prohibition mentioned above pertaining to Gov. Code Sec. 4217.12, we followed our local regulations, consistent with the guidance provided by CDE in the cited FAQs. The Capital Public Finance, Dickinson Welding & Inspection, Iomian Construction Services and Terracon Consultants are all professional services which are not subject to competitive bidding. The Odyssey Landscaping Co. contract (above) was less than the public works bid limit of $15,000 and, therefore, was not subject to competitive bidding. Notwithstanding the preceding, the San Joaquin County Office of Education spent $6,203,056.87 on all Prop 39 projects. Of this amount, $1,675,535 [was] Prop 39 funds and the balance [was] local funds. Of the $6.2 million spent on all Prop 39 projects, SJCOE paid Johnson Controls, Inc. a total of $5,094,411.59, of which $1,419,338.67 is attributable to the Venture Academy Family of Schools. By virtue of simple journal accounting entries, all of the Venture Prop 39 funds received ($573,704) could have been used to fund part of the Venture share of the Johnson Controls Inc. energy contract. Rather, we chose to use the Prop 39 funds for Venture’s pro rata share of all contracts needed to complete the projects as described above, and then use a significant amount of additional, local funds for the balance of the necessary contracts. Stepping back from the detailed accounting methodology we elected, the Prop 39 funds received prompted a significant local (non- Prop 39) investment and were highly effective in achieving their intended purpose. SCO Comment Our finding and recommendation remain unchanged. -A27- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program The district states that there is no definition of sole source in statute or in Proposition 39 guidance. Although we concur that the Proposition 39 guidelines do not define the term sole source, we disagree that there is no definition of the term in statute. Our review of other California code sections and regulations that use the phrase “sole source” indicates that when the phrase is used for contracting, it describes a non-competitive bidding process of awarding contracts—in other words, a process where contracts are awarded without advertising or bidding. The scope of our audit is to ensure compliance with state statutes and regulations. Therefore, although the charter school may have followed its own procurement regulations, it did not follow the minimum standards of PRC section 26235(c) which states, in part, “A community college district or LEA shall not use a sole source process to award funds pursuant to this chapter.” -A28- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program West Covina Unified School District Proposition 39 Program Background The CEC approved West Covina Unified School District’s EEP for $1,891,376, consisting of $130,573 for energy management services, $31,468 for training, and $1,729,335 for program implementation. The district used its program implementation funds for the following energy efficiency measures: Proposition 39 Reported Share Used Energy Annual Cost School Site at School Site Efficiency Measures Savings California Elementary $ 98,643 Lighting retrofit and relamping $ 7,255 Cameron Elementary 89,839 Lighting retrofit and relamping 7,139 Coronado Alternate 95,442 Lighting retrofit and relamping 10,631 District Office 88,838 Lighting retrofit and relamping 8,179 Edgewood Middle School 261,789 Lighting retrofit, relamping, and fixture replacement 21,804 Hollencrest Middle School 106,846 Lighting retrofit and relamping 10,573 Merced Elementary 108,647 Lighting retrofit 13,097 Merlinda Elementary 97,642 Lighting retrofit and relamping 9,463 Monte Vista Elementary 79,835 Lighting retrofit and relamping 8,987 Orangewood Elementary 108,722 Lighting retrofit and relamping 13,652 Vine Elementary 81,436 Lighting retrofit, relamping, and fixture replacement 6,648 Walnut Grove Intermediate 104,046 Lighting retrofit, relamping, and fixture replacement 8,312 Wescove Elementary 64,028 Lighting retrofit, relamping, and fixture replacement 8,248 West Covina High School 343,582 Lighting retrofit, relamping, and fixture replacement 38,804 $ 1,729,335 $ 172,792 With these energy efficiency measures, the school district reported a combined SIR of 1.60 and the creation of 9.68 direct job-years. In addition, the district received $136,277 in planning funds directly from the CDE, which it used for screening and audits, and energy management services. We audited the Proposition 39 program costs to ensure compliance with Audit Results the Job Creation Fund program guidelines, as well as the CEC’s Proposition 39 Program Implementation Guidelines and EEP Handbook. We identified the following audit issues: Sole-sourced project costs The district contracted IES for implementation and energy management services, as follows: Implementation costs $ 2,096,481 Energy management costs 109,022 Total costs $ 2,205,503 The district did not provide supporting documentation to show that it considered other vendors before awarding these contracts to IES. Therefore, we found that the district sole-sourced these Proposition 39 contracts, totaling $2,205,503. However, only $2,027,653 of the contracts was approved by the CEC. Because we audited only the amount approved -A29- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program by the CEC in the district’s final project completion report, we found that the district sole-sourced a total of $2,027,653. PRC section 26235(c) states, in part, “A community college district or LEA shall not use a sole source process to award funds pursuant to this chapter.” Proposition 39 funds applied to ineligible expenditures The district used Proposition 39 funds to pay Associated Environmental Management $8,075 for storm water pollution prevention services. We found that these services were not related to approved project costs in the district’s EEP. The district self-certified in its EEP that “The LEA commits to use the funds for the eligible energy project(s) approved in its energy expenditure plan.” The CEC’s Proposition 39 Program Implementation Guidelines state, “LEAs can only use Proposition 39 funding for the eligible energy projects approved in their energy expenditure plans.” Recommendation We recommend that the CDE take appropriate action in response to funds paid to the district that did not meet the sole-source requirement, and funds spent on ineligible project costs. No additional recommendation is applicable, as the Proposition 39 program has ended. District Response We informed the district of the findings via email on February 4, 2019. Drew Passalacqua, Ed.D., Assistant Superintendent of Business Services, responded via letter on February 14, 2019. We included the district’s response letter as Attachment F. The district did not respond to the finding regarding ineligible expenditures. The district’s response to the sole-source finding, in part, is as follows: Without offering supporting evidence or explanation, the auditor concludes the following: “We found that the district sole-sourced its implementation and energy manager services, totaling $2,205,503.” The auditor further claims, “The district did not provide documentation to support that it considered other vendors when it awarded the contracts to Indoor Environmental Services (IES) as [follows]: • Implementation costs - $2,096,481 • Energy manager costs - $109,022 • Total costs - $2,205,503” -A30- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program The auditor references Public Resource Code (“PRC”) section 26235(c), which states, in part, “A community college district or LEA shall not use a sole source process to award funds pursuant to this chapter.” The California Legislature has never defined “sole source process” as it relates to Prop 39. Further, as of 2014-15, when the District went through its RFQ [request for qualifications] process, the California Energy Commission had not yet released any definition or parameters on the “sole source” prohibition in its Prop 39 Guidelines or Frequently Asked Questions. The Prop 39 Guidelines merely deferred to each educational agency’s own “procurement regulations and procedures, as long as they reflect applicable state and local laws and regulations and are not in conflict with the minimum legal standards specified in [Public Resource Code section 26235].” Even the State Controller’s own Prop 39 audit reports provide a broad definition of “no sole source” and have established a relatively low standard for school districts to meet in their Prop 39 audits. For example, in the 2017-18 PROGRAM AUDIT OF THE CALIFORNIA CLEAN ENERGY JOBS ACT (“2017-18 SCO Audit Report”), the California State Controller’s Office stated: We have interpreted the requirement to ‘not use a sole source process to award funds,’ as the need to use a competitive process. Competitive processes promote competition, prevent favoritism, and make the procurement process transparent. (Program Audit of the Clean Energy Jobs Act, Fiscal Year 2017-18, https: // www.sco.ca . gov/Files -AUD/07 2018ca ceja .pdf, at 12, emphasis added.) Thus, we disagree with the auditor’s finding that the District has provided “no documentation” to prove that the District did not sole source funds. The District has already submitted a number of records showing a competitive RFQ process, where multiple vendors were considered by the District. So, it is difficult for the District to understand what exactly the auditor is looking for in making such a determination. Any further guidance from the auditor on this standard, and the documentation that would suffice to show compliance, would be most helpful to the District prior to any negative audit finding. In its response (see Attachment F) the district explained that language in the original RFQ documents included project implementation services. SCO Comment Our findings and recommendation remain unchanged. We agree that the district submitted documentation supporting $55,000 in planning services; however, the district did not provide supporting documentation to show that it considered more than one vendor before awarding contracts for implementation and energy management costs, totaling $2,205,503. -A31- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program The district indicates that further guidance on the sole-source requirement would be helpful. Four months before we contacted the district about our audit findings, we provided the following guidance in an email to the district’s Chief Fiscal Executive on October 25, 2018: The district provided a board agenda requesting approval of the RFP [request for proposals] bid No. 11:1415 for Implementation Services inclusive of district energy manager and training services for the award of contract to IES totaling $2,216,483 (please see attached board agenda). We do not have documentation to support that more than one vendor was considered when awarding this contract. Please provide documentation for the award of contract to IES for Implementation Services inclusive of district energy manager and training services. On November 7, 2018, we received a response from the Chief Fiscal Executive asserting that RFQ No. 10:1314 covered the district’s award for Proposition 39 planning and implementation services, including energy management and training services. The response quoted sections of RFQ No. 10:1314 to support this position. We disagree with the district’s conclusions. We noted that the district issued separate RFQs for project planning and implementation. If the district had intended for RFQ No. 10:1314 to be inclusive of all activities, then there would not have been an additional, separate RFQ for implementation, and energy management and training services (RFQ No. 11:1415). In its response, the district does not explain why it did not provide supporting documentation for RFQ No. 11:1415, such as a copy of the RFQ, communications to vendors requesting bids, or bids subsequently received from various vendors, when the district’s board document identified RFQ No. 11-1415 for implementation services and stated that bids had been received for this RFQ. We found reference to RFQ No. 11:1415 in a district board agenda dated May 15, 2015, stating “RFP bids were received from various contractors with the following result of the lowest bidder”; the agenda then identifies IES as the chosen vendor for implementation services. Had the district provided any evidence supporting this statement other than RFQ No. 10:1314, we might not have identified an audit finding. -A32- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Willits Unified School District Proposition 39 Program Background The CEC approved Willits Unified School District’s EEP for $544,280, consisting of $45,000 for energy management services, and $499,280 for program implementation. The district used its program implementation funds for the following energy efficiency measures: Proposition 39 Reported Share Used Energy Annual Cost School Site at School Site Efficiency Measures Savings Baechtel Grove Middle $ 80,800 Lighting retrofit $ 6,110 Blosser Lane Elementary 88,276 Lighting retrofit 3,722 Brookside Elementary 118,959 Lighting retrofit 3,943 Sanhedrin High 15,236 Lighting retrofit 1,269 Sherwood Elementary 7,589 Lighting retrofit 660 Willits High 188,420 Lighting retrofit 18,242 $ 499,280 $ 33,946 With these energy efficiency measures, the district reported a combined SIR of 1.33 and the creation of 2.80 direct job-years. In addition, the district received $29,259 in planning funds directly from the CDE, which it used for energy management services. Audit Results We audited the Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CEC’s Proposition 39 Program Implementation Guidelines and EEP Handbook. We identified the following audit issue: Projected energy savings not identified in awarded contracts We reviewed the district’s contracts with IES and determined that the contracts do not identify the projected energy savings. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” We also identified the following observation: Unused planning funds We found that the district applied unused planning funds to program implementation. However, these funds were not included in its approved EEP. As a result, the district received funding that exceeded its approved EEP by $8,712. We informed the CDE of our observation via email on January 30, 2019. Recommendation We recommend that the CDE take appropriate action in response to the unused planning funds identified in this audit. -A33- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program No additional recommendation is applicable, as the Proposition 39 program has ended. District’s Response We informed the district of the audit finding and observation via email on February 7, 2019. Nikki Agenbroad, Director of Fiscal Services, responded via email stating that the district did not need to include a response. -A34- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Yreka Union High School District Proposition 39 Program Background The CEC approved Yreka Union High School District’s EEP for $255,353, consisting of $19,540 for energy management services, and $235,813 for program implementation. The district used its program implementation funds for the following energy efficiency measures: Proposition 39 Reported Share Used Energy Annual Cost School Site at School Site Efficiency Measures Savings Yreka High 235,813 HVAC system, chiller/boiler replacement 12,469 $ 235,813 $ 12,469 With these energy efficiency measures, the district reported a combined SIR of 1.63 and the creation of 1.32 direct job-years. In addition, the district received $20,257 in planning funds directly from the CDE, which it used for screening and audits, and program assistance. Audit Results We audited the Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CEC’s Proposition 39 Program Implementation Guidelines and EEP Handbook. We identified the following audit issues: Sole-sourced project costs The district contracted IES for planning services. The district did not provide supporting documentation to show that it considered other vendors before awarding the contract to IES. Therefore, we found that the district sole-sourced its Proposition 39 contract, totaling $20,257. PRC section 26235(c) states, in part, “A community college district or LEA shall not use a sole source process to award funds pursuant to this chapter.” Projected energy savings not identified in awarded contracts We reviewed the district’s contracts with IES and determined that the contracts do not identify the projected energy savings. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” Final project completion reports submitted after the deadline The district’s final report was submitted on February 1, 2018, 16 months after the reported project completion date of September 30, 2016. PRC section 26240(b) states, in part: As a condition of receiving funds from the Job Creation Fund, not sooner than one year but no later than 15 months after an entity completes its -A35- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program first eligible project with grant, loan, or other assistance from the Job Creation Fund, the entity shall submit a report of its project expenditures to the Citizens Oversight Board …. Recommendation We recommend that the CDE take appropriate action in response to funds paid to the district that did not meet the sole-source requirement. No additional recommendation is applicable, as the Proposition 39 program has ended. District’s Response We informed the district of the three audit findings via email on February 13, 2019. We did not receive a response from the district. -A36- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Butte-Glenn Community College District Proposition 39 Program Background The California Community Colleges Chancellor’s Office CCCCO approved Butte-Glenn Community College District’s Proposition 39 Funding Application (Form B) for $1,244,954. The district used its program implementation funds for the following energy efficiency and renewable energy generation measures: Proposition 39 Energy Efficiency and Year 1 Savings-to- Direct Share Used Renewable Energy Cost Investment Job-Years School Site at School Site Generation Measures Savings Ratio Created Application No. BUTTEG-1415-001 Butte College – Main Campus $ 2 97,824 Monitoring-based commissioning Butte College – Skyway Center 1 3,249 Monitoring-based commissioning $ 3 11,073 $ 1 1,484 1.78 2.16 Application No. BUTTEG-1516-001 Butte College – Skyway Center 9 33,881 Photovaltaic (solar) panels 9 33,881 $ 5 0,635 2.01 5.04 $ 1,244,954 $ 62,119 Audit Results We audited the Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CCCCO’s Proposition 39: Clean Energy Jobs Act of 2012 – California Community Colleges Energy Project Guidance (Energy Project Guidance). We identified the following audit issues: Sole-sourced project costs The district contracted with Dan’s Electric Supply to furnish and install gas and electric meters as part of Application No. BUTTEG-1415-001 monitoring-based commissioning (MBCx) projects. The total amount of Proposition 39 funds related to this contract is $92,660. The district also contracted with Murley Consulting Group for Application No. BUTTEG- 1516-001 for solar consulting services totaling $63,470. The district did not provide supporting documentation to show that it considered other vendors before awarding contracts to Dan’s Electric Supply and Murley Consulting Group. Therefore, we found that the district sole-sourced these Proposition 39 contracts, totaling $156,130. PRC section 26235(c) states, in part, “A community college district or LEA shall not use a sole source process to award funds pursuant to this chapter.” Projected energy savings not identified in awarded contracts We reviewed the district’s contracts with Direct Digital Controls, Inc.; All Phase Mechanical; CW Electric; GRD Energy; and Hankins Electric, and determined that the contracts do not identify the projected energy savings. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” -A37- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Recommendation We recommend that the CCCCO take appropriate action in response to funds paid to the district that did not meet the sole-source requirement. No additional recommendation is applicable, as the Proposition 39 program has ended. District’s Response We informed the district of the two audit findings via email on April 16, 2019. Kimberly Jones, Director of Facilities Planning and Management, and Jim Nicholas, Director of Business Services, responded via letter dated April 22, 2019. The district’s response letter is included as Attachment G. The district’s response to the sole-source finding is as follows: BGCCD is a rural district and, historically, has faced challenges getting numerous competitive bids when requests for proposals go out on specific projects. The District has used the best value criteria on several projects when necessary to ensure fiscal standards and required project outcomes are met. When looking for engineering expertise for both Solar and MBCx projects, GRD and Murley Consulting Group were engineering consultants recommended to the District by the California Community College Investor Owned Utilities Partnership (CCC/IOU Partnership) due to Butte County's rural setting and lack of local expertise. The CCC/IOU Partnership was established in 2006 and created to encourage energy efficiency investments and foster best practices in the California Community College System. The state's four investor-owned utilities (IOUs), including Pacific Gas & Electric (PG&E), Southern California Edison (SCE), Southern California Gas Company (SCG), and San Diego Gas & Electric (SDG&E), have partnered with the California Community College (CCC) Chancellor's Office and the CCC Districts to provide technical assistance, financial incentives, and project support for energy efficiency improvements to the CCC system statewide. One of the primary functions of the CCCIOU has been to support the community colleges in the implementation of the California Clean Energy Jobs Act of 2012 (Proposition 39) by leveraging the infrastructure of the Partnership for the identification, installation, and timely close out of energy projects to ensure program fiscal accountability. The District awarded contracts under the basis of Government Code 53060 professional services agreement. For special services and advice in financial, economic, accounting, engineering, legal or administrative matters, Districts may award contracts without engaging in a competitive bidding or proposal process per Government Code § 53060. Such persons contracted under this provision must be specially trained, experienced and competent to perform the services required. Contracts for GRD and Murley Consulting Group were established individually under the Public Contract Code section 20651 which eliminated the need to competitively bid the work. GRD was a consultant for the MBCx project with a contract of $62,270 and Murley Consulting Group was a consultant for the Skyway Center Solar for $63,470. -A38- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program The MBCx project had two separate components to the project; one was for gas meters and the other for electrical meters. The contracts that were issued were done through an informal bidding process dictated by Public Contract Code 22000 Uniform Public Construction Cost Accounting Procedures (UPCCAP) that was approved by the BGCCD Board of Trustees in January, 2013. The project required the purchase of miscellaneous materials and supplies that were purchased from Dan's Electric, a local supply house. The purchase orders to Dan’s Electric fall under public contract code 20651 as the District only purchased equipment and materials from them and each purchase was under the required bid limit. By doing this the District saved the project markup from the contractors. Portions of the project were self-performed, with the materials and supplies being purchased and the project being completed by existing staff. The district’s response to the projected energy savings finding is as follows: BGCCD has followed existing law requiring all eligible energy projects to achieve a minimum savings to investment ratio (SIR) of 1.01 (reduced in 2016/2017 from the previous SIR of 1.05). All projects were thoroughly researched to ensure adequate saving were present before the project proposals were submitted to the California Community College Chancellor's Office for approval. The District verified savings on all completed projects and has been above the minimum SIR on all projects. With SI rates included in the project proposals, the Request for Proposals, and inclusion in Board of Trustee documents, and while including project specifications and costs on all contracts, the District did unknowingly omit inclusion of the SIR figures on the contracts. All information is readily available for any project, and not has not been omitted from the process. The District relied on the expertise of the CCC/IOU Partnership and Newcomb Anderson McCormick for analyzing each project to ensure energy saving requirements that were submitted in each of the project applications was accurate. The District entered into the consulting relationship with Newcomb Anderson McCormick on the recommendation from the CCCIOU based upon their use of the firm as professional experts in Prop 39 project development, management, implementation, and project closings. The required Code language appears to be intended to document projects savings and tie them back to the projects that were submitted to ensure the savings was accomplished. Accordingly, the District believes the substance of the Prop 39 requirements have been met. SCO Comment Our findings and recommendation remain unchanged. The scope of our audit is to ensure compliance with state statutes and regulations. The district cites using best value criteria, Government Code section 53060, and Public Contract Code section 20651 to support its use of sole-sourced contracts. However, PRC section 26235(c) states, “A community college district or LEA shall not use a sole source process to award funds pursuant to this chapter. A community college district or LEA may use the best value criteria as defined in paragraph (1) of subdivision (c) of section 20133 of the Public Contract Code to award funds pursuant to this chapter. -A39- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program On December 12, 2013, the CCCCO published guidance on sole-source requirements in its “Proposition 39 Contracting Fact Sheet” which states “Proposition 39 defers to local contracting practices as long as the prohibition of sole source contracts and all applicable law related to contractor qualifications, licensing, and certification requirements related to the project are met.” The Fact Sheet also notes that “To fully comply with that “Best Value” criteria and the prohibition against sole source contracting when utilizing their Prop 39 funds, a District will need to engage in a two-step process…” The two-step process that the CCCCO describes is for districts to use a comprehensive RFQ/RFP evaluation process. However, the district did not follow this process for awarding the contracts in question. -A40- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Contra Costa Community College District Proposition 39 Program Background The CCCCO approved Contra Costa Community College District’s Form B for $1,253,496. The district used its program implementation funds for the following energy efficiency measures: Proposition 39 Year 1 Savings-to- Direct Share Used Energy Cost Investment Job-Years School Site at School Site Efficiency Measures Savings Ratio Created CONTRA-1314-011 Diablo Valley College $ 1 1,484 Lighting occupancy sensors Diablo Valley College 6 41,051 Library boiler/chiller retrofit and pumping variable frequency drive Los Medanos College 7 ,832 Recital Hall interior lighting retrofit Los Medanos College 3 9,589 Gym lighting retrofit Los Medanos College 7 ,326 Little Theater lighting retrofit 7 07,282 $ 5 6,136 1.09 7.31 CONTRA-1617-005 Diablo Valley College 5 46,214 Stadium lighting retrofit 5 46,214 2 9,727 1.09 3.22 $ 1,253,496 $ 85,863 Audit Results We audited the Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CCCCO’s Energy Project Guidance. We identified the following audit issues: Sole-sourced project costs The district contracted with Alfatech Consulting to provide engineering consultation and related professional services for the Stadium Lighting D- 1142 project. The Proposition 39 funds related to Alfatech Consulting total $119,700. The district also contracted with Hallpass Capital, Inc., dba Gonled, to purchase, install, and commission new stadium LED lighting fixtures for the Stadium Lighting D-1142 project. The Proposition 39 funds related to Gonled total $544,414. The district did not provide supporting documentation to show that it considered other vendors before awarding contracts to Alfatech Consulting and Gonled. Therefore, we found that the district sole-sourced these Proposition 39 contracts, totaling $664,114. PRC section 26235(c) states, in part, “A community college district or LEA shall not use a sole source process to award funds pursuant to this chapter.” Projected energy savings not identified in awarded contracts We reviewed the district’s contracts with Pacific Metro Electric, Integra Construction, Star Energy Management, and Gonled, and determined that the contracts do not identify the projected energy savings. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” -A41- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Recommendation We recommend that the CCCCO take appropriate action in response to funds paid to the district that did not meet the sole-source requirement. No additional recommendation is applicable, as the Proposition 39 program has ended. District’s Response We informed the district of the two audit findings via email on April 18, 2019. The district did not respond to the findings. -A42- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program South Orange County Community College District Proposition 39 Program Background The CCCCO approved South Orange County Community College District’s Form B for $1,575,973. The district used its program implementation funds for the following energy efficiency measures: Proposition 39 Year 1 Savings-to- Direct Share Used Energy Cost Investment Job-Years School Site at School Site Efficiency Measures Savings Ratio Created SOUTHO-1415-001 Saddleback College $ 7 80,000 Exterior lighting controls and retrofit $ 7 80,000 $ 8 4,386 1.36 4.37 SOUTHO-1516-001 Saddleback College $ 7 95,973 Exterior lighting controls and retrofit $ 7 95,973 $ 6 6,699 1.33 4.59 $ 1,575,973 Audit Results We audited the Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CCCCO’s Energy Project Guidance. We identified the following audit issue: Sole-sourced project costs The district contracted WSP (Parsons and Brinckerhoff) for labor compliance services. The district did not provide supporting documentation to show that it considered other vendors before awarding the contract to WSP (Parsons and Brinckerhoff). Therefore, we found that the district sole-sourced its Proposition 39 contract, totaling $3,533. PRC section 26235(c) states, in part, “A community college district or LEA shall not use a sole source process to award funds pursuant to this chapter.” Projected energy savings not identified in awarded contracts We reviewed the district’s contract with Anderson & Howard Electric and determined that the contract does not identify the projected energy savings. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” Proposition 39 funds applied to ineligible project expenditures We found that for South Orange County Community College District applied proposition 39 funds from application SOUTHO-01516-001-05 to project costs not included in the application approved by the CCCCO. The district improperly paid $19,579 to vendor Clear Blue Energy for an interior lighting project that was not identified in the application. The district signed and certified in its application that the funding would be used for the energy projects identified in its application. -A43- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Recommendation We recommend that the CCCCO take appropriate action in response to funds paid to the district that did not meet the sole-source requirements, and funds spent on ineligible project costs. No additional recommendation is applicable, as the Proposition 39 program has ended. District’s Response We informed the district of the audit finding via email on February 4, 2019. Kathleen Burke, Ed.D., Chancellor, responded via letter on February 14, 2019. The district’s response letter is included as Attachment H. The district agreed with the projected energy savings finding, stating that “The District has amended its contract templates to ensure that energy evaluations are now also included in all such contracts prospectively.” The district’s response to the sole-source finding is as follows: As it relates to the contract with WSP (Parsons and Brinkerhoff), the District followed Government Code Section 53060 which allows for the hiring of contractors that provide specialized services without obtaining multiple bids. The District believes that the labor compliance services provided by WSP (Parsons and Brinkerhoff) constitute specialized accounting and administrative services as allowed by this Government Code. Furthermore, sole sourcing typically is a factor when we are required to go out to bid for goods or services, when no bidding is required, such as allowed within Government Code Section 53060, any contract issued under this code would not be considered sole sourcing. The district’s response to the ineligible expenditures finding is as follows: During the 2015/2016 fiscal year, the District contributed $33,365 of local funds above the allocated amount of Proposition 39 funding for that fiscal year to complete the interior lighting project. The State subsequently provided additional funding for the interior lighting project in fiscal year 2016/2017, which was used to cover the overage from the prior year. Project managers have been trained to communicate with the Fiscal Services department to ensure that Proposition 39 funds are charged according to the applications submitted. SCO Comment Our findings and recommendation remain unchanged. On December 12, 2013, the CCCCO published guidance on the sole- source requirements in the Proposition 39 Contracting Fact Sheet, which states: Proposition 39 defers to local contracting practices as long as the prohibition of sole source contracts and all applicable law related to contractor qualifications, licensing, and certification requirements related to the project are met. -A44- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Therefore, although the district followed its own procurement standards, it did not follow the minimum standards of the sole-source requirement for Proposition 39 funds contained in PRC section 26235(c). Although the district may have contributed discretionary funds towards the electric lighting project in question, the district’s approved application for Proposition 39 funding did not include this project. -A45- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Attachment A— Hesperia Unified School District’s Response to Audit Results Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Attachment B— High Tech High International Charter School’s Response to Audit Results Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Attachment C— Mark Twain Union Elementary School District’s Response to Audit Results Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Attachment D— Pine Ridge Elementary School District’s Response to Audit Results Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Attachment E— Venture Academy Charter School’s Response to Audit Results Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Attachment F— West Covina Unified School District’s Response to Audit Results Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Attachment G— Butte Glenn Community College District’s Response to Audit Results Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Attachment H— South Orange County Community College District’s Response to Audit Results State Controller’s Office Division of Audits Post Office Box 942850 Sacramento, CA 94250-5874 http://www.sco.ca.gov S19-39M-0001