Coast Community College District

COAST COMMUNITY COLLEGE DISTRICT Revised Audit Report HEALTH FEE ELIMINATION PROGRAM Chapter 1, Statutes of 1984, 2nd Extraordinary Session, and Chapter 1118, Statutes of 1987 July 1, 2002, through June 30, 2006 J C OHN HIANG California State Controller September 2010 September 10, 2010 Jim Moreno, President Board of Trustees Coast Community College District 1370 Adams Avenue Costa Mesa, CA 92626 Dear Mr. Moreno: The State Controller’s Office audited the costs claimed by Coast Community College District for the legislatively mandated Health Fee Elimination Program (Chapter 1, Statutes of 1984, 2nd Extraordinary Session, and Chapter 1118, Statutes of 1987) for the period of July 1, 2002, through June 30, 2006. This revised final report supersedes our previous report dated October 28, 2009. We revised Finding 3 to correct errors in the allowable indirect cost rates for fiscal year (FY) 2004-05 and FY 2005-06. As a result, allowable costs increased by $58,508 for the audit period. The district claimed $1,892,316 for the mandated program. Our audit disclosed that $1,502,965 is allowable and $389,351 is unallowable. The costs are unallowable primarily because the district claimed ineligible costs, understated offsetting revenues, and understated indirect costs. The State paid the district $283,619. Allowable costs claimed exceed the amount paid by $1,219,346. If you have any questions, please contact Jim L. Spano, Chief, Mandated Cost Audits Bureau, at (916) 323-5849. Sincerely, Original signed by JEFFREY V. BROWNFIELD Chief, Division of Audits JVB/vb Jim Moreno -2- September 10, 2010 cc: Ding-Jo H. Currie, Ph.D., Chancellor Coast Community College District Kimberly Allen Administrative Director Coast Community College District Christine Atalig, Auditor Fiscal Services Unit California Community Colleges Chancellor’s Office Thomas Todd, Principal Program Budget Analyst Education Systems Unit Department of Finance Jay Lal, Manager Division of Accounting and Reporting State Controller’s Office Coast Community College District Health Fee Elimination Program Contents Revised Audit Report Summary ............................................................................................................................ 1 Background ........................................................................................................................ 1 Objective, Scope, and Methodology ................................................................................. 2 Conclusion .......................................................................................................................... 2 Views of Responsible Official ........................................................................................... 3 Restricted Use .................................................................................................................... 3 Revised Schedule 1—Summary of Program Costs ............................................................. 4 Revised Findings and Recommendations ............................................................................. 7 Attachment—District’s Response to Draft Audit Report Coast Community College District Health Fee Elimination Program Revised Audit Report Summary The State Controller’s Office (SCO) audited the costs claimed by Coast Community College District for the legislatively mandated Health Fee Elimination Program (Chapter 1, Statutes of 1984, 2nd Extraordinary Session, and Chapter 1118, Statutes of 1987) for the period of July 1, 2002, through June 30, 2006. The district claimed 1,892,316 for the mandated program. Our audit disclosed that $1,502,965 is allowable and $389,351 is unallowable. The costs are unallowable because the district claimed ineligible costs, understated offsetting revenues, and understated indirect costs. The State paid the district $283,619. Allowable costs claimed exceed the amount paid by $1,219,346. Background Chapter 1, Statutes of 1984, 2nd Extraordinary Session (E.S.) repealed Education Code section 72246 which authorized community college districts to charge a health fee for providing health supervision and services, providing medical and hospitalization services, and operating student health centers. This statute also required that health services for which a community college district charged a fee during fiscal year (FY) 1983-84 had to be maintained at that level in FY 1984-85 and every year thereafter. The provisions of this statute would automatically sunset on December 31, 1987, reinstating the community college districts’ authority to charge a health service fee as specified. Chapter 1118, Statutes of 1987, amended Education Code section 72246 (subsequently renumbered as section 76355 by Chapter 8, Statutes of 1993). The law requires any community college district that provided health services in FY 1986-87 to maintain health services at the level provided during that year for FY 1987-88 and for each fiscal year thereafter. On November 20, 1986, the Commission on State Mandates (CSM) determined that Chapter 1, Statutes of 1984, 2nd Extraordinary Session imposed a ―new program‖ upon community college districts by requiring community college districts that provided health services in FY 1983-84 to maintain health services at the level provided during that year for FY 1984-85 and for each fiscal year thereafter. This maintenance-of-effort requirement applied to all community college districts that levied a health service fee in FY 1983-84. On April 27, 1989, the CSM determined that Chapter 1118, Statutes of 1987, amended this maintenance-of-effort requirement to apply to all community college districts that provided health services in FY 1986-87, requiring them to maintain that level in FY 1987-88 and for each fiscal year thereafter. -1- Coast Community College District Health Fee Elimination Program The program’s parameters and guidelines establish the state mandate and define reimbursement criteria. The CSM adopted the parameters and guidelines on August 27, 1987, and amended them on May 25, 1989. In compliance with Government Code section 17558, the SCO issues claiming instructions to assist school districts in claiming mandated program reimbursable costs. Objective, Scope, We conducted the audit to determine whether costs claimed represent increased costs resulting from the Health Fee Elimination Program for and Methodology the period of July 1, 2002, through June 30, 2006. Our audit scope included, but was not limited to, determining whether costs claimed were supported by appropriate source documents, were not funded by another source, and were not unreasonable and/or excessive. We conducted this performance audit under the authority of Government Code sections 12410, 17558.5, and 17561. We did not audit the district’s financial statements. We conducted the audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We limited our review of the district’s internal controls to gaining an understanding of the transaction flow and claim preparation process as necessary to develop appropriate auditing procedures. Conclusion Our audit disclosed instances of noncompliance with the requirements outlined above. These instances are described in the accompanying Summary of Program Costs (Schedule 1) and in the Findings and Recommendations section of this report. For the audit period, Coast Community College District claimed $1,892,316 for costs of the Health Fee Elimination Program. Our audit disclosed that $1,502,965 is allowable and $389,351 is unallowable. For the FY 2002-03 claim, the State paid the district $283,619. Our audit disclosed that $227,943 is allowable. The State will offset $55,676 from other mandated program payments due the district. Alternatively, the district may remit this amount to the State. For the FY 2003-04 claim, the State made no payment to the district. Our audit disclosed that $414,232 is allowable. The State will pay allowable costs claimed that exceed the amount paid, totaling $414,232, contingent upon available appropriations. For the FY 2004-05 claim, the State made no payment to the district. Our audit disclosed that $458,400 is allowable. The State will pay allowable costs claimed that exceed the amount paid, totaling $458,400, contingent upon available appropriations. -2- Coast Community College District Health Fee Elimination Program For the FY 2005-06 claim, the State made no payment to the district. Our audit disclosed that $402,390 is allowable. The State will pay allowable costs claimed that exceed the amount paid, totaling $402,390, contingent upon available appropriations. Views of We issued a draft audit report on September 9, 2009. Kimberly Allen, Administrative Director-Fiscal Affairs, responded by letter dated Responsible September 17, 2009 (Attachment), agreeing with the audit results. Official We issued a final audit report on October 28, 2009. Subsequently, we revised Finding 3 to recalculate allowable indirect cost rates for FY 2004-05 and FY 2005-06. As a result, we revised the understated indirect costs in Finding 3 by $112,685, from $97,484 to $210,169. The adjustment did not affect FY 2004-05, as allowable costs exceed the amount claimed. However, for FY 2005-06, the adjustment increased allowable costs by $58,508. We advised Ms. Allen of the revisions on August 6, 2010. She responded by e-mail on August 24, 2010, agreeing with the revisions to the audit report. Restricted Use This report is solely for the information and use of Coast Community College District, the California Community Colleges Chancellor’s Office, the California Department of Finance, and the SCO; it is not intended to be and should not be used by anyone other than these specified parties. This restriction is not intended to limit distribution of this report, which is a matter of public record. Original signed by JEFFREY V. BROWNFIELD Chief, Division of Audits September 10, 2010 -3- Coast Community College District Health Fee Elimination Program Revised Schedule 1— Summary of Program Costs July 1, 2002, through June 30, 2006 Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustment Reference 1 July 1, 2002, through June 30, 2003 Direct costs: Salaries $ 683,308 $ 683,308 $ — Benefits 162,131 162,131 — Services and supplies 230,069 229,065 (1,004) Finding 1 Less costs of services that exceed services provided in FY 1986-87 base year — (20,811) (20,811) Finding 2 Total direct costs 1,075,508 1,053,693 (21,815) Indirect costs 286,989 281,881 (5,108) Finding 3 Total direct and indirect costs 1,362,497 1,335,574 (26,923) Less authorized health service fees (1,078,878) (1,105,404) (26,526) Finding 4 Less offsetting revenues/reimbursements — (2,227) (2,227) Finding 5 Total program costs $ 283,619 227,943 $ (55,676) Less amount paid by the State (283,619) Allowable costs claimed in excess of (less than) amount paid $ (55,676) July 1, 2003, through June 30, 2004 Direct costs: Salaries $ 580,753 $ 580,753 $ — Benefits 177,126 177,126 — Services and supplies 398,159 328,238 (69,921) Finding 1 Less costs of services that exceed services provided in FY 1986-87 base year — (15,638) (15,638) Finding 2 Total direct costs 1,156,038 1,070,479 (85,559) Indirect costs 276,657 242,762 (33,895) Finding 3 Total direct and indirect costs 1,432,695 1,313,241 (119,454) Less authorized health service fees (859,242) (890,391) (31,149) Finding 4 Less offsetting revenues/reimbursements — (8,618) (8,618) Finding 5 Total program costs $ 573,453 414,232 $ (159,221) Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 414,232 -4- Coast Community College District Health Fee Elimination Program Revised Schedule 1 (continued) Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustment Reference 1 July 1, 2004, through June 30, 2005 Direct costs: Salaries $ 655,107 $ 655,107 $ — Benefits 194,211 194,211 — Services and supplies 297,869 289,129 (8,740) Finding 1 Less costs of services that exceed services provided in FY 1986-87 base year — (16,788) (16,788) Finding 2 Total direct costs 1,147,187 1,121,659 (25,528) Indirect costs 275,145 408,845 133,700 Finding 3 Total direct and indirect costs 1,422,332 1,530,504 108,172 Less authorized health service fees (963,932) (930,800) 33,132 Finding 4 Less offsetting revenues/reimbursements — (10,700) (10,700) Finding 5 Subtotal 458,400 589,004 130,604 Less allowable costs that exceed costs claimed — (130,604) (130,604) Total program costs $ 458,400 458,400 $ — Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 458,400 July 1, 2005, through June 30, 2006 Direct costs: Salaries $ 702,040 $ 702,040 $ — Benefits 200,253 200,253 — Services and supplies 297,153 288,416 (8,737) Finding 1 Less costs of services that exceed services provided in FY 1986-87 base year — (29,848) (29,848) Finding 2 Total direct costs 1,199,446 1,160,861 (38,585) Indirect costs 293,731 409,203 115,472 Finding 3 Total direct and indirect costs 1,493,177 1,570,064 76,887 Less authorized health service fees (916,333) (1,154,656) (238,323) Finding 4 Less offsetting revenues/reimbursements — (13,018) (13,018) Finding 5 Total program costs $ 576,844 402,390 $ (174,454) Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 402,390 -5- Coast Community College District Health Fee Elimination Program Revised Schedule 1 (continued) Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustment Reference 1 Summary: July 1, 2002, through June 30, 2006 Direct costs: Salaries $ 2,621,208 $ 2,621,208 $ — Benefits 733,721 733,721 — Services and supplies 1,223,250 1,134,848 (88,402) Less costs of services that exceed services provided in FY 1986-87 base year — (83,085) (83,085) Total direct costs 4,578,179 4,406,692 (171,487) Indirect costs 1,132,522 1,342,691 210,169 Total direct and indirect costs 5,710,701 5,749,383 38,682 Less authorized health service fees (3,818,385) (4,081,251) (262,866) Less offsetting revenues/reimbursements — (34,563) (34,563) Subtotal 1,892,316 1,633,569 (258,747) Less allowable costs that exceed costs claimed — (130,604) (130,604) Total program costs $ 1,892,316 1,502,965 $ (389,351) Less amount paid by the State (283,619) Allowable costs claimed in excess of (less than) amount paid $ 1,219,346 _________________________ 1 See the Findings and Recommendations section. -6- Coast Community College District Health Fee Elimination Program Revised Findings and Recommendations FINDING 1— The district overstated services and supplies costs totaling $88,402 for the audit period. The overstatements occurred because the district Overstated services included costs for catastrophic insurance coverage for athletes in its and supplies reimbursement claims. The costs for athlete insurance are not eligible for reimbursement; the district believed that these costs were eligible for reimbursement when it prepared its claims. The following table shows the athletic insurance calculation and audit adjustment for each fiscal year: Fiscal Year 2002-03 2003-04 2004-05 2005-06 To tal Student insurance basic coverage $ 108,203 $ 109,285 $ 104,785 $ 117,829 Catastrophic coverage for students 4,314 4,530 4,530 4,530 Total student insurance 112,517 113,815 109,315 122,359 Less insurance costs claimed (113,521) (183,736) (118,055) (131,096) Total audit adjustment $ (1,004) $ (69,921) $ (8,740) $ (8,737) $ (88,402) The program’s parameters and guidelines (section III, Eligible Claimants) state that eligible claimants are community college districts which provided health services in the 1986-87 fiscal year and continue to provide the same services as a result of this mandated program. The parameters and guidelines (section V.B., Reimbursable Costs, Reimbursable Activities), also state that the following cost items related to insurance are reimbursable: ―(1) on-campus accident, (2) voluntary, and (3) insurance inquiry/claim administration.‖ Education Code section 76355(d) (formerly section 72246(e)) states that athletic insurance is not an authorized expenditure for health services. Recommendation The district should ensure that all costs claimed are in accordance with the program’s parameters and guidelines. District’s Response The district agreed with the finding. -7- Coast Community College District Health Fee Elimination Program FINDING 2— The district claimed ineligible health cost items totaling $83,085 for the audit period ($47,240 in salaries and benefits, and $35,845 in services Ineligible health cost and supplies). We determined that the district did not deduct the costs of items providing current fiscal year health cost items that are in excess of the level provided in the FY 1986-87 base year. The following list summarizes health cost items in excess of the level provided in the FY 1986-87 base year by the individual colleges: Coastline Community College Acne Surgery Exc Ben Les Trunk; 0.5 cm Adult 40-64 yrs old (physical) IV Infusion Therapy/DX-by Albuterol Inhaler IV Tubing Set Ankle 3 View/Complete Knee Support Hinged Antibiotic inj. Administr Nebulizer Treatment Anti-Thyroid Microsomal A Tennis Elbow Blk w/ gel Ec Arm Sling Deluxe Therap activ to imprv fun Brow Shaping Wax Service Therap Proc 1/> areas eal Exc Ben Les Fac; 1.1 to Therapeutic Inj. Admini Exc Ben Les Scalp; 0.6 to Walker boot: low profile Exc Ben Les Scalp; 1.1 to Orange Coast College Golden West College Physical - Allied Hepatitis A Physical - General Hepatitis B Physical - Mini HPV Hepatitis B Other Physical Physical Exam Intake The parameters and guidelines (section III, Eligible Claimants) state that community college districts that provided health services in FY 1986-87 and continue to provide the same services as a result of this mandate are eligible to claim reimbursement of those costs. The parameters and guidelines (section V.A., Reimbursable Costs, Scope of the Mandate) state that eligible community college districts shall be reimbursed for the costs of providing a health services program. Only services provided in FY 1986-87 may be claimed. The parameters and guidelines (section V.B., Reimbursable Costs, Reimbursable Activities) lists cost items that are reimbursable to the extent they were provided by the district in FY 1986-87. For Orange Coast College, we determined that the college provided excess health cost items in FY 2002-03, FY 2003-04, and FY 2005-06; therefore, those cost items are unallowable. In order to determine the unallowable costs, we calculated the percentage of unallowable cost items. The unallowable percentages were then multiplied by claimed salaries and benefits to determine unallowable costs. For Golden West College, we determined that the college provided excess health cost items in FY 2005-06; therefore, those cost items are unallowable. The college did not document the health cost items that it provided in FY 2002-03 and FY 2004-05 due to changes in its computer system. Based on evidence from the current and prior SCO audits, we determined that the college also provided excess cost items for these two -8- Coast Community College District Health Fee Elimination Program years. In consultation with district representatives, we calculated a percentage of unallowable health cost items based on an average of documented unallowable health cost items. This calculation was based on the average of unallowable cost item percentages from the prior SCO audit for FY 2000-01 (4.47%) and FY 2001-02 (4.57%), and the current audit for FY 2003-04 (0.00%) and FY 2005-06 (4.17%). We took the total of all four years, divided by four, and determined an unallowable percentage of 3.30% for FY 2002-03 and FY 2004-05. We then multiplied the unallowable percentage by salaries and benefits claimed to determine unallowable costs. If the college subsequently provides the actual number of health cost items that it provided during FY 2002-03 and FY 2004-05, we will modify the calculation accordingly. For Coastline Community College, we identified that the college provided excess health cost items during all three years of the audit period; therefore, those cost items are unallowable. Coastline Community College contracts with Memorial Prompt Care to provide health services for students because it does not operate a health service center on campus. The cost of the contract is the amount that the college collects for student health fees during the year. Accordingly, we multiplied the unallowable cost item percentage times the actual health cost item fees collected by the college during each fiscal year to determine the unallowable costs. The following table shows the excess cost items calculation and audit adjustment for each fiscal year: Orange Golden Coast West Coastline College College College Total Fiscal Year 2002-03 Salaries and benefits claimed $ 553,548 $ 291,891 $ — Contracted health services claimed — — 89,244 Percentage of current year health cost items that exceed cost items provided in FY 1986-87 × (0.97)% × (3.30)% × (6.51)% Audit adjustment $ (5,369) $ (9,632) $ (5,810) $ (20,811) Fiscal Year 2003-04 Salaries and benefits claimed $ 546,421 $ 211,458 $ — Contracted health services claimed — — 187,998 Percentage of current year health cost items that exceed cost items provided in FY 1986-87 × (0.66)% × 0.00% × (6.40)% Audit adjustment $ (3,606) $ — $ (12,032) (15,638) Fiscal Year 2004-05 Salaries and benefits claimed $ 552,842 $ 296,477 $ — Contracted health services claimed — — 152,600 Percentage of current year health cost items that exceed cost items provided in FY 1986-87 × 0.00% × 3.30% × (4.59)% Audit adjustment $ — $ (9,784) $ (7,004) (16,788) Fiscal Year 2005-06 Salaries and benefits claimed $ 586,777 $ 315,517 $ — Contracted health services claimed — — 127,307 Percentage of current year health cost items that exceed cost items provided in FY 1986-87 × (0.97)% × (4.17)% × (8.64)% Audit adjustment $ (5,692) $ (13,157) $ (10,999) (29,848) Total audit adjustment $ (83,085) -9- Coast Community College District Health Fee Elimination Program Recommendation We recommend that the district ensure that all costs claimed are in accordance with the program’s parameters and guidelines. District’s Response The district agreed with the finding. FINDING 3— The district understated indirect costs by the net amount of $210,169 for the audit period (overstated by $39,003 and understated by $249,172). Misstated indirect The costs were overstated by $39,003 because the district applied its costs federally approved Office of Management and Budget (OMB) Circular A-21 indirect cost rate to the incorrect cost base for FY 2002-03 and FY 2003-04. The costs were understated by $249,172 because, for FY 2004-05 and FY 2005-06, the district incorrectly claimed indirect costs by using the OMB Circular A-21 methodology instead of the SCO FAM-29C rate. The district claimed indirect costs using a federally approved OMB Circular A-21 rate for all four years of the audit period. The approved rate was based on employee salaries; however, the district incorrectly applied the rate to costs in excess of salaries for FY 2003-04. We were unable to determine, and the district did not identify, what costs the district used in excess of salaries when it applied its indirect cost rate. For FY 2002-03 and FY 2003-04, we recomputed indirect costs by multiplying allowable salaries by the approved rate of 42%. There was no adjustment for Coastline College because the district contracts with Memorial Prompt Care for services. Consequently, the district did not incur any costs for salaries and benefits for that health center. The parameters and guidelines and the SCO’s claiming instructions do not allow the use of a federally approved rate for FY 2004-05 and beyond. Therefore, we re-calculated allowable indirect cost rates based on the FAM-29C methodology that the parameters and guidelines and the SCO’s claiming instructions allow. The FAM-29C rate was 36.45% for FY 2004-05 and 35.25% FY 2005-06. The following table summarizes the audit adjustments: Orange Golden Coast West Coastline College College College Total Fiscal Year 2002-03 Allowable salaries and wages $441,507 $229,639 $ — Federally approved indirect cost rate × 42% × 42% × 0% Allowable indirect costs $185,433 $ 96,448 $ — $ 281,881 Less indirect costs claimed (286,989) Audit adjustment (5,108) Fiscal Year 2003-04 Allowable salaries and wages $413,427 $164,579 $ — Federally approved indirect cost rate × 42% × 42% × 0% Allowable indirect costs $173,639 $ 69,123 $ — $ 242,762 Less indirect costs claimed (276,657) Audit adjustment (33,895) -10- Coast Community College District Health Fee Elimination Program Orange Golden Coast West Coastline College College College Total Fiscal Year 2004-05 Allowable direct costs $623,534 $326,367 $171,758 FAM-29C indirect cost rate × 36.45% × 36.45% × 36.45% Allowable indirect costs $227,278 $118,961 $ 62,606 $ 408,845 Less indirect costs claimed (275,145) Audit adjustment 133,700 Fiscal Year 2005-06 Allowable direct costs $657,618 $339,465 $163,778 FAM-29C indirect cost rate × 35.25% × 35.25% × 35.25% Allowable indirect costs $231,810 $119,661 $ 57,732 $ 409,203 Less indirect costs claimed (293,731) Audit adjustment 115,472 Total audit adjustment $ 210,169 The parameters and guidelines (section VI.B.3, Claim Preparation, Allowable Overhead Cost) state that indirect costs may be claimed in the manner described by the State Controller in his claiming instructions. For FY 2002-03 and FY 2003-04, the SCO’s claiming instructions state: A college has the option of using a federally approved rate, utilizing the cost accounting principles from Office of Management and Budget Circular A-21 ―Cost Principles for Educational Institutions,‖ or the Controller’s [FAM-29C] methodology. . . . For FY 2004-05 forward, the SCO’s claiming instructions state: A CCD [community college district] may claim indirect costs using the Controller’s methodology [FAM-29C]. . . . If specifically allowed by a mandated program’s P’s and G’s [parameters and guidelines], a district may alternately choose to claim indirect costs using either (1) a federally approved rate prepared in accordance with Office of Management and Budget (OMB) Circular A-21, Cost Principles for Educational Institutions; or (2) a flat 7% rate. Recommendation We recommend that the district ensure that all costs claimed are in accordance with the program’s parameters and guidelines. We also recommend that the district claim indirect costs based on indirect costs rates computed in accordance with the SCO’s claiming instructions. The district should prepare its ICRPs using the SCO’s Form FAM-29C. District’s Response The district agreed with the finding. SCO’s Comment Subsequent to the issuance of the final audit report issued October 28, 2009, we revised the allowable indirect cost rates for FY 2004-05 and FY 2005-06. Our original calculations excluded allowable depreciation expense incurred by the district for capitol assets as an indirect cost on -11- Coast Community College District Health Fee Elimination Program Form FAM-29C. We obtained the depreciation amounts of $6,323,796 from Note 4 of the district’s Financial Statements for FY 2004-05 and the depreciation amounts of $6,764,750 from Note 6 of the district’s Financial Statements for FY 2005-06. This increased the indirect cost rate for those two fiscal years to 36.45% in FY 2004-05 and to 35.25% in FY 2005-06. As a result, we revised the understated indirect costs by $112,685, from $97,484 to $210,169. Our recommendation is unchanged. FINDING 4— The district misstated authorized health service fees by $262,866 for the audit period. The misstatements occurred because the district claimed Misstated authorized costs using student enrollment and Board of Governors Grant (BOGG) health service fees recipient data that did not agree with data that the district reported to the California Community Colleges Chancellor’s Office (CCCCO). As a result, the district understated the number of students subject to health fees by 19,931 during the audit period. Mandated costs do not include costs that are reimbursable from authorized fees. Government Code section 17514 states that ―costs mandated by the state‖ means any increased costs that a school district is required to incur. To the extent a community college district can charge a fee, they are not required to incur a cost. In addition, Government Code section 17556(d) states that the Commission on State Mandates shall not find costs mandated by the State if the school district has the authority to levy service charges, fees, or assessments sufficient to pay for the mandated program or increased level of service. Education Code section 76355, subdivision (c), states that health fees are authorized for all students except those who: (1) depend exclusively upon prayer for healing; (2) are attending a community college under an approved apprenticeship training program; or (3) demonstrate financial need. The CCCCO identified the fees authorized by Education Code section 76355, subdivision (a). The authorized fees for each summer term are $9 for FY 2002-03 and FY 2003-04, $10 for FY 2004-05, and $11 for FY 2005-06. The authorized fees for each fall and spring semester are $12 for FY 2002-03 and FY 2003-04, $13 for FY 2004-05, and $14 for FY 2005-06. In order to calculate authorized health service fee revenue, we obtained student enrollment and Board of Governors Grant (BOGG) recipient data from the CCCCO. The CCCCO identified the district’s enrollment based on the CCCCO’s MIS data element STD7, codes A through G. The CCCCO eliminated any duplicate students based on their social security numbers. From the district enrollment, the CCCCO identified the number of BOGG recipients based on MIS data element SF21, all codes with first letter B or F, and the number of apprenticeship enrollees based on data element SB23, code 1. Effective January 1, 2006, Education Code section 76355, subdivision (c), no longer excludes students who have a financial need. -12- Coast Community College District Health Fee Elimination Program The following table shows the authorized health services fees calculation and audit adjustment: Summer Fall Spring Session Semester Semester Total Fiscal Year 2002-03 Student enrollment 28,706 48,677 46,636 Less BOGG waivers (5,418) (10,485) (10,177) Subtotal 23,288 38,192 36,459 Authorized health service fee rate × $ (9) × $(12) × $(12) Authorized health service fees $ (209,592) $ (458,304) $ (437,508) $ (1,105,404) Less authorized health service fees claimed 1,078,878 Audit adjustment (26,526) Fiscal Year 2003-04 Student enrollment 13,259 43,913 44,492 Less BOGG waivers (3,408) (10,632) (10,962) Subtotal 9,851 33,281 33,530 Authorized health service fee rate × $ (9) × $(12) × $(12) Authorized health service fees $ (88,659) $ (399,372) $ (402,360) (890,391) Less authorized health service fees claimed 859,242 Audit adjustment (31,149) Fiscal Year 2004-05 Student enrollment 16,417 44,873 43,320 Less BOGG waivers (4,821) (12,767) (12,746) Subtotal 11,596 32,106 30,574 Authorized health service fee rate × $(10) × $(13) × $(13) Authorized health service fees $ (115,960) $ (417,378) $ (397,462) (930,800) Less authorized health service fees claimed 963,932 Audit adjustment 33,132 Fiscal Year 2005-06 Student enrollment 17,375 44,107 42,758 Less BOGG waivers (5,519) (13,705) — Subtotal 11,856 30,402 42,758 Authorized health service fee rate × $(11) × $(14) × $(14) Authorized health service fees $ (130,416) $ (425,628) $ (598,612) (1,154,656) Less authorized health service fees claimed 916,333 Audit adjustment (238,323) Total audit adjustment $ (262,866) Recommendation We recommend that the district deduct authorized health service fees from mandate-related costs claimed. To properly calculate authorized health service fees, we recommend that the district identify the number of enrolled students based on CCCCO data element STD7, codes A through G. We also recommend that the district identify the number of apprenticeship program enrollees based on data elements SB23, code 1, and STD7, codes A through G. -13- Coast Community College District Health Fee Elimination Program In addition, we recommend that the district maintain documentation that identifies the number of students excluded from the health service fee based on Education Code section 76355, subdivision (c)(1). If the district excludes any students from receiving health services, the district should maintain contemporaneous documentation of a district policy that excludes those students and documentation identifying the number of students excluded. District’s Response The district agreed with the finding. FINDING 5— The district understated offsetting savings/reimbursements by $34,563 for the audit period. The understatements occurred because Orange Coast Understated offsetting College received health services revenue that was not reported in the revenues/reimbursements district’s mandated cost claims. Specifically, we identified that Orange Coast College health services revenues were not posted to its general ledger under health services (account #122-61302-64410 or account #122-61302-64430). Instead, the revenues were posted to a separate account called OCC–Ancillary (account #02-1000-1000-247500-6710). The district should have included these offsetting revenues in its mandated cost claims. The following table summarizes the audit adjustment: Fiscal Years 2002-03 2003-04 2004-05 2005-06 Total OCC–Ancillary Expenses $ 28,598 $ 27,759 $ 26,377 $ 17,628 Revenues (30,825) (36,377) (37,077) (30,646) Total audit adjustment $ (2,227) $ (8,618) $ (10,700) $ (13,018) $ (34,563) The parameters and guidelines (section VIII, Offsetting Savings and Other Reimbursements) state that any offsetting savings the claimant experiences as a direct result of this statute must be deducted from the costs claimed. In addition, reimbursement for this mandate received from any source (e.g., federal, state, etc.) shall be identified and deducted from this claim. Recommendation We recommend that the district report all offsetting savings/ reimbursements attributable to its health services program. District’s Response The district agreed with the finding. -14- Coast Community College District Health Fee Elimination Program Attachment— District’s Response to Draft Audit Report State Controller’s Office Division of Audits Post Office Box 942850 Sacramento, CA 94250-5874 http://www.sco.ca.gov S09-MCC-037