Peralta Community College District

PERALTA COMMUNITY COLLEGE DISTRICT Audit Report COLLECTIVE BARGAINING PROGRAM Chapter 961, Statutes of 1975, and Chapter 1213, Statutes of 1991 July 1, 2001, through June 30, 2004 J C OHN HIANG California State Controller August 2007 J C OHN HIANG California State Controller August 10, 2007 Elihu Harris, Chancellor Peralta Community College District 333 East 8th Street Oakland, CA 94606 Dear Mr. Harris: The State Controller’s Office audited the costs claimed by the Peralta Community College District for the legislatively mandated Collective Bargaining Program (Chapter 961, Statutes of 1975, and Chapter 1213, Statutes of 1991) for the period of July 1, 2001, through June 30, 2004. The district claimed $594,608 for the mandated program. Our audit disclosed that $538,442 is allowable and $56,166 is unallowable. The unallowable costs occurred primarily because the district claimed ineligible and unsupported costs. The State paid the district $412,231. Allowable costs claimed exceed the amount paid by $126,211. If you have any questions, please contact Jim L. Spano, Chief, Compliance Audits Bureau, at (916) 323-5849. Sincerely, Original signed by JEFFREY V. BROWNFIELD Chief, Division of Audits JVB/jj cc: Thuy Nguyen, General Counsel Peralta Community College District Thomas L. Smith, Esq. Vice Chancellor for Finance and Administration Peralta Community College District Marty Rubio, Specialist Fiscal Accountability Section California Community Colleges Chancellor’s Office Jeannie Oropeza, Program Budget Manager Education Systems Unit Department of Finance Peralta Community College District Collective Bargaining Program Contents Audit Report Summary............................................................................................................................ 1 Background........................................................................................................................ 1 Objective, Scope, and Methodology................................................................................. 2 Conclusion.......................................................................................................................... 2 Views of Responsible Official........................................................................................... 3 Restricted Use.................................................................................................................... 3 Schedule 1—Summary of Program Costs............................................................................ 4 Findings and Recommendations........................................................................................... 6 Peralta Community College District Collective Bargaining Program Audit Report Summary The State Controller’s Office (SCO) audited the costs claimed by the Peralta Community College District for the legislatively mandated Collective Bargaining Program (Chapter 961, Statutes of 1975, and Chapter 1213, Statutes of 1991) for the period of July 1, 2001, through June 30, 2004. The last day of fieldwork was June 20, 2007. The district claimed $594,608 for the mandated program. Our audit disclosed that $538,442 is allowable and $56,166 is unallowable. The unallowable costs occurred primarily because the district claimed ineligible and unsupported costs. The State paid the district $412,231. Allowable costs claimed exceed the amount paid by $126,211. Background In 1975, the State enacted the Rodda Act (Chapter 961, Statutes of 1975), requiring the employer and employee to meet and negotiate, thereby creating a collective bargaining atmosphere for public school employers. The legislation created the Public Employment Relations Board to issue formal interpretations and rulings regarding collective bargaining under the Act. In addition, the legislation established organizational rights of employees and representational rights of employee organizations, and recognized exclusive representatives relating to collective bargaining. On July 17, 1978, the Board of Control (now the Commission on State Mandates [CSM]) determined that the Rodda Act imposed a reimbursable state mandate upon school districts reimbursable under Government Code section 17561. Chapter 1213, Statutes of 1991, added Government Code section 3547.5, requiring school district to publicly disclose major provisions of a collective bargaining effort before the agreement becomes binding. On August 20, 1998, the CSM determined that this legislation also imposed a state mandate upon school district reimbursable under Government Code section 17561. Costs of publicly disclosing major provisions of collective bargaining agreements that district incurred after July 1, 1996, are allowable. Claimants are allowed to claim increased costs. For claim components G1 through G3, increased costs represent the difference between the current-year Rodda Act activities and the base-year Winton Act activities (generally, fiscal year 1974-75), as adjusted by the implicit price deflator. For components G4 through G7, increased costs represent actual costs incurred. -1- Peralta Community College District Collective Bargaining Program The seven components are as follows: G1–Determining bargaining units and exclusive representatives G2–Election of unit representatives G3–Costs of negotiations G4–Impasse proceedings G5–Collective bargaining agreement disclosure G6–Contract administration G7–Unfair labor practice costs Parameters and Guidelines establishes the state mandate and defines reimbursement criteria. The CSM adopted the Parameters and Guidelines on October 22, 1980, and last amended it on January 27, 2000. In compliance with Government Code section 17558, the SCO issues claiming instructions for mandated programs, to assist local agencies and school district in claiming reimbursable costs. Objective, We conducted the audit to determine whether costs claimed represent increased costs resulting from the Collective Bargaining Program for the Scope, and period of July 1, 2001, through June 30, 2004. Methodology 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 the audit according to Government Auditing Standards, issued by the Comptroller General of the United States, and under the authority of Government Code sections 12410, 17558.5, and 17561. We did not audit the district’s financial statements. We limited our audit scope to planning and performing audit procedures necessary to obtain reasonable assurance that costs claimed were allowable for reimbursement. Accordingly, we examined transactions, on a test basis, to determine whether the costs claimed were supported. 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. We asked the district’s representative to submit a written representation letter regarding the district’s accounting procedures, financial records, and mandated cost claiming procedures, as recommended by Government Auditing Standards. However, the district did not submit a representation letter. 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. -2- Peralta Community College District Collective Bargaining Program For the audit period, the Peralta Community College District claimed $594,608 for costs of the Collective Bargaining Program. Our audit disclosed that $538,442 is allowable and $56,166 is unallowable. For the fiscal year (FY) 2001-02 claim, the State paid the district $126,599. Our audit disclosed that $102,013 is allowable. The State will offset $24,586 from other mandated program payments due the district. Alternatively, the district may remit this amount to the State. For the FY 2002-03 claim, the State paid the district $285,632. Our audit disclosed that $254,052 is allowable. The State will offset $31,580 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 $182,377 is allowable. The State will pay that amount, contingent upon available appropriations. Views of We issued a draft audit report on June 29, 2007. Thomas L. Smith, Esq., Vice Chancellor for Finance and Administration, responded by telephone Responsible on August 6, 2007, agreeing with the audit results. Official Restricted Use This report is solely for the information and use of Peralta 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 -3- Peralta Community College District Collective Bargaining Program Schedule 1— Summary of Program Costs July 1, 2001, through June 30, 2004 Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustment Reference 1 July 1, 2001, through June 30, 2002 Component Activities G1 through G3: Salaries and benefits $ 21,756 $ 20,432 $ (1,324) Finding 1 Materials and supplies 131 — (131) Finding 2 Contracted services 38,047 30,888 (7,159) Finding 3 Subtotals 59,934 51,320 (8,614) Less adjusted base year direct costs (4,986) (4,986) — Increased direct costs, G1 through G3 54,948 46,334 (8,614) Component Activities G4 through G7: Salaries and benefits 19,572 11,698 (7,874) Finding 1 Materials and supplies 294 — (294) Finding 2 Contracted services 34,137 33,688 (449) Finding 3 Increased direct costs, G4 through G7 54,003 45,386 (8,617) Total increased direct costs, G1 through G7 108,951 91,720 (17,231) Indirect costs 17,648 10,293 (7,355) Finding 4 Total program costs $ 126,599 102,013 $ (24,586) Less amount paid by the State (126,599) Allowable costs claimed in excess of (less than) amount paid $ (24,586) July 1, 2002, through June 30, 2003 Component Activities G1 through G3: Salaries and benefits $ 96,385 $ 81,334 $ (15,051) Finding 1 Contracted services 124,685 97,166 (27,519) Finding 3 Subtotals 221,070 178,500 (42,570) Less adjusted base year direct costs (5,098) (5,098) — Increased direct costs, G1 through G3 215,972 173,402 (42,570) Component Activities G4 through G7: Salaries and benefits 26,297 18,500 (7,797) Finding 1 Contracted services 43,363 26,226 (17,137) Finding 3 Increased direct costs, G4 through G7 69,660 44,726 (24,934) Total increased direct costs, G1 through G7 285,632 218,128 (67,504) Indirect costs — 35,924 35,924 Finding 4 Total program costs $ 285,632 254,052 $ (31,580) Less amount paid by the State (285,632) Allowable costs claimed in excess of (less than) amount paid $ (31,580) -4- Peralta Community College District Collective Bargaining Program Schedule 1 (continued) Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustment Reference 1 July 1, 2003, through June 30, 2004 Component Activities G1 through G3: Salaries and benefits $ 73,830 $ 67,689 $ (6,141) Finding 1 Materials and supplies 2,109 2,109 — Contracted services 73,662 73,662 — Subtotals 149,601 143,460 (6,141) Less adjusted base year direct costs (5,284) (5,284) — Increased direct costs, G1 through G3 144,317 138,176 (6,141) Component Activities G4 through G7: Salaries and benefits 33,037 23,379 (9,658) Finding 1 Contracted services 5,023 5,023 — Increased direct costs, G4 through G7 38,060 28,402 (9,658) Total increased direct costs, G1 through G7 182,377 166,578 (15,799) Indirect costs — 32,529 32,529 Finding 4 Subtotal 182,377 199,107 16,730 Less allowable costs that exceed amount claimed 2 — (16,730) (16,730) Total program costs $ 182,377 182,377 $ — Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 182,377 Summary: July 1, 2001, through June 30, 2004 Total reimbursable costs $ 594,608 $ 538,442 $ (56,166) Less amount paid by the State (412,231) Allowable costs claimed in excess of (less than) amount paid $ 126,211 _________________________ 1 See the Findings and Recommendations section. 2 Government Code section 17561 stipulates that the State will not reimburse any claim more than one year after the filing deadline specified in the SCO’s claiming instructions. That deadline has expired for FY 2003-04 claims. -5- Peralta Community College District Collective Bargaining Program Findings and Recommendations FINDING 1— The district claimed unallowable salary and benefit costs totaling $47,845 for the audit period. The audit adjustment resulted from the Unallowable salary following issues. and benefit costs Inaccurate Productive Hourly Rates The district reported inaccurate productive hourly rates, which resulted in net understated salary and benefit costs totaling $6,284 for the audit period. The district calculated incorrect productive hourly rates because the district did not use timely/current employee salary payroll information to calculate productive hourly rates. We calculated audited productive hourly rates based on salary rates documented in the district’s payroll records. The following table summarizes the audit adjustment that resulted from the district’s use of inaccurate productive hourly rates. Fiscal Year 2001-02 2002-03 2003-04 Total Salary and benefit costs: Components G1-G3 $ (1,324) $ 9,645 $ (5,040) $ 3,281 Components G4-G7 (305) 4,669 (1,361) 3,003 Audit adjustment $ (1,629) $ 14,314 $ (6,401) $ 6,284 Ineligible Costs The district claimed unallowable salary and benefit costs totaling $20,133. The claimed costs are unallowable due to the following reasons. • The district claimed costs that are not reimbursable by Parameters and Guidelines. Non-reimbursable costs claimed include costs for regular meetings and costs incurred by the district Chancellor. • The district claimed unallowable training costs for costs of employees to attend workshops and monthly meetings, which are not reimbursable under the mandated program. The following table summarizes the audit adjustment that resulted from unallowable costs. Fiscal Year 2001-02 2002-03 2003-04 Total Salary and benefit costs: Components G1-G3 $ — $ (1,511) $ — $ (1,511) Components G4-G7 (5,974) (4,351) (8,297) (18,622) Audit adjustment $ (5,974) $ (5,862) $ (8,297) $ (20,133) -6- Peralta Community College District Collective Bargaining Program Unsupported Hours Claimed The district claimed overstated salary and benefit costs totaling $33,996 for the audit period. The district claimed inaccurate mandate-related hours primarily for the following reasons. • The district made mathematical errors in preparing the mandated cost claims. The errors are mainly attributed to claiming duplicated hours. • The district claimed employee hours that were either not adequately supported or not supported. • The district claimed overtime costs for salaried employees who did not earn overtime pay. The following table summarizes the audit adjustment that resulted from unsupported hours claimed. Fiscal Year 2001-02 2002-03 2003-04 Total Salary and benefit costs: Components G1-G3 $ — $ (23,185) $ (1,101) $ (24,286) Components G4-G7 (1,595) (8,115) — (9,710) Audit adjustment $ (1,595) $ (31,300) $ (1,101) $ (33,996) The following table summarizes all of the audit adjustments for salaries and benefits. Fiscal Year 2001-02 2002-03 2003-04 Total Salary and benefit costs: Components G1-G3: Productive hourly rate $ (1,324) $ 9,645 $ (5,040) $ 3,281 Ineligible costs — (1,511) — (1,511) Unsupported costs — (23,185) (1,101) (24,286) Total, components G1-G3: (1,324) (15,051) (6,141) (22,516) Components G4-G7: Productive hourly rate (305) 4,669 (1,361) 3,003 Ineligible costs (5,974) (4,351) (8,297) (18,622) Unsupported costs (1,595) (8,115) — (9,710) Total, components G4-G7: (7,874) (7,797) (9,658) (25,329) Audit adjustment $ (9,198) $ (22,848) $ (15,799) $ (47,845) Government Code section 17560 requires school districts to file an annual reimbursement claim that details the costs actually incurred for the fiscal year. Parameters and Guidelines states, “Public school employers will be reimbursed for the ‘increased costs’ incurred as a result of compliance with the mandate.” Government Code section 17514 states that “costs mandated by the State” means any increased costs, which a school district is required to incur. -7- Peralta Community College District Collective Bargaining Program Parameters and Guidelines states, “Personal development and informational programs, i.e., classes, conferences, seminars, workshops, and time spent by employees attending such meetings are not reimbursable.” Parameters and Guidelines also states, “. . . the costs for salaries and expenses of the governing authority, for example the School Superintendent and Governing Board, are not reimbursable.” Recommendation We recommend that the district develop and implement an adequate recording and reporting system to ensure all costs claimed are allowable and properly supported. District’s Response The district agrees with the audit finding. FINDING 2— The district overstated material and supply costs by $425 during audit period. The overstated costs occurred because the district incorrectly Misclassified material reported contracted services costs as material and supply costs. Finding 3 and supply costs identifies the understated contracted services costs. The following table summarizes the audit adjustment. FY 2001-02 Components G1-G3: Materials and supplies $ (131) Components G4-G7: Materials and supplies (294) Audit adjustment $ (425) Government Code section 17560 requires school districts to file an annual reimbursement claim that details the costs actually incurred for the fiscal year. Recommendation We recommend that the district develop and implement procedures to ensure that all costs claimed are properly classified on the mandated cost claims. District’s Response The district agrees with the audit finding. -8- Peralta Community College District Collective Bargaining Program FINDING 3— The district claimed unallowable contracted services costs totaling $52,264 for the audit period. The audit adjustment resulted from the Unallowable contracted following issues. service costs Mathematical Errors The district claimed overstated costs totaling $48,906 for the audit period due to mathematical errors, including claiming duplicate costs and typographical errors. Non-reimbursable Training Costs The district claimed unallowable training costs totaling $3,783 during the audit period. The unallowable training costs consist of employee seminars and retreats and employee conflict-resolution training sessions. Per the Parameters and Guidelines, reimbursable training costs are limited to training held for supervisory and management personnel for contract administration and interpretation of the negotiated contract. Misclassified Costs The district understated contract services costs by $425 during the audit period, as previously identified in Finding 2–Misclassified material costs. The understated costs occurred because the district incorrectly reported contracted services costs as materials and supplies. The following table summarizes all of the audit adjustments for contracted services. Fiscal Year 2001-02 2002-03 Total Contracted services: Components G1-G3: Mathematical errors $ (6,750) $ (25,019) $ (31,769) Non-reimbursable training costs (540) (2,500) (3,040) Misclassified costs 131 — 131 Total, components G1-G3: (7,159) (27,519) (34,678) Components G4-G7: Mathematical errors — (17,137) (17,137) Non-reimbursable training costs (743) — (743) Misclassified costs 294 — 294 Total, components G4-G7: (449) (17,137) (17,586) Audit adjustment $ (7,608) $ (44,656) $ (52,264) Parameters and Guidelines states, “Public school employers will be reimbursed for the ‘increased costs’ incurred as a result of compliance with the mandate.” Government Code section 17514 states that “costs mandated by the State” means any increased costs, which a school district is required to incur. Government Code section 17560 requires school districts to file an annual reimbursement claim that details the costs actually incurred for the fiscal year. -9- Peralta Community College District Collective Bargaining Program Parameters and Guidelines states, “Reasonable costs incurred for a reasonable number of training sessions held for supervisory and management personnel on contract administration/interpretation of the negotiated contract are reimbursable. Contract interpretations at staff meetings are not reimbursable. Personal development and informational programs, i.e., classes, conferences, seminars, workshops, and time spent by employees attending such meetings are not reimbursable.” Recommendation We recommend that the district develop and implement an effective control and reporting system to ensure that all claimed costs are eligible and adequately supported. District’s Response The district agrees with the audit finding. FINDING 4— The district claimed inaccurate indirect costs, which resulted in net undertated indirect costs totaling $61,098 for the audit period. This audit Understated indirect finding resulted from the following. costs • The district did not claim indirect costs for FY 2002-03 and FY 2003-04. However, the district has a federally approved indirect cost rate of 48%, which is effective for all three fiscal years under audit. • The district incorrectly calculated indirect costs for FY 2001-02 using salaries and benefits instead of excluding the benefits. The district also incorrectly calculated indirect costs against materials and supplies. The federally approved rate that the district has, notes that the rate is derived from direct salary and wages but excluding fringe benefits. Therefore, the federally approved rate is applicable only to salaries. • Audit adjustments made to the related salary costs identified in Finding 1. The following table summarizes the unallowable indirect costs. Fiscal Year 2001-02 2002-03 2003-04 Total Total indirect costs claimed (item (a)) $ 17,648 $ — $ — $ 17,648 Total salaries and benefits allowed $ 32,130 $ 99,834 $ 91,068 Less base year costs adjusted by IPD (4,986) (5,098) (5,284) Subtotal 27,144 94,736 85,784 Less benefits @ 21% (5,700) (19,895) (18,015) Total salaries allowed 21,444 74,841 67,769 Indirect cost rate allowed × 48% × 48% × 48% Total indirect costs allowed (item (b)) $ 10,293 $ 35,924 $ 32,529 $ 78,746 Indirect costs (over)/underclaimed (item (b) – item (a)) $ (7,355) $ 35,924 $ 32,529 $ 61,098 -10- Peralta Community College District Collective Bargaining Program Parameters and Guidelines states that claimants will only be reimbursed for the increased costs incurred as a result of compliance with the mandate. Recommendation We recommend that the district develop and implement an adequate recording and reporting system to ensure all costs claimed are allowable and properly supported. District’s Response The district agrees with the audit finding. -11- State Controller’s Office Division of Audits Post Office Box 942850 Sacramento, California 94250-5874 http://www.sco.ca.gov S06-MCC-002