Shasta County

SHASTA COUNTY Audit Report CHILD ABDUCTION AND RECOVERY PROGRAM Chapter 1399, Statutes of 1976; Chapter 162, Statutes of 1992; and Chapter 988, Statutes of 1996 July 1, 2003, through June 30, 2006 J C OHN HIANG California State Controller November 2008 J C OHN HIANG California State Controller November 26, 2008 Linda Hartman, Chairperson Board of Supervisors Shasta County 1450 Court Street, Suite 308B Redding, CA 96001-1680 Dear Ms. Hartman: The State Controller’s Office audited the costs claimed by Shasta County for the legislatively mandated Child Abduction and Recovery Program (Chapter 1399, Statutes of 1976; Chapter 162, Statutes of 1992; and Chapter 988, Statutes of 1996) for the period of July 1, 2003, through June 30, 2006. The county claimed $1,082,448 for the mandated program. Our audit disclosed that $758,254 is allowable and $324,194 is unallowable. The costs are unallowable because the county claimed unsupported and overstated costs, and did not report offsetting revenues. The State paid the county $774,490. The amount paid exceeds allowable costs claimed by $16,236. 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/sk cc: The Honorable Connie Regnell, Auditor-Controller Shasta County Sherri Jenkins, SB-90 Coordinator Shasta County Elizabeth Leslie, Chief Fiscal Officer District Attorney’s Office Shasta County Todd Jerue, Program Budget Manager Corrections and General Government Department of Finance Shasta County Child Abduction and Recovery 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 Attachment—County’s Response to Draft Audit Report Shasta County Child Abduction and Recovery Program Audit Report Summary The State Controller’s Office (SCO) audited the costs claimed by Shasta County for the legislatively mandated Child Abduction and Recovery Program (Chapter 1399, Statutes of 1976; Chapter 162, Statutes of 1992; and Chapter 988, Statutes of 1996) for the period of July 1, 2003, through June 30, 2006. The county claimed $1,082,448 for the mandated program. Our audit disclosed that $758,254 is allowable and $324,194 is unallowable. The costs are unallowable because the county claimed unsupported and overstated costs, and did not report offsetting revenues. The State paid the county $774,490. The amount paid exceeds allowable costs claimed by $16,236. Background Chapter 1399, Statutes of 1976 established the mandated Child Abduction and Recovery Program based on the following laws: • Civil Code section 4600.1 (repealed and added as Family Code sections 3060-3064 by Chapter 162, Statutes of 1992) • Penal Code sections 278 and 278.5 (repealed and added as Penal Code sections 277, 278, and 278.5 by Chapter 988, Statutes of 1996) • Welfare and Institutions Code section 11478.5 (repealed and added as Family Code section 17506 by Chapter 478, Statutes of 1999, last amended by Chapter 759, Statutes of 2002) These laws require the District Attorney’s Office to assist persons having legal custody of a child in: • Locating their children when they are unlawfully taken away; • Gaining enforcement of custody and visitation decrees and orders to appear; • Defraying expenses related to the return of an illegally detained, abducted, or concealed child; • Civil court action proceedings; and • Guaranteeing the appearance of offenders and minors in court actions. On September 19, 1979, the State Board of Control (now the Commission on State Mandates [CSM]) determined that this legislation imposed a state mandate reimbursable under Government Code section 17561. -1- Shasta County Child Abduction and Recovery Program The program’s parameters and guidelines establish the state mandate and define reimbursement criteria. CSM adopted the parameters and guidelines on January 21, 1981, and last amended them on August 26, 1999. In compliance with Government Code section 17558, the SCO issues claiming instructions to assist local agencies in claiming mandated program reimbursable costs. Objective, Scope, We conducted the audit to determine whether costs claimed represent increased costs resulting from the Child Abduction and Recovery and Methodology Program for the period of July 1, 2003, 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 county’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 county’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, Shasta County claimed $1,082,448 for costs of the Child Abduction and Recovery Program. Our audit disclosed that $758,254 is allowable and $324,194 is unallowable. For the fiscal year (FY) 2003-04 claim, the State made no payments to the county. Our audit disclosed that $232,321 is allowable. The State will pay that amount, contingent upon available appropriations. For the FY 2004-05 claim, the State paid the county $445,559. Our audit disclosed that $289,336 is allowable. The State will offset $156,223 from other mandated program payments due the county. Alternatively, the county may remit this amount to the State. For the FY 2005-06 claim, the State paid the county $328,931. Our audit disclosed that $236,597 is allowable. The State will offset $92,334 from other mandated program payments due the county. Alternatively, the county may remit this amount to the State. -2- Shasta County Child Abduction and Recovery Program Views of We issued a draft audit report on October 17, 2008. Connie Regnell, Auditor-Controller, responded by letter dated November 4, 2008 Responsible (Attachment), agreeing with the audit results. This final audit report Official includes the county’s response. Restricted Use This report is solely for the information and use of Shasta County, the California Department of Finance, and the SCO; it is not intended to be and should not be used by anyone other than these specified parties. This restriction is not intended to limit distribution of this report, which is a matter of public record. Original signed by JEFFREY V. BROWNFIELD Chief, Division of Audits November 26, 2008 -3- Shasta County Child Abduction and Recovery Program Schedule 1— Summary of Program Costs July 1, 2003, through June 30, 2006 Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustment Reference 1 July 1, 2003, through June 30, 2004 Direct costs: Salaries $ 126,989 $ 126,989 $ — Benefits 43,855 43,855 — Services and supplies 26,562 26,562 — Travel and training 3,587 3,587 — Total direct costs 200,993 200,993 — Indirect costs 106,965 33,639 (73,326) Finding 3 Total direct and indirect costs 307,958 234,632 (73,326) Less offsetting savings/reimbursements — (2,311) (2,311) Finding 4 Total program costs $ 307,958 232,321 $ (75,637) Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 232,321 July 1, 2004, through June 30, 2005 Direct costs: Salaries $ 171,163 $ 143,493 $ (27,670) Finding 1 Benefits 76,807 65,658 (11,149) Finding 1 Services and supplies — 31,627 31,627 Finding 2 Travel and training — 1,298 1,298 Finding 2 Total direct costs 247,970 242,076 (5,894) Indirect costs 197,706 48,377 (149,329) Finding 3 Total direct and indirect costs 445,676 290,453 (155,223) Less offsetting savings/reimbursements (117) (1,117) (1,000) Finding 4 Total program costs $ 445,559 289,336 $ (156,223) Less amount paid by the State (445,559) Allowable costs claimed in excess of (less than) amount paid $ (156,223) -4- Shasta County Child Abduction and Recovery Program Schedule 1 (continued) Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustment Reference 1 July 1, 2005, through June 30, 2006 Direct costs: Salaries $ 103,545 $ 106,295 $ 2,750 Finding 1 Benefits 52,816 54,059 1,243 Finding 1 Services and supplies 35,058 35,058 — Travel and training 1,827 1,827 — Total direct costs 193,246 197,239 3,993 Indirect costs 137,394 41,067 (96,327) Finding 3 Mathematical error 54 — (54) Total direct and indirect costs 330,694 238,306 (92,388) Less offsetting savings/reimbursements (1,709) (1,709) — Reverse mathematical error (54) — 54 Total program costs $ 328,931 236,597 $ (92,334) Less amount paid by the State (328,931) Allowable costs claimed in excess of (less than) amount paid $ (92,334) Summary: July 1, 2003, through June 30, 2006 Direct costs: Salaries $ 401,697 $ 376,777 $ (24,920) Benefits 173,478 163,572 (9,906) Services and supplies 61,620 93,247 31,627 Travel and training 5,414 6,712 1,298 Total direct costs 642,209 640,308 (1,901) Indirect costs 442,065 123,083 (318,982) Mathematical error 54 — (54) Total direct and indirect costs 1,084,328 763,391 (320,937) Less offsetting savings/reimbursements (1,826) (5,137) (3,311) Reverse mathematical error (54) — 54 Total program costs $ 1,082,448 758,254 $ (324,194) Less amount paid by the State (774,490) Allowable costs claimed in excess of (less than) amount paid $ (16,236) _________________________ 1 See the Findings and Recommendations section. -5- Shasta County Child Abduction and Recovery Program Findings and Recommendations FINDING 1— The county claimed unallowable salaries and benefits totaling $34,826. The unallowable costs resulted because the county overstated fiscal year Unallowable salaries (FY) 2004-05 costs and understated FY 2005-06 costs. and benefits Fiscal Year 2004-05 The county claimed unallowable salaries and benefits totaling $27,670 and $11,149, respectively. For one employee, the county overstated both the productive hourly rate and the actual mandate-related hours worked. The county’s time records did not support the productive hourly rate and hours claimed. Fiscal Year 2005-06 The county overstated and understated employees’ allowable costs. Overall, the county understated salaries and benefits by $2,750 and $1,243, respectively. The understated costs resulted because: • The county revised its productive hourly rate methodology from previous fiscal years. The county used 1,700 average productive hours to calculate productive hourly rates. However, the county did not provide documentation to support the 1,700 average productive hours. Therefore, we recalculated productive hourly rates based on the actual productive hours that the county documented in its time records. • The county used an incorrect base to calculate a productive hourly rate for one employee. The county calculated the rate using total paid hours (including hours worked, vacation hours, and holiday hours) rather than hours worked only. • The county overstated actual mandate-related hours worked for two employees. The county’s time records did not support the hours claimed. The following table summarizes the audit adjustment: Fiscal Year 2004-05 2005-06 Total Salaries $ (27,670) $ 2,750 $ (24,920) Benefits (11,149) 1,243 (9,906) Audit adjustment $ (38,819) $ 3,993 $ (34,826) The program’s parameters and guidelines require counties to report actual costs. They also require that costs claimed be “traceable to source documents and/or worksheets that show evidence of and the validity of such costs.” -6- Shasta County Child Abduction and Recovery Program Recommendation We recommend that the county claim only those costs that its accounting records support. County’s Response We concur with this finding and in the future will require documentation from departments to support all costs claimed. We will continue to strongly recommend the use of times studies for all departments. SCO’s Comment Our finding and recommendation are unchanged. However, in its response, the county states that it will “recommend the use of time studies for all departments.” The county claimed mandate-related costs based on semi-weekly time cards that employees prepared. We recommend that the county continue to use its semi-weekly time cards to document mandate-related costs. If the county intends to document mandate-related time using time studies, it should ensure that its time studies comply with the SCO’s time study guidelines. FINDING 2— The county understated services and supplies by $31,627. The county also understated travel and training by $1,298. The understated costs Understated services resulted because the county made a mathematical error in its FY 2004-05 and supplies and claim. understated travel and training The following table summarizes the audit adjustment: Services and Travel and Supplies Training Total Audit adjustment FY 2004-05 $ 31,627 $ 1,298 $ 32,925 The parameters and guidelines state that counties shall be reimbursed for the increased costs which they are required to incur. Recommendation We recommend that the county review its claims for mathematical accuracy. County’s Response We concur with this finding and have put procedures in place to ensure mathematical errors are avoided. SCO’s Comment Our finding and recommendation are unchanged. -7- Shasta County Child Abduction and Recovery Program FINDING 3— The county claimed unallowable indirect costs totaling $318,982. The unallowable costs resulted because the county overstated its indirect cost Unallowable indirect rates and claimed indirect costs attributable to the unallowable salaries costs and benefits identified in Finding 1. The county overstated its indirect cost rates because it incorrectly allocated costs as direct or indirect based on funding it received from outside sources. In addition, the county incorrectly calculated its indirect cost rates by using a base of total salaries and benefits rather than direct salaries and benefits. During our audit fieldwork, the county prepared revised indirect cost rate proposals. In its revised proposals, the county correctly calculated its indirect cost rates by using direct salaries and benefits as the direct cost base. In addition, the county properly allocated costs as direct or indirect, except that the county included the cost of employees’ non-productive time in its indirect cost pool. We calculated allowable indirect cost rates by reallocating these costs from the indirect cost pool to the direct cost base, because the county recovers these costs through its claimed productive hourly rates. The following tables summarize the audit adjustments to the indirect cost rates that the county claimed: Costs Allowable Audit Reported Costs Adjustment FY 2003-04 Direct costs: Salaries and wages $3,529,068 $3,103,301 $ (425,767) Fringe benefits 1,077,139 958,313 (118,826) Total direct costs (A) $4,606,207 $4,061,614 $ (544,593) Indirect costs: Salaries and wages $1,742,862 $ 278,492 $ (1,464,370) Fringe benefits 552,712 73,054 (479,658) Services and supplies 473,286 326,689 (146,597) A-87 and fixed asset costs 132,845 125,241 (7,604) Subtotal indirect costs 2,901,705 803,476 (2,098,229) Less intrafund transfers/other (17,584) (3,743) 13,841 Total indirect costs (B) $2,884,121 $ 799,733 $ (2,084,388) Indirect cost rate, FY 2003-04 (B ÷ A) 62.61% 19.69% (42.92)% FY 2004-05 Direct costs: Salaries and wages $3,399,881 $3,062,777 $ (337,104) Fringe benefits 1,374,338 1,260,739 (113,599) Total direct costs (C) $4,774,219 $4,323,516 $ (450,703) Indirect costs: Salaries and wages $2,224,410 $ 336,249 $ (1,888,161) Fringe benefits 920,651 113,281 (807,370) Services and supplies 532,852 426,134 (106,718) A-87 and fixed asset costs 128,576 124,558 (4,018) Total indirect costs (D) $3,806,489 $1,000,222 $ (2,806,267) Indirect cost rate, FY 2004-05 (D ÷ C) 79.73% 23.13% (56.60)% -8- Shasta County Child Abduction and Recovery Program Costs Allowable Audit Reported Costs Adjustment FY 2005-06 Direct costs: Salaries and wages $3,466,796 $3,093,338 $ (373,458) Fringe benefits 1,534,611 1,392,405 (142,206) Total direct costs (E) $5,001,407 $4,485,743 $ (515,664) Indirect costs: Salaries and wages $2,456,988 $ 373,457 $ (2,083,531) Fringe benefits 1,044,628 142,205 (902,423) Services and supplies 696,465 449,638 (246,827) A-87 and fixed asset costs 196,576 183,287 — Total indirect costs (F) $4,394,657 $1,148,587 $ (3,232,781) Indirect cost rate, FY 2005-06 (F ÷ E) 87.87% 25.61% (62.26)% The following table summarizes the audit adjustment: Fiscal Year 2003-04 2004-05 2005-06 Total Allowable salaries and benefits $ 170,844 $ 209,151 $ 160,354 Allowable indirect cost rate × 19.69% × 23.13% × 25.61% Allowable indirect costs 33,639 48,377 41,067 $ 123,083 Less indirect costs claimed (106,965) (197,706) (137,394) (442,065) Audit adjustment $ (73,326) $(149,329) $ (96,327) $(318,982) The parameters and guidelines state, “All costs claimed must be traceable to source documents and/or worksheets that show evidence of and the validity of such costs.” They also state that counties may claim indirect costs using the procedures provided in Office of Management and Budget (OMB) Circular A-87 (Title 2 CFR Part 225). The circular states that the county must distribute salaries and wages based on personnel activity reports or equivalent documentation when employees work on both indirect and direct cost activities. The circular also states that the distribution base may be (1) total direct costs (excluding capital expenditures and other distorting items), (2) direct salaries and wages, or (3) another base which results in an equitable distribution. Recommendation We recommend that the county: • Allocate salaries and wages between direct and indirect activities based on personnel activity reports or equivalent documentation that meets the requirements of OMB Circular A-87. • Calculate indirect cost rates using a distribution base specified in OMB Circular A-87. County’s Response We concur with this finding and as the coordinating department for Shasta County’s mandated claim submission, we will review methodology for both the productive hourly rates and indirect cost rate proposals to be sure they conform to OMB Circular A-87. -9- Shasta County Child Abduction and Recovery Program SCO’s Comment Our finding and recommendation are unchanged. FINDING 4— The county understated offsetting savings/reimbursements by $3,311. The county did not report FY 2003-04 restitution payments received Understated offsetting totaling $2,311. In addition, the county’s FY 2004-05 claim contained a savings/reimbursements mathematical error that resulted in understated offsetting savings/ reimbursements totaling $1,000. The following table summarizes the audit adjustment: Fiscal Year 2003-04 2004-05 Total Audit adjustment $ (2,311) $ (1,000) $ (3,311) The parameters and guidelines state, “Reimbursement for this mandate received from any source . . . shall be identified and deducted from the claim.” Recommendation We recommend that the county properly report offsetting savings/ reimbursements according to the parameters and guidelines. County’s Response We concur with this finding and will emphasize the department’s need to review the program’s parameters and guidelines to be sure of their knowledge of reporting requirements. SCO’s Comment Our finding and recommendation are unchanged. -10- Shasta County Child Abduction and Recovery Program Attachment— County’s Response to Draft Audit Report State Controller’s Office Division of Audits Post Office Box 942850 Sacramento, CA 94250-5874 http://www.sco.ca.gov S08-MCC-010