Santa Monica City

CITY OF SANTA MONICA Audit Report FIREFIGHTERS’ CANCER PRESUMPTION PROGRAM Chapter 1568, Statutes of 1982 July 1, 2001, through June 30, 2004 S W TEVE ESTLY California State Controller November 2006 S W TEVE ESTLY California State Controller November 9, 2006 Steve Stark Chief Financial Officer City of Santa Monica 1717 4th Street, Suite 250 Santa Monica, CA 90401 Dear Mr. Stark: The State Controller’s Office audited the costs claimed by the City of Santa Monica for the legislatively mandated Firefighters’ Cancer Presumption Program (Chapter 1568, Statutes of 1982) for the period of July 1, 2001, through June 30, 2004. The city claimed $493,773 for the mandated program. Our audit disclosed that $272,413 is allowable and $221,360 is unallowable. The unallowable costs occurred because the city claimed non-cancer related costs, used an incorrect monthly disability rate, and did not abate reimbursements against related costs. The State paid the city $10. The State will pay allowable costs claimed that exceed the amount paid, totaling $272,403, contingent upon available appropriations. 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/vb cc: Annette Morales, Senior Budget Analyst City of Santa Monica Todd Jerue, Program Budget Manager Corrections and General Government Department of Finance City of Santa Monica Firefighters’ Cancer Presumption Program Contents Audit Report Summary............................................................................................................................ 1 Background........................................................................................................................ 1 Objective, Scope, and Methodology................................................................................. 1 Conclusion.......................................................................................................................... 2 Views of Responsible Officials.......................................................................................... 2 Restricted Use.................................................................................................................... 2 Schedule 1—Summary of Program Costs............................................................................ 3 Findings and Recommendations........................................................................................... 5 Attachment—City’s Response to Draft Audit Report Steve Westly • California State Controller City of Santa Monica Firefighters’ Cancer Presumption Program Audit Report Summary The State Controller’s Office (SCO) audited the costs claimed by the City of Santa Monica for the legislatively mandated Firefighters’ Cancer Presumption Program (Chapter 1568, Statutes of 1982) for the period of July 1, 2001, through June 30, 2004. The last day of fieldwork was August 21, 2006. The city claimed $493,773 for the mandated program. Our audit disclosed that $272,413 is allowable and $221,360 is unallowable. The unallowable costs occurred because the city claimed non-cancer related costs, used an incorrect monthly disability benefit rate, and did not abate reimbursements against related costs. The State paid the city $10. The State will pay allowable costs claimed that exceed the amount paid, totaling $272,403, contingent upon available appropriations. Background Chapter 1568, Statutes of 1982, added and amended Labor Code Section 3272.1, which states that cancer that has developed or manifested itself in firefighters will be presumed to have arisen out of and in the course of employment, unless the presumption is controverted by other evidence. The presumption is extended to a firefighter following termination of service for a period of three calendar months for each year of requisite service, but not to exceed 60 months in any circumstance, commencing with the last date actually worked in the specified capacity. On February 23, 1984, the Board of Control (now the Commission on State Mandates [COSM]) determined that Chapter 1568, Statutes of 1982, imposed a reimbursable mandate under Government Code Section 17561. Parameters and Guidelines establishes the state mandate and defines reimbursement criteria. COSM adopted the Parameters and Guidelines on October 24, 1985, and last amended it on March 26, 1987. In compliance with Government Code Section 17558, the SCO issues claiming instructions for mandated programs, to assist local agencies and school districts in claiming reimbursable costs. Objective, We conducted the audit to determine whether costs claimed represent increased costs resulting from the Firefighters’ Cancer Presumption Scope, and Program for the 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 city’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. Steve Westly • California State Controller 1 City of Santa Monica Firefighters’ Cancer Presumption Program We limited our review of the city’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, the City of Santa Monica claimed $493,773 for costs of the Firefighters’ Cancer Presumption Program. Our audit disclosed that $272,413 is allowable and $221,360 is unallowable. For fiscal year (FY) 2001-02, the State made no payment to the city. Our audit disclosed that $18,708 is allowable. The State will pay allowable costs claimed that exceed the amount paid, totaling $18,708, contingent upon available appropriations. For FY 2002-03, the State paid the city $10. Our audit disclosed that $219,403 is allowable. The State will pay allowable costs claimed that exceed the amount paid, totaling $219,393, contingent upon available appropriations. For FY 2003-04, the State made no payment to the city. Our audit disclosed that $34,302 is allowable. The State will pay allowable costs claimed that exceed the amount paid, totaling $34,302, contingent upon available appropriations. Views of We issued a draft audit report on June 30, 2006. Steve Stark, Chief Financial Officer, responded by letter dated August 11, 2006, agreeing Responsible with the audit results, but noting that some death benefit costs were Officials accidently left off of the claim. In a letter dated September 5, 2006, the city submitted documentation that validated additional disability benefits costs not claimed for FY 2002-03. This report incorporates the additional allowable costs. Restricted Use This report is solely for the information and use of the City of Santa Monica, 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 Steve Westly • California State Controller 2 City of Santa Monica Firefighters’ Cancer Presumption 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 Salaries $ 44 $ 44 $ — Benefits 8 8 — Services and supplies 4,431 4,431 — Disability benefit costs 35,072 32,920 (2,152) Finding 1 Total direct costs 39,555 37,403 (2,152) Indirect costs 13 13 — Total direct and indirect costs 39,568 37,416 (2,152) Less offsetting savings/reimbursements — — — Subtotal 39,568 37,416 (2,152) Reimbursable percentage × .50 × .50 × .50 Total program costs $ 19,784 18,708 $ (1,076) Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 18,708 July 1, 2002, through June 30, 2003 Salaries $ 1,989 $ 1,989 $ — Benefits 246 246 — Services and supplies 68,150 64,770 (3,380) Finding 2 Disability benefit costs 368,223 396,019 27,796 Finding 1 Total direct costs 438,608 463,024 24,416 Indirect costs 199 199 — Total direct and indirect costs 438,807 463,223 24,416 Less offsetting savings/reimbursements — (6,369) (6,369) Finding 3 Subtotal 438,807 456,854 18,047 Reimbursable percentage × .50 × .50 × .50 Subtotal 219,403 228,426 9,023 Allowable costs in excess of amount claimed 2 — (9,023) (9,023) Total program costs $ 219,403 219,403 $ — Less amount paid by the State (10) Allowable costs claimed in excess of (less than) amount paid $ 219,393 Steve Westly • California State Controller 3 City of Santa Monica Firefighters’ Cancer Presumption Program Schedule 1 (continued) Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustment Reference 1 July 1, 2003, through June 30, 2004 Salaries $ — $ — $ — Benefits — — — Services and supplies 76,176 68,148 (8,028) Finding 2 Disability benefit costs 432,996 399,456 (33,540) Finding 1 Total direct costs 509,172 467,604 (41,568) Indirect costs — — — Total direct and indirect costs 509,172 467,604 (41,568) Less offsetting savings/reimbursements — (399,001) (399,001) Finding 3 Subtotal 509,172 68,603 (440,569) Reimbursable percentage × .50 × .50 × .50 Total program costs $ 254,586 34,302 $ (220,285) Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 34,302 Summary: July 1, 2001, through June 30, 2004 Salaries $ 2,033 $ 2,033 $ — Benefits 254 254 — Services and supplies 148,757 137,349 (11,408) Finding 2 Disability benefit costs 836,291 828,395 (7,896) Finding 1 Total direct costs 987,335 968,031 (19,304) Indirect costs 212 212 — Total direct and indirect costs 987,547 968,243 (19,304) Less offsetting savings/reimbursements — (405,370) (405,370) Finding 3 Subtotal 987,547 562,873 (424,674) Reimbursable percentage × .50 × .50 × .50 Subtotal 493,773 281,436 (212,337) Allowable costs in excess of amount claimed 2 — (9,023) (9,023) Total program costs $ 493,773 272,413 $ (221,360) Less amount paid by the State (10) Allowable costs claimed in excess of (less than) amount paid $ 272,403 _________________________ 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 2002-03. Steve Westly • California State Controller 4 City of Santa Monica Firefighters’ Cancer Presumption Program Findings and Recommendations FINDING 1— For the audit period, the city overstated disability benefit costs by $7,896. Misstated and ineligible disability For fiscal year (FY) 2001-02, the disability benefit costs overstatement benefits occurred because the city claimed total disability benefits of $25,480 for one employee based on a weekly rate of $490 for 52 weeks. However, the city’s records supported only total payments of $23,328, a difference of $2,152. For FY 2002-03, the disability benefits costs understatement occurred because the city inadvertently omitted costs for one employee. For FY 2003-04, the overstatement occurred because the city claimed ineligible non-cancer-related disability benefit costs for one employee. The following table summarizes the audit adjustments. Fiscal Year 2001-02 2002-03 2003-04 Total Incorrect disability benefits rate $ (2,152) $ — $ — $ (2,152) Eligible/(ineligible) disability benefits — 27,796 (33,540) (5,744) Audit adjustment $ (2,152) $ 27,796 $ (33,540) $ (7,896) Parameters and Guidelines, Section X, Supporting Data, states that for auditing purposes, all costs claimed must be traceable to source documents or worksheets that show evidence of and the validity of such costs, and these documents must be kept on file and made available on the request of the State Controller. Parameters and Guidelines, Section VI, states that a claim is reimbursable if “the one or more carcinogens to which the worker was exposed are reasonably linked to the disabling cancer, as demonstrated by competent medical evidence.” Recommendation We recommend that the city review all claims to ensure that reported costs are reimbursable under the mandate. City’s Response The city agreed with the finding. Steve Westly • California State Controller 5 City of Santa Monica Firefighters’ Cancer Presumption Program FINDING 2— For FY 2002-03 and FY 2003-04, the city claimed ineligible service and supply costs of a total of $11,408. The overstatements occurred because Ineligible services and the city claimed non-cancer related services and supplies costs for one supplies employee. The following table summarizes the audit adjustments. Fiscal Year 2002-03 2003-04 Total Services and supplies $ (3,380) $ (8,028) $ (11,408) Parameters and Guidelines, Section VI, states that a claim is reimbursable if “the one or more carcinogens to which the worker was exposed are reasonably linked to the disabling cancer, as demonstrated by competent medical evidence.” Recommendation We recommend that the city review all claims to ensure that reported costs are reimbursable under the mandate. City’s Response The city agreed with the finding. FINDING 3— For FY 2002-03 and FY 2003-04, the city did not report third-party Unreported reimbursements of $405,370. reimbursements The city received medical expense reimbursements for one employee from its insurance carrier in FY 2002-03 and FY 2003-04. These reimbursements were not abated against claimed costs. Following is a summary of the audit adjustments to cost reductions. Fiscal Year 2002-03 2003-04 Total Offsetting reimbursements $ (6,369) $ (399,001) $ (405,370) Parameters and Guidelines, Section IX, states that “any offsetting savings the claimants experience as a direct result of this statute must be deducted from the costs claimed. It further states that 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 city report all costs in gross amounts and then deduct reimbursements to arrive at net reported costs. City’s Response The city agreed with the finding. Steve Westly • California State Controller 6 City of Santa Monica Firefighters’ Cancer Presumption Program Attachment— City’s Response to Draft Audit Report Steve Westly • California State Controller State Controller’s Office Division of Audits Post Office Box 942850 Sacramento, California 94250-5874 http://www.sco.ca.gov C06-MCC-005