Riverside County

RIVERSIDE COUNTY Audit Report PEACE OFFICERS’ CANCER PRESUMPTION PROGRAM Chapter 1171, Statutes of 1989 July 1, 2002, through June 30, 2006 J C OHN HIANG California State Controller March 2009 J C OHN HIANG California State Controller March 10, 2009 The Honorable Jeff Stone, Chairman Board of Supervisors Riverside County 4080 Lemon Street Riverside, CA 92501 Dear Mr. Stone: The State Controller’s Office audited the costs claimed by Riverside County for the legislatively mandated Peace Officers’ Cancer Presumption Program (Chapter 1171, Statutes of 1989) for the period of July 1, 2002, through June 30, 2006. The county claimed $472,635 ($472,711 less a $76 penalty for filing a late claim) for the mandated program. Our audit disclosed that $430,594 is allowable and $42,041 is unallowable. The costs are unallowable primarily because the county claimed ineligible, non-mandate-related, and unsupported costs. The State paid the county $159,405. Allowable costs claimed exceed the amount paid by $271,189. If you disagree with the audit findings, you may file an Incorrect Reduction Claim (IRC) with the Commission on State Mandates (CSM). The IRC must be filed within three years following the date that we notify you of a claim reduction. You may obtain IRC information at CSM’s Web site, at www.csm.ca.gov (Guidebook link); you may obtain IRC forms by telephone, at (916) 323-3562, or by e-mail, at csminfo@csm.ca.gov. 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 The Honorable Jeff Stone, Chairman -2- March 10, 2009 cc: The Honorable Robert E. Byrd Auditor-Controller Riverside County Michael G. Alexander Deputy Auditor-Controller Riverside County Victoria Currier Worker’s Compensation Manager Riverside County Todd Jerue, Program Budget Manager Corrections and General Government Department of Finance Riverside County Peace Officers’ Cancer Presumption Program Contents Audit Report Summary............................................................................................................................ 1 Background........................................................................................................................ 1 Objective, Scope, and Methodology................................................................................. 1 Conclusion.......................................................................................................................... 2 Views of Responsible Officials.......................................................................................... 2 Restricted Use.................................................................................................................... 3 Schedule 1—Summary of Program Costs............................................................................ 4 Findings and Recommendations........................................................................................... 6 Attachment—County’s Response to Draft Audit Report Riverside County Peace Officers’ Cancer Presumption Program Audit Report Summary The State Controller’s Office (SCO) audited the costs claimed by Riverside County for the legislatively mandated Peace Officers’ Cancer Presumption Program (Chapter 1171, Statutes of 1989) for the period of July 1, 2002, through June 30, 2006. The county claimed $472,635 ($472,711 less a $76 penalty for filing a late claim) for the mandated program. Our audit disclosed that $430,594 is allowable and $42,041 is unallowable. The costs are unallowable primarily because the county claimed ineligible, non-mandate-related, and unsupported costs. The State paid the county $159,405. Allowable costs claimed exceed the amount paid by $271,189. Background Labor Code section 3212.1 (amended by Chapter 1171, Statutes of 1989) provisions also cover peace officers who are primarily engaged in law enforcement activities, as defined in Penal Code sections 830.1 and 830.2. Previously, the provisions applied only to public sector firefighters. The law states that cancer that has developed or manifested itself in peace officers is presumed to have arisen out of and in the course of employment, unless other evidence controverts the presumption. The presumption extends to a peace officer 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 July 23, 1992, the Commission on State Mandates (CSM) determined that Chapter 1171, Statutes of 1989, imposed a state mandate reimbursable under Government Code section 17561. The program’s parameters and guidelines establish the state mandate and define reimbursement criteria. CSM adopted the parameters and guidelines on January 21, 1993. 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 Peace Officers’ Cancer Presumption and Methodology Program for 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 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, -1- Riverside County Peace Officers’ Cancer Presumption Program 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, Riverside County claimed $472,635 ($472,711 less a $76 penalty for filing a late claim) for costs of the Peace Officers’ Cancer Presumption Program. Our audit disclosed that $430,594 is allowable and $42,041 is unallowable. For the fiscal year (FY) 2002-03 claim, the State made no payment to the county. Our audit disclosed that $32,154 is allowable. The State will pay that amount, contingent upon available appropriations. For the FY 2003-04 claim, the State made no payment to the county. Our audit disclosed that $271,214 is allowable. The State will pay that amount, contingent upon available appropriations. For the FY 2004-05 claim, the State paid the county $107,943. Our audit disclosed that $90,352 is allowable. The State will offset $17,591 from other mandated program payments due to the county. Alternatively, the county may remit this amount to the State. For the FY 2005-06 claim, the State paid the county $51,462. Our audit disclosed that $36,874 is allowable. The State will offset $14,588 from other mandated program payments due to the county. Alternatively, the county may remit this amount to the State. Views of We issued a draft audit report on December 31, 2008. Michael G. Alexander, Deputy Auditor-Controller, and Vicky Currier, Worker’s Responsible Compensation Officer, responded by letter dated January 9, 2009 Officials (Attachment), disagreeing with the audit results. This final audit report includes the county’s response. We redacted the county’s response to exclude cancer claimants’ names. -2- Riverside County Peace Officers’ Cancer Presumption Program Restricted Use This report is solely for the information and use of Riverside 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 March 10, 2009 -3- Riverside County Peace Officers’ Cancer Presumption Program 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: Services and supplies $ 15,176 $ 13,696 $ (1,480) Finding 1 Disability benefits 58,276 50,763 (7,513) Finding 2 Total direct costs 73,452 64,459 (8,993) Reimbursable percentage × 50% × 50% × 50% Subtotal 36,726 32,230 (4,496) Less late filing penalty (76) (76) — Total program costs $ 36,650 32,154 $ (4,496) Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 32,154 July 1, 2003, through June 30, 2004 Direct costs: Services and supplies $ 19,282 $ 12,793 $ (6,489) Finding 1 Disability benefits 533,878 529,634 (4,244) Finding 2 Total direct costs 553,160 542,427 (10,733) Reimbursable percentage × 50% × 50% × 50% Total program costs $ 276,580 271,214 $ (5,366) Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 271,214 July 1, 2004, through June 30, 2005 Direct costs: Salaries $ 5,732 $ 5,732 $ — Benefits 2,797 2,797 — Services and supplies 14,216 7,951 (6,265) Finding 1 Disability benefits 188,961 160,044 (28,917) Finding 2 Total direct costs 211,706 176,524 (35,182) Indirect costs 4,181 4,181 — Total direct and indirect costs 215,887 180,705 (35,182) Reimbursable percentage × 50% × 50% × 50% Total program costs $ 107,943 90,352 $ (17,591) Less amount paid by the State (107,943) Allowable costs claimed in excess of (less than) amount paid $ (17,591) -4- Riverside County Peace Officers’ Cancer Presumption 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 $ 4,483 $ 4,483 $ — Benefits 2,105 2,105 — Services and supplies 20,984 2,922 (18,062) Finding 1 Disability benefits 71,904 60,789 (11,115) Finding 2 Total direct costs 99,476 70,299 (29,177) Indirect costs 3,449 3,449 — Total direct and indirect costs 102,925 73,748 (29,177) Reimbursable percentage × 50% × 50% × 50% Total program costs $ 51,462 36,874 $ (14,588) Less amount paid by the State (51,462) Allowable costs claimed in excess of (less than) amount paid $ (14,588) Summary: July 1, 2002, through June 30, 2006 Direct costs: Salaries $ 10,215 $ 10,215 $ — Benefits 4,902 4,902 — Services and supplies 69,658 37,362 (32,296) Disability benefits 853,019 801,230 (51,789) Total direct costs 937,794 853,709 (84,085) Indirect costs 7,630 7,630 — Total direct and indirect costs 945,424 861,339 (84,085) Reimbursable percentage × 50% × 50% × 50% Subtotal 472,711 430,670 (42,041) Less late filing penalty (76) (76) — Total program costs $ 472,635 430,594 $ (42,041) Less amount paid by the State (159,405) Allowable costs claimed in excess of (less than) amount paid $ 271,189 _________________________ 1 See the Findings and Recommendations section. -5- Riverside County Peace Officers’ Cancer Presumption Program Findings and Recommendations FINDING 1— The county claimed unallowable services and supplies totaling $32,296. The unallowable services and supplies resulted because of the following: Unallowable services and supplies • The county claimed costs applicable to ineligible claimants. The county denied the employees’ worker’s compensation claims on the basis that the employees’ cancer ailments did not arise out of and in the course of employment. • The county claimed non-mandate-related costs. The county claimed total costs applicable to claimants who had both mandate-related and non-mandate-related ailments. The county also claimed costs that were unrelated to claimants’ worker’s compensation claims. • The county claimed unsupported costs. The county did not provide source documentation that validates the claimed costs. • The county understated claimed costs. We identified mandate-related costs that the county did not claim. The program’s parameters and guidelines state, “cancer that has developed or manifested itself in peace officers will be presumed to have arisen out of and in the course of employment, unless the presumption is controverted by other evidence.” They also state that only cancer-related ailments are reimbursable under the mandated program. In addition, they state, “all costs claimed must be traceable to source documents or work sheets that show evidence of the validity of such costs.” The following table summarizes the audit adjustment: Fiscal Year 2002-03 2003-04 2004-05 2005-06 Total Ineligible claimant $ (575) $ (2,579) $ (3,719) $ (17,960) $ (24,833) Non-mandate- related costs (508) (3,611) (1,921) (102) (6,142) Unsupported costs (640) (299) (949) — (1,888) Understated costs 243 — 324 — 567 Audit adjustment $ (1,480) $ (6,489) $ (6,265) $ (18,062) $ (32,296) Recommendation We recommend that the county claim only those costs that are properly supported and reimbursable under the mandated program. Specifically, we recommend that the county: • Claim costs only for eligible claimants; • Claim only mandate-related costs (i.e., those costs attributable to cancer ailments); and • Maintain source documentation supporting claimed costs. -6- Riverside County Peace Officers’ Cancer Presumption Program County’s Response You have determined the “Services and Supplies” and “Disability Benefits” costs of [four] cases to be unallowable. Your finding is based on the fact that their claims were initially denied, so their costs must be unallowable. These cases are currently in litigation and still open. Since legal costs are eligible in the program Parameters and Guidelines (Ps and Gs), we believe we are correctly claiming these costs. Also, the court has previously found in favor of the claimant in a prior workers compensation claim that was initially denied. Therefore, we would lose the opportunity for reimbursement if these costs are not filed in a timely manner, as we await the final court decision of these pending cases. Since your office has two years in which to complete our field audit, there is plenty of time to end the audit later, giving us time to await court determination. The county submitted a table identifying the costs for which it is requesting reconsideration. We redacted the county’s response to exclude claimants’ names. The following table re-categorizes the costs to identify the fiscal year and those costs that are applicable to this audit finding: Fiscal Year 2002-03 2003-04 2004-05 2005-06 Total Ineligible claimant: Case No. 1 $ (575) $ — $ (104) $ (1,978) $ (2,657) Case No. 2 — (369) (3,615) (2,886) (6,870) Case No. 3 — — — (2,977) (2,977) Case No. 4 — — — (6,320) (6,320) Total $ (575) $ (369) $ (3,719) $ (14,161) $ (18,824) SCO’s Comment Our finding and recommendation are unchanged. The unallowable costs in question are related to litigation of claims that the county denied. These costs are unallowable regardless of the outcome of litigation. In its Statement of Decision dated September 27, 2007, the Commission on State Mandates stated, “This statute [Labor Code section 3212.1] authorizes, but does not require, local agencies to dispute the claims of injured employees. Thus, it is the decision made by the local agency to dispute the claim that triggers any litigation costs incurred. Litigation costs are not mandated by the state.” -7- Riverside County Peace Officers’ Cancer Presumption Program FINDING 2— The county claimed unallowable disability benefits totaling $51,789. The unallowable disability benefits resulted because of the following: Unallowable disability benefits • The county claimed costs applicable to ineligible claimants. The county denied the employees’ worker’s compensation claims on the basis that the employees’ cancer ailments did not arise out of and in the course of employment. • The county claimed non-mandate-related costs. The county claimed total costs applicable to claimants who had both mandate-related and non-mandate-related ailments. • The county claimed unsupported costs. The county did not provide source documentation that validates the claimed costs. The program’s parameters and guidelines state, “cancer that has developed or manifested itself in peace officers will be presumed to have arisen out of and in the course of employment, unless the presumption is controverted by other evidence.” They also state that only cancer-related ailments are reimbursable under the mandated program. In addition, they state, “all costs claimed must be traceable to source documents or work sheets that show evidence of the validity of such costs.” The following table summarizes the audit adjustment: Fiscal Year 2002-03 2003-04 2004-05 2005-06 Total Ineligible claimant $ (2,112) $ (2,386) $ (915) $ (9,753) $ (15,166) Non-mandate- related costs (1,250) (1,858) (27,499) (1,362) (31,969) Unsupported costs (4,151) — (503) — (4,654) Audit adjustment $ (7,513) $ (4,244) $ (28,917) $ (11,115) $ (51,789) Recommendation We recommend that the county claim only those costs that are properly supported and reimbursable under the mandated program. Specifically, we recommend that the county: • Claim costs only for eligible claimants; • Claim only mandate-related costs (i.e., those costs attributable to cancer ailments); and • Maintain source documentation supporting claimed costs. -8- Riverside County Peace Officers’ Cancer Presumption Program County’s Response You have determined the “Services and Supplies” and “Disability Benefits” costs of [four] cases to be unallowable. Your finding is based on the fact that their claims were initially denied, so their costs must be unallowable. These cases are currently in litigation and still open. Since legal costs are eligible in the program Parameters and Guidelines (Ps and Gs), we believe we are correctly claiming these costs. Also, the court has previously found in favor of the claimant in a prior workers compensation claim that was initially denied. Therefore, we would lose the opportunity for reimbursement if these costs are not filed in a timely manner, as we await the final court decision of these pending cases. Since your office has two years in which to complete our field audit, there is plenty of time to end the audit later, giving us time to await court determination. The county submitted a table identifying the costs for which it is requesting reconsideration. We redacted the county’s response to exclude claimants’ names. The following table re-categorizes the costs to identify the fiscal year and those costs that are applicable to this audit finding: Fiscal Year 2002-03 2005-06 Total Ineligible claimant: Case No. 1 $ (2,112) $ (850) $ (2,962) Case No. 2 — (4,283) (4,283) Case No. 3 — (801) (801) Case No. 4 — (805) (805) Total $ (2,112) $ (6,739) $ (8,851) SCO’s Comment Our finding and recommendation are unchanged. The county did not submit any documentation showing that these cases were adjudicated in the claimants’ favor. As the county denied the claims, they do not meet all elements identified in the parameters and guidelines and the applicable costs are not reimbursable under the mandated program. If the county submits documentation showing that the claims were adjudicated in the claimants’ favor, we will revise our final audit report as warranted. -9- Riverside County Peace Officers’ Cancer Presumption 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-028