SCO
Contra Costa County
Perinatal Services
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CONTRA COSTA COUNTY
Audit Report
PERINATAL SERVICES PROGRAM
Chapter 1603, Statutes of 1990
July 1, 1999, through June 30, 2002
STEVE WESTLY
California State Controller
February 2004
STEVE WESTLY
California State Controller
February 27, 2004
The Honorable Kenneth J. Corcoran
Auditor-Controller
Contra Costa County
625 Court Street, Room 103
Martinez, CA 94553-1282
Dear Mr. Corcoran:
The State Controller’s Office (SCO) has completed an audit of the claims filed by Contra Costa
County for costs of the legislatively mandated Perinatal Services Program (Chapter 1603,
Statutes of 1990) for the period of July 1, 1999, through June 30, 2002.
The county claimed and was paid $1,458,468 for the mandated program. Our audit disclosed
that none of the claimed costs is allowable. The unallowable costs occurred because the county
claimed unsupported costs. The total amount paid should be returned to the State.
The SCO has established an informal audit review process to resolve a dispute of facts. The
auditee should submit, in writing, a request for a review and all information pertinent to the
disputed issues within 60 days after receiving the final report. The request and supporting
documentation should be submitted to: Richard J. Chivaro, Chief Counsel, State Controller’s
Office, Post Office Box 942850, Sacramento, CA 94250-0001.
If you have any questions, please contact Jim L. Spano, Chief, Compliance Audits Bureau, at
(916) 323-5849.
Sincerely,
Original Signed By:
VINCENT P. BROWN
Chief Operating Officer
VPB:jj
cc: Patrick Godley
Chief Financial Officer
Contra Costa County
Health Services Department
Calvin Smith, Program Budget Manager
Corrections and General Government
Department of Finance
Contra Costa County Perinatal Services Program
Contents
Audit Report
Summary............................................................................................................................ 1
Background........................................................................................................................ 1
Objective, Scope, and Methodology................................................................................. 1
Conclusion.......................................................................................................................... 2
Views of Responsible Official........................................................................................... 2
Restricted Use.................................................................................................................... 3
Schedule 1—Summary of Program Costs........................................................................... 4
Schedule 2—Detail of Errors in County Claims................................................................. 6
Finding and Recommendation.............................................................................................. 8
Attachment—County’s Response to Draft Audit Report
Steve Westly • California State Controller
Contra Costa County Perinatal Services Program
Audit Report
Summary The State Controller’s Office (SCO) has completed an audit of the claims
filed by Contra Costa County for costs of the legislatively mandated
Perinatal Services Program (Chapter 1603, Statutes of 1990) for the
period of July 1, 1999, through June 30, 2002. The last day of fieldwork
was May 2, 2003.
The county claimed and was paid $1,458,468 for the mandated program.
The audit disclosed that none of the claimed costs is allowable. The
unallowable costs occurred because the county claimed unsupported
costs. The total amount paid should be returned to the State.
Background Chapter 1603, Statutes of 1990, added Section 10901 to the Health and
Safety Code, requiring each county to establish protocols and apply
assessment procedures for maternal substance abuse and for intervention
activities on behalf of a substance-exposed infant. Requirements include:
• Identifying needed services for the mother, child, or family,
including, where applicable, services to assist the mother in caring
for her child and services to assist maintaining children in her home;
and
• Determining the level of risk to the newborn upon release to the
home and the corresponding level of services and intervention, if
any, necessary to protect the newborn's health and safety, including a
referral to the county welfare department for child welfare services.
On February 25, 1993, the Commission on State Mandates determined
that Chapter 1603, Statutes of 1990, resulted in state-mandated costs that
are reimbursable pursuant to Title 2, Division 4, Part 7, of the
Government Code.
Parameters and Guidelines, adopted by the Commission on State
Mandates, establishes state mandates and defines criteria for
reimbursement. In compliance with Government Code Section 17558,
the SCO issues claiming instructions for each mandate requiring state
reimbursement, to assist local agencies in claiming reimbursable costs.
Objective, The audit objective was to determine whether costs claimed were
Scope, and increased costs incurred as a result of the legislatively mandated
Perinatal Services Program (Chapter 1603, Statutes of 1990) for the
Methodology
period of July 1, 1999, through June 30, 2002.
The auditor performed the following procedures:
• Reviewed the costs claimed to determine if they were increased
costs resulting from the mandated program;
• Traced the costs claimed to the supporting documentation to
determine whether the costs were properly supported;
Steve Westly • California State Controller 1
Contra Costa County Perinatal Services Program
• Confirmed that the costs claimed were not funded by another
source; and
• Reviewed the costs claimed to determine that they were not
unreasonable and/or excessive.
The SCO conducted the audit in accordance with Government Auditing
Standards, issued by the Comptroller General of the United States. The
SCO did not audit the county’s financial statements. The scope was
limited to planning and performing audit procedures necessary to obtain
reasonable assurance concerning the allowability of expenditures claimed
for reimbursement. Accordingly, transactions were examined on a test
basis, to determine whether the amounts claimed for reimbursement were
supported.
Review of the county’s management controls was limited to gaining an
understanding of the transaction flow and claim preparation process as
necessary to develop appropriate auditing procedures.
Conclusion The 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 Finding and
Recommendation section of this report. In addition, Schedule 2 details
the errors in the county’s claims.
For the audit period, Contra Costa County claimed and was paid
$1,458,468 for costs of the legislatively mandated Perinatal Services
Program. The audit disclosed that none of the claimed costs is allowable.
For fiscal year (FY) 1999-2000, the county was paid $316,304 by the
State. The audit disclosed that none of the costs is allowable. The amount
paid should be returned to the State.
For FY 2000-01, the county was paid $567,017 by the State. The audit
disclosed that none of the costs is allowable. The amount paid should be
returned to the State.
For FY 2001-02, the county was paid $575,147 by the State. The audit
disclosed that none of the costs is allowable. The amount paid should be
returned to the State.
The SCO issued a draft audit report on December 5, 2003. Paul Abelson,
Views of
Chief Accountant in the County Auditor-Controller’s Office, responded
Responsible
by the attached letter dated December 31, 2003, disagreeing with the
Official
audit results. The county’s response is included in this final audit report.
Steve Westly • California State Controller 2
Contra Costa County Perinatal Services Program
Restricted Use This report is solely for the information and use of Contra Costa 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
Steve Westly • California State Controller 3
Contra Costa County Perinatal Services Program
Schedule 1—
Summary of Program Costs
July 1, 1999, through June 30, 2002
Actual Costs Allowable Audit
Cost Elements Claimed per Audit Adjustments 1
July 1, 1999, through June 30, 2000
Labor:
Initial in-hospital screening $ 25,565 $ — $ 25,565
Toxicology screening 64,817 — 64,817
Perinatal assessment 32,405 — 32,405
Total labor 122,787 — 122,787
Services and supplies 25,337 — 25,337
Indirect costs 168,180 — 168,180
Total costs $ 316,304 — $ 316,304
Less amount paid by the State (316,304)
Allowable costs claimed in excess of (less than) amount paid $ (316,304)
July 1, 2000, through June 30, 2001
Labor:
Initial in-hospital screening $ 102,630 $ — $ 102,630
Toxicology screening 61,336 — 61,336
Perinatal assessment 30,672 — 30,672
Total labor 194,638 — 194,638
Services and supplies 106,582 — 106,582
Indirect costs 265,797 — 265,797
Total costs $ 567,017 — $ 567,017
Less amount paid by the State (567,017)
Allowable costs claimed in excess of (less than) amount paid $ (567,017)
July 1, 2001, through June 30, 2002
Labor:
Initial in-hospital screening $ 107,792 $ — $ 107,792
Toxicology screening 56,218 — 56,218
Perinatal assessment 28,112 — 28,112
Total labor 192,122 — 192,122
Services and supplies 105,219 — 105,219
Indirect costs 277,806 — 277,806
Total costs $ 575,147 — $ 575,147
Less amount paid by the State (575,147)
Allowable costs claimed in excess of (less than) amount paid $ (575,147)
Steve Westly • California State Controller 4
Contra Costa County Perinatal Services Program
Schedule 1 (continued)
Actual Costs Allowable Audit
Cost Elements Claimed per Audit Adjustments 1
Summary: July 1, 1999, through June 30, 2002
Labor:
Initial in-hospital screening $ 235,987 $ — $ 235,987
Toxicology screening 182,371 — 182,371
Perinatal assessment 91,189 — 91,189
Total labor 509,547 — 509,547
Services and supplies 237,138 — 237,138
Indirect costs 711,783 — 711,783
Total costs $1,458,468 — $1,458,468
Less amount paid by the State (1,458,468)
Allowable costs claimed in excess of (less than) amount paid $(1,458,468)
__________________________
1 See the Finding and Recommendation section.
Steve Westly • California State Controller 5
Contra Costa County Perinatal Services Program
Schedule 2—
Detail of Errors in County Claims
July 1, 1999, through June 30, 2002
Error Amount 1
Cost Element Error 1 Error 2 Error 3 Error 4 Error 5 Error 6 Error 7 Error 8 Total
July 1, 1999, through June 30, 2000
Labor:
Initial in-hospital screening $ — $ (8,518) $ — $ — $ — $ — $ (2,311) $ — $ (10,829)
Toxicology screening — — (35,925) — — — (5,857) — (41,782)
Perinatal assessment — — — (27,920) (1,557) — (2,928) — (32,405)
Total labor — (8,518) (35,925) (27,920) (1,557) — (11,096) — (85,016)
Services and supplies — (1,757) (7,411) (5,760) (321) — (2,289) — (17,538)
Indirect costs — (11,667) (49,204) (38,240) (2,133) — (15,197) (14,809) (131,250)
Total costs $ — $ (21,942) $ (92,540) $ (71,920) $ (4,011) $ — $ (28,582) $ (14,809) $ (233,804)
July 1, 2000, through June 30, 2001
Labor:
Initial in-hospital screening $ (64,084) $ (17,680) $ — $ — $ — $ — $ (6,494) $ — $ (88,258)
Toxicology screening — — (26,460) — — — (3,881) — (30,341)
Perinatal assessment — — — (26,937) (1,795) — (1,940) — (30,672)
Total labor (64,084) (17,680) (26,460) (26,937) (1,795) — (12,315) — (149,271)
Services and supplies (35,092) (9,682) (14,489) (14,751) (983) — (6,744) — (81,741)
Indirect costs (87,513) (24,144) (36,134) (36,785) (2,451) — (16,817) (19,412) (223,256)
Total costs $(186,689) $ (51,506) $ (77,083) $ (78,473) $ (5,229) $ — $ (35,876) $ (19,412) $ (454,268)
Steve Westly • California State Controller 6
Contra Costa County Perinatal Services Program
Schedule 2 (continued)
Error Amount 1
Cost Element Error 1 Error 2 Error 3 Error 4 Error 5 Error 6 Error 7 Error 8 Total
July 1, 2001, through June 30, 2002
Labor:
Initial in-hospital screening $ (62,135) $ (18,914) $ — $ — $ — $ (8,384) $ (6,217) $ — $ (95,650)
Toxicology screening — — (21,497) — — (4,373) (3,238) — (29,108)
Perinatal assessment — — — (21,801) (2,514) (2,187) (1,610) — (28,112)
Total labor (62,135) (18,914) (21,497) (21,801) (2,514) (14,944) (11,065) — (152,870)
Services and supplies (34,031) (10,359) (11,774) (11,940) (1,377) (8,185) (6,060) — (83,726)
Indirect costs (89,847) (27,350) (31,085) (31,525) (3,635) (21,609) (16,000) (16,783) (237,834)
Total costs $(186,013) $ (56,623) $ (64,356) $ (65,266) $ (7,526) $ (44,738) $ (33,125) $ (16,783) $ (474,430)
Summary: July 1, 1999, through June 30, 2002
Labor:
Initial in-hospital screening $(126,219) $ (45,112) $ — $ — $ — $ (8,384) $ (15,022) $ — $ (194,737)
Toxicology screening — — (83,882) — — (4,373) (12,976) — (101,231)
Perinatal assessment — — — (76,658) (5,866) (2,187) (6,478) — (91,189)
Total labor (126,219) (45,112) (83,882) (76,658) (5,866) (14,944) (34,476) — (387,157)
Services and supplies (69,123) (21,798) (33,674) (32,451) (2,681) (8,185) (15,093) — (183,005)
Indirect costs (177,360) (63,161) (116,423) (106,550) (8,219) (21,609) (48,014) (51,004) (592,340)
Total costs $(372,702) $(130,071) $(233,979) $(215,659) $ (16,766) $ (44,738) $ (97,583) $ (51,004) $(1,162,502)
__________________________
1 All claimed costs, totaling $1,458,468, were unsupported. However, even if the costs on this schedule had been supported, they would have been unallowable because of the
errors noted. See the Finding and Recommendation section of this report for an explanation of the different errors.
Steve Westly • California State Controller 7
Contra Costa County Perinatal Services Program
Finding and Recommendation
FINDING— The county claimed all labor costs based on after-the-fact estimates of
time spent by the county hospital staff performing the mandated
Unsupported costs
activities. The county did not maintain contemporaneous time
claimed
distribution records that showed the actual time spent by each staff
member involved in the applicable activities. Consequently, all costs
claimed, totaling $1,458,468, are unallowable.
Parameters and Guidelines for the Perinatal Services Program specifies
that only actual increased costs incurred in the performance of the
mandated activities are reimbursable. Further, it specifies that actual staff
labor hours are reimbursable if documented by timesheets or a proper
time study.
Since no time records were maintained by the county, all labor costs are
unsupported. Also, since services and supplies and indirect costs were
claimed as a percentage of labor, those costs are also unsupported.
Fiscal Year
1999-2000 2000-01 2001-02 Totals
Salaries and benefits $ (122,787) $ (194,638) $ (192,122) $ (509,547)
Services and supplies (25,337) (106,582) (105,219) (237,138)
Indirect costs (168,180) (265,797) (277,806) (711,783)
Totals $ (316,304) $ (567,017) $ (575,147) $ (1,458,468)
Schedule 2
Even if all of the costs had been supported, the following costs, detailed
in Schedule 2, would have been unallowable because of errors in the
county’s claims.
Error 1–The county claimed the costs of a medical social worker as a
direct cost and again as part of indirect costs in FY 2000-01 and FY
2001-02, resulting in overstated costs totaling $372,702.
Error 2–The county claimed the cost of initial in-hospital screenings of
all mothers admitted into the hospital rather than just those mothers
whose pre-natal medical records indicated that they were “at risk” for
drug use, resulting in overstated costs totaling $130,071.
Error 3–The county claimed toxicology screening costs based on testing
quantities that were not supported by its lab statistics, resulting in
overstated costs totaling $233,979.
Error 4–The county claimed perinatal assessment costs based on a
number of referrals not supported in its medical social worker’s records,
resulting in overstated costs totaling $215,659.
Steve Westly • California State Controller 8
Contra Costa County Perinatal Services Program
Error 5–The county claimed costs for perinatal assessments performed
by unidentified nursing personnel (although most were performed by the
county’s medical social worker), resulting in overstated costs totaling
$16,766.
Error 6–The county claimed labor costs in FY 2001-02 for all
employees by using a productive hourly rate, although some hourly
workers were not entitled to paid time off. This resulted in overstated
costs totaling $44,738.
Error 7–The county claimed fringe benefits using an average percentage
factor, despite the fact that most employees received fringe benefits at a
lower rate. This resulted in overstated costs totaling $97,583.
Error 8–The county did not compute its indirect cost rates in accordance
with the requirements of Office of Management and Budget (OMB)
Circular A-87, resulting in overstated costs totaling $51,004.
• The cost of patient meals was included in indirect costs although they
are paid for under the hospital’s Medi-Cal contract.
• In FY 2000-01 and FY 2001-02, the county applied the indirect cost
rate to total costs rather than to salaries and benefits only.
• The county did not include hospital contract staff members in the
salary base when computing indirect cost rates.
• Indirect costs were applied to budget unit salaries based on permanent
assignments, even though some employees worked on a temporary
basis in other budget units.
Recommendation
The county should ensure that all costs claimed are eligible costs
incurred as a result of the mandate and are supported by proper
accounting records.
County’s Response
Contra Costa County is disappointed with the draft letter we received
regarding the SB-90 Perinatal Services Audit. The findings and
conclusions depart significantly from what was communicated to
Health Services personnel during the audit and at the exit conference.
As we understand it, the main issue of contention concerns the level of
documentation supporting the time spent providing the mandated
services. In preparing the Perinatal Services claims the nursing staff,
along with management, did not think that an extensive time study was
necessary; therefore a time element was determined based on
interviews with staff members performing each of the three required
activities: Initial In-Hospital Screenings, Toxicology Screenings, and
Perinatal Assessments.
From discussion with Health Services personnel, we understand the
State Auditor disagreed and offered a solution agreed to by both
Steve Westly • California State Controller 9
Contra Costa County Perinatal Services Program
parties. The State Audit manager, Mike Querin, would provide an
example of a Perinatal Services time study from which we would
perform a Contra Costa study, based on current activities. We would
then retroactively apply the findings to our 1999/00, 2000/01 and
2001/02 fiscal year claims. We were surprised that there was no
mention of this agreement in the draft letter.
Furthermore, since the State auditors acknowledged during the exit
conference that there were allowable costs, it was totally unexpected
that the report proposes to disallow the claim entirely. While we concur
that there were some findings in our claims that could be deemed non-
reimbursable, we have difficulty accepting that all of the costs incurred
to administer this State mandate can be completely disallowed.
Notwithstanding the above, we feel it is our duty to respond directly to
your findings listed in the draft report:
Error 1 – . . . The County concurs that we did claim both direct and
indirect costs in this situation. The County intended to claim the social
worker as a direct service cost and not as an indirect cost. Elimination
of the indirect Medical Social Worker’s costs is appropriate.
Error 2 – . . . The County disagrees. The fact that a screening is done
on all mothers admitted to the hospital to determine risk, does not have
an effect on the Mandate. The Mandate requires that an initial
screening and a more detailed need assessment be performed, by a
health practitioner or a medical social worker prior to the releasing of
newborns from the hospital and identifying needed services for the
mother, child, or family including, where applicable, suggested
services to maintain children in their home. Because not all children
were determined to be at risk does not negate the costs incurred.
Error 3 – . . . The County concurs with this finding
Error 4 – . . . The County was not given the detail to support this error
listing. In order to respond we would need to know what records were
examined and how the disallowed cost was determined.
Error 5 – . . . The County concurs with this finding.
Error 6 – . . . The County concurs with this finding.
Error 7 – . . . The County concurs with this finding.
Error 8 – . . . The County disagrees with this finding. Not only does the
County compute the indirect cost rate on OMB Circular A-87, but we
also used the cost methodology of CMS 25-52 which is approved by
the Federal regulations as the proper indirect cost rate.
SCO’s Comment
The finding and recommendation remain unchanged.
The SCO discussed with the county’s Health Services Department staff
the possibility of accepting a current time study as a reasonable substitute
for time records not maintained during the audit period. However, it is
Steve Westly • California State Controller 10
Contra Costa County Perinatal Services Program
the county’s responsibility to develop and implement such a time study.
SCO staff would be available to consult with county staff on the
information that should be included in the time study. But Health
Services Department staff members have not contacted the SCO since the
exit conference held on May 2, 2003. Should the county choose to
perform a time study after issuance of this final audit report, the SCO
will amend the audit report as needed based on the results of the time
study.
The following comments address the county’s disagreements with
specific claim errors detailed above.
Error 1–The county concurred.
Error 2–The county disagreed, stating that costs of screening all mothers
is allowable.
The county did not furnish any evidence that all pregnant women
admitted into the county hospital for delivery were “at risk” for
substance abuse and, therefore, needed a higher level of screening. Also,
county hospital employees told the SCO auditor that most screenings
were performed by a medical social worker, whose costs were accounted
for as indirect costs. Therefore, the county hospital should not have
incurred significant additional direct costs as a result of these screenings.
Error 3–The county concurred.
Error 4–The county stated that the SCO auditor did not provide
sufficient detail of the error to allow the county to address the issue.
The SCO auditor counted the number of substance abuse assessment
forms submitted by the county hospital to the county child protective
services agency, and the count was verified by one of the county
hospital’s medical social workers. The SCO can provide additional
information at the county’s request.
Error 5–The county concurred.
Error 6–The county concurred.
Error 7–The county concurred.
Error 8–The county disagreed, stating that its indirect cost rates were
computed in accordance with OMB Circular A-87.
Several specific errors were noted in the finding above regarding the
computation and application of the indirect cost rates that do not conform
to the requirements of OMB Circular A-87.
Steve Westly • California State Controller 11
Contra Costa County Perinatal Services Program
Attachment—
County’s Response to
Draft Audit Report
Steve Westly • California State Controller
Contra Costa County Perinatal Services Program
Steve Westly • California State Controller
Contra Costa County Perinatal Services Program
Steve Westly • California State Controller
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State Controller’s Office
Division of Audits
Post Office Box 942850
Sacramento, California 94250-5874
http://www.sco.ca.gov
S03-MCC-027