San Joaquin County

SAN JOAQUIN COUNTY Audit Report PERMANENT ABSENT VOTERS PROGRAM Chapter 1422, Statutes of 1982 July 1, 2002, through June 30, 2005 J C OHN HIANG California State Controller January 2008 J C OHN HIANG California State Controller January 23, 2008 The Honorable Adrian J. Van Houten, CPA Auditor-Controller San Joaquin County 24 South Hunter Street, 1st Floor, Room 103 Stockton, CA 95202 Dear Mr. Van Houten: The State Controller’s Office audited the costs claimed by San Joaquin County for the legislatively mandated Permanent Absent Voters Program (Chapter 1422, Statutes of 1982) for the period of July 1, 2002, through June 30, 2005. The county claimed $427,841 ($428,841 less a $1,000 penalty for filing a late claim) for the mandated program. Our audit disclosed that $343,200 is allowable and $84,641 is unallowable. The unallowable costs resulted primarily from the county claiming unallowable salaries, benefits, and services and supplies. The State paid the county $178,661. Allowable costs claimed exceed the amount paid by $164,539. 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:wm cc: Austin Erdman Interim Registrar of Voters San Joaquin County Todd Jerue, Program Budget Manager Corrections and General Government Department of Finance San Joaquin County Permanent Absent Voters 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 San Joaquin County Permanent Absent Voters Program Audit Report Summary The State Controller’s Office (SCO) audited the costs claimed by San Joaquin County for the legislatively mandated Permanent Absent Voters Program (Chapter 1422, Statutes of 1982) for the period of July 1, 2002, through June 30, 2005. The county claimed $427,841 ($428,841 less a $1,000 penalty for filing a late claim) for the mandated program. Our audit disclosed that $343,200 is allowable and $84,641 is unallowable. The unallowable costs resulted primarily from the county claiming unallowable salaries, benefits, and services and supplies. The State paid the county $178,661. Allowable costs claimed exceed the amount paid by $164,539. Chapter 1422, Statutes of 1982, added Election Code sections 1450 through 1456 (subsequently renumbered to Election Code sections 3200 Background through 3206 by Chapter 920, Statutes of 1994). The law requires counties to establish a permanent absent voter program. This legislation requires county clerks to: • Establish and maintain a list of permanent absent voters who provide evidence of physical disability; • Mail absent voter ballots to such voters for each election in which they are eligible to vote; and • Delete from the permanent absent voter list any person who fails to return an executed absent voter ballot for any statewide district primary or general election. On September 21, 1989, the Commission on State Mandates (CSM) determined that Chapter 1422, Statutes of 1982, 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 March 27, 1990. 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 Permanent Absent Voters Program for and Methodology the period of July 1, 2002, through June 30, 2005. 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. -1- San Joaquin County Permanent Absent Voters Program 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 county’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 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, San Joaquin County claimed $427,841 ($428,841 less a $1,000 penalty for filing a late claim) for costs of the Permanent Absent Voters Program. Our audit disclosed that $343,200 is allowable and $84,641 is unallowable. For the fiscal year (FY) 2002-03 claim, the State made no payments to the county. Our audit disclosed that $41,196 is allowable. The State will pay that amount, contingent upon available appropriations. For the FY 2003-04 claim, the State made no payments to the county. Our audit disclosed that $144,118 is allowable. The State will pay that amount, contingent upon available appropriations. For the FY 2004-05 claim, the State paid the county $178,661. Our audit disclosed that $157,886 is allowable. The State will offset $20,775 from other mandated program payments due to the county. Alternatively, the county may remit this amount to the State. Views of We discussed our audit results with the county’s representatives during an exit conference conducted on November 27, 2007. Austin Erdman, Responsible Interim Registrar of Voters; Dolly Zarzuela, Deputy Auditor-Controller; Officials Robert S. Lee, Deputy Auditor-Controller; and other county representatives agreed with the audit results. Mr. Lee declined a draft audit report and agreed that we could issue the audit report as final. -2- San Joaquin County Permanent Absent Voters Program Restricted Use This report is solely for the information and use of San Joaquin 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 January 23, 2008 -3- San Joaquin County Permanent Absent Voters Program Schedule 1— Summary of Program Costs July 1, 2002, through June 30, 2005 Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustment Reference 1 July 1, 2002, through June 30, 2003 Salaries $ 15,160 $ 12,399 $ (2,761) Finding 1 Benefits 2,705 2,212 (493) Finding 1 Services and supplies 31,325 15,443 (15,882) Finding 2 Total direct costs 49,190 30,054 (19,136) Indirect costs 13,233 11,142 (2,091) Finding 3 Total program costs $ 62,423 41,196 $ (21,227) Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 41,196 July 1, 2003, through June 30, 2004 Salaries $ 44,440 $ 39,605 $ (4,835) Finding 1 Benefits 5,201 4,652 (549) Finding 1 Services and supplies 101,120 67,815 (33,305) Finding 2 Total direct costs 150,761 112,072 (38,689) Indirect costs 36,996 33,046 (3,950) Finding 3 Total direct and indirect costs 187,757 145,118 (42,639) Less late filing penalty (1,000) (1,000) — Total program costs $ 186,757 144,118 $ (42,639) Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 144,118 July 1, 2004, through June 30, 2005 Salaries $ 45,542 $ 40,030 $ (5,512) Finding 1 Benefits 5,635 4,955 (680) Finding 1 Services and supplies 90,777 77,791 (12,986) Finding 2 Total direct costs 141,954 122,776 (19,178) Indirect costs 36,707 35,110 (1,597) Finding 3 Total program costs $ 178,661 157,886 $ (20,775) Less amount paid by the State (178,661) Allowable costs claimed in excess of (less than) amount paid $ (20,775) -4- San Joaquin County Permanent Absent Voters Program Schedule 1 (continued) Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustment Reference 1 Summary: July 1, 2002, through June 30, 2005 Salaries $ 105,142 $ 92,034 $ (13,108) Benefits 13,541 11,819 (1,722) Services and supplies 223,222 161,049 (62,173) Total direct costs 341,905 264,902 (77,003) Indirect costs 86,936 79,298 (7,638) Total direct and indirect costs 428,841 344,200 (84,641) Less late filing penalty (1,000) (1,000) — Total program costs $ 427,841 343,200 $ (84,641) Less amount paid by the State (178,661) Allowable costs claimed in excess of (less than) amount paid $ 164,539 _________________________ 1 See the Findings and Recommendations section. -5- San Joaquin County Permanent Absent Voters Program Findings and Recommendations FINDING 1— The county claimed unallowable salaries totaling $13,108. The related benefits total $1,722. Unallowable costs occurred for the following Unallowable salaries reasons: and benefits • For fiscal year (FY) 2002-03, the county’s documentation did not support 57 hours claimed for one employee. In addition, documentation showed that the county understated one employee’s productive hourly rate. These adjustments result in overstated costs totaling $903. • For FY 2003-04, the county understated hours claimed for four employees. These adjustments result in understated costs totaling $763. • The county claimed salaries and benefits that were actually related to the Absentee Ballots Program. Rather than adjust the county’s claims for both programs, we adjusted allowable costs for the Permanent Absent Voters Program claims based on the reimbursement percentage allowable for the county’s Absentee Ballots Program claims. We identified allowable absentee ballots cast and additional absentee ballot filings in our audit report issued January 23, 2008, covering the county’s Absentee Ballots Program claims. The program’s parameters and guidelines state, “For auditing purposes, all costs claimed must be traceable to source documents or worksheets that show evidence of and the validity of such costs.” The following table summarizes the audit adjustment for salaries: Fiscal Year 2002-03 2003-04 2004-05 Regular Regular Overtime Regular Overtime Salaries Salaries Salaries Salaries Sarlaries Total Salaries claimed $ 15,160 $ 28,474 $ 15,966 $ 26,975 $ 18,567 (Overstated)/understated costs (903) 763 — — — Costs applicable to the Permanent Absent Voters Program only — (934) — (927) — Subtotal 14,257 28,303 15,966 26,048 18,567 Number of allowable absentee ballots cast ÷ 47,228 ÷ 80,675 ÷ 80,675 ÷ 64,326 ÷ 64,326 Cost per absentee ballot cast $ 0.3019 $ 0.3508 $ 0.1979 $ 0.4049 $ 0.2886 Number of reimbursable absentee ballots × 41,073 × 70,473 × 70,473 × 56,380 × 56,380 Subtotal $ 12,399 $ 24,724 $ 13,947 $ 22,830 $ 16,273 $ 90,173 Costs applicable to the Permanent Absent Voters Program only — 934 — 927 — 1,861 Allowable costs 12,399 25,658 13,947 23,757 16,273 92,034 Salaries claimed (15,160) (28,474) (15,966) (26,975) (18,567) (105,142) Audit adjustment $ (2,761) $ (2,816) $ (2,019) $ (3,218) $ (2,294) $ (13,108) -6- San Joaquin County Permanent Absent Voters Program The following table summarizes the audit adjustment for benefits, based on the unallowable salaries: Fiscal Year 2002-03 2003-04 2004-05 Regular Regular Overtime Regular Overtime Salaries Salaries Salaries Salaries Salaries Total Unallowable salaries $ (2,761) $ (2,816) $ (2,019) $ (3,218) $ (2,294) Benefit rate claimed × 17.84% × 13.97% × 7.66% × 15.20% × 8.26% Audit adjustment $ (493) $ (394) $ (155) $ (490) $ (190) $ (1,722) Recommendation We recommend that the county claim only those costs that are applicable to the mandated program and supported by appropriate source documentation. County’s Response The county agreed with the audit finding. FINDING 2— The county claimed unallowable services and supplies totaling $62,173. Overstated services These costs are unallowable for the following reasons: and supplies • The county claimed postage costs that its invoice documentation did not support. • The county claimed ballot costs that it also claimed on its Absentee Ballots Program claim. • The county claimed sales tax costs that its invoice documentation did not support. Various invoices showed no sales tax liability. • The county overstated envelope costs. For FY 2003-04 and FY 2004-05, the county claimed a unit price of $0.07 for outgoing and reply envelopes. However, the county’s documentation supports a unit price of $0.06 and $0.066, respectively. For FY 2003-04, the county claimed a unit price of $0.05 for permanent absent voters reply envelopes. However, the county’s documentation supports a unit price of $0.034. • The county understated database setup, shipping, and other miscellaneous costs. • The county claimed services and supplies that were actually related to the Absentee Ballots Program. Rather than adjust the county’s claims for both programs, we adjusted allowable costs for the Permanent Absent Voters Program claims based on the reimbursement percentage allowable for the county’s Absentee Ballots Program claims. We identified allowable absentee ballots cast and additional absentee ballot filings in our audit report dated January 23, 2008, covering the county’s absentee ballot claims. The program’s parameters and guidelines state that counties may claim only actual costs. They also state, “Actual costs must be traceable and supported by source documents that show the validity of such costs, when they were incurred, and their relationship to reimbursable activities.” -7- San Joaquin County Permanent Absent Voters Program The following table summarizes the audit adjustment: Fiscal Year 2002-03 2003-04 2004-05 Total Services and supplies claimed $ 31,325 $ 101,120 $ 90,777 Unsupported postage costs (7,907) (19,299) — Duplicate costs claimed (6,303) — — Unsupported sales tax — (3,033) (1,592) Overstated envelope costs — (2,260) (430) Understated database set-up, shipping, and miscellaneous costs — 738 — Costs applicable to the Permanent Absent Voters Program only (4,285) (2,534) — Costs related to absentee ballots 12,830 74,732 88,755 Number of allowable absentee ballots cast ÷ 47,228 ÷ 80,675 ÷ 64,326 Cost per absentee ballot cast $ 0.2717 $ 0.9263 $ 1.3798 Number of reimbursable absentee ballots × 41,073 × 70,473 × 56,380 Subtotal $ 11,158 $ 65,281 $ 77,791 $ 154,230 Costs applicable to the Permanent Absent Voters Program only 4,285 2,534 — 6,819 Allowable costs 15,443 67,815 77,791 161,049 Services and supplies claimed (31,325) (101,120) (90,777) (223,222) Audit adjustment $ (15,882) $ (33,305) $ (12,986) $ (62,173) Recommendation We recommend that the county claim only those costs that are reimbursable under the mandated program and supported by appropriate source documentation. County’s Response The county agreed with the audit finding. FINDING 3— The county overstated indirect costs claimed by $7,638 because it Overstated indirect overstated and understated costs included in its indirect cost pool for each fiscal year. These overstated and understated costs resulted in costs understated indirect cost rates. However, the county overstated total claimed indirect costs because it claimed indirect costs applicable to unallowable salaries identified in Finding 1. The county overstated and understated indirect cost pool costs for the following reasons: • The county overstated salaries and benefits that it included in its indirect cost pools. The county’s documentation did not support the reported costs. • The county included all employees’ overtime salaries in its indirect cost pools. However, the county reported all regular salaries and benefits as direct costs for these employees. In addition, the county claimed overtime costs as direct costs on its mandated program claims. The county agreed that all overtime salaries should be reported as direct costs in its indirect cost rate proposals. -8- San Joaquin County Permanent Absent Voters Program • The county understated indirect services and supplies by excluding election management system software costs from its indirect cost pools. The parameters and guidelines state that counties may claim indirect costs using the procedures provided in Office of Management and Budget (OMB) Circular A-87 (Title 2, Code of Federal Regulations, Part 225). The circular states that salaries will be based on payroll documentation. It also states that counties must treat each cost item consistently in like circumstances either as a direct or an indirect cost. The following table summarizes the adjustments to the indirect cost rate proposals: Costs Allowable Audit Reported Costs Adjustment FY 2002-03 Direct costs: Regular salaries $ 542,109 $ 559,651 $ 17,542 Overtime salaries — 40,790 40,790 Total direct costs (A) $ 542,109 $ 600,441 $ 58,332 Indirect costs: Regular salaries $ 96,498 $ 78,956 $ (17,542) Overtime salaries 40,790 — (40,790) Benefits 28,815 23,576 (5,239) Other 307,118 437,020 129,902 Total indirect costs (B) $ 473,221 $ 539,552 $ 66,331 Indirect cost rate (B ÷ A) 87.29% 89.86% FY 2003-04 Direct costs: Regular salaries $ 689,331 $ 701,932 $ 12,601 Overtime salaries — 54,511 54,511 Total direct costs (A) $ 689,331 $ 756,443 $ 67,112 Indirect costs: Regular salaries $ 96,498 $ 83,897 $ (12,601) Overtime salaries 54,511 — (54,511) Benefits 30,134 26,201 (3,933) Other 392,757 521,059 128,302 Total indirect costs (B) $ 573,900 $ 631,157 $ 57,257 Indirect cost rate (B ÷ A) 83.25% 83.44% FY 2004-05 Direct costs: Regular salaries $ 748,308 $ 753,545 $ 5,237 Overtime salaries — 38,640 38,640 Total direct costs (A) $ 748,308 $ 792,185 $ 43,877 Indirect costs: Regular salaries $ 95,530 $ 90,293 $ (5,237) Overtime salaries 38,640 — (38,640) Benefits 33,908 32,045 (1,863) Other 435,095 572,458 137,363 Total indirect costs (B) $ 603,173 $ 694,796 $ 91,623 Indirect cost rate (B ÷ A) 80.60% 87.71% -9- San Joaquin County Permanent Absent Voters Program Based on the allowable salaries and allowable indirect cost rates, the following table summarizes the audit adjustment to indirect costs claimed: Fiscal Year 2002-03 2003-04 2004-05 Total Allowable salaries $ 12,399 $ 39,605 $ 40,030 Allowable indirect cost rate × 89.86% × 83.44% × 87.71% Allowable indirect costs 11,142 33,046 35,110 $ 79,298 Less indirect costs claimed (13,233) (36,996) (36,707) (86,936) Audit adjustment $ (2,091) $ (3,950) $ (1,597) $ (7,638) Recommendation We recommend that the county prepare its indirect cost rate proposals according to OMB Circular A-87 requirements. County’s Response The county agreed with the audit finding. -10- State Controller’s Office Division of Audits Post Office Box 942850 Sacramento, CA 94250-5874 http://www.sco.ca.gov S06-MCC-045