Imperial County

IMPERIAL COUNTY Audit Report PESTICIDE USE REPORTS PROGRAM Chapter 1200, Statutes of 1989 July 1, 1997, through June 30, 2001 S W TEVE ESTLY California State Controller June 2003 S W TEVE ESTLY California State Controller June 25, 2003 The Honorable Douglas R. Newland Auditor-Controller Imperial County 940 Main Street, Suite 108 El Centro, CA 92243-2873 Dear Mr. Newland: The State Controller’s Office (SCO) has completed an audit of the claims filed by Imperial County for costs of the legislatively mandated Pesticide Use Reports Program (Chapter 1200, Statutes of 1989) for the period of July 1, 1997, through June 30, 2001. The county claimed and was paid $460,798 for the mandated program. Our audit disclosed that $139,538 is allowable and $321,260 is unallowable. The unallowable costs occurred because the county claimed unsupported costs and understated claimed revenue offsets. The amount paid in excess of allowable costs claimed, totaling $321,260, 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 WALTER BARNES Chief Deputy State Controller, Finance WB:ams/jj cc: Stephen L. Birdsall Agricultural Commissioner Imperial County Calvin Smith, Program Budget Manager Corrections and General Government Department of Finance Imperial County Pesticide Use Reports Program Contents Audit Report Summary..................................................................................................................................... 1 Background................................................................................................................................ 1 Objective, Scope, and Methodology........................................................................................ 1 Conclusion.................................................................................................................................. 2 Views of Responsible Officials................................................................................................. 2 Restricted Use............................................................................................................................. 3 Findings and Recommendations.................................................................................................. 4 Schedule 1—Summary of Program Costs.................................................................................. 8 Attachment—Auditee’s Response to Draft Audit Report Steve Westly • California State Controller Imperial County Pesticide Use Reports Program Audit Report Summary The State Controller’s Office (SCO) has completed an audit of the claims filed by Imperial County for costs of the legislatively mandated Pesticide Use Reports Program (Chapter 1200, Statutes of 1989) for the period of July 1, 1997, through June 30, 2001. The last day of fieldwork was October 23, 2002. The county claimed and was paid $460,798 for the mandated program. The audit disclosed that $139,538 is allowable and $321,260 is unallowable. The unallowable costs occurred because the county claimed unsupported costs and understated claimed revenue offsets. Consequently, the amount paid in excess of allowable costs claimed, totaling $321,260, should be returned to the State. Background Chapter 1200, Statutes of 1989, added Food and Agricultural Code Section 12979 and its implementing regulations in Title 3, California Code of Regulations. This legislation requires increased pesticide reporting requirements by pesticide users, which includes all agricultural users, and increases recordkeeping requirements by pesticide dealers that are licensed by the State. It also requires county agricultural commissioners to issue operator site identification numbers to specified persons, inspect and audit certain records, and file the newly-required pesticide use reports with the State. On November 19, 1992, the Commission on State Mandates determined that Chapter 1200, Statutes of 1989, 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 objective of the audit was to determine whether costs claimed are Scope, and increased costs incurred as a result of the legislatively mandated Pesticide Use Reports Program (Chapter 1200, Statutes of 1989), for the Methodology period of July 1, 1997, through June 30, 2001. 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; • Confirmed that the costs claimed were not funded by another source; and • Reviewed the costs claimed to determine that the costs were not unreasonable and/or excessive. Steve Westly • California State Controller 1 Imperial County Pesticide Use Reports Program 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 Findings and Recommendations section of this report and in the accompanying Summary of Program Costs (Schedule 1). For the audit period, Imperial County claimed and was paid $460,798 for costs of the legislatively mandated Pesticide Use Reports Program. The audit disclosed that $139,538 is allowable and $321,260 is unallowable. For fiscal year (FY) 1997-98, the county was paid $155,877 by the State. The audit disclosed that $29,322 is allowable. The amount paid in excess of allowable costs claimed, totaling $126,555, should be returned to the State. For FY 1998-99, the county was paid $140,776 by the State. The audit disclosed that $5,062 is allowable. The amount paid in excess of allowable costs claimed, totaling $135,714, should be returned to the State. For FY 1999-2000, the county was paid $89,293 by the State. The audit disclosed that $47,571 is allowable. The amount paid in excess of allowable costs claimed, totaling $41,722, should be returned to the State. For FY 2000-01, the county was paid $74,852 by the State. The audit disclosed that $57,583 is allowable. The amount paid in excess of allowable costs claimed, totaling $17,269, should be returned to the State. Views of The SCO issued a draft audit report on March 14, 2003. Douglas R. Responsible Newland, County Auditor-Controller, and Stephen L. Birdsall, County Agricultural Commissioner, responded by the attached letter dated Officials May 12, 2003. The county agrees with the audit results presented in Findings 1 and 2, which were revised from the draft report based on additional information the county provided. However, the county disagrees with the audit results presented in Finding 3. The county’s response is included in this final audit report (Attachment). Steve Westly • California State Controller 2 Imperial County Pesticide Use Reports Program Restricted Use This report is solely for the information and use of Imperial County 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 Imperial County Pesticide Use Reports Program Findings and Recommendations FINDING 1— The county claimed labor costs using productive hourly salary and fringe benefit rates that were not supported by its payroll records. In some Unsupported labor cases, it appeared that claimed salary rates were based on the highest costs claimed salary step of employee classifications when the employees performing the work were actually paid at a lower step. Also, it appeared that some clerical errors were made in entering labor rates on the claims. Parameters and Guidelines for the mandated program specifies that only actual increased costs incurred in the performance of the mandated activities and supported by appropriate documentation are reimbursable. As a result, claimed labor costs have been adjusted to actual costs as follows: Audit Adjustment Fiscal Year 1997-98 1998-99 1999-2000 2000-01 Total Issuing ID numbers $(12,811) $(15,839) $ 3,114 $ 1,980 $(23,556) Reviewing and filing with DPR (5,649) (7,194) (3,184) 743 (15,284) Auditing and inspecting records (1,779) (2,457) 4,132 28 (76) Totals $(20,239) $(25,490) $ 4,062 $ 2,751 $(38,916) Recommendation The county should ensure that all costs claimed are eligible increased costs incurred as a result of the mandate, and are supported by its accounting records. Auditee’s Response The county submitted additional information in support of $8,179 of additional allowable labor costs. SCO’s Comment The SCO reviewed and accepted the county’s additional information. Accordingly, the audit adjustment has been reduced by $8,179, from $47,095 to $38,916. Steve Westly • California State Controller 4 Imperial County Pesticide Use Reports Program FINDING 2— Indirect costs claimed were not supported by the indirect cost rate computation prepared by the county Auditor-Controller’s Office or by Unsupported the indirect cost rate computation prepared by the county Agricultural indirect costs Commissioner’s Office as part of its Annual Financial Statement claimed submitted to the California Department of Food and Agriculture (CDFA). The Annual Financial Statement is the basis for most state funding of the county’s agricultural programs from CDFA and the Department of Pesticide Regulation (DPR). The indirect costs claimed were based on a computation that did not account for all departmental salaries, and classified a substantial amount of costs as indirect costs that should have been classified as direct charges to other programs. Parameters and Guidelines and the SCO’s claiming instructions require the county, when claiming an indirect cost rate exceeding 10%, to submit with its claim a departmental indirect cost rate proposal prepared in accordance with federal Office of Management and Budget (OMB) Circular A-87 (Cost Principles for State, Local, and Indian Tribal Governments). OMB Circular A-87 specifies that indirect costs are allowable only when costs cannot reasonably be identified to a particular program, and are allocated to each program relative to the benefits received. Furthermore, costs must be consistent with policies that apply uniformly to all programs. The SCO auditor has allowed the rate documented by the county Auditor-Controller’s Office, and has adjusted claimed costs as follows: Audit Adjustment Fiscal Year 1997-98 1998-99 1999-2000 2000-01 Total Indirect costs claimed $ 57,270 $ 27,104 $ 15,288 $ 22,046 $ 121,708 Indirect costs allowed (19,147) (21,251) (19,033) (19,781) (79,212) Adjustment $(38,123) $ (5,853) $ 3,745 $ (2,265) $ (42,496) Recommendation The county should ensure that indirect costs claimed are supported by an acceptable indirect cost rate proposal prepared in accordance with OMB Circular A-87. Auditee’s Response The county submitted additional information in support of $1,759 of additional allowable indirect costs. SCO’s Comment The SCO reviewed and accepted the county’s additional information. Accordingly, the audit adjustment has been reduced by $1,759, from $44,255 to $42,496. Steve Westly • California State Controller 5 Imperial County Pesticide Use Reports Program FINDING 3— The county understated revenues allocable to the mandate that are Revenue offsets required to be deducted on its claims. The county received revenues from understated the following sources: • Unclaimed gas tax allotment: These state funds are allocated to counties under the Food and Agricultural Code to help fund all of the activities carried out by the county Agricultural Commissioner’s Office. The county did not offset any of these revenues on its claims because it believed this revenue was not allocable to the mandate. • Mill tax assessment: These state funds are allocated to counties by DPR to help fund county pesticide use enforcement costs within the county Agricultural Commissioner’s Office. The county understated these revenues because it used the ratio of restricted to unrestricted application reporting costs rather than the ratio of pesticide use reporting costs to total pesticide use enforcement costs. • Memorandum of understanding: These state funds are allocated by DPR to counties under the Food and Agricultural Code to help fund the county’s mandated activities. The county did not offset any of these revenues on its claims. It appears the county was unsure of the nature of these revenues. • DPR pesticide application reporting contract: DPR reimburses the county $0.30 per line for electronically submitting to DPR information on each application of restricted and unrestricted pesticides within the county. The county correctly offset these revenues on its claims. Parameters and Guidelines specifies that any offsetting savings or reimbursements received by the county from any source as a result of this mandate shall be identified and deducted so only net county costs are claimed. As a result, claimed revenue offsets have been adjusted as follows: Amount Amount Audit Claimed per Audit Adjustments Fiscal Year 1997-98: Unclaimed gas tax allotment $ — $ 13,749 $ (13,749) Mill tax assessment 5,599 28,018 (22,419) Memorandum of understanding — 32,025 (32,025) DPR pesticide application reporting contract 5,088 5,088 — Totals, FY 1997-98 10,687 78,880 (68,193) Fiscal Year1998-99: Unclaimed gas tax allotment — 26,002 (26,002) Mill tax assessment 5,562 30,556 (24,994) Memorandum of understanding — 53,375 (53,375) DPR pesticide application reporting contract 5,097 5,097 — Totals, FY 1998-99 10,659 115,030 (104,371) Steve Westly • California State Controller 6 Imperial County Pesticide Use Reports Program Amount Amount Audit Claimed per Audit Adjustments Fiscal Year 1999-2000: Unclaimed gas tax allotment — 20,731 (20,731) Mill tax assessment 5,400 34,198 (28,798) Memorandum of understanding — — — DPR pesticide application reporting contract 5,058 5,058 — Totals, FY 1999-2000 10,458 59,987 (49,529) Fiscal Year 2000-01: Unclaimed gas tax allotment — 16,577 (16,577) Mill tax assessment 30,784 31,962 (1,178) Memorandum of understanding — — — DPR pesticide application reporting contract 5,665 5,665 — Totals, FY 2000-01 36,449 54,204 (17,755) Totals $ 68,253 $ 308,101 $ (239,848) Recommendation The county should ensure that all applicable revenues are offset on its claims against its mandated program costs. Auditee’s Response The county disagreed that unclaimed gas tax allotment revenues should be offset on its claims. It stated that there is no mention in any Commission on State Mandates pronouncements regarding the offsetting of these revenues. Further, it contended that this revenue source would be unaffected if the mandate were eliminated. SCO’s Comment The SCO disagrees with the county’s contention. Unclaimed gas tax allotment revenues are allocated by the state Department of Food and Agriculture based on total agricultural program costs reported by counties statewide. When a county reports its mandated costs within total agricultural program costs, as did Imperial County, it increases the county’s share of statewide revenue allocations. Allowable labor and indirect costs have been increased above due to information provided by the county. As a result, required revenue offsets have been adjusted by $4,674, from $235,174 to $239,848. Steve Westly • California State Controller 7 Imperial County Pesticide Use Reports Program Schedule 1— Summary of Program Costs July 1, 1997, through June 30, 2001 Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustments Reference 1 July 1, 1997, through June 30, 1998 Direct costs: Issuing ID number $ 79,686 $ 66,875 $ (12,811) Reviewing and filing with DPR 14,961 9,312 (5,649) Auditing and inspecting records 14,647 12,868 (1,779) Total direct costs 109,294 89,055 (20,239) Finding 1 Indirect costs 57,270 19,147 (38,123) Finding 2 Total costs 166,564 108,202 (58,362) Less offsetting revenues (10,687) (78,880) (68,193) Finding 3 Net costs $ 155,877 29,322 $ (126,555) Less amount paid by the State (155,877) Allowable costs claimed in excess of (less than) amount paid $ (126,555) July 1, 1998, through June 30, 1999 Direct costs: Issuing ID number $ 87,725 $ 71,886 $ (15,839) Reviewing and filing with DPR 17,849 10,655 (7,194) Auditing and inspecting records 18,757 16,300 (2,457) Total direct costs 124,331 98,841 (25,490) Finding 1 Indirect costs 27,104 21,251 (5,853) Finding 2 Total costs 151,435 120,092 (31,343) Less offsetting revenues (10,659) (115,030) (104,371) Finding 3 Net costs $ 140,776 5,062 $ (135,714) Less amount paid by the State (140,776) Allowable costs claimed in excess of (less than) amount paid $ (135,714) July 1, 1999, through June 30, 2000 Direct costs: Issuing ID number $ 67,374 $ 70,488 $ 3,114 Reviewing and filing with DPR 8,044 4,860 (3,184) Auditing and inspecting records 9,045 13,177 4,132 Total direct costs 84,463 88,525 4,062 Finding 1 Indirect costs 15,288 19,033 3,745 Finding 2 Steve Westly • California State Controller 8 Imperial County Pesticide Use Reports Program Schedule 1 (continued) Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustments Reference 1 July 1, 1999, through June 30, 2000 (continued) Total costs 99,751 107,558 7,807 Less offsetting revenues (10,458) (59,987) (49,529) Finding 3 Net costs $ 89,293 47,571 $ (41,722) Less amount paid by the State (89,293) Allowable costs claimed in excess of (less than) amount paid $ (41,722) July 1, 2000, through June 30, 2001 Direct costs: Issuing ID number $ 66,809 $ 68,789 $ 1,980 Reviewing and filing with DPR 19,743 20,486 743 Auditing and inspecting records 2,703 2,731 28 Total direct costs 89,255 92,006 2,751 Finding 1 Indirect costs 22,046 19,781 (2,265) Finding 2 Total costs 111,301 111,787 486 Less offsetting revenues (36,449) (54,204) (17,755) Finding 3 Net costs $ 74,852 57,583 $ (17,269) Less amount paid by the State (74,852) Allowable costs claimed in excess of (less than) amount paid $ (17,269) Summary: July 1, 1997, through June 30, 2001 Direct costs: Issuing ID number $ 301,594 $ 278,038 $ (23,556) Reviewing and filing with DPR 60,597 45,313 (15,284) Auditing and inspecting records 45,152 45,076 (76) Total direct costs 407,343 368,427 (38,916) Finding 1 Indirect costs 121,708 79,212 (42,496) Finding 2 Total costs 529,051 447,639 (81,412) Less offsetting revenues (68,253) (308,101) (239,848) Finding 3 Net costs $ 460,798 139,538 $(321,260) Less amount paid by the State (460,798) Total allowable costs claimed in excess of (less than) amount paid $(321,260) __________________________ 1 See the Findings and Recommendations section. Steve Westly • California State Controller 9 Imperial County Pesticide Use Reports Program Attachment— Auditee’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 S03-MCC-009