Marin County

MARIN COUNTY Audit Report REGIONAL HOUSING NEED DETERMINATION PROGRAM Chapter 1143, Statutes of 1980 July 1, 2000, through June 30, 2003 S W TEVE ESTLY California State Controller January 2006 S W TEVE ESTLY California State Controller January 6, 2006 The Honorable Richard Arrow Auditor-Controller Marin County 3501 Civic Center Drive, Room 225 San Rafael, CA 94903 Dear Mr. Arrow: The State Controller’s Office audited the costs claimed by Marin County for the legislatively mandated Regional Housing Need Determination Program (Chapter 1143, Statutes of 1980) for the period of July 1, 2000, through June 30, 2003. The county claimed $376,241 ($377,241 less a $1,000 penalty for filing a late claim) for the mandated program. Our audit disclosed that $149,014 is allowable and $227,227 is unallowable. The unallowable costs occurred primarily because the county claimed unsupported costs. The State paid the county $31,609. Allowable costs claimed exceed the amount paid by $117,405. If you disagree with the audit findings, you may file an Incorrect Reduction Claim (IRC) with the Commission on State Mandates (COSM). 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 COSM’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, Compliance Audits Bureau, at (916) 323-5849. Sincerely, Original Signed By: JEFFREY V. BROWNFIELD Chief, Division of Audits JVB/ams The Honorable Richard Arrow -2- January 6, 2006 cc: Alex Hinds, Director Community Development Agency Marin County Ian Roth Administrative Services Manager Community Development Agency Marin County Danny Briones SB 90 Coordinator Auditor-Controller's Office Marin County James Tilton, Program Budget Manager Corrections and General Government Department of Finance Marin County Regional Housing Need Determination Program Contents Audit Report Summary............................................................................................................................ 1 Background........................................................................................................................ 1 Objective, Scope, and Methodology................................................................................. 1 Conclusion.......................................................................................................................... 2 Views of Responsible Official........................................................................................... 2 Restricted Use.................................................................................................................... 2 Schedule 1—Summary of Program Costs............................................................................ 3 Findings and Recommendations........................................................................................... 4 Attachment—County’s Response to Draft Audit Report Steve Westly • California State Controller Marin County Regional Housing Need Determination Program Audit Report Summary The State Controller’s Office (SCO) audited the costs claimed by Marin County for the legislatively mandated Regional Housing Need Determination Program (Chapter 1143, Statutes of 1980) for the period of July 1, 2000, through June 30, 2003. The last day of fieldwork was June 13, 2005. The county claimed $376,241 ($377,241 less a $1,000 penalty for filing a late claim) for the mandated program. Our audit disclosed that $149,014 is allowable and $227,227 is unallowable. The unallowable costs occurred primarily because the county claimed unsupported costs. The State paid the county $31,609. Allowable costs claimed exceed the amount paid by $117,405. Background Chapter 1143, Statutes of 1980, established substantially more detailed requirements for the housing element of local agencies’ general plan. Cities and counties were required to have provisions in their housing elements for meeting their “appropriate share of the regional demand for housing” as determined by their regional Council of Government. On August 19, 1981, the State Board of Control (now the Commission on State Mandates) ruled that Chapter 1143, Statutes of 1980, resulted in state-mandated costs that are reimbursable pursuant to Government Code Section 17561. Parameters and Guidelines establishes the state mandate and defines criteria for reimbursement. The State Board of Control adopted Parameters and Guidelines on March 25, 1982. 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, We conducted the audit to determine whether costs claimed represent increased costs resulting from the Regional Housing Need Determination Scope, and Program for the period of July 1, 2000, through June 30, 2003. 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 Section 17558.5. 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. Steve Westly • California State Controller 1 Marin County Regional Housing Need Determination Program 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, Marin County claimed $376,241 ($377,241 less a $1,000 penalty for filing a late claim) for costs of the Regional Housing Need Determination Program. Our audit disclosed that $149,014 is allowable and $227,227 is unallowable. For fiscal year (FY) 2000-01, the State paid the county $21,205. Our audit disclosed that $19,885 is allowable. The county should return $1,320 to the State. For FY 2001-02, the State paid the county $10,404. Our audit disclosed that $96,013 is allowable. The State will pay allowable costs claimed that exceed the amount paid, totaling $85,609, contingent upon available appropriations. For FY 2002-03, the State made no payments to the county. Our audit disclosed that $33,116 is allowable. The State will pay that amount, contingent upon available appropriations. Views of We issued a draft audit report on October 12, 2005. Alex Hinds, Director of the Marin County Community Development Agency, responded by Responsible letter dated November 3, 2005, in which he disagreed with Finding 1. Official The county’s response is included as an attachment to this final audit report. Restricted Use This report is solely for the information and use of Marin 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 2 Marin County Regional Housing Need Determination Program Schedule 1— Summary of Program Costs July 1, 2000, through June 30, 2003 Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustment Reference 1 July 1, 2000, through June 30, 2001 Salaries and benefits $ 3,481 $ 2,008 $ (1,473) Finding 1 Services and supplies 17,000 17,000 — Indirect costs 724 877 153 Finding 3 Total costs 21,205 19,885 (1,320) Less late filing penalty — — — Total reimbursable costs $ 21,205 19,885 $ (1,320) Less amount paid by the State (21,205) Allowable costs claimed in excess of (less than) amount paid $ (1,320) July 1, 2001, through June 30, 2002 Salaries and benefits $ 80,981 $ 416 $ (80,565) Finding 1 Services and supplies 83,750 96,500 12,750 Finding 2 Indirect costs 44,053 97 (43,956) Finding 3 Total costs 208,784 97,013 (111,771) Less late filing penalty (1,000) (1,000) — Total reimbursable costs $ 207,784 96,013 $ (111,771) Less amount paid by the State (10,404) Allowable costs claimed in excess of (less than) amount paid $ 85,609 July 1, 2002, through June 30, 2003 Salaries and benefits $ 81,763 $ 603 $ (81,160) Finding 1 Services and supplies 29,350 32,316 2,966 Finding 2 Indirect costs 36,139 197 (35,942) Finding 3 Total costs 147,252 33,116 (114,136) Less late filing penalty — — — Total reimbursable costs $ 147,252 33,116 $ (114,136) Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 33,116 Summary: July 1, 2000, through June 30, 2003 Salaries and benefits $ 166,225 $ 3,027 $ (163,198) Finding 1 Services and supplies 130,100 145,816 15,716 Finding 2 Indirect costs 80,916 1,171 (79,745) Finding 3 Total costs 377,241 150,014 (227,227) Less late filing penalty (1,000) (1,000) — Total reimbursable costs $ 376,241 149,014 $ (227,227) Less amount paid by the State (31,609) Allowable costs claimed in excess of (less than) amount paid $ 117,405 _________________________ 1 See the Findings and Recommendations section. Steve Westly • California State Controller 3 Marin County Regional Housing Need Determination Program Findings and Recommendations FINDING 1— The county claimed salary and fringe benefit costs that were Salary and fringe unsupported. benefit costs • In fiscal year (FY) 2000-01 through FY 2002-03, the county did not unsupported maintain employee timesheets to support the labor hours devoted to the mandated activities. The county claimed a total of 3,532 hours. The county submitted copies of its contract consultant’s invoices and daily planners that documented only 60 county employee hours devoted to meetings held with the consultant. • In FY 2000-01 through FY 2002-03, the county claimed salary costs for two employees of the Community Development Agency using productive hourly labor rates that understated the employees’ actual salaries and benefits. During our audit fieldwork, the county provided corrected labor rates, which included allowable fringe benefits. Parameters and Guidelines for the program specifies that only actual increased costs that are incurred in the performance of the mandated activities and that are adequately documented are reimbursable. As a result, we have adjusted claimed salary and benefit costs as follows. Fiscal Year 2000-01 2001-02 2002-03 Total Salary and benefit costs $ (1,473) $ (80,565) $ (81,160) $ (163,198) Recommendation We recommend that the county ensure that all costs claimed are eligible increased costs incurred as a result of the mandate and that they are supported by appropriate documentation. County’s Response The county contends that the mandate’s Parameters and Guidelines allows for alternatives to actual employee time records to support labor costs claimed. The county contends that a comparison of costs incurred by two similar Northern California counties demonstrates that its claimed costs are justifiable and reasonable. SCO’s Comment The mandate’s Parameters and Guidelines specifies that, for all labor costs claimed, the county must be able to document the classification of the employees involved, the mandated function performed, the number of hours devoted to the function, the hourly salary rate, and the fringe benefit costs. It further states that if claimed costs cannot be supported, they will be disallowed by the State Controller. The county’s comparison of its claimed costs to other counties’ costs does not represent appropriate documentation of actual increased costs incurred. The finding and recommendation remain unchanged. Steve Westly • California State Controller 4 Marin County Regional Housing Need Determination Program FINDING 2— In FY 2001-02 and FY 2002-03, the county, due to errors in compiling Understated services its claims, underreported allowable services and supplies costs by a total of $15,716. and supplies Parameters and Guidelines specifies that only actual increased costs that are incurred in the performance of the mandated activities and that are adequately documented are reimbursable. As a result, we have adjusted claimed costs as follows. Fiscal Year 2000-01 2001-02 2002-03 Total Services and supplies $ — $ 12,750 $ 2,966 $ 15,716 Recommendation We recommend that the county ensure that all costs claimed are eligible increased costs incurred as a result of the mandate, and that they are supported by appropriate documentation. County’s Response The county did not respond to this finding. SCO’s Comment The finding and recommendation remain unchanged. FINDING 3— The county claimed indirect costs at incorrect rates, and applied the rates Indirect costs to salaries and benefits that were unsupported. unsupported We determined in Finding 1 that most salary and benefit costs claimed were unsupported; therefore, indirect costs related to these unsupported salary and benefit costs are unallowable. In addition, we determined that the indirect cost rates claimed were in error. The county erroneously classified some labor and services and supplies costs as indirect. Also, the county charged the wrong years’ countywide cost allocation plan charges to the indirect cost pool. Parameters and Guidelines specifies that only actual increased costs that are incurred in the performance of the mandated activities and that are adequately documented are reimbursable. We recomputed allowable indirect cost rates for each fiscal year and applied these revised rates to allowable salary and benefit costs, which resulted in the following adjustments. Fiscal Year 2000-01 2001-02 2002-03 Total Indirect costs $ 153 $ (43,956) $ (35,942) $ (79,745) Steve Westly • California State Controller 5 Marin County Regional Housing Need Determination Program Recommendation We recommend that the county ensure that all costs claimed are eligible increased costs incurred as a result of the mandate, and that they are supported by appropriate documentation. County’s Response The county did not respond to this finding. SCO’s Comment The finding and recommendation remain unchanged. Steve Westly • California State Controller 6 Marin County Regional Housing Need Determination Program Attachment— County’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 S05-MCC-031