Monterey County

MONTEREY COUNTY Audit Report REGIONAL HOUSING NEED DETERMINATION PROGRAM Chapter 1143, Statutes of 1980 July 1, 2000, through June 30, 2002 S W TEVE ESTLY California State Controller December 2004 S W TEVE ESTLY California State Controller December 3, 2004 James Colangelo, Director Environmental Resource Policy Agency Monterey County 29 Bishop Street, Suite 203 Pajaro, CA 95076 Dear Mr. Colangelo: The State Controller’s Office audited the claims filed by Monterey County for costs of the legislatively mandated Regional Housing Need Determination Program (Chapter 1143, Statutes of 1980) for the period of July 1, 2000, through June 30, 2002. The county claimed $461,417 ($462,417 in costs less a $1,000 penalty for filing late) for the mandated program. Our audit disclosed that $134,832 is allowable and $326,585 is unallowable. The unallowable costs occurred primarily because the county claimed unsupported labor costs. The State made no payments to the county. The State will pay allowable costs claimed, totaling $134,832, contingent upon available appropriations. 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:JVB/ams cc: The Honorable Michael J. Miller Auditor-Controller Monterey County Gail Kitaji Environmental Resource Policy Agency Monterey County James Tilton, Program Budget Manager Corrections and General Government Department of Finance Monterey County Regional Housing Need Determination 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........................................................................................... 4 Steve Westly • California State Controller Monterey County Regional Housing Need Determination Program Audit Report Summary The State Controller’s Office (SCO) audited the claims filed by Monterey County for costs of the legislatively mandated Regional Housing Need Determination Program (Chapter 1143, Statutes of 1980) for the period of July 1, 2000, through June 30, 2002. The last day of fieldwork was February 24, 2004. The county claimed $461,417 ($462,417 in costs less a $1,000 penalty for filing late) for the mandated program. Our audit disclosed that $134,832 is allowable and $326,585 is unallowable. The unallowable costs occurred primarily because the county claimed unsupported labor costs. The State made no payments to the county. The State will pay allowable costs claimed, totaling $134,832, contingent upon available appropriations. Background Chapter 1143, Statutes of 1980, established substantially more detailed requirements for the housing element of city and county general plans. Cities and counties were required to provide in their housing elements for the regional demand for housing, taking into account certain specified factors. In addition, 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 councils 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 reimbursement criteria. The State Board of Control adopted the Parameters and Guidelines on March 25, 1982. In compliance with Government Code Section 17558, the SCO issues claiming instructions for mandated programs, to assist local agencies and school districts 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, 2002. Methodology Our audit scope included, but was not limited to, determining whether costs claimed were supported by appropriate source documents, not funded by another source, and not unreasonable and/or excessive. Steve Westly • California State Controller 1 Monterey County Regional Housing Need Determination 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 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 concerning the allowability of expenditures claimed 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 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 Findings and Recommendations section of this report. For the audit period, Monterey County claimed $461,417 ($462,417 in costs less a $1,000 penalty for filing late) for costs of the Regional Housing Need Determination Program. Our audit disclosed that $134,832 is allowable and $326,585 is unallowable. For fiscal year (FY) 2000-01, the State made no payment to the county. Our audit disclosed that $61,392 is allowable. The State will pay that amount contingent upon available appropriations. For FY 2001-02, the State made no payment to the county. Our audit disclosed that $73,440 is allowable. The State will pay that amount contingent upon available appropriations. Views of We issued a draft audit report on September 20, 2004. Gail Kitaji, Senior Accountant in the Environmental Resource Policy Agency, responded by Responsible e-mail on November 15, 2004, stating that the county chose not to Officials respond to the draft audit report. Restricted Use This report is solely for the information and use of Monterey 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 Monterey County Regional Housing Need Determination Program Schedule 1— Summary of Program Costs July 1, 2000, through June 30, 2002 Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustments Reference1 July 1, 2000, through June 30, 2001 Salaries $ 63,131 $ — $ (63,131) Finding 1 Benefits 26,799 — (26,799) Finding 1 Services and supplies 67,458 62,392 (5,066) Finding 2 Total direct costs 157,388 62,392 (94,996) Indirect costs 37,321 — (37,321) Finding 1 Total costs 194,709 62,392 (132,317) Less late filing penalty (1,000) (1,000) — Total reimbursable costs $ 193,709 61,392 $ (132,317) Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 61,392 July 1, 2001, through June 30, 2002 Salaries $ 92,740 $ — $ (92,740) Finding 1 Benefits 42,450 — (42,450) Finding 1 Services and supplies 73,440 73,440 — Total direct costs 208,630 73,440 (135,190) Indirect costs 59,078 — (59,078) Finding 1 Total costs 267,708 73,440 (194,268) Less late filing penalty — — — Total reimbursable costs $ 267,708 73,440 $ (194,268) Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 73,440 Summary: July 1, 2000, through June 30, 2002 Salaries $ 155,871 $ — $ (155,871) Finding 1 Benefits 69,249 — (69,249) Finding 1 Services and supplies 140,898 135,832 (5,066) Finding 2 Total direct costs 366,018 135,832 (230,186) Indirect costs 96,399 — (96,399) Finding 1 Total costs 462,417 135,832 (326,585) Less late filing penalty (1,000) (1,000) — Total reimbursable costs $ 461,417 134,832 $ (326,585) Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 134,832 _________________________ 1 See the Findings and Recommendations section. Steve Westly • California State Controller 3 Monterey County Regional Housing Need Determination Program Findings and Recommendations FINDING 1— The county claimed all labor costs based on after-the-fact estimates of time spent by county personnel to perform mandated activities. The Unsupported county did not maintain contemporaneous time distribution records that labor costs showed actual time spent by each staff member involved in the applicable activities. Parameters and Guidelines for the Regional Housing Need Determination Program specifies that only actual increased costs incurred in the performance of the mandated activities and adequately documented are reimbursable. All labor costs are unallowable because no time records were maintained by the county. Indirect costs are also unallowable because those costs were claimed as a percentage of labor. As a result, claimed costs have been adjusted as follows: Fiscal Year 2000-01 2001-02 Total Salaries $ (63,131) $ (92,740) $ (155,871) Benefits (26,799) (42,450) (69,249) Indirect costs (37,321) (59,078) (96,399) Audit adjustment $ (127,251) $ (194,268) $ (321,519) Recommendation We recommend that the county ensure that all costs claimed are eligible increased costs incurred as a result of the mandate and are supported by appropriate documentation. FINDING 2— The county claimed $5,066 for services and supplies costs in FY 2000-01 that were not eligible for reimbursement. Ineligible services and supplies costs • The county claimed $2,760 relating to training services provided by a contractor. However, the contract between the county and the contractor does not include training in the scope of work to be conducted, nor is training listed as a reimbursable cost in Parameters and Guidelines. • The county claimed $2,306 for services described as “other tasks” that could not be documented as related to the mandate. Parameters and Guidelines for the Regional Housing Need Determination 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, services and supplies costs claimed in FY 2000-01 have been reduced by $5,066. Steve Westly • California State Controller 4 Monterey 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 are supported by accounting records. Steve Westly • California State Controller 5 State Controller’s Office Division of Audits Post Office Box 942850 Sacramento, California 94250-5874 http://www.sco.ca.gov S04-MCC-024