Ohlone Community College District

OHLONE COMMUNITY COLLEGE DISTRICT Audit Report COLLECTIVE BARGAINING PROGRAM Chapter 961, Statutes of 1975, and Chapter 1213, Statutes of 1991 July 1, 2002, through June 30, 2005 J C OHN HIANG California State Controller June 2009 J C OHN HIANG California State Controller June 30, 2009 The Honorable Garrett S. Yee President, Board of Trustees Ohlone Community College District 43600 Mission Boulevard Fremont, CA 94539-0390 Dear Mr. Yee: The State Controller’s Office audited the costs claimed by the Ohlone Community College District for the legislatively mandated Collective Bargaining Program (Chapter 961, Statutes of 1975, and Chapter 1213, Statutes of 1991) for the period of July 1, 2002, through June 30, 2005. The district claimed $487,583 ($488,583 less a $1,000 penalty for filing a late claim) for the mandated program. Our audit disclosed that the entire amount is allowable. The State paid the district $282,359. The State will pay allowable costs claimed that exceed the amount paid, totaling $205,224, contingent upon available appropriations. 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/vb cc: Joanne Schultz Executive Dean of Business Services Ohlone Community College District Lyle K. Engeldinger Dean of Human Resources Ohlone Community College District Kuldeep Kaur, Specialist Fiscal Planning and Administration California Community Colleges Chancellor’s Office Jeannie Oropeza, Program Budget Manager Education Systems Unit Department of Finance Ohlone Community College District Collective Bargaining Program Contents Audit Report Summary ............................................................................................................................ 1 Background ........................................................................................................................ 1 Objective, Scope, and Methodology ................................................................................. 2 Conclusion .......................................................................................................................... 2 Views of Responsible Official ........................................................................................... 3 Restricted Use .................................................................................................................... 3 Schedule 1—Summary of Program Costs............................................................................ 4 Findings and Recommendations ........................................................................................... 6 Attachment—District’s Response to Draft Audit Report Ohlone Community College District Collective Bargaining Program Audit Report Summary The State Controller’s Office (SCO) audited the costs claimed by the Ohlone Community College District for the legislatively mandated Collective Bargaining Program (Chapter 961, Statutes of 1975, and Chapter 1213, Statutes of 1991) for the period of July 1, 2002, through June 30, 2005. The district claimed $487,583 ($488,583 less a $1,000 penalty for filing a late claim) for the mandated program. Our audit disclosed that the entire amount is allowable. The State paid the district $282,359. The State will pay allowable costs claimed that exceed the amount paid, totaling $205,224, contingent upon available appropriations. Background In 1975, the State enacted the Rodda Act (Chapter 961, Statutes of 1975), requiring the employer and employee to meet and negotiate, thereby creating a collective bargaining atmosphere for public school employers. The legislation created the Public Employment Relations Board to issue formal interpretations and rulings regarding collective bargaining under the Act. In addition, the legislation established organizational rights of employees and representational rights of employee organizations, recognized exclusive representatives relating to collective bargaining. On July 17, 1978, the Board of Control (now the Commission on State Mandates [CSM]) determined that the Rodda Act imposed a state mandate upon school districts reimbursable under Government Code section 17561. Chapter 1213, Statutes of 1991, added Government Code section 3547.5, requiring school districts to publicly disclose major provisions of a collective bargaining effort before the agreement becomes binding. On August 20, 1998, CSM determined that this legislation also imposed a state mandate upon school districts reimbursable under Government Code section 17561. Costs of publicly disclosing major provisions of collective bargaining agreements that districts incurred after July 1, 1996, are allowable. Claimants are allowed to claim increased costs. For claim components G1 through G3, increased costs represent the difference between the current-year Rodda Act activities and the base-year Winton Act activities (generally, fiscal year 1974-75), as adjusted by the implicit price deflator. For Components G4 through G7, increased costs represent actual costs incurred. -1- Ohlone Community College District Collective Bargaining Program The seven components of the Collective Bargaining Program are as follows: G1–Determining bargaining units and exclusive representatives G2–Election of unit representatives G3–Costs of negotiations G4–Impasse proceedings G5–Collective bargaining agreement disclosure G6–Contract administration G7–Unfair labor practice costs The program’s parameters and guidelines establish the state mandate and define reimbursement criteria. CSM adopted the parameters and guidelines on October 22, 1980, and last amended them on January 27, 2000. In compliance with Government Code section 17558, the SCO issues claiming instructions to assist local agencies and school districts in claiming mandated program reimbursable costs. Objective, Scope, We conducted the audit to determine whether costs claimed represent increased costs resulting from the Collective Bargaining Program for the and Methodology 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. We conducted this performance audit under the authority of Government Code sections 12410, 17558.5, and 17561. We did not audit the district’s financial statements. We conducted the audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We limited our review of the district’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, the Ohlone Community College District claimed $487,583 ($488,583 less a $1,000 penalty for filing a late claim) for costs of the Collective Bargaining Program. Our audit disclosed that the entire amount is allowable. The State paid the district $282,359. The State will pay allowable costs claimed that exceed the amount paid, totaling $205,224, contingent upon available appropriations. -2- Ohlone Community College District Collective Bargaining Program Views of We issued a draft audit report on July 9, 2008. Joanne Schultz, Dean of Business Services, responded by letter dated July 28, 2008 (Attachment), Responsible agreeing with the audit results. This final audit report includes the Official district’s response. Restricted Use This report is solely for the information and use of the Ohlone Community College District, the California Department of Education, the California Community Colleges Chancellor’s Office, 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 June 30, 2009 -3- Ohlone Community College District Collective Bargaining 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 Direct costs: Components G1 through G3: Salaries and benefits $ 16,764 $ 16,764 $ — Contracted services 104,455 88,133 (16,322) Finding 1 Increased direct costs, Components G1 through G3 121,219 104,897 (16,322) Components G4 through G7: Salaries and benefits 7,093 7,093 — Contracted services 151,256 124,257 (26,999) Finding 1 Increased direct costs, Components G4 through G7 158,349 131,350 (26,999) Total increased direct costs 279,568 236,247 (43,321) Indirect costs 2,791 57,243 54,452 Finding 2 Subtotal 282,359 293,490 11,131 Less allowable costs that exceed amount claimed 2 — (11,131) (11,131) Total program costs $ 282,359 282,359 $ — Less amount paid by the State (282,359) Allowable costs claimed in excess of (less than) amount paid $ — July 1, 2003 through June 30, 2004 Direct costs: Components G1 through G3: Salaries and benefits $ 13,227 $ 13,227 $ — Contracted services 33,164 30,797 (2,367) Finding 1 Increased direct costs, Components G1 through G3 46,391 44,024 (2,367) Components G4 through G7: Salaries and benefits 215 215 — Contracted services 122,950 134,066 11,116 Finding 1 Increased direct costs, Components G4 through G7 123,165 134,281 11,116 Total increased direct costs 169,556 178,305 8,749 Indirect costs 3,054 43,774 40,720 Finding 2 Subtotals 172,610 222,079 49,469 Less late payment penalty (1,000) (1,000) — Subtotals 171,610 221,079 49,469 Less allowable costs that exceed amount claimed 2 — (49,469) (49,469) Total program costs $ 171,610 171,610 $ — Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 171,610 -4- Ohlone Community College District Collective Bargaining Program Schedule 1 (continued) Actual Costs Allowable Audit Cost Elements Claimed per Audit Adjustment Reference 1 July 1, 2004, through June 30, 2005 Direct costs: Components G1 through G3: Salaries and benefits $ 17,527 $ 17,527 $ — Contracted services 5,657 5,657 — Increased direct costs, Components G1 through G3 23,184 23,184 — Components G4 through G7: Salaries and benefits — — — Contracted services 4,010 4,010 — Increased direct costs, Components G4 through G7 4,010 4,010 — Total increased direct costs 27,194 27,194 — Indirect costs 6,420 6,420 — Total program costs $ 33,614 33,614 $ — Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 33,614 Summary: July 1, 2002, through June 30, 2005 Total increased direct costs $ 476,318 $ 441,746 $ (34,572) Indirect costs 12,265 107,437 95,172 Subtotal 488,583 549,183 60,600 Less late claim penalty (1,000) (1,000) — Subtotal 487,583 548,183 60,600 Less allowable costs that exceed costs claimed 2 — (60,600) (60,600) Total program costs $ 487,583 487,583 $ — Less amount paid by the State (282,359) Allowable costs claimed in excess of (less than) amount paid $ 205,224 _________________________ 1 See the Findings and Recommendations section. 2 Government Code section 17561 stipulates that the State will not reimburse any claim more than one year after the filing deadline specified in the SCO’s claiming instructions. That deadline has expired for FY 2002-03 and FY 2003-04. -5- Ohlone Community College District Collective Bargaining Program Findings and Recommendations FINDING 1— The district claimed unallowable contracted services costs totaling $34,572 for the audit period. The audit adjustment resulted from the Unallowable contracted following issues: services costs • The district claimed duplicate invoices for fiscal year (FY) 2002-03 and FY 2003-04 totaling $14,594. This amount should have been claimed in FY 2002-03. • The district claimed $1,148 for FY 2003-04 which should have been claimed for FY 2002-03. The district also claimed $1,526 for FY 2003-04 that should have been claimed for FY 2004-05. • For FY 2002-03 and FY 2003-04 the district provided invoices that did not support the hours claimed for contracted services totaling $18,452. The following table summarizes the contracted services audit adjustment: Fiscal Year 2002-03 2003-04 Total Contracted Services Component activities G1–G3: Duplicate invoices $ (3,416) $ — $ (3,416) Incorrect fiscal year 1,148 (1,148) — Claimed hours not supported by invoices (14,054) (1,219) (15,273) Total, component activities G1–G3 (16,322) (2,367) (18,689) Component activities G4–G7: Duplicate invoices (11,178) — (11,178) Incorrect fiscal year — (1,526) (1,526) Claimed hours not supported by invoices (15,821) 12,642 (3,179) Total, component activities G4–G7 (26,999) 11,116 (15,883) Audit adjustment $ (43,321) $ 8,749 $ (34,572) The program’s parameters and guidelines state that the claimant must support the level of costs claimed and that the claimant will only be reimbursed for the “increased costs” incurred. Government Code section 17514 states that “costs mandated by the State” means any increased costs that a school district is required to incur. Government Code section 17560 requires an annual reimbursement claim to detail the costs actually incurred for each fiscal year. Recommendation We recommend that the district develop and implement an effective control and reporting system to ensure that all claimed costs are eligible and adequately supported. District’s Response The district agreed with the audit finding. -6- Ohlone Community College District Collective Bargaining Program FINDING 2— The district understated allowable indirect costs by $95,172 for the audit period. Allowable indirect costs The district did not provide documentation to explain how it calculated indirect cost rates for FY 2002-03 and FY 2003-04. We recalculated the indirect cost rates for FY 2002-03 and FY 2003-04 based on the State Controller’s Office’s (SCO) FAM-29C methodology. In addition, the district applied its indirect cost rates to salaries and benefits. However, the FAM-29C methodology includes contract services in the base. Therefore, we applied the FAM-29C indirect cost rates to salaries and benefits, and contract services. The following table summarizes the audited and claimed indirect rate: Fiscal Year 2002-03 2003-04 Allowable indirect cost rate 24.23% 24.55% Less claimed indirect cost rate (11.70)% (22.72)% Difference 12.53% 1.83% The following table summarizes the understated indirect costs: Fiscal Year 2002-03 2003-04 Total Total allowable increased direct costs $ 236,247 $ 178,305 Allowable indirect cost rate × 24.23% × 24.55% Allowable indirect costs 57,243 43,774 $ 101,017 Less claimed indirect costs (2,791) (3,054) (5,845) Audit adjustment $ 54,452 $ 40,720 $ 95,172 The parameters and guidelines state: Community College District must use one of the following three alternatives: • A Federally-approved rate based on OMB Circular A-21; • The State Controller’s FAM-29C which uses the CCFS-311; or • Seven percent (7%) Recommendation We recommend that the district claim indirect costs based on indirect cost rates computed in accordance with the SCO’s claiming instructions. District’s Response The district agreed with the audit finding. -7- Ohlone Community College District Collective Bargaining Program Attachment— District’s Response to Draft Audit Report State Controller’s Office Division of Audits Post Office Box 942850 Sacramento, CA 94250-5874 http://www.sco.ca.gov S08-MCC-005