California Clean Energy Jobs Act Proposition 39 Program Audit

PROGRAM AUDIT OF THE CALIFORNIA CLEAN ENERGY JOBS ACT Audit Report PROPOSITION 39 PROGRAM Chapter 29, Statutes of 2013 July 1, 2019, through June 30, 2020 BETTY T. YEE California State Controller August 2021 BETTY T. YEE California State Controller August 9, 2021 Adrienne Alvord, Chair Citizens Oversight Board 1516 9th Street, MS 19 Sacramento, CA 95814 Dear Ms. Alvord: The State Controller’s Office audited a selection of completed projects related to the California Clean Energy Jobs Act for the period of July 1, 2019, through June 30, 2020. As of June 30, 2020, 313 local educational agencies (LEAs) reported $213,837,359 in completed project costs and 31 community college districts (CCDs) reported $36,403,651 in completed project costs. From the list of completed projects, we selected for audit 16 LEAs and four CCDs, which together reported total expenditures of $39,178,611. Our audit found that:  Six LEAs and two CCDs sole-sourced a portion of their project costs, resulting in unallowable costs of $1,411,867;  One LEA has unspent planning funds totaling $25,355, and two LEAs have unspent implementation funds totaling $102,725;  One LEA and one CCD spent Proposition 39 funds on ineligible expenditures, resulting in unallowable costs of $40,321;  Two LEAs earned interest, totaling $37,992, on their Proposition 39 funds but did not spend it;  Eleven LEAs and three CCDs did not identify the projected energy savings in the awarded contracts, and five LEAs and two CCDs did not have signed contracts with one or more of their vendors;  Twelve LEAs submitted their final project completion reports after the deadline; and  One LEA is in violation of the energy measure payback period. We also identified an issue that is not significant to the audit objective, but warrants the attention of management. Specifically, we found that one LEA applied its unused planning funds to program implementation. However, as these funds were not included in the LEA’s approved energy expenditure plan, the amount of Proposition 39 funds paid to this LEA exceeded its approved energy expenditure plan by $235,475. Adrienne Alvord, Chair -2- August 9, 2021 This final audit report identifies six LEAs and two CCDs that sole-sourced a portion of their project costs, in violation of Public Resources Code section 26235(c). This final audit report also identifies one LEA and one CCD that spent Proposition 39 funds on ineligible expenditures. Public Resources Code section 26240(h) states: The Superintendent of Public Instruction shall require local educational agencies to pay back funds if they are not used in accordance with state statute or regulations…The Chancellor of the California Community Colleges shall require a community college to pay back funds if they are not used in accordance with state statute or regulations… Findings 1 and 3 are both apportionment-significant for LEAs. If you disagree with either finding, you have 30 days from the date the State Controller’s Office emailed this report to request a summary review of any apportionment-significant audit findings on the grounds of substantial compliance. In addition, you have 60 days from delivery of this letter—or 30 days following the conclusion of a summary review regarding the finding included in that review—to file a formal appeal of any apportionment-significant audit findings on any one or more of the grounds set forth in Education Code (EC) section 41344(d). The request for a summary review or formal appeal should be submitted to the following address: Executive Officer Education Audit Appeals Panel 770 L Street, Suite 1100 Sacramento, California 95814 If you have any questions regarding the summary review process or the appeal process, please see the Education Audit Appeals Panel (EAAP) website (www.eaap.ca.gov) or call EAAP at (916) 445-7745. LEAs working to resolve audit exceptions may request structured repayment plans under EC section 41344. To request a repayment plan, the LEA must submit a letter to the California Department of Education (CDE) within 90 days of receipt of this letter; within 30 days of withdrawing or receiving a determination of a summary review if there is no appeal; or within 30 days of withdrawing or receiving a final determination regarding an appeal pursuant to EC section 41344(a). More information on repayment plans can be found on the CDE’s website (http://www.cde.ca.gov/fg/au/ag/resolution.asp) or by contacting the CDE, School Fiscal Services Division, Categorical Allocations and Management Assistant Unit, at (916) 323-8068. Findings 1 and 3 both have a fiscal impact on the affected CCDs. If you disagree with these two findings, Title 5, section 59100, et seq. provides that the Chancellor for the California Community Colleges has the authority to review audit findings involving CCDs. The request for an appeal should be submitted to: Amanda Voie, Specialist Fiscal Accountability College Finance and Facilities Planning Division California Community Colleges Chancellor’s Office 1102 Q Street Sacramento, CA 95811 Adrienne Alvord, Chair -3- August 9, 2021 You may also call the California Community Colleges Chancellor’s Office Fiscal Accountability Office at (916) 323-1759 for more information. If you have any questions about the audit findings, please contact Lisa Kurokawa, Chief, Compliance Audits Bureau, by telephone at (916) 327-3138. Sincerely, Original signed by KIMBERLY TARVIN, CPA Chief, Division of Audits KT/ls cc: Jim Bartridge, Program and Policy Advisor Citizens Oversight Board Jack Bastida, Program Specialist Citizens Oversight Board Tony Thurmond, State Superintendent of Public Instruction California Department of Education Tami Pierson, Interim Director Audits and Investigations Division California Department of Education Kelly Levario, Staff Services Manager II Audits and Investigations Division California Department of Education Elizabeth Dearstyne, Director School Fiscal Services Division California Department of Education Derrick Andrade, Education Fiscal Services Consultant School Fiscal Services Division California Department of Education David Hochschild, Chair California Energy Commission Drew Bohan, Executive Director California Energy Commission Michael Sokol, Deputy Director Efficiency Division California Energy Commission Armand Angulo, Assistant Deputy Director Renewable Energy Division California Energy Commission Eloy Ortiz Oakley, Chancellor California Community Colleges Pamela Haynes, President Board of Governors California Community Colleges Chancellor’s Office Adrienne Alvord, Chair -4- August 9, 2021 Lizette Navarette, Vice Chancellor College Finance and Facilities Planning Division California Community College Chancellor’s Office Hoang Nguyen, Director of Facilities Planning College Finance and Facilities Planning Division California Community College Chancellor’s Office Amanda Voie, Specialist College Finance and Facilities Planning Division California Community Colleges Chancellor’s Office Mary C. Kelly, CPA, Executive Officer Education Audit Appeals Panel Jeffrey Hall, President Board of Trustees Allan Hancock Joint Community College District Kevin G. Walthers, Ph.D., President Allan Hancock Joint Community College District Eric D. Smith, Associate Superintendent/Vice President Finance and Administration Allan Hancock Joint Community College District Laura Becker, Director Business Services Allan Hancock Joint Community College District Mark A. Lopez, President Board of Education Anaheim Elementary School District Christopher Downing, Ed.D., Superintendent Anaheim Elementary School District Jesus Chavarria, Assistant Superintendent Administrative Services Anaheim Elementary School District Priscilla Martinez, Director Business Services Anaheim Elementary School District Isela Vazquez, Senior Director Facilities, Planning and Construction Anaheim Elementary School District Jill McGrady, President Board of Trustees Antelope Valley Union High School District David J. Vierra, Ph.D., Superintendent Antelope Valley Union High School District Brian Hawkins, Assistant Superintendent Business Services Antelope Valley Union High School District Adrienne Alvord, Chair -5- August 9, 2021 Carleton Lincoln, Ed.D., Chief Executive Officer Children of Promise Preparatory Academy Samuel Shalhoub, President Board of Trustees Coast Unified School District Scott Smith, Superintendent Coast Unified School District Annie Lachance, Chief Business Official Coast Unified School District Lillie Campbell, President Board of Education Community Collaborative Charter Dr. Cindy Petersen, Superintendent Community Collaborative Charter Aaron Thornsberry, Chief Business Official Community Collaborative Charter Chrissa Gillies, President Board of Trustees Cotati−Rohnert Park Unified School District Dr. Mayra Perez, Superintendent Cotati–Rohnert Park Unified School District Robert Marical, Chief Business Official Cotati–Rohnert Park Unified School District Josh Savage, Executive Director Maintenance and Facilities Cotati–Rohnert Park Unified School District Linda Porras, President Board of Education Desert Sands Unified School District Scott Bailey, Superintendent Desert Sands Unified School District Sonya Melendez, Director Fiscal Services Desert Sands Unified School District Peter Landsberger, President Board of Trustees Foothill–De Anza Community College District Judy C. Miner, Chancellor Foothill–De Anza Community College District Susan Cheu, Vice Chancellor Business Services Foothill–De Anza Community College District Dr. Armine Hacopian, President Board of Trustees Glendale Community College District Dr. David Viar, Superintendent/President Glendale Community College District Adrienne Alvord, Chair -6- August 9, 2021 Dr. Anthony Culpepper, Executive Vice President Administrative Services Glendale Community College District Susan Courtey, Director Business Services Glendale Community College District Ruben Mendoza, President Board of Education Madera Unified School District Todd Lile, Superintendent Madera Unified School District Arelis Garcia, Chief Financial Officer Fiscal Services Madera Unified School District Sandon Schwartz, Deputy Superintendent Madera Unified School District Rosalind Cox, Director Facilities Planning and Construction Management Madera Unified School District Susan Harautuneian, Director Purchasing Department Madera Unified School District Naomi Landry, President Board of Education Mattole Unified School District Karen Ashmore, Superintendent Mattole Unified School District Shari Lovett, Director Northern United–Humboldt Charter School Charlene G. West, Ph.D., President Board of Education Modesto City Elementary School District Sara Noguchi, Ed.D., Superintendent Modesto City Elementary School District Tim Zearley, Associate Superintendent Business Services Modesto City Elementary School District Duane Wolterstorff, Senior Director Business Services Modesto City Elementary School District Roger Orth, Senior Director Maintenance and Operations Modesto City Elementary School District Tina Heimerdinger, President Board of Education Mountain Empire Unified School District Patrick Keeley, Ed.D., Superintendent Mountain Empire Unified School District Adrienne Alvord, Chair -7- August 9, 2021 Gary Hobelman, Assistant Superintendent Business Services Mountain Empire Unified School District Manuel Aguirre, President Board of Trustees Romoland School District Trevor Painton, Superintendent Romoland School District Keith Bacon, Chief Business Official Romoland School District Mimi Capistrano, Fiscal Services Supervisor Business Services Romoland School District Shanell Williams, President Board of Trustees San Francisco Community College District Dianna Gonzales, J.D., Interim Chancellor San Francisco Community College District John al-Amin, Ph.D., Vice Chancellor Finance and Administration San Francisco Community College District Marian Lam, Assistant Director Capital Planning Office of Facilities and Capital Planning San Francisco Community College District Gabriela López, President Board of Education San Francisco Unified School District Vincent Matthews, Ed.D., Superintendent San Francisco Unified School District Myong Leigh, Deputy Superintendent Policy and Operations San Francisco Unified School District Meghan Wallace, Chief Financial Officer Finance Department San Francisco Unified School District Paula Villescaz, President Board of Education San Juan Unified School District Kent Kern, Superintendent San Juan Unified School District Kent Stephens, Deputy Superintendent Business Support Services San Juan Unified School District Frank Camarda, Assistant Superintendent Operations, Facilities and Transportation San Juan Unified School District Adrienne Alvord, Chair -8- August 9, 2021 Nicholas Arps, Director Facilities, Construction and Modernization San Juan Unified School District Chris Ralston, Manager Maintenance and Operations San Juan Unified School District Cherie Chenoweth, Business Operations Supervisor Facilities, Maintenance & Transportation San Juan Unified School District Kimberly Braziel, President Board of Trustees Sunnyside Union School District Steve Tsuboi, Superintendent-Principal Sunnyside Union School District Candy Alari, Business Manager Sunnyside Union School District Jaymes Lackey, President Board of Trustees Thermalito Union Elementary School District Gregory Blake, Superintendent Thermalito Union Elementary School District Cody Walker, Assistant Superintendent Thermalito Union Elementary School District Rachel Young, Accounting Specialist Thermalito Union Elementary School District Lisa Anderson, Executive Director Fiscal Services Butte County Office of Education Corey Weber, Director of Fiscal Services Business Services Humboldt County Office of Education Patricia Smith, Chief Financial Officer Business Services Los Angeles County Office of Education Julie DeWall, Chief Business and Administrative Services Madera County Superintendent of Schools Dean West, CPA, Associate Superintendent Business Services Orange County Department of Education Tina Daigneault, Chief Business Official Administrative and Business Services Riverside County Office of Education Nick Schweizer, Assistant Superintendent Business Services Sacramento County Office of Education Adrienne Alvord, Chair -9- August 9, 2021 Michael Simonson, Deputy Superintendent Business Services San Diego County Office of Education Sheldon K. Smith, Ed.D., Assistant Superintendent Business Services San Luis Obispo County Office of Education Mary Downey, Deputy Superintendent Business Services Sonoma County Office of Education Donald Gatti, Deputy Superintendent Business Services Stanislaus County Office of Education Fernie Marroquin, Ed.D., Assistant Superintendent Business Services Tulare County Office of Education Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Contents Audit Report Summary ............................................................................................................................ 1 Background ........................................................................................................................ 1 Audit Authority .................................................................................................................. 4 Objective, Scope, and Methodology ................................................................................. 4 Conclusion .......................................................................................................................... 6 Follow-up on Prior Audit Findings .................................................................................. 7 Views of Responsible Officials .......................................................................................... 8 Restricted Use .................................................................................................................... 8 Schedule 1—Total Completed Proposition 39 Program Costs for Local Educational Agencies ....................................................................... 9 Schedule 2—Total Completed Proposition 39 Program Costs for Community College Districts ..................................................................... 16 Findings and Recommendations ........................................................................................... 17 Observation and Recommendation ...................................................................................... 27 Appendix—Audit Results by Local Educational Agency and Community College District ....................................................................... A1 Attachment A—Antelope Valley Union High School District’s Response to Audit Results Attachment B—Children of Promise Preparatory Academy’s Response to Audit Results Attachment C—Madera Unified School District’s Response to Audit Results Attachment D—Romoland School District’s Response to Audit Results Attachment E—Sunnyside Union School District’s Response to Audit Results Attachment F—Foothill–De Anza Community College District’s Response to Audit Results Attachment G—Glendale Community College District’s Response to Audit Results Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Audit Report Summary The State Controller’s Office (SCO) audited a selection of completed projects related to the California Clean Energy Jobs Act for the period of July 1, 2019, through June 30, 2020. As of June 30, 2020, 313 local educational agencies (LEAs) reported $213,837,359 in completed project costs and 31 community college districts (CCDs) reported $36,403,651 in completed project costs. From the list of completed projects, we selected for audit 16 LEAs and four CCDs, which together reported total expenditures of $39,178,611. Our audit found that:  Six LEAs and two CCDs sole-sourced a portion of their project costs, resulting in unallowable costs of $1,411,867;  One LEA has unspent planning funds totaling $25,355, and two LEAs have unspent implementation funds totaling $102,725;  One LEA and one CCD spent Proposition 39 funds on ineligible expenditures, resulting in unallowable costs of $40,321;  Two LEAs earned interest, totaling $37,992,on their Proposition 39 funds but did not spend it;  Eleven LEAs and three CCDs did not identify the projected energy savings in the awarded contracts, and five LEAs and two CCDs did not have signed contracts with one or more of their vendors;  Twelve LEAs submitted their final project completion reports after the deadline; and  One LEA is in violation of the energy measure payback period. We also identified an issue that is not significant to the audit objective, but warrants the attention of management. Specifically, we found that one LEA applied its unused planning funds to program implementation. However, as these funds were not included in the LEA’s approved energy expenditure plan (EEP), the amount of Proposition 39 funds paid to this LEA exceeded its approved EEP by $235,475. A separate summary of the audit results for the 16 LEAs and four CCDs selected for audit is included as an Appendix to this report. Background The California Clean Energy Jobs Act was created with the approval of Proposition 39 (Chapter 29, Statutes of 2013) in the November 2012 statewide election. The statute changed the corporate income tax code to allocate projected revenue from the General Fund to the Clean Energy Job Creation Fund for five fiscal years, beginning with fiscal year (FY) 2013-14. Under the initiative, it is estimated that up to $550 million is available annually to be appropriated by the California State Legislature for purposes of funding eligible projects that create jobs in California while improving energy efficiency and expanding clean energy generation. -1- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Senate Bill 73 requires that 89% of the funds deposited annually into the Clean Energy Job Creation Fund be made available to LEAs for energy efficiency and clean energy projects, and 11% be made available to CCDs for energy efficiency and clean energy projects. An eligible energy project is an installation at or modification to a school site that improves energy efficiency or expands clean energy generation. Energy efficiency measures include heating, ventilation, and air conditioning (HVAC) system retrofits and various interior and exterior retrofits; clean energy generation measures include photovoltaic (solar) panels. All facilities within an LEA are eligible for Proposition 39 program funding. Citizens Oversight Board Proposition 39 also established the Citizens Oversight Board to review expenditures, audit the Clean Energy Job Creation Fund, and maintain transparency and accountability of the Fund. The California Treasurer, Attorney General, and State Controller each appoint three members of the Citizens Oversight Board; the California Energy Commission (CEC) and the California Public Utilities Commission appoint two ex officio members. California Department of Education The California Department of Education (CDE) is responsible for distributing Proposition 39 funding to LEAs that serve grade K-12 students. CDE allocates funds based on the following formula:  85% based on average daily attendance reported as of the second principal apportionment for the prior year; and  15% based on the number of students eligible for free and reduced- priced meals in the prior year. These funds may be used by LEAs for energy efficiency and clean energy projects, as well as related energy planning, energy training, and energy management. LEAs are required to submit an EEP to the CEC for consideration and approval. An EEP includes a technical description and project specifications for the proposed eligible energy measures. Funds are released to an LEA only after the CEC approves the EEP. LEAs with prior-year average daily attendance of 1,000 or lower are eligible to receive funding for both the current year and the following year in the current year. LEAs that select this option do not receive a funding allocation in the following year. LEAs whose first year of eligibility was FY 2013-14 also had the option of requesting a portion of that year’s award allocation for energy planning activities without submitting an EEP to the CEC. The energy planning funds can be spent only on the following four activities:  Energy audits and energy surveys/assessments;  Proposition 39 program assistance;  Hiring or retaining an energy manager; and  Energy-related training. -2- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Any unused energy planning funds must be applied toward implementing energy projects from an LEA’s approved EEP. California Energy Commission The CEC is the primary state agency responsible for energy policy and planning. Public Resources Code (PRC) section 26235(a) requires the CEC to establish guidelines in consultation with the State Superintendent of Public Instruction, the Chancellor of the California Community Colleges, and the California Public Utilities Commission. On December 19, 2013, the CEC adopted program implementation guidelines, to which substantive revisions have been made. For this audit period, we referred to Proposition 39: California Clean Energy Jobs Act – 2016 Program Implementation Guidelines (2016 Program Implementation Guidelines). These guidelines provide direction to LEAs on the types of awards and the required proposals, explain the screening and evaluation criteria, describe the standards to be used to evaluate project proposals, and outline the award process. The 2016 Program Implementation Guidelines include a savings-to- investment ratio (SIR) calculation. To be approved for Proposition 39 funding, energy projects must achieve an SIR above 1.0. For example, for every dollar invested in the eligible energy project, the LEA must accrue over $1 in savings. The SIR calculation is based on the present value of the savings divided by project installation costs, subtracting rebates and other grant funding sources. The 2016 Program Implementation Guidelines also include a formula for estimating job creation benefits, pursuant to PRC section 26235(e)(10). The CEC also developed the Proposition 39: California Clean Energy Jobs Act – 2015 Energy Expenditure Plan Handbook (EEP Handbook), which includes step-by-step instructions to assist LEAs in completing the required forms. California Community Colleges Chancellor’s Office The California Community Colleges Chancellor’s Office (CCCCO) is the state agency that oversees the California community college system. The CCCCO is responsible for distributing Proposition 39 funding to individual CCDs. The funds may be used by CCDs for energy efficiency and alternative energy projects, along with related improvements and repairs, that contribute to reducing operating costs and improving health and safety conditions in the community college system. On May 29, 2013, the CCCCO issued the California Community Colleges Energy Project Guidance to assist CCDs with implementing projects that meet the Proposition 39 requirements. The CCCO subsequently published an addendum to the California Community Colleges Energy Project Guidance; the Proposition 39 Implementation Guidelines were issued in October 2013 and revised in January 2014, April 2015, and April 2016. For this audit period, we referred to the April 2015 version of the Proposition 39 Implementation Guidelines. We also verified that the Project Funding Application (Form B) and the CCC Proposition 39 Job Creation Tracking Report (Form J) submitted by each CCD complied with revisions contained in the April 2016 guidelines. -3- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Projects must be consistent with the State’s energy loading order, which guides the State’s energy policies and decisions according to the following priority order: 1) decreasing electricity demand by increasing energy efficiency and reducing energy usage in periods of high demand or cost, 2) meeting new energy supply needs with renewable resources, and 3) meeting new energy generation needs with clean fossil-fuel generation. CCDs have been pursuing and implementing energy efficiency and renewable energy projects for many years. The California Public Utilities Commission administers the California Community Colleges/Investor Owned Utilities Energy Efficiency Partnership, a joint program of the CCDs and California’s four investor-owned utilities. This public-private partnership has been advocating, promoting, and supporting energy efficiency in the California Community College system since 2006. The partnership has successfully reduced energy usage throughout the community college system, resulting in savings of over $12 million. Audit Authority Government Code section 12410 and PRC section 26210 provide the legal authority to conduct this audit. Government Code section 12410 states, in part, “The Controller shall superintend the fiscal concerns of the state and audit the disbursement of any state money for correctness, legality, and for sufficient provisions of law for payment.” The SCO’s interagency agreement with the Citizens Oversight Board, pursuant to PRC section 26210(d)(2), commissions the SCO to review a selection of completed projects to assess the effectiveness of the expenditures in meeting the objectives of the California Clean Energy Jobs Act. Objective, Scope, On July 21, 2020, we entered into an agreement with the Citizens Oversight Board to conduct an audit of a selection of completed projects and Methodology (80% LEA projects and 20% CCD projects) to evaluate their effectiveness in meeting the objectives of the Clean Energy Job Creation Fund’s program guidelines. We selected 16 LEAs and four CCDs for audit. To achieve our audit objective for the LEA K-12 Proposition 39 Program, we selected 16 of 313 LEAs with project costs totaling $30,994,040 and determined whether:  Planning funds were expended in accordance with program requirements and unspent planning funds were applied towards implementing eligible energy projects approved by the CEC;  The LEA submitted an EEP to the CEC consistent with the LEA’s priority of eligible projects;  The CEC approved the EEP in compliance with the 2016 Program Implementation Guidelines and EEP Handbook;  The approved EEP included: o A signed utility data release form from the LEA allowing the CEC to access both historical and future utility billing data; -4- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program o A benchmarking process established by the CEC to determine a prioritized plan for implementing the eligible energy projects; o An identification of eligible energy projects according to any one of the three methods available to LEAs (these include an energy survey; an American Society of Heating, Refrigerating and Air- Conditioning Engineering Level 2 energy audit; or data analytics); o A SIR that adheres to the cost-effectiveness determination set forth by the CEC; and o A job-creation benefits estimation that adheres to the formula set forth by the CEC.  The final report to the CEC contained the information outlined in PRC section 26240, subdivision (b), paragraphs (1) through (7);  The LEA did not use a sole-source process to award funds;  The LEA had a signed contract that identified project specifications, costs, and projected energy savings;  The LEA supported project costs;  The LEA paid back Proposition 39 funds if the project was torn down, remodeled, or deemed surplus and sold prior to the payback of the project; and  If the LEA received funds for the Bus Replacement Program, the replacement bus was present and in operation. Our audit responsibilities included verifying the existence of school buses purchased through the State’s Bus Replacement Program, pursuant to PRC section 26205.5 (a) (1). The CDE provided information to us verifying that the following LEAs received such funds during the fiscal year ended June 30, 2020: o Anaheim Elementary School District − $2,501,732; o Madera Unified School District − $1,660,045; and o Thermalito Union Elementary School District − $1,660,047. California schools were closed for the 2020-21 school year while following statewide COVID-19 protocols. As a result, we were unable to verify the existence of the school buses purchased by these three LEAs with funds allocated from the Bus Replacement Program. Errors found in the selected samples were not projected to the intended (total) population. To achieve our audit objective for the CCD Proposition 39 Program, we selected four of 31 CCDs with completed project costs totaling $8,184,571 and determined whether:  The CCD submitted a Proposition 39 Funding Application to the CCCCO, and the CCCCO approved the application consistent with its Proposition 39 Implementation Guidelines;  The CCD submitted a Call for Projects form that identified projects as energy efficiency or renewable energy generation; -5- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program  The Proposition 39 Close-out Project Completion form and the Annual Project Expenditure Report submitted to the CCCCO contained the following information: o The estimated amount of energy saved, accompanied by specific energy consumption and utility bill cost data for the individual facility where the project is located; o The nameplate rating of the new clean energy generation method installed; o The number of trainees resulting from the project; o The amount of time between awarding financial assistance and completing the project or training activities; o The entity’s energy intensity before and after project completion, as determined by an energy rating or benchmark system; and o The number of direct full-time equivalent employees created by each project and the average number of months or years of utilization of each of these employees.  The CCD did not use a sole-source process to award funds;  The CCD had a signed contract that identified project specifications, costs, and projected energy savings;  The CCD supported project costs; and  The CCD paid back the Proposition 39 Program funds if the project was torn down, remodeled, or deemed surplus and sold prior to the payback of the project. Errors found in the selected samples were not projected to the intended (total) population. We did not audit the LEAs’ and CCDs’ financial statements. We conducted this 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 objective. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objective. Conclusion As a result of conducting the audit procedures, we found instances of noncompliance with the audit objective outlined in the Objective, Scope, and Methodology section. These instances are quantified in the Schedules and described in the Findings and Recommendations section of this report. We selected 16 LEAs and four CCDs with completed projects for audit. These 20 agencies reported total completed project costs of $39,178,611 ($30,994,040 for LEAs and $8,184,571 for CCDs). Our audit found:  Six LEAs and two CCDs sole-sourced a portion of their project costs, resulting in unallowable costs of $1,411,867; -6- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program  One LEA has unspent planning funds totaling $25,355, and two LEAs have unspent implementation funds totaling $102,725;  One LEA and one CCD spent Proposition 39 funds on ineligible expenditures, resulting in unallowable costs of $40,321;  Two LEAs earned interest, totaling $37,992, on their Proposition 39 funds but did not spend it;  Eleven LEAs and three CCDs did not identify the projected energy savings in the awarded contracts, and five LEAs and two CCDs did not have signed contracts with one or more of their vendors;  Twelve LEAs submitted their final project completion reports after the deadline; and  One LEA is in violation of the energy measure payback period. We also identified an issue that is not significant to the audit objective, but warrants the attention of management. Specifically, we found that one LEA applied its unused planning funds to program implementation. However, as these funds were not included in the LEA’s approved EEP, the amount of Proposition 39 funds paid to this LEA exceeded its approved EEP by $235,475. This issue is described in the Observation and Recommendation section of this report. Follow-up on We previously conducted an audit of 17 LEAs and four CCDs. The audit scope included projects completed between July 1, 2018, and June 30, Prior Audit 2019. We issued our audit report on June 30, 2020. The report found that: Findings  Six LEAs sole-sourced a portion of their project costs, resulting in unallowable costs of $9,537,047;  Twelve LEAs and four CCDs did not identify the projected energy savings in the awarded contracts, and four LEAs did not have a signed contract;  One LEA spent Proposition 39 funds on ineligible expenditures, resulting in unallowable costs of $3,034;  Nine LEAs submitted their final project completion reports after the deadline; and  Two LEAs applied their unspent planning funds to program implementation. However, as these funds were not included in the LEAs’ approved EEPs, the amount of Proposition 39 funds paid to these LEAs exceeded their approved EEPs by $232,713. The 16 LEAs and four CCDs selected for the current audit were not previously audited under the Proposition 39 Program. However, we found that the current audit identifies the same issues noted in prior audit reports. -7- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Views of We discussed our audit results with representatives of the 16 LEAs and four CCDs selected for testing during audit fieldwork, and via email at the Responsible end of the audit. All responses to the findings have been included in the Officials LEA’s or CCD’s respective section of the Appendix; and each formal response received on letterhead has been included as an Attachment to this report. Restricted Use This report is solely for the information and use of the Citizens Oversight Board, the CDE, the CEC, the CCCCO, Allan Hancock Joint Community College District, Anaheim Elementary School District, Antelope Valley Union High School District, Children of Promise Preparatory Academy, Coast Unified School District, Community Collaborative Charter School, Cotati–Rohnert Park Unified School District, Desert Sands Unified School District, Foothill–De Anza Community College District, Glendale Community College District, Madera Unified School District, Mattole Valley Charter School, Modesto City Elementary School District, Mountain Empire Unified School District, Romoland School District, San Francisco Community College District, San Francisco Unified School District, San Juan Unified School District, Sunnyside Union School District, Thermalito Union Elementary School District, 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, and is available on the SCO website at https://www.sco.ca.gov. Original signed by KIMBERLY TARVIN, CPA Chief, Division of Audits August 9, 2021 -8- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Schedule 1— Total Completed Proposition 39 Program Costs for Local Educational Agencies July 1, 2019, through June 30, 2020 Program Planning Amount Local Educational Agency Implementation Funds 1 Total Unallowable Reference 2, 3 Completed projects selected for audit: Anaheim Elementary $ 1,824,952 $ 293,311 $ 2,118,263 $ (76,871) Finding 1, 5, 6 Antelope Valley Union High School District 3 3 ,832,092 82,595 3 ,914,687 (16,298) Finding 1, 4, 5 Children of Promise Preparatory Academy 267,668 - 267,668 (25,846) Finding 1, 5, 7 Coast Unified 224,784 57,272 282,056 - Finding 5, 6 Community Collaborative Charter 197,200 114,500 311,700 - Finding 5, 6 Cotati–Rohnert Park Unified School District (EEP #4951, #5126) 1 ,190,735 130,000 1 ,320,735 - Finding 5, 6 Desert Sands Unified School District 6 ,521,118 - 6 ,521,118 - Finding 6 Madera Unified 4 ,790,235 292,039 5 ,082,274 (339,941) Finding 1, 5, 6 Mattole Valley Charter (#159) 168,197 26,362 194,559 (82,933) Finding 2, 6 Modesto City Elementary3 3 ,707,593 230,589 3 ,938,182 - Finding 4, 6 Mountain Empire Unified 459,915 114,629 574,544 (574,544) Finding 1, 5, 6 Romoland Elementary 839,484 42,400 881,884 - Finding 3, 6 San Francisco Unified 1 ,177,670 720,401 1 ,898,071 (32,074) Finding 1, 5 San Juan Unified School District (EEP #1895, #1897) 2 ,480,055 400,049 2 ,880,104 - Finding 5, 6 Sunnyside Union Elementary 218,192 - 218,192 (45,147) Finding 2, 5 Thermalito Union 590,003 - 590,003 - Finding 5, 6 Total, completed projects selected for audit $ 28,489,893 $ 2,504,147 $ 30,994,040 4 $ (1,193,654) Completed projects not selected for audit: ABC Unified School District $ 515,315 $ 245,671 $ 760,986 Academia Avance Charter 254,194 24,200 278,394 Academy for Academic Excellence 419,354 15,000 434,354 Alliance Collins Family College–Ready High 267,378 22,912 290,290 Alliance Dr. Olga Mohan High 72,543 24,125 96,668 Alliance Marc & Eva Stern Math and Science 238,840 23,216 262,056 Alta-Dutch Flat Union Elementary 22,352 15,745 38,097 Amador County Office of Education 209,824 53,121 262,945 Amador County Unified School District 753,213 130,000 883,213 American River Charter 202,519 50,760 253,279 Antelope Elementary 53,511 45,801 99,312 Apple Valley Unified 3,171,159 - 3 ,171,159 Aspire Lionel Wilson Academy 277,974 3 ,000 280,974 Bay Area Technology 238,707 26,334 265,041 Beardsley Elementary 538,068 69,640 607,708 Beverly Hills Unified 727,510 130,000 857,510 Big Lagoon Union Elementary 61,732 15,808 77,540 Borrego Springs Unified 272,956 5 ,600 278,556 Briggs Elementary 249,681 - 249,681 Browns Elementary 244,892 8 ,900 253,792 Buellton Union Elementary 236,273 30,000 266,273 Burbank Unified 1,176,556 86,000 1 ,262,556 Burlingame Elementary 598,361 79,624 677,985 Butte County Office of Education 206,080 51,568 257,648 Butte Valley Unified 210,167 53,406 263,573 Butteville Union Elementary 182,129 51,702 233,831 Calexico Unified 2,349,489 - 2 ,349,489 Caliber: Beta Academy 137,799 - 137,799 California Military Institute 361,874 - 361,874 California Virtual Academy @ Los Angeles 302,991 40,751 343,742 -9- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Schedule 1 (continued) Program Planning Local Educational Agency Implementation Funds 1 Total Completed projects not selected for audit (continued): Campbell Union High 282,626 83,000 365,626 Camptonville Academy 261,617 3,900 265,517 Camptonville Elementary 69,400 7 ,500 76,900 Cardiff Elementary 226,272 30,900 257,172 Castro Valley Unified (EEP #481) 1 ,873,513 70,230 1 ,943,743 Castro Valley Unified (EEP #1008) 43,653 70,230 113,883 Cayucos Elementary 241,501 13,808 255,309 Central Elementary 1 ,109,381 - 1,109,381 Central Union Elementary School District 109,559 - 109,559 Centralia Elementary 1 ,080,655 - 1,080,655 Chaffey Joint Union High School District 1,155,044 177,543 1 ,332,587 Charter Oak Unified 1 ,201,778 27,393 1 ,229,171 Chawanakee Unified 281,778 - 281,778 Chula Vista Elementary School District 1 ,279,516 - 1,279,516 Chula Vista Elementary School District – Chula Vista Learning Community Charter 153,599 - 153,599 Classical Academy 466,339 51,815 518,154 Cloverdale Unified 559,030 - 559,030 Clovis Unified 5 ,960,995 20,300 5 ,981,295 Coastal Academy 419,590 46,769 466,359 Colusa Unified 560,368 - 560,368 Community Outreach Academy 383,256 118,500 501,756 Community School for Creative Education 232,342 25,523 257,865 Competitive Edge Charter Academy 210,874 52,978 263,852 Connecting Waters Charter 37,537 - 37,537 Coronado Unified 636,727 - 636,727 Corona–Norco Unified 1 ,702,434 - 1,702,434 Cottonwood Creek Charter 203,810 50,874 254,684 Cox Academy 198,098 58,967 257,065 Creative Connections Arts Academy 264,314 15,133 279,447 Culver City Unified 1 ,510,184 130,000 1 ,640,184 Davis Joint Unified 664,543 127,429 791,972 Di Giorgio Elementary 152,100 32,033 184,133 Dinuba Unified 1 ,649,005 - 1,649,005 Douglas City Elementary 205,295 36,814 242,109 Downtown Value 271,098 - 271,098 Dunsmuir Joint Union High School District 15,000 - 15,000 e3 Civic High 214,766 - 214,766 Edison Elementary 527,054 44,514 571,568 El Dorado Union High School District – Virtual Academy at Shenandoah 75,370 - 75,370 Excellence in Justice and Education – Elementary Academy Charter 159,871 24,228 184,099 Excellence in Justice and Education – Middle Academy 148,984 21,551 170,535 El Dorado Union High 1 ,393,215 - 1,393,215 El Rancho Unified 2,182,312 107,790 2 ,290,102 El Tejon Unified 229,949 50,505 280,454 Elk Hills Elementary 139,934 45,000 184,934 Environmental Charter Middle 251,369 22,500 273,869 Etiwanda Elementary 1 ,390,710 86,801 1 ,477,511 Eureka Union 654,661 - 654,661 Fairfax Elementary 560,089 96,347 656,436 Feaster (Mae L.) Charter 167,051 - 167,051 Fillmore Unified 870,808 76,618 947,426 Franklin Elementary 247,930 11,407 259,337 -10- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Schedule 1 (continued) Program Planning Local Educational Agency Implementation Funds 1 Total Completed projects not selected for audit (continued): Fuente Nueva Charter 65,804 15,437 81,241 Fullerton Elementary 2 ,967,739 186,943 3 ,154,682 Fusion Charter 154,692 - 154,692 Futures High 264,505 8,642 273,147 Glenn County Office of Education 134,302 13,630 147,932 Golden Feather Union Elementary 168,850 17,363 186,213 Grenada Elementary School 250,000 - 250,000 Harvest Ridge Coop Charter 72,500 50,030 122,530 Hemet Unified 4 ,961,020 308,652 5 ,269,672 Heritage K-8 241,660 25,050 266,710 Heritage Peak Charter 300,925 108,979 409,904 High Tech Elementary North County 173,616 - 173,616 High Tech High North County 250,372 10,000 260,372 High Tech Middle North County 249,716 10,000 259,716 Higher Learning Academy 212,161 52,804 264,965 Highland Academy 202,235 - 202,235 Highlands Community Charter 171,157 - 171,157 Hilmar Unified 408,824 - 408,824 Holtville Unified 575,865 - 575,865 Hughson Unified 239,449 - 239,449 Ida Jew Academies 267,016 - 267,016 Inspire Charter School 30,138 - 30,138 Inspire Charter School - South 30,964 - 30,964 Ivy Academia 225,803 103,902 329,705 Janesville Union Elementary 243,425 15,974 259,399 Jefferson Elementary 33,804 - 33,804 Jefferson Union High 1 ,024,930 - 1,024,930 John B. Riebli Elementary 255,633 - 255,633 Journey 209,649 15,000 224,649 Julian Charter (EEP #2442) 48,336 76,516 124,852 Julian Charter (EEP #2464) 23,220 76,516 99,736 Julian Charter (EEP #5276) 305,280 103,069 408,349 Julian Union High 227,079 - 227,079 Jurupa Unified School District 2 ,866,610 - 2,866,610 Kashia Elementary 19,155 - 19,155 Kenwood 200,250 - 200,250 Keppel Union Elementary 680,616 - 680,616 Kerman Unified (EEP #5691) 1 ,114,936 100,220 1 ,215,156 Kerman Unified (EEP #5693) 82,953 100,220 183,173 Kernville Union Elementary 275,004 17,766 292,770 Kings County Office of Education 247,465 17,422 264,887 Kingsburg Joint Union High 426,665 105,002 531,667 La Habra City School District 400,060 1,469 401,529 La Mesa–Spring Valley (EEP #1634) 2 ,502,000 - 2,502,000 La Mesa–Spring Valley (EEP #2227) 663,148 - 663,148 Lakeside Union Elementary 26,675 54,610 81,285 Lamont Elementary 766,365 14,449 780,814 Las Virgenes Unified 748,330 30,515 778,845 Lassen Union High 213,316 53,046 266,362 Laytonville Unified 270,142 - 270,142 Lazear Charter Academy 172,688 54,435 227,123 Lemoore Middle College High 254,724 - 254,724 Lemoore Union Elementary 724,322 - 724,322 Leroy Greene Academy 213,136 51,913 265,049 Liberty Elementary 242,897 22,404 265,301 -11- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Schedule 1 (continued) Program Planning Local Educational Agency Implementation Funds 1 Total Completed projects not selected for audit (continued): Liberty Union High 1,676,113 29,640 1 ,705,753 Lincoln Street 43,142 - 43,142 Lindsay Unified 582,408 47,315 629,723 Literacy First Charter 265,823 2 ,000 267,823 Live Oak Elementary 576,660 - 576,660 Livermore Valley Joint Unified School District 1 ,067,942 159,280 1 ,227,222 Loma Vista Immersion Academy 206,794 - 206,794 Long Valley Charter 182,793 - 182,793 Los Alamitos Unified 649,435 101,500 750,935 Los Banos Unified 2 ,403,936 143,945 2 ,547,881 Los Feliz Charter School for the Arts 236,934 26,327 263,261 Los Olivos Elementary 200,702 50,206 250,908 Lost Hills Union Elementary 285,625 - 285,625 Lucerne Valley Unified 292,354 - 292,354 Madera County Office of Education 136,717 22,469 159,186 Maricopa Unified 265,435 5 ,000 270,435 Mark West Charter 82,761 5 ,000 87,761 Mark West Union Elementary 238,895 25,642 264,537 McCloud Union Elementary 69,500 9 ,000 78,500 Mendocino County Office of Education 123,009 30,000 153,009 Merced City Elementary 2 ,554,393 144,172 2 ,698,565 Mesa Union Elementary 241,496 15,000 256,496 Mill Valley Elementary 444,140 - 444,140 Minarets Charter High 254,974 - 254,974 Miwok Valley Language Academy Charter 205,650 55,355 261,005 Modesto City High 3 ,478,316 - 3,478,316 Modoc Joint Unified School District 106,651 - 106,651 Monte Rio Union Elementary 79,097 - 79,097 Moreno Valley Unified School District 3 ,168,481 154,000 3 ,322,481 Morongo Unified 1 ,153,768 - 1,153,768 Mount Pleasant Elementary 600,247 - 600,247 Napa County Office of Education 257,130 - 257,130 Napa Valley Language Academy 184,675 26,065 210,740 Nevada County Office of Education 252,803 - 252,803 New Designs Charter 272,111 29,764 301,875 New Hope Elementary 210,147 53,000 263,147 Newcastle Charter 252,930 - 252,930 Newcastle Elementary School District 252,546 - 252,546 NextGeneration STEAM Academy 87,764 16,036 103,800 Novato Charter School 110,415 - 110,415 Oakland Charter Academy 229,724 26,242 255,966 Oakland Military Institute, College Preparatory Academy 219,125 20,975 240,100 Oakley Union Elementary School District 1 ,136,222 - 1,136,222 Orange County School of Arts 516,492 - 516,492 Ojai Unified 592,810 - 592,810 Old Adobe Elementary Charter 256,375 - 256,375 Old Adobe Union 197,750 53,802 251,552 Old Town Academy K-8 Charter 201,299 50,491 251,790 Orchard View 145,060 50,158 195,218 Orland Joint Unified 550,494 - 550,494 Oroville Union High 483,023 64,485 547,508 Oxford Preparatory Academy–South Orange County 230,653 25,654 256,307 Pacific View Charter 268,984 - 268,984 Pajaro Valley Unified 1 ,874,426 - 1,874,426 Palmdale Elementary School District 267,905 215,000 482,905 -12- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Schedule 1 (continued) Program Planning Local Educational Agency Implementation Funds 1 Total Completed projects not selected for audit (continued): Panama–Buena Vista Union 604,080 124,191 728,271 Pathways Charter 173,976 43,650 217,626 Patterson Joint Unified 1 ,336,732 75,000 1 ,411,732 Peninsula Union 61,816 15,459 77,275 Petaluma Accelerated Charter 30,439 - 30,439 Pioneer Union Elementary 79,827 - 79,827 Pixley Union Elementary 548,978 28,341 577,319 Placer County Office of Education 232,359 24,052 256,411 Pleasant Valley Joint Union Elementary 162,275 26,054 188,329 Princeton Joint Unified 258,758 - 258,758 PUC Santa Rosa Charter Academy 32,965 26,450 59,415 Raisin City Elementary 248,869 24,645 273,514 Ramona City Unified 1 ,260,328 17,651 1 ,277,979 Redwood Academy of Ukiah 115,080 51,100 166,180 Richfield Elementary School District (EEP #85) 101,046 50,523 151,569 Richfield Elementary School District (EEP #5367) 105,758 50,523 156,281 River Delta Joint Unified 533,710 34,904 568,614 River Montessori Elementary Charter 219,906 32,354 252,260 River Oak Charter 111,787 51,883 163,670 Riverbank Language Academy 205,502 55,513 261,015 Riverbank Unified 538,386 42,315 580,701 Riverdale Joint Unified 556,855 41,790 598,645 Riverside Unified School District 1 ,458,325 - 1,458,325 Robla Elementary 568,675 - 568,675 Rocketship Discovery Prep 47,832 22,989 70,821 Rocketship Los Suenos Academy 107,117 3,000 110,117 Rocketship Mateo Sheedy Elementary 108,056 3,000 111,056 Rocketship Mosaic Elementary 47,070 22,988 70,058 Rocketship Si Se Puede Academy 86,113 3 ,000 89,113 Rocky Point Charter 245,504 - 245,504 Rowland Unified 3 ,566,146 523 3,566,669 Saddleback Valley Unified School District 938,474 354,087 1 ,292,561 Saint Helena Unified 425,000 70,548 495,548 San Bruno Park Elementary 542,327 68,134 610,461 San Dieguito Union High 1 ,238,876 145,004 1 ,383,880 San Jacinto Unified School District 1 ,176,797 136,615 1 ,313,412 San Lorenzo Unified (EEP #690) 2 ,278,595 135,000 2 ,413,595 San Lorenzo Unified (EEP #2620) 324,530 135,000 459,530 San Lucas Union Elementary 78,960 404 79,364 San Luis Coastal Unified School District 394,252 130,000 524,252 San Luis Obispo County Office of Education (EEP #1679) 231,062 21,047 252,109 San Luis Obispo County Office of Education (EEP #2588) 7 ,894 21,048 28,942 San Miguel Elementary 232,735 25,642 258,377 Sanger Academy Charter 281,532 - 281,532 Sanger Unified School District 2 ,329,544 138,419 2 ,467,963 Santa Clara Elementary 65,448 10,000 75,448 Santa Cruz City Elementary 600,396 - 600,396 Sausalito Marin City School District 225,608 33,402 259,010 SAVA: Sacramento Academic and Vocational Academy 201,882 59,500 261,382 Scotts Valley Unified 154,916 - 154,916 Sherman Thomas Charter High 64,503 12,000 76,503 Sherman Thomas Charter School 135,808 22,000 157,808 Sherwood Montessori 206,788 - 206,788 Shiloh Charter 67,917 10,063 77,980 Shiloh Elementary 24,636 3 ,600 28,236 -13- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Schedule 1 (continued) Program Planning Local Educational Agency Implementation Funds 1 Total Completed projects not selected for audit (continued): Sierra Charter 218,724 53,420 272,144 Sierra Sands Unified 1 ,117,243 29,900 1 ,147,143 Silver Oak High Public Montessori Charter 73,105 3 ,750 76,855 Simi Valley Unified 1 ,746,135 20,000 1 ,766,135 Smythe Academy of Arts and Sciences 456,715 113,755 570,470 Snowline Joint Unified School District 1 ,442,806 130,000 1 ,572,806 Solana Beach Elementary 598,908 35,500 634,408 Somis Union 262,170 - 262,170 Sonoma Mountain Elementary 255,892 - 255,892 Soquel Union Elementary 393,251 - 393,251 South Fork Union 247,544 15,662 263,206 Southern Trinity Joint Unified School District 73,100 - 73,100 Spencer Valley Elementary 67,482 5 ,875 73,357 Sunridge Charter School 150,060 50,269 200,329 Sutter County Office of Education 256,947 13,822 270,769 Taylion High Desert Academy/Adelanto 100,071 - 100,071 Taylion San Diego Academy 59,578 - 59,578 Tehama County Office of Education 137,991 9,500 147,491 Temecula Preparatory 298,228 - 298,228 Temecula Valley Charter School 118,606 - 118,606 Temecula Valley Unified School District (EEP #669) 4 ,030,524 - 4,030,524 Temecula Valley Unified School District (EEP #2256) 1,439,247 - 1,439,247 Tierra Pacifica Charter 144,056 - 144,056 Tracy Joint Unified (EEP #5647) 2 ,571,013 - 2,571,013 Tracy Joint Unified (EEP #5648) 899,155 - 899,155 Travis Unified 1 ,190,057 6 ,500 1 ,196,557 Trona Joint Unified 264,408 - 264,408 Tustin Unified School District 107,737 - 107,737 Twain Harte 254,236 7 ,853 262,089 Twin Hills Charter Middle School 152,430 50,935 203,365 Twin Hills Union Elementary 154,120 51,648 205,768 Twin Ridges Elementary 25,906 4 ,720 30,626 Twin Rivers Charter 266,677 - 266,677 Two Rock Union 206,869 47,500 254,369 Ukiah Unified School District (EEP #2417) 1 ,133,153 43,359 1 ,176,512 Ukiah Unified School District (EEP #2421) 241,018 43,359 284,377 University Preparatory Academy Charter 254,012 - 254,012 Urban Corps of San Diego County Charter 250,000 - 250,000 Urban Discovery Academy Charter 256,376 - 256,376 Urban Montessori Charter 181,486 25,709 207,195 Vacaville Unified 83,563 85,898 169,461 Ventura Unified 1 ,601,709 166,865 1 ,768,574 Victor Elementary 2 ,879,234 127,145 3 ,006,379 Vineland Elementary 304,508 - 304,508 Visalia Unified (EEP #2301) 100,000 - 100,000 Visalia Unified (EEP #5032) 367,650 379,039 746,689 Wasco Union High 570,476 28,125 598,601 Washington Middle College High 218,918 - 218,918 Weaver Union 438,448 95,351 533,799 West Covina Unified School District 251,283 136,277 387,560 Western Center Academy 122,184 6 ,500 128,684 Western Placer Unified 1 ,427,559 47,976 1 ,475,535 Westminster 2 ,381,332 - 2,381,332 Westside Preparatory Charter 215,497 54,128 269,625 Willits Elementary Charter 218,732 2 ,500 221,232 -14- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Schedule 1 (continued) Program Planning Local Educational Agency Implementation Funds 1 Total Completed projects not selected for audit (continued): Woodlake Unified 285,677 21,000 306,677 Woodward Leadership Academy 82,772 - 82,772 Yreka Union Elementary 297,727 1,272 298,999 Yuba County Career Preparatory Charter 247,059 17,632 264,691 Yuba County Office of Education 209,221 52,852 262,073 Total, completed projects not selected for audit 171,797,027 11,046,292 182,843,319 Total completed projects $ 200,286,920 $ 13,550,439 $ 213,837,359 _________________________ 1 The planning funds are requested directly from CDE before an EEP is submitted. 2 See the Findings and Recommendations section. 3 The following districts earned interest on Proposition 39 allocations but did not spend it: Antelope Valley Union High School District ($15,829) and Modesto City Elementary School District ($22,163). The unspent earned interest is not included in the Amount Unallowable column, as it was not part of the overall EEP total. See Finding 4 – Unspent earned interest. 4 We tested 100% of the costs reported, totaling 30,994,040, for the 16 LEAs selected for audit. -15- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Schedule 2— Total Completed Proposition 39 Program Costs for Community College Districts July 1, 2018, through June 30, 2019 Program Amount Community College District Implementation Unallowable Reference 1 Completed projects selected for audit: Allan Hancock Joint Community College District $ 1,061,036 $ ( 126,552) Finding 1, 3, 5 Foothill–De Anza Community College District 2 ,726,499 (219,741) Finding 1, 5 Glendale Community College District 1 ,913,134 - Finding 5 San Francisco Community College District 2 ,483,902 - Finding 5 Total, completed projects selected for audit $ 8,184,571 2 $ ( 346,293) Completed projects not selected for audit: Antelope Valley Community College District $ 929,063 Compton Community College District 397,311 Copper Mountain Community College District 97,928 El Camino Community College District 437,754 Feather River Community College District 26,763 Gavilan Joint Community College District 148,082 Imperial Community College District 252,607 Lassen Community College District 271,822 Long Beach Community College District 2 ,167,096 Los Angeles Community College District 12,367,389 Los Rios Community College District 1 ,478,202 Merced Community College District 576,807 Mt. San Jacinto Community College District 691,421 Napa Valley Community College District 441,699 North Orange County Community College District 323,791 Pasadena Area Community College District 1 ,202,000 Rancho Santiago Community College District 370,781 Redwoods Community College District 254,213 Rio Hondo Community College District 1 ,172,061 Riverside Community College District 1 ,362,786 San Bernardino Community College District 471,464 San Joaquin Delta Community College District 882,818 Santa Clarita Community College District 501,448 Santa Monica Community College District 276,830 Solano Community College District 552,010 Sonoma County Junior College District 357,497 West Kern Community College District 207,437 Total, completed projects not selected for audit $ 28,219,080 Total completed projects $ 36,403,651 ______________________ 1 See the Findings and Recommendations section. 2 We tested 100% of the costs reported, totaling $8,184,571, for the four CCDs selected for audit. -16- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Findings and Recommendations FINDING 1— We found that six LEAs and two CCDs sole-sourced a portion of their project costs, totaling $1,411,867, as follows: Sole-sourced project costs Local Educational Agency/ Contract Community College District Amount Anaheim Elementary School District $ 76,871 Antelope Valley Union High School District 1 6,298 Children of Promise Preparatory Academy 2 5,846 Madera Unified School District 339,941 Mountain Empire Unified School District 574,544 San Francisco Unified School District 3 2,074 Subtotal, Local Educational Agencies 1,065,574 Allan Hancock Joint Community College District1 126,552 Foothill–De Anza Community College District 219,741 Subtotal, Community College Districts 346,293 Total $ 1 ,411,867 1 We found that of the $126,552 that Allan Hancock Joint Community College District expended on sole-sourced contracts; $34,513 was also applied to ineligible expenditures (see Finding 3). These six LEAs and two CCDs did not provide supporting documentation to show that they considered other vendors before awarding contracts. PRC section 26235(c) states, in part, “A community college district or LEA shall not use a sole source process to award funds pursuant to this chapter.” PRC section 26240(h) states: The Superintendent of Public Instruction shall require local educational agencies to pay back funds if they are not used in accordance with state statute or regulations…The Chancellor of the California Community Colleges shall require a community college to pay back funds if they are not used in accordance with state statute or regulations… PUC section 388(b) states: The Department of General Services or any other state or local agency intending to enter into an energy savings contract or a contract for an energy retrofit project may establish a pool of qualified energy service companies based on qualifications, experience, pricing, or other pertinent factors. Energy service contracts for individual projects undertaken by any state or local agency may be awarded through a competitive selection process to individuals or firms identified in the pool. The pool of qualified energy service companies and contractors shall be reestablished at least every two years or shall expire. -17- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program The CCCCO’s Proposition 39 Implementation Guidelines (“Step 9. Fully Develop Project Workscope, Schedule and Contracts for Project Implementation,” page 21) states, in part: Districts shall not use a sole-source process to award grant proceeds. Districts may use the best-value criteria as defined in paragraph (1) of subdivision (c) of Section 20133 of the Public Contract Code to award funds. Best value is defined as “a value determined by objective criteria related to price, features, functions, and life-cycle costs.” Exhibit N (Contracting “Best Practices” Fact Sheet) of the CCCCO’s Proposition 39 Implementation Guidelines states, in part: To fully comply with that “Best Value” criteria and the prohibition against sole source contracting when utilizing [its] Prop 39 funds, a District will need to engage in a two-step process that accomplishes the following: 1. Request for Qualification (RFQ): Pre-qualifies energy project contractors based on several criteria including energy project history, team member qualifications, firm financial viability, and experience working with Community Colleges, AND 2. Request for Proposals (RFP): Identifies and evaluates the specific project workscope, schedule, and other requirements where multiple contractors (at least two, three would be better) submit proposals for District evaluation and consideration. Typically, the RFP should include the following elements and respondent submittal requirements:  Proposed workscope  Request price and life-cycle economics  Technical proposal and identification of specific equipment to be installed  Energy savings  Project approach  Schedule  Exceptions Exhibit N continues: A comprehensive RFQ/RFP evaluation process should always be used when implementing Proposition 39 funded projects. This process can either be combined into a single solicitation, or can use a two-step, separate RFQ & RFP process. We have interpreted the PRC section 26235(c) prohibition against “[using] a sole source process to award funds” as a requirement to use a competitive bidding process. Competitive processes improve cost-effectiveness, prevent favoritism, and make the procurement process transparent. These LEAs and CCDs contracted with various vendors for their Proposition 39 Program energy upgrade projects. Despite the implementation guidance and best practices, the LEAs and CCDs used noncompetitive processes to sign contracts with these vendors and, thus, did not ensure the cost effectiveness of these services. -18- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Recommendation We recommend that:  The CDE take appropriate action to recover Proposition 39 funds from LEAs that sole-sourced their project costs in violation of PRC section 26235(c); and  The CCCCO take appropriate action to recover Proposition 39 funds from CCDs that sole-sourced their project costs in violation of PRC section 26235(c). No additional recommendation for LEAs and CCDs is applicable to this finding, as the Proposition 39 Program has ended. LEAs’ and CCDs’ Responses We notified the six LEAs and two CCDs of this finding during audit fieldwork and at the end of the audit via email. Findings and Recommendations for individual LEAs and CCDs are included in the Appendix. All responses to the findings have been included in the LEA’s and CCD’s respective section of the Appendix; and each formal response received on letterhead has been included as an Attachment to this report. FINDING 2— We found that one LEA has unspent planning funds of $25,355, and two LEAs have unspent program implementation funds totaling $102,725. Unspent funds These LEAs spent less on their projects than they had budgeted. The following table summarizes this finding: Unspent planning funds: Mattole Valley Charter School $ 25,355 Subtotal, unspent planning funds 25,355 Unspent program implementation funds: Mattole Valley Charter School 57,578 Sunnyside Union Elementary School District 45,147 Subtotal, unspent program implementation funds 102,725 Total unspent funds $ 128,080 The CEC’s 2016 Program Implementation Guidelines state on page 5: The SSPI [State Superintendent of Public Instruction] is responsible for administering awards to LEAs that serve grade K-12 students. These funds may be used by LEAs for energy efficiency and clean energy projects, related energy planning, energy training, energy management, and energy projects with related non-energy benefits. LEAs are required to submit an energy expenditure plan to the Energy Commission for consideration and approval. Funds are released to the LEA only after the Commission approves an LEA’s energy expenditure plan(s). -19- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program PRC section 26240(b) states: As a condition of receiving funds from the Job Creation Fund…the entity shall submit a report of its project expenditures to the Citizens Oversight Board.... PRC section 26240(h)(1) states: The Superintendent of Public Instruction shall require local educational agencies to pay back funds if they are not used in accordance with state statute or regulations… Recommendation We recommend that the districts return the unspent funds to the State. Although the Proposition 39 program has ended, the unspent funds must be returned. LEAs’ Responses We notified the LEAs of this finding during audit fieldwork and at the end of the audit via email. Findings and Recommendations for individual LEAs are included in the Appendix. All responses to the findings have been included in the LEA’s respective section of the Appendix; and each formal response received on letterhead has been included as an Attachment to this report. CDE’s Response We notified CDE of the unspent funds for the LEAs. CDE advised that it will issue invoices to these districts in order to recover the unspent funds and return them to the Job Creation Fund. FINDING 3— We found that one LEA and one CCD applied Proposition 39 funds to Ineligible project costs not approved by the CCCCO, resulting in ineligible expenditures of $40,321. expenditures Local Educational Agency/ Community College District Amount Romoland Elementary School District $ 5 ,808 Subtotal, Local Educational Agencies 5,808 Allan Hancock Joint Community College District 3 4,513 Subtotal, Community College Districts 3 4,513 Total $ 40,321 -20- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program PRC section 26235(f) states: The Superintendent of Public Instruction shall not distribute funds to an LEA unless the LEA has submitted to the Energy Commission, and the Energy Commission has approved, an expenditure plan that outlines the energy projects to be funded. An LEA shall utilize a simple form expenditure plan developed by the Energy Commission. The Energy Commission shall promptly review the plan.…A portion of the funds may be distributed to an LEA upon request for energy audits and other plan development activities prior to submission of the plan. The CEC’s 2016 Program Implementation Guidelines (“Energy Planning Funds Reservation Option,” page 10) state: LEAs whose first year of eligibility was fiscal year 2013-14, the first year of the program, had the option of requesting a portion of that year’s award allocation for energy planning activities in 2013-14 without submitting an energy expenditure plan(s) to the Energy Commission. This option was available only for the fiscal year 2013-14 award allocation and was intended to be used for planning activities for subsequent fiscal years (2013-14 through 2017-18)…. The CCCCO’s Proposition 39 Implementation Guidelines (“Step 10. Energy Project Implementation,” page 22) states: Districts will be responsible for the implementation of projects funded by Proposition 39. If, after approval and during implementation of a project, the scope changes such that the energy savings, construction costs, or cost-effectiveness are significantly affected, the Chancellor’s Office will require that Districts provide a revised Project Application (Form B) documenting the change of scope…. Step 10 of the CCCCO’s Proposition 39 Implementation Guidelines also includes “adding a project not included in the approved Funding Application” in the list of significant changes. Recommendation We recommend that:  The CDE take appropriate action to recover Proposition 39 funds from LEAs whose project costs are not in compliance with the 2016 Program Implementation Guidelines; and  The CCCCO take appropriate action to recover Proposition 39 funds from CCDs whose project costs are not in compliance with the Proposition 39 Implementation Guidelines. LEA’s and CCD’s Responses We notified the LEA and the CCD of this finding during audit fieldwork and at the end of the audit via email. Findings and Recommendations for individual LEAs and CCDs are included in the Appendix. All responses to the findings have been included in the LEA’s respective section of the Appendix; and each formal response received on letterhead has been included as an Attachment to this report. -21- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program FINDING 4— We found that two LEAs earned interest, totaling $37,992, on their Unspent earned Proposition 39 allocations but did not spend it. These LEAs completed all of their energy projects, and applied all of their awarded Proposition 39 interest funds to all projects within their approved EEPs. As the Proposition 39 program has ended and there are no remaining eligible energy projects on which the LEAs can expend the earned interest, it should be returned to the Clean Energy Job Creation Fund, as shown in the table below: Unspent earned interest: Antelope Valley Union High School District $ 1 5,829 Modesto City Elementary School District 22,163 Total unspent earned interest $ 3 7,992 The CEC’s 2016 Program Implementation Guidelines (“Interest Earned on Proposition 39 Funds,” page 10) state: Any interest earned on Proposition 39 funds shall be expended only toward Proposition 39 eligible energy projects. LEAs should make every effort to track interest earned from Proposition 39 allocations separately for use on Proposition 39 eligible energy projects and to facilitate auditing in accordance with PRC 26206(e) and 26240(h)(1). PRC section 26206(e) states, “All projects shall be subject to audit.” PRC section 26240(h)(1) states, “The Superintendent of Public Instruction shall require local educational agencies to pay back funds if they are not used in accordance with state statute or regulations…” Recommendation We recommend that the districts return the unspent earned interest to the State. Although the Proposition 39 program has ended, the unspent funds must be returned. LEAs’ Responses We notified the two LEAs of this finding during audit fieldwork and at the end of the audit via email. Findings and Recommendations for individual LEAs are included in the Appendix. All responses to the findings have been included in the LEA’s respective section of the Appendix; and each formal response received on letterhead has been included as an Attachment to this report. CDE’s Response We notified CDE of the unspent interest earned by the two LEAs. Prior to issuance of this report, CDE emailed instructions to the LEAs on how they can return the unspent earned interest to CDE. CDE will follow up with the LEAs to assist with this recovery. -22- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program FINDING 5— We found that 11 LEAs and three CCDs did not identify projected energy No projected energy savings in the awarded contracts as required. In addition, five LEAs and two CCDs did not have signed contracts. The table below summarizes this savings identified finding: and/or no signed contract Projected Energy Savings Not No Signed Identified Contract Local Educational Agency Anaheim Elementary School District1 X X Antelope Valley Union High School District2 X X Children of Promise Preparatory Academy3 X Coast Unified School District4 X Community Collaborative Charter X Cotati–Rohnert Park Unified School District X Madera Unified School District X Mountain Empire Unified School District X X San Francisco Unified School District5 X San Juan Unified School District (EEP #1895 and EEP #1897) X X Sunnyside Union Elementary School District6 X Thermalito Union Elementary School District X Community College District Allan Hancock Joint Community College District X Foothill–De Anza Community College District7 X X Glendale Community College District8 X San Francisco Community College District X 1 We found that Anaheim Elementary School District did not have signed contracts for six vendors. In addition, we found that two of the awarded contracts did not identify the projected energy savings as required. 2 We found that Antelope Valley Union High School District did not have signed contracts for two vendors. 3 We found that two of Children of Promise Preparatory Academy's awarded contracts did not identify the projected energy savings as required. 4 We found that two of Coast Unified School District's awarded contracts did not identify the projected energy savings as required. 5 We found that two of San Francisco Unified School District's awarded contracts did not identify the projected energy savings as required. 6 We found that two of Sunnyside Union Elementary School District's awarded contracts did not identify the projected energy savings as required. 7 We found that four of Foothill–De Anza Community College District's awarded contracts did not identify the projected energy savings as required. 8 We found that three of Glendale Community College District's awarded contracts did not identify the projected energy savings as required. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” The CCCCO’s Proposition 39 Implementation Guidelines (“Step 9. Fully Develop Project Workscope, Schedule and Contracts for Project Implementation,” page 21) states, “Projects funded by awards shall require contracts that identify the project specifications, costs, and projected energy savings.” This finding does not result in questioned costs; however, ensuring that contracts are signed and include projected energy savings helps to ensure that program objectives are achieved. -23- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Recommendation No recommendation for LEAs and CCDs is applicable to this finding, as the Proposition 39 program has ended and the finding does not identify any questioned costs. LEAs’ and CCDs’ Responses We notified the affected LEAs and CCDs of this finding during audit fieldwork and at the end of the audit via email. Findings and Recommendations for individual LEAs and CCDs are included in the Appendix. All responses to the finding have been included in the LEA or CCD’s respective section of the Appendix; and each formal response received on letterhead has been included as an Attachment to this report. FINDING 6— We found that 12 LEAs submitted their final project completion reports Final project after the deadline. Each LEA is required to submit a final project completion report to the CEC 12 to 15 months after its EEP is completed. completion report An EEP is considered complete when the LEA has completed all measures submitted late in the approved EEP. The following table identifies the number of months the final report was submitted after the project was completed: Local Educational Agency Months Anaheim Elementary School District 37 Coast Unified School District 31 Community Collaborative Charter School 23 Cotati–Rohnert Park Unified School District: EEP #4951 61 EEP #5126 16 Desert Sands Unified School District 52 Madera Unified School District 22 Mattole Valley Charter School 21 Modesto City Elementary School District 16 Mountain Empire Unified School District 23 Romoland Elementary School District 17 San Juan Unified School District (EEP #1895) 23 Thermalito Union Elementary School District 19 PRC section 26240(b) states: As a condition of receiving funds from the Job Creation Fund…not sooner than one year but no later than 15 months after an entity completes its first eligible project with a grant, loan, or other assistance from the Job Creation Fund…the entity shall submit a report of its project expenditures to the Citizens Oversight Board…To the extent practical, this report shall also contain information on any of the following: (1) The total final gross project cost before deducting any incentives or other grants and the percentage of total project cost derived from the Job Creation Fund... -24- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program (2) The estimated amount of energy saved, accompanied by specified energy consumption and utility bill cost data for the individual facility where the project is located, in a format to be specified by the Energy Commission. (3) The nameplate rating of new clean energy generation installed. (4) The number of trainees. (5) The number of direct full-time equivalent employees and the average number of months or years of utilization of each of these employees. (6) The amount of time between awarding of the financial assistance and the completion of the project or training activities. (7) The entity’s energy intensity before and after project completion, as determined from an energy rating or benchmark system… LEAs should submit timely final reports to the CEC to allow the CEC to respond promptly to changing situations and maintain effective program oversight. Information contained in the final reports is compiled into a report that the CEC submits annually to the Citizens Oversight Board. Recommendation No recommendation for LEAs is applicable to this finding, as the Proposition 39 program has ended and the finding does not identify any questioned costs. LEAs’ Responses We notified the 12 LEAs of this finding during audit fieldwork and at the end of the audit via email. Findings and Recommendations for individual LEAs are included in the Appendix. All responses to the finding have been included in the LEA’s respective section of the Appendix; and each formal response received on letterhead has been included as an Attachment to this report. FINDING 7— We found that one LEA is in violation of the energy measure payback Violation of energy period. measure payback Children of Promise Preparatory Academy closed on June 30, 2020, after period Inglewood Unified School District denied the school’s charter petition. As a result, the school ceased operations. A court-appointed receiver has been designated to oversee disposal of the charter school’s assets. The facility is currently vacant and for sale as a charter school site; however, until this facility is sold to an entity that will continue using the facility as a school site, the LEA is in violation of the energy measure payback period. Per the CEC’s 2016 Program Implementation Guidelines (“Step 8: Energy Project Tracking and Reporting,” page 33), “LEAs must not sell or demolish the approved energy measure installed with Proposition 39 program award funding prior to the payback of the energy measure.” -25- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Recommendation We recommend that the CEC monitor the sale of Children of Promise Preparatory Academy facilities to ensure that they continue being used as school sites. LEA’s Response We notified the LEA of this finding during audit fieldwork and at the end of the audit via email. The Finding and Recommendation for this LEA, in addition to a summary of the LEA’s response, is included in the Appendix. The school’s formal response, received on letterhead, has been included as an Attachment to this report. -26- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Observation and Recommendation We found that one LEA applied its unused planning funds to program OBSERVATION— implementation. However, as these funds were not included in the LEA’s Unused planning approved EEP, the amount of Proposition 39 funds paid to the LEA funds exceeded its approved EEP by $235,475, as follows: A B C = B−A Program Planning Total Total Unused Local Educational Agency Implementation Funds EEP Approved CDE Apportionment Planning Funds Antelope Valley Union High School District $ 5,017,378 $ 107,595 $ 5 ,124,973 $ 5,360,448 $ 2 35,475 We reviewed Antelope Valley Union High School District’s accounting ledgers and found that the district received funds in excess of the total amounts indicated in the EEPs approved by the CEC. LEAs had the option of requesting planning funds for energy planning activities in FY 2013-14 without submitting an EEP to CEC. The funds were intended to be used for planning activities for FY 2013-14 through FY 2017-18. Any unused planning funds can be applied toward implementing energy projects that are part of an approved EEP. The district opted to use only a portion of its planning funds, and did not apply the remaining funds toward program implementation. Therefore, the district has unused planning funds of $235,475. PRC section 26235(f) states: The Superintendent of Public Instruction shall not distribute funds to an LEA unless the LEA has submitted to the Energy Commission, and the Energy Commission has approved, an expenditure plan that outlines the energy projects to be funded. An LEA shall utilize a simple form expenditure plan developed by the Energy Commission. The Energy Commission shall promptly review the plan.…A portion of the funds may be distributed to an LEA upon request for energy audits and other plan development activities prior to submission of the plan. The CEC’s 2016 Program Implementation Guidelines (“Energy Planning Funds Reservation Option,” page 10) state: LEAs whose first year of eligibility was fiscal year 2013-14, the first year of the program, had the option of requesting a portion of that year’s award allocation for energy planning activities in 2013-14 without submitting an energy expenditure plan(s) to the Energy Commission. This option was available only for the fiscal year 2013-14 award allocation and was intended to be used for planning activities for subsequent fiscal years (2013-14 through 2017-18)…. The CEC’s 2016 Program Implementation Guidelines (“Unused Energy Planning Awards,” page 13) also state that “Any unused energy planning funds shall be applied toward implementing eligible energy project(s) approved as part of an LEA’s energy expenditure plan(s).” -27- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Recommendation We recommend that:  CDE take appropriate action in response to the LEA’s unused planning funds; and  CDE and CEC account for unused planning funds that were applied to program implementation without being included in an approved EEP. CDE’s Response We notified CDE of the Observation via email on June 14, 2021. The CDE responded by email on June 14, 2021, stating that it will contact the LEA about the unused planning funds. -28- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Appendix— Audit Results by Local Educational Agency and Community College District Local Educational Agencies Anaheim Elementary School District .............................................................................................. A2 Antelope Valley Union High School District .................................................................................. A5 Children of Promise Preparatory Academy ..................................................................................... A14 Coast Unified School District .......................................................................................................... A17 Community Collaborative Charter School ....................................................................................... A19 Cotati–Rohnert Park Unified School District .................................................................................. A21 Desert Sands Unified School District .............................................................................................. A23 Madera Unified School District ....................................................................................................... A25 Mattole Valley Charter School ........................................................................................................ A30 Modesto City Elementary School District ....................................................................................... A32 Mountain Empire Unified School District ....................................................................................... A35 Romoland School District ................................................................................................................ A37 San Francisco Unified School District ............................................................................................. A40 San Juan Unified School District ..................................................................................................... A42 Sunnyside Union School District ..................................................................................................... A44 Thermalito Union Elementary School District ................................................................................ A46 Community College Districts Allan Hancock Joint Community College District .......................................................................... A48 Foothill–De Anza Community College District .............................................................................. A52 Glendale Community College District ............................................................................................. A57 San Francisco Community College District .................................................................................... A60 -A1- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Anaheim Elementary School District Proposition 39 Program Background The California Energy Commission (CEC) approved Anaheim Elementary School District’s energy expenditure plan (EEP) for $1,824,952, consisting of $373,000 for energy management services and $1,451,952 for program implementation. The district used its program implementation funds for the following energy efficiency measures: Proposition 39 Reported Share Used Energy Annual Cost School Site at School Site Efficiency Measures* Savings District Office $ 51,236 Interior/exterior lighting retrofit $ 16,644 Guinn (James M.) Elementary 15,509 Interior lighting retrofit 7,690 Henry (Patrick) Elementary 6 ,949 HVAC−Packaged/split system AC/Heat Pump/VRF 433 Jefferson (Thomas) Elementary 7 ,604 HVAC−Packaged/split system AC/Heat Pump/VRF 1,168 Juarez (Benito) Elementary 113,100 Building envelope−insulation; interior lighting retrofit 7,338 Keys preschool and training facility 13,328 Interior lighting retrofit 7,415 Marshall (John) Elementary 9 ,000 HVAC Controls−Energy management system - Olive Street Elementary 32,205 HVAC−Packaged/split system AC/Heat Pump/VRF 2,116 Orange Grove Elementary 2 ,896 HVAC−Packages/split system AC/Heat Pump/VRF 621 Revere (Paul) Elementary 4 ,480 Building envelope−insulation 4,125 Ross (Betsy) Elementary 4 ,021 HVAC-Packaged/split system AC/Heat Pump/VRF 643 Interior lighting retrofit; building envelope−windows/ Stoddard (Alexander J.) Elementary 1 ,167,910 1 4,947 skylights; HVAC−Packaged/split system AC/Heat Pump/VRF Sunkist Elementary 23,714 HVAC−Packaged/split system AC/Heat Pump/VRF 3,155 Total $ 1,451,952 $ 66,295 *HVAC: heating, ventilation, and air conditioning; AC: air conditioning; VRF: variable refrigerant flow With these energy efficiency measures, the district reported a combined savings-to-investment ratio (SIR) of 1.01 and the creation of 8.13 direct job-years. In addition, the district received $293,311 in planning funds directly from the California Department of Education (CDE), which it used for screening and audits. Audit Results We audited Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CEC’s 2016 Program Implementation Guidelines and EEP Handbook. We identified the following audit issues. Sole-sourced project costs We found that the district sole-sourced its contracts with Global Lighting Organization ($28,837), Geary Pacific Supply ($6,949), US Air Conditioning Distributors ($24,044), Johnson Controls ($9,000), and Johnstone Supply ($8,041). The district did not provide supporting documentation to show that it considered other vendors before awarding contracts to these five vendors. Therefore, we found that the district sole- sourced these Proposition 39 contracts, totaling $76,871. -A2- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Public Resources Code (PRC) section 26235(c) states, in part, “A community college district or LEA [local educational agency] shall not use a sole source process to award funds pursuant to this chapter.” PRC section 26240(h)(1) states, “The Superintendent of Public Instruction shall require local educational agencies to pay back funds if they are not used in accordance with state statute or regulations…” Public Utilities Code (PUC) section 388(b) states: The Department of General Services or any other state or local agency intending to enter into an energy savings contract or a contract for an energy retrofit project may establish a pool of qualified energy service companies based on qualifications, experience, pricing, or other pertinent factors. Energy service contracts for individual projects undertaken by any state or local agency may be awarded through a competitive selection process to individuals or firms identified in the pool. The pool of qualified energy service companies and contractors shall be reestablished at least every two years or shall expire. No projected energy savings identified and/or no signed contracts We reviewed the district’s contracts with DJM Construction Company and Erickson-Hall Construction Co., and determined that the contracts do not identify the projected energy savings. In addition, the district did not support that it had signed contracts with Global Lighting Organization, Geary Pacific Supply, Howard Industries, US Air Conditioning Distributors, Johnson Controls, and Johnstone Supply. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” Final project completion report submitted late The district’s final report was submitted on September 12, 2019, 37 months after the reported project completion date of August 31, 2016. PRC section 26240(b) states: As a condition of receiving funds from the Job Creation Fund…not sooner than one year but no later than 15 months after an entity completes its first eligible project with a grant, loan, or other assistance from the Job Creation Fund…the entity shall submit a report of its project expenditures to the Citizens Oversight Board…. Recommendation We recommend that the CDE take appropriate action to recover Proposition 39 funds that the district expended on sole-sourced project costs, in violation of PRC section 26235(c). No additional recommendation is applicable, as the Proposition 39 program has ended. -A3- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program District’s Response We informed the district of the audit findings via email on June 1, 2021. Priscilla Martinez, Director of Business Services, responded vie email on June 10, 2021. The district’s response to Finding 1 – Sole-sourced project costs, and Finding 5 – No projected energy savings identified and/or no signed contract, is as follows: The District purchased equipment and supplies from the aforementioned vendors [Global Lighting Co., Geary Pacific Supply, Howard Industries, US Air Conditioning Distributors, and Johnstone Supply] in accordance with Public Contract Code (PCC) section 20111(a) and section 22002(c). PCC 20111(a) allowed the District to issue a purchase order with an informal quote given that the amount purchased fell below the bid limit threshold. Secondly, PCC 22002(c) established that the equipment and supplies did not constitute a “public project” as defined by said code. With this in mind, the District purchased equipment and supplies via a legal binding instrument; a purchase order. However, the District recognizes that the Prop. 39 CA Clean Energy Jobs Act grant stipulated that districts obtain more than one quote for the purchase of equipment and supplies. Moving forward, the District will be consistent in applying this as best practice. The district did not respond to Finding 6 – Final project completion report submitted late. SCO Comment Our findings and recommendation remain unchanged. -A4- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Antelope Valley Union High School District Proposition 39 Program Background The CEC approved Antelope Valley Union High School District’s EEP for $3,832,092. The district used its program implementation funds for the following energy efficiency measures: Proposition 39 Reported Share Used at Energy Annual Cost School Site School Site Efficiency Measures* Savings Antelope Valley High $ 279,179 Interior/exterior lighting retrofit $ 20,238 Eastside High 595,019 Interior/exterior lighting retrofit 43,417 Lancaster High 374,475 Interior/exterior lighting retrofit 32,210 Interior/exterior lighting retrofit; HVAC–Packaged/split system Littlerock High 2,191,912 AC/Heat Pump/VRF 67,524 Quartz Hill High 391,507 Interior/exterior lighting retrofit 28,561 Total $ 3,832,092 $ 191,950 *HVAC: Heating, ventilation, and air conditioning; AC: air conditioning; VRF: variable refrigerant flow With these energy efficiency measures, the district reported a combined SIR of 1.06 and the creation of 21.46 direct job-years. In addition, the district received $82,595 in planning funds directly from the CDE, which it used for screening and audits. We audited Proposition 39 program costs to ensure compliance with the Audit Results Job Creation Fund program guidelines, as well as the CEC’s 2016 Program Implementation Guidelines and the EEP Handbook. We identified the following audit issues. Sole-sourced project costs The district contracted with Lozano Smith, LLP for legal services ($6,398), and Brian Hayes for inspection services ($9,900). The district did not provide supporting documentation to show that it considered other vendors or agencies before awarding contracts to Lozano Smith, LLP and Brian Hayes. Therefore, we found that the district sole-sourced these Proposition 39 contracts, totaling $16,298. PRC section 26235(c) states, in part, “A community college district or LEA shall not use a sole source process to award funds pursuant to this chapter.” PRC section 26240(h)(1) states, “The Superintendent of Public Instruction shall require local educational agencies to pay back funds if they are not used in accordance with state statute or regulations…” PUC section 388(b) states: The Department of General Services or any other state or local agency intending to enter into an energy savings contract or a contract for an energy retrofit project may establish a pool of qualified energy service companies based on qualifications, experience, pricing, or other -A5- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program pertinent factors. Energy service contracts for individual projects undertaken by any state or local agency may be awarded through a competitive selection process to individuals or firms identified in the pool. The pool of qualified energy service companies and contractors shall be reestablished at least every two years or shall expire. Unspent earned interest The district accumulated interest, totaling $15,829, on its allocations from the Proposition 39 Program. The district’s approved EEP was completed and the final report was submitted. The district applied all of its awarded Proposition 39 funds to all projects within its approved EEP. As the Proposition 39 program has ended and there are no remaining eligible energy projects on which the district can expend the earned interest, it should be returned to the Clean Energy Job Creation Fund. We notified CDE of the unspent earned interest. Prior to issuance of this report, CDE emailed instructions to the district on how it can return the unused interest earned on Proposition 39 funds to CDE. CDE will follow up with the district to assist with this recovery. The CEC’s 2016 Program Implementation Guidelines (“Interest Earned on Proposition 39 Funds,” page 10) state: Any interest earned on Proposition 39 funds shall be expended only toward Proposition 39 eligible energy projects. LEAs should make every effort to track interest earned from Proposition 39 allocations separately for use on Proposition 39 eligible energy projects and to facilitate auditing in accordance with PRC 26206(e) and 26240(h)(1). PRC section 26206(e) states, “All projects shall be subject to audit.” PRC section 26240(h)(1) states, “The Superintendent of Public Instruction shall require local educational agencies to pay back funds if they are not used in accordance with state statute or regulations…” No projected energy savings identified and/or no signed contract We reviewed the district’s contract with Trane, and determined that the contract does not identify the projected energy savings. In addition, the district did not provide support that it had a signed contract with Lozano Smith, LLP. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” We also made the following observation: Unused planning funds We found that the district applied unused planning funds to program implementation. However, these funds were not included in the district’s approved EEP. As a result, the district received funding that exceeded its approved EEP by$235,475. -A6- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program We notified CDE of the Observation via email on June 14, 2021. The CDE responded by email on June 14, 2021, stating that it will contact the LEA about the unused planning funds. PRC section 26235(f) states: The Superintendent of Public Instruction shall not distribute funds to an LEA unless the LEA has submitted to the Energy Commission, and the Energy Commission has approved, an expenditure plan that outlines the energy projects to be funded. An LEA shall utilize a simple form expenditure plan developed by the Energy Commission. The Energy Commission shall promptly review the plan.…A portion of the funds may be distributed to an LEA upon request for energy audits and other plan development activities prior to submission of the plan. The CEC’s 2016 Program Implementation Guidelines (“Energy Planning Funds Reservation Option,” page 10) state: LEAs whose first year of eligibility was fiscal year 2013-14, the first year of the program, had the option of requesting a portion of that year’s award allocation for energy planning activities in 2013-14 without submitting an energy expenditure plan(s) to the Energy Commission. This option was available only for the fiscal year 2013-14 award allocation and was intended to be used for planning activities for subsequent fiscal years (2013-14 through 2017-18)…. The CEC’s 2016 Program Implementation Guidelines (“Unused Energy Planning Awards,” page 13) also state that “Any unused energy planning funds shall be applied toward implementing eligible energy project(s) approved as part of an LEA’s energy expenditure plan(s).” Recommendation We recommend that the CDE take appropriate action to recover Proposition 39 funds that the district expended on sole-sourced project costs, in violation of PRC section 26235(c). No additional recommendation is applicable, as the Proposition 39 program has ended. District’s Response We informed the district of the audit findings and Observation via email on June 3, 2021. Brian Hawkins, Assistant Superintendent of Business Services, responded by email dated June 22, 2021. The district’s response letter is included as Attachment A. The district’s response to Finding 1 – Sole-sourced project costs, is as follows: The District believes that it acted in good faith and complied with the relevant program requirements in entering into these contracts. A. It was not Clear that Proposition 39’s Limitation on Sole Sourcing Applied to these Contracts. Public Resources Code section 26235(c) (“Section 26235(c)”) provides that an “LEA shall not use a sole source process to award funds pursuant to this chapter. [An] LEA may use the best value -A7- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program criteria as defined in paragraph (1) of subdivision (c) of Section 20133 of the Public Contract Code to award funds pursuant to this chapter.” Notably, Section 26235(c) does not define the term “sole source” or describe the precise scope of the sole source limitation. Section 26235(c) provides that an “LEA may use the best value criteria as defined in paragraph (1) of subdivision (c) of Section 20133 of the Public Contract Code to award funds pursuant to this chapter.” Public Contract Code section 20133, which has since been repealed and replaced with Public Contract Code section 22161, defines the term “best value” in the context of design-build projects. (See Pub. Contract Code, § 22161, subd. (a).) In the absence of other clear statutory language or guidance, it was not clear that the sole source limitation also applied to the retention of project consultants, such as legal counsel or the project inspector. B. The District complied with the Sole Source Limitation even if it applied to these Contracts. Section 26235(c) limits sole sourcing but otherwise provides little detail regarding the procurement methods that an LEA may use in the Proposition 39 context. Importantly, however, the California Energy Commission (“CEC”), in its “Frequently Asked Questions California Clean Energy Jobs Act (Proposition 39),” (“FAQ”) sheds some light on this issue, indicating that an “LEA shall defer to [its] own procurement regulations and procedures, as long as they reflect applicable state and local laws and regulations, and do not conflict with the minimum legal standards specified above.”… Here, the District used its own procurement regulations and applicable law. Public Contract Code section 20111 and corresponding California Department of Education guidance indicate that a school district, as of 2016, did not need to competitively bid contracts for services that were valued at less than $87,800. (Pub. Contract Code, § 20111, subd. (a)(1).) Government Code section 50360 also permits a school district to “contract with and employ any persons for the furnishing [of] special services and advice in financial, economic, accounting, engineering, legal, or administrative matters,” without bid or with a very informal process. The contracts at issue are for legal and inspection services and thus fall within the purview of Government Code section 53060. (See also Education Code sections 35041.5 and 35204.) Additionally, the contracts are valued at $945; $6,398; and $9,900, respectively, and thus fall well-below the competitive bidding threshold. As a result, according to general procurement law and District policy, the District was permitted to contract with “any person[]” for these services and was not required to undergo a competitive process. The Guidelines permit LEAs to follow their own procurement regulations and applicable law, so long as they do not conflict with the Proposition 39 standards. In this case, the District informally retained the firms and inspector in good faith and in compliance with longstanding law, based on the belief it did not conflict with the sole source limitation, as that limitation did not clearly apply to contracts for these services. -A8- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program C. The District Did Not Sole Source these Contracts. Finally, the District did not “sole source” these contracts. While Section 26235(c) does not define “sole source” as used in that section, Public Resources Code section 25620.5(e) presents analogous language, indicating that “single source” procurement involves choosing from “two or more parties.” This statute further explains that “sole source” procurement involves less competition than single source, seemingly implying that sole source procurement involves no form of choice between one option or another. (Pub. Resources Code, § 25620.5, subd. [e].) So it is reasonable to view “sole source” for the purposes of Proposition 39 to mean direct contracting with one vendor without even considering other vendors. By using two different legal firms, by definition, the District did not Sole Source its legal representation. Thus, the District substantially and in good faith complied with the sole source limitation. The district’s response to Finding 4 – Unspent earned interest, and to the Observation is as follows: The District agrees with the SCO as to the amount of unused funds in the amount of $46,373.00 and with the amount of interest earned for the duration of the project of $15,829.00. The district’s response to Finding 5 − No projected energy savings identified and/or no signed contract, is as follows: The District believes that it acted in good faith and complied with the relevant program requirements in entering into these contracts. A. Section 26206(d) Does not Apply to the District’s Contracts with Atkinson and Lozano Smith. Section 26206(d) provides, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” Section 26206(d) is limited to contracts for “projects,” as that term is used in the context of Proposition 39. The relevant statutes do not define this term, but the Guidelines indicate that an “eligible energy project” is “[a]n energy efficiency measure or bundled group of energy efficiency measures and/or clean energy installations (in or at one or more school sites) within an LEA.” (Guidelines, H-3.) Accordingly, Section 26206(d) must be read to mean that a contract for the implementation of energy efficiency measures must include a description of projected energy savings. Other related contracts—such as those for legal services—need not include this information. Therefore, the District’s contracts with Atkinson and Lozano Smith need not include estimates of the Project’s energy savings. B. The District’s Contract with Trane Complied with Section 26206(d). Section 26206(d) requires that a contract “identify” a project’s “projected energy savings.” Neither the statute nor the Guidelines provide any guidance on how an LEA must satisfy this -A9- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program requirement. For example, neither expressly requires this projection to be expressed as a dollar figure. As a result, LEAs were left with reasonable discretion to attempt to identify expected savings in good faith. Here, the District’s contract with Trane (“Contract”) does, in fact, identify the Project’s projected energy savings, although not in a specific dollar amount. Section 6 of the Contract states as follows: Anticipated Savings. As required under SB 73, the District anticipates savings on energy expenditures to result from the Project in the amount determined by the approved CEC expenditure plan, over the life cycle of the Project. That anticipated sum exceeds the Total System Price by a ratio of at least 1.01. The Contract identifies the District’s anticipated energy savings in terms of a savings-to-investment ratio (“SIR”), which is recognized in the Guidelines as a measure of cost-effectiveness that is explicitly sanctioned by the CEC. (See Guidelines, p. 23 [“An eligible energy project must achieve a minimum savings-to-investment ratio (SIR) of 1.01 to be approved for a Proposition 39 award.”].)…. Section 6 of the Contract states that the Project will yield an SIR of at least 1.01. The Contract indicates that the Project price is $3,340,934; so, by multiplying this number by 1.01, one can reasonably understand from the face of the Contract that the District’s anticipated savings are at least $3,374,343.34. (Contract, Section 7.) Additionally, the Contract states that the anticipated energy savings would be “in the amount determined by the approved CEC expenditure plan.” (Contract, Section 6.) The District could not articulate its anticipated savings with greater specificity at the time of contracting. Due to the structure of the Prop 39 program, the savings was based on the scope of work that could be accomplished. The scope of work in turn affected the contract price, and contract price was based on Prop 39 funding amount. In addition to identify the anticipated savings in Section 6, the parties accounted for this potential change in contract price in Section 7 of the Contract…. The parties were cognizant of the fact that the District’s EEP had not yet been approved and that the Contract’s scope of work could change as a function of the District’s Proposition 39 allocations. Thus, the parties did not finalize the scope of work at the time of contracting. Accordingly, the District could not describe its anticipated energy savings in more specific terms, as the District did not yet know what energy efficiency measures would be implemented. The District’s submitted EEP thereafter described the Project’s estimated energy savings in great detail. Specifically, the District presented its projected energy savings in terms of: (1) demand savings, measured in kilowatts; (2) annual electric savings, measured in kilowatt hours; and (3) annual cost savings, measured in dollars. The District thereby reported its anticipated savings to the CEC. -A10- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program In sum, the Contract identified the District’s projected energy savings in terms of: (1) an SIR, which is a savings measurement that has been explicitly adopted by the CEC; and (2) the information presented in the District’s EEP, which was reviewed and approved by the CEC. Since neither the relevant statutes nor the Guidelines establish that a contract must identify projected savings via any particular method or measurement, the method used by the District here substantially complied with the projected energy savings requirement. It is evident that the District made a good faith effort to strictly and substantially comply with the requirements of Proposition 39 and did so to the greatest extent possible. The district’s response to the Observation is as follows: The SCO has received information from CDE regarding the specific amounts provided to [Antelope Valley Union High School District] for Prop 39 projects, and those funds have been fully accounted for by the SCO. During the course of construction, it was found that the initial contractor did not comply specifically with the Architect’s original drawings for the installation of the many air conditioning units. The District was required to issue a change order for those services. These costs were not part of the original EEP approved by the Energy Commission and therefore became an added cost to the District. It appears funds may have been transferred into Resource 62300.0 to cover the impending change order. The net change order was finalized at $187,452, but was not paid from Resource 62300.0. Resource 62300.0 currently has a balance of $37,998.23, which is the initial amount the District accounted for as the difference between EEP funds received and expended. Those funds now reside in Object code 9520 to provide for reimbursement to the CDE. These are the only funds in Resource code 62300.0 at this time. SCO Comment Our findings and recommendations remain unchanged. We will address the district’s response in the order presented. Sole-sourced project costs The district’s response indicates its reliance on the provisions of Government Code section 53060, PRC section 25620.5(e), the “best value” provisions of Public Contract Code section 20133(c), and its own procurement policies and procedures. The district cites its compliance with these sources as a valid reason for not complying with the sole-source language of PRC section 26235(c). The district is correct that the CEC’s Proposition 39 “Frequently Asked Questions” document1 states: The LEA shall defer to [its] own procurement regulations and procedures, as long as they reflect applicable state and local laws and regulations, and do not conflict with the minimum legal standards specified above. 1 Available under the “Program Information” tab on the “California Clean Energy Jobs Act K-12 Program – Prop 39” page of the CEC’s website. The quoted text is in the second paragraph on page 27. -A11- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program In addition, the CEC’s 2016 Program Implementation Guidelines (“Energy Project Construction Compliance Requirements,” page 35) state: ….The guidelines defer to the LEA’s own procurement regulations and procedures, as long as they reflect applicable state and local laws and regulations, and do not conflict with the minimum legal standards specified above. However, the district fails to recognize that the guidelines defer to the LEA’s own procurement regulations as long as they “do not conflict with the minimum legal standards specified above” [emphasis added]. The “minimum legal standards specified above” are PRC sections 26206(d), 26235(a)(2), and 26235(c). The district’s procurement regulations conflict with the sole-source prohibition contained in PRC section 26235(c); therefore, we found that the district’s reliance on Government Code section 53060, PRC section 25620.5(e), the “best value” provisions of Public Contract Code section 20133(c), and its own policies and procedures in lieu of PRC section 26235(c) was misplaced. Furthermore, the California State Legislature repealed the “best value” provisions of PCC section 20133(c) in 2014. As a result, this statute was not applicable when the district entered into these contracts with its vendors. The district’s response includes a legal theory of sole-sourcing that is based on PRC section 25620.5(e). We are not qualified to opine on the validity of legal arguments. The district may choose to pursue an appeal of the audit findings. We provide guidance on filing an appeal elsewhere in this report. The district’s response conveys the district’s belief that legal services related to the Proposition 39 Program do not constitute a “project” under the provisions of the Program and, therefore, no contract is required. We disagree. To the extent that a vendor provides legal services to the district for its Proposition 39 projects, those expenditures constitute part of the overall project(s)—similar to engineering, inspection, and other “soft” costs. Accordingly, the district should support program costs for legal services with a properly executed contract. No projected energy savings identified The district states that the program guidelines provide no clear guidance on how districts can comply with the provisions of PRC section 26206(d). We disagree. The CEC Proposition 39 Implementation Guidelines state, “All contracts need a clear and accurate description of the energy project, including material, products, or services to be procured, and a budget that includes cost and an estimate of the projected energy savings” [emphasis added]. The program’s provisions require only an estimate of the projected energy savings. In addition, no financial impacts apply to districts for violations of this program provision. -A12- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program In addition, the district states that it does not need to include projected energy savings in a contract with its legal counsel. Our finding does not recommend that the district include projected energy saving in its contract for legal counsel; rather, our finding identifies the district’s lack of a signed contract. Unused planning funds We found that the district received Proposition 39 Program allocations from the CDE totaling $5,171,346. The district’s two EEPs contained approved program costs totaling $5,124,973. We reported the difference of $46,373 to the CDE as unused planning funds that should be repaid to the Clean Energy Job Creation Fund. The district’s accounting records for the Proposition 39 Program include $189,102 of additional revenue postings that do not indicate the source of the funds. We advised the district of the need to provide documentation to substantiate that these funds did not originate from the Proposition 39 Program. The district did not provide such documentation. -A13- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Children of Promise Preparatory Academy Proposition 39 Program Background The CEC approved Children of Promise Preparatory Academy’s EEP for $267,668, consisting of $21,538 for energy management services, $4,308 for training, and $241,822 for program implementation. The charter school used its program implementation funds for the following energy efficiency measures: Proposition 39 Reported Share Used at Energy Annual Cost School Site School Site Efficiency Measures* Savings Children of Promise Interior/exterior lighting retrofit, lighting controls, and Preparatory Academy $ 241,822 HVAC-Packaged/Split System AC/Heat Pump/VRF $ 11,009 *HVAC: Heating, venting, and air conditioning; AC: air conditioning; VRF: variable refrigerant flow With these energy efficiency measures, the charter school reported a combined SIR of 1.05 and the creation of 1.35 direct job-years. We audited Proposition 39 program costs to ensure compliance with the Audit Results Job Creation Fund program guidelines, as well as the CEC’s 2016 Program Implementation Guidelines and EEP Handbook. We identified the following audit issues. Sole-sourced project costs The charter school sole-sourced its contract with First Note Finance, Inc. ($26,533) for its energy manager services. The charter school did not provide supporting documentation to show that it considered other vendors before awarding its contract to First Note Finance, Inc. Therefore, we found that the charter school sole-sourced this Proposition 39 contract, totaling $26,533. However, the charter school requested only $25,846 in its EEP, for an energy manager and training costs. Because we audited only the amount approved in the charter school’s final project completion report, we found that the charter school sole-sourced a total of $25,846. PRC section 26235(c) states, in part, “A community college district or LEA shall not use a sole source process to award funds pursuant to this chapter.” PRC section 26240(h)(1) states, “The Superintendent of Public Instruction shall require local educational agencies to pay back funds if they are not used in accordance with state statute or regulations…” PUC section 388(b) states: The Department of General Services or any other state or local agency intending to enter into an energy savings contract or a contract for an energy retrofit project may establish a pool of qualified energy service companies based on qualifications, experience, pricing, or other pertinent factors. Energy service contracts for individual projects undertaken by any state or local agency may be awarded through a -A14- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program competitive selection process to individuals or firms identified in the pool. The pool of qualified energy service companies and contractors shall be reestablished at least every two years or shall expire. No projected energy savings identified and/or no signed contract We reviewed the charter school’s contracts with Stinson Mechanical Contractors, and Felix Electrical and Construction Service, and determined that the contracts do not identify the projected energy savings. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” Violation of energy measure payback period The charter school closed on June 30, 2020 after Inglewood Unified School District denied the school’s charter petition. The facility is currently vacant and for sale as a charter school site. The school completed its energy projects in 2018 using $241,822 of Proposition 39 funds with energy payback periods of seven years for its lighting project and 27.7 years for its HVAC system project. Until this facility is sold, the charter school is in violation of the energy measure payback period. Per the CEC’s 2016 Program Implementation Guidelines (“Step 8: Energy Project Tracking and Reporting,” page 33), “LEAs must not sell or demolish the approved energy measure installed with Proposition 39 program award funding prior to the payback of the energy measure.” PRC section 26235(i) states, “…an LEA receiving moneys pursuant to this chapter for a project for that facility shall require that the school repay to the state all moneys received from the Job Creation Fund for the project if the school voluntarily vacates the facility within five years of project completion.…” Recommendation We recommend that:  The CDE take appropriate action to recover Proposition 39 funds that the district expended on sole-sourced project costs, in violation of PRC section 26235(c); and  The CEC monitor the sale of the Children of Promise Preparatory Academy facility to ensure that they will continue being used as a school site. No additional recommendation is applicable, as the Proposition 39 program has ended. Charter School’s Response We informed the charter school of the audit findings via email on May 4, 2021. Carleton Lincoln, Ed.D., Founder/CEO, responded by letter dated June 4, 2021. The charter school’s response letter is included as Attachment B. -A15- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program The charter school’s response to our audit findings is as follows: COPPA [Children of Promise Preparatory Academy] was forced to close in June 2020 due to Inglewood Unified School District’s (IUSD) unwarranted denial of COPPA’s charter petition. This closure happened before the State Controller’s Office initiated the audit on September 28, 2020. Because of the closure, COPPA had no staff, no paid hours, no facility, and no resources to locate and provide answers and supporting documents to the auditor. The few resources that COPPA did have was used for the wind-down and dissolution of the school as required by state and federal law. In addition, all of the school’s documents were archived in long term storage with no intent to be in active use. Former staff that had knowledge about where and how the records were stored and organized were no longer employed. Moreover, the school was impacted by COVID-19, an unprecedented event and global in nature. Access to physical storage and to former contractors and organizations related to Prop 39 was severely limited. In the month of May 2021, most of COPPA’s activities had to be suspended due [to] Dr. Carleton Lincoln’s, the CEO’s, medical emergency. Dr. Lincoln makes up the majority of the school’s staff. At the end of May, COPPA received a court order for the appointment of a receiver who is to marshal and dispose of the school property and school’s assets. This means that COPPA will no longer have any resources, including Dr. Lincoln and his assistant, to even wind down and dissolve the school and there will be no one at COPPA to continue correspondence with your office. The school has attempted to cooperate and provide what little documentation could be provided, despite the school’s closure and discontinued operation months before the audit. We are concerned that the audit findings are unreasonable because a closed school that is no longer in operation cannot realistically provide adequate answers. It seems that auditing a closed school would inevitably conclude with negative findings because the school could not proffer an appropriate response. COPPA respectfully ask the auditor to reconsider and dismiss their findings and/or forgive any penalties assessed against the school due to the extraordinary impact of COVID-19 and the unfortunate and unwarranted closing of the school. SCO Comment Our findings and recommendation remain unchanged. Although we recognize that the charter school participated in the program to the best of its ability, the scope of our audit is to ensure compliance with state statutes and regulations. These requirements state, in part, that LEAs cannot use a sole-source process to award funds for energy management services, and that LEAs must identify projected energy savings in the awarded contracts. SCO provides audit services for the Citizens Oversight Board related to the Proposition 39 Program, but does not have authority to dismiss and/or forgive related audit findings and/or penalties assessed against the school. -A16- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Coast Unified School District Proposition 39 Program Background The CEC approved Coast Unified School District’s EEP for $224,784, consisting of $1,983 for energy management services and $222,801 for program implementation. The district used its program implementation funds for the following energy efficiency measures: Proposition 39 Reported Share Used Energy Annual Cost School Site at School Site Efficiency Measures* Savings Cambria Grammar $ 16,686 Exterior lighting retrofit $ 2,501 Coast US District Office 34,148 Interior/exterior lighting retrofit; HVAC controls; HVAC-Condensing furnace 1,647 Coast Union High 95,302 Interior/exterior lighting retrofit; HVAC controls; HVAC-Condensing furnace 7,645 Leffingwell High 7 ,093 Exterior lighting retrofit; HVAC controls 5 14 HVAC-condensing furnace; HVAC controls; interior/exterior lighting retrofit; Santa Lucia Middle 69,572 HVAC-Packaged/split system AC/Heat Pump/VRF 4,773 Total $ 222,801 $ 1 7,080 *HVAC: Heating, ventilation, and air conditioning; AC: air conditioning; VRF: variable refrigerant flow With these energy efficiency measures, the district reported a combined SIR of 1.39 and the creation of 1.25 direct job-years. In addition, the district received $57,272 in planning funds directly from the CDE, which it used for an energy manager. Audit Results We audited Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CEC’s 2016 Program Implementation Guidelines and EEP Handbook. We identified the following audit issues. No projected energy savings identified and/or no signed contract We reviewed the district’s contracts with JR Barto (HVAC) and Energy Retrofit Co. (lighting), and determined that the contracts do not identify the projected energy savings. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” Final project completion report submitted late The district’s final report was submitted on March 13, 2020, 31 months after the reported project completion date of September 21, 2017. PRC section 26240(b) states: As a condition of receiving funds from the Job Creation Fund…not sooner than one year but no later than 15 months after an entity completes its first eligible project with a grant, loan, or other assistance from the Job Creation Fund…the entity shall submit a report of its project expenditures to the Citizens Oversight Board…. -A17- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Recommendation No recommendation is applicable, as the Proposition 39 program has ended. District’s Response We informed the district of the audit findings via email on March 3, 2021. Annie Lachance, Chief Business Official, responded via email on March 11, 2021. The district’s response to Finding 5 – No projected energy savings identified and/or no signed contract, is as follows: All projected energy savings was included in the studies done prior to the contracts. The projected energy savings was not included as part of the contract. The district’s response to Finding 6 – Final project completion report submitted late, is as follows:  Per CEC reporting process, the “Final Report” is generated based on the completion status of the “Annual Progress Report.” After reviewing the timeline, it appears [that] the completion status in the 2018 “Annual Progress Report” (APR) was mistakenly checked as “NOT Completed.” This error was corrected in 2019 Annual Progress Report, but unfortunately it put us 12 months behind.  We indicated the completion status as complete in the 2019 Annual Progress Report and were awaiting the release of the Final Report around October, 2019. After waiting for several months for the FINAL REPORT, we contacted CEC in December 2019. We began working with the project manager in January, 2020 to complete an amendment, then we received the FINAL REPORT in February, 2020. Please note that both CEC and CLEAResult’s operations (IT and management support) were severely challenged by COVID 19 related “Shelter-in-Place” order but we were able to get the Final Report released in February and completed in March of 2020. This set us back a few months as well. SCO Comment Our findings remain unchanged. Although we recognize that the district participated in the program to the best of its ability, the scope of our audit is to ensure compliance with state statutes and regulations, which require that the projected energy savings be identified in the awarded contract. -A18- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Community Collaborative Charter School Proposition 39 Program Background The CEC approved Community Collaborative Charter School’s EEP for $197,200. The charter school used its program implementation funds for the following energy efficiency measures: Proposition 39 Reported Share Used Energy Annual Cost School Site at School Site Efficiency Measures* Savings Community Collaborative Charter $ 197,200 Interior/exterior lighting retrofit; HVAC controls $ 9,687 *HVAC: Heating, ventilation, and air conditioning With these energy efficiency measures, the charter school reported a combined SIR of 1.05 and the creation of 1.10 direct job-years. In addition, the charter school received $114,500 in planning funds directly from the CDE, which it used for screening and audits, and program assistance. Audit Results We audited Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CEC’s 2016 Program Implementation Guidelines and EEP Handbook. We identified the following audit issues. No projected energy savings identified and/or no signed contract We reviewed the district’s contract with Alliance Building Solutions, and determined that the contract does not identify the projected energy savings. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” Final project completion report submitted late The district’s final report was submitted on November 26, 2019, 23 months after the reported project completion date of December 17, 2017. PRC section 26240(b) states: As a condition of receiving funds from the Job Creation Fund…not sooner than one year but no later than 15 months after an entity completes its first eligible project with a grant, loan, or other assistance from the Job Creation Fund…the entity shall submit a report of its project expenditures to the Citizens Oversight Board…. -A19- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Charter School’s Response We informed the charter school of the audit findings via email on March 19, 2021. The school responded later that day requesting a formal exit conference. We conducted a formal telephone exit conference with the school representatives on March 25, 2021. Aaron Thornsberry, Chief Business Official, responded via email later that day agreeing with the audit findings. The charter school’s response to Finding 5 − No projected energy savings and/or no signed contract, is as follows: We agree with the State Controller’s Office finding in accordance with section 26206(d). Projected energy savings were not included in the contract, but [were] shared with us outside of the contract to ensure the contract scope was appropriate. This was an oversight by our organization. The charter school’s response to Finding 6 – Final project completion report submitted late, is as follows: We agree with the State Controller’s Office Finding in accordance with section 26240(b). Unfortunately, we could not file timely as the data needed to file the report was delayed from the utility companies and was not received until well after the deadline. The report was submitted as quickly as possible after receiving the data. -A20- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Cotati Rohnert Park Unified School District – Proposition 39 Program Background The CEC approved Cotati–Rohnert Park Unified School District’s EEP Number 4951 for $1,055,335, consisting of $103,004 for energy management services and $952,331 for program implementation. In addition, the CEC approved the district’s EEP Number 5126 for $135,400, consisting of $10,000 for energy management services and $125,400 for program implementation. The district used its program implementation funds for the following efficiency measures: Proposition 39 Energy Efficiency and Reported Share Used Renewable Energy Annual Cost School Site at School Site Generation Measures* Savings EEP #4951: HVAC Controls−Programmable/Smart Thermostats; HVAC− Evergreen Elementary $ 250,176 Packaged/split system AC/heat pump/VRF; HVAC−Duct sealing $ 9,663 John Reed Primary 110,632 Interior/exterior lighting retrofit; interior linear fluorescent relamping 9,286 Rancho Cotati HS 379,879 Interior/exterior lighting retrofit; interior linear fluorescent relamping 38,868 Thomas Page Academy 9 9,809 Interior/exterior lighting retrofit; interior linear fluorescent relamping 9,935 Waldo Rohnert Intermediate 111,835 Interior/exterior lighting retrofit; interior linear fluorescent relamping 8,471 Total, EEP #4951 $ 952,331 $ 7 6,223 EEP #5126: Technology High $ 125,400 HVAC−Chiller/boiler replacement $ 1,936 Total, EEP #5126 $ 125,400 $ 1,936 *HVAC: Heating, venting, and air conditioning; AC: air conditioning; VRF: variable refrigerant flow With the energy efficiency measures from EEP Number 4951, the district reported a combined SIR of 1.46 and the creation of 5.33 direct job-years. With the energy efficiency measures from EEP Number 5126, the district reported a combined SIR of 1.01 and the creation of 0.70 direct job-years. In addition, the district received $130,000 in planning funds directly from the CDE, which it used for screening and audits, and an energy manager. Audit Results We audited Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CEC’s 2016 Program Implementation Guidelines and EEP Handbook. We identified the following audit issues. No projected energy savings identified and/or no signed contract We reviewed the district’s contract with Indoor Environmental Services (IES), and determined that the contract does not identify the projected energy savings. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” -A21- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Final project completion report submitted late The district’s final report for EEP Number 4951 was submitted on December 3, 2019, 61 months after the reported project completion date of November 1, 2014. The district’s final report for EEP Number 5126 was submitted on December 3, 2019, 16 months after the reported project completion date of August 31, 2018. PRC section 26240(b) states: As a condition of receiving funds from the Job Creation Fund…not sooner than one year but no later than 15 months after an entity completes its first eligible project with a grant, loan, or other assistance from the Job Creation Fund…the entity shall submit a report of its project expenditures to the Citizens Oversight Board…. Recommendation No recommendation is applicable, as the Proposition 39 program has ended. District’s Response We informed the district of the two audit findings on March 2, 2021. Robert Marical, Chief Business Official, responded via email on March 8, 2021. The district’s response to Finding 5 – No projected energy savings identified and/or no signed contract, is as follows: The District included the projected energy savings as an attachment to the Board Resolution that was approved by the Board. Additionally, energy savings calculations were performed with the help of the on-line Energy Saving Calculators developed by California Energy Commission (CEC). These on-line calculators are offered by CEC as a part of Proposition 39 program. The projected savings were then submitted as part of the process and approved by the CEC. All documents were approved as part of the project. We think the District acted within the spirit and guidelines of the program. We will include projected savings in future contracts moving forward. The district’s response to Finding 6 – Final project completion report submitted late, is as follows: Our contractor reported that there was an issue gathering data from PG&E in a timely manner, which caused delays in completing the Final Reports for EEP 5126 within the 15 month timeframe. They were submitted a few weeks after the deadline. Final Reports from EEP 4951 also had data retrieval issues after the amendment was approved. SCO Comment Our findings remain unchanged. Although we recognize that the district participated in the program to the best of its ability, the scope of our audit is to ensure compliance with state statutes and regulations, which require that the projected energy savings be identified in the awarded contract. -A22- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Desert Sands Unified School District Proposition 39 Program Background The CEC approved Desert Sands Unified School District’s EEP for $6,521,118. The district used its program implementation funds for the following energy efficiency measures and renewable energy generation measures: Proposition 39 Energy Efficiency and Reported Share Used Renewable Energy Annual Cost School Site at School Site Generation Measures* Savings Indio Middle $ 566,865 Interior/exterior lighting fixture retrofit $ 3 5,093 La Quinta High 1 ,100,932 HVAC-Packaged/Split System AC/Heat Pump/VRF 62,818 La Quinta Middle 560,657 Interior/exterior lighting fixture retrofit 32,210 Madison Elementary 281,749 Interior/exterior lighting fixture retrofit 18,067 Monroe Elementary 278,540 Interior/exterior lighting fixture retrofit 16,185 Palm Desert High 3 ,329,610 Photovoltaic panels 2 41,308 Truman Elementary 402,765 Interior/exterior lighting fixture retrofit 24,306 Total $ 6,521,118 $ 429,987 *HVAC: Heating, ventilation, and air conditioning; AC: air conditioning; VRF: variable refrigerant flow With these energy efficiency and renewable energy generation measures, the district reported a combined SIR of 1.03 and the creation of 31.85 direct job-years. Audit Results We audited Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CEC’s 2016 Program Implementation Guidelines and EEP Handbook. We identified the following audit issue: Final project completion report submitted late The district’s final report was submitted on May 10, 2019, 52 months after the reported project completion date of December 31, 2014. PRC section 26240(b) states: As a condition of receiving funds from the Job Creation Fund…not sooner than one year but no later than 15 months after an entity completes its first eligible project with a grant, loan, or other assistance from the Job Creation Fund…the entity shall submit a report of its project expenditures to the Citizens Oversight Board…. Recommendation No recommendation is applicable, as the Proposition 39 program has ended. -A23- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program District’s Response We informed the district of the audit finding via email on March 11, 2021. Sonya Melendez, Director of Fiscal Services, responded via email on March 22, 2021. The district’s response to the finding is as follows: Due to turnover in key positions overseeing this project, there was an oversight on the timely submission of the report of project expenditures to the Citizens Oversight Board. Once this was brought to the District’s attention, the report was submitted. SCO Comment Our finding remains unchanged. -A24- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Madera Unified School District Proposition 39 Program Background The CEC approved Madera Unified School District’s EEP for $4,790,235, consisting of $331,843 for energy management services, $66,368 for training, and $4,392,024 for program implementation. The district used its program implementation funds for the following energy efficiency measures: Proposition 39 Reported Share Used at Energy Annual Cost School Site School Site Efficiency Measures* Savings Alpha Elementary $ 32,839 Exterior lighting fixture retrofit, HVAC controls $ 3,359 Berenda Elementary 1 5,908 Exterior lighting fixture retrofit, HVAC controls 2,587 Cesar Chavez Elementary 5 3,054 Exterior lighting fixture retrofit, HVAC controls 3,482 District Office Maintenance, Transportation 6 0,728 Exterior lighting fixture retrofit, HVAC controls 7,234 Dixieland Elementary 5,616 Exterior lighting fixture retrofit, HVAC controls 1,280 Eastin Arcola 8,200 Exterior lighting fixture retrofit, HVAC controls 2,138 Furman (Duane E.) High** 1 4,926 Exterior lighting fixture retrofit, HVAC controls 1,300 George Washington Elementary 9,092 Exterior lighting fixture retrofit, HVAC controls 1,768 Howard Elementary 1 3,977 Exterior lighting fixture retrofit, HVAC controls 1,921 Jack G. Desmond Middle 9 8,261 Exterior lighting fixture retrofit, HVAC controls 9,730 James Madison Elementary 1 3,523 Exterior lighting fixture retrofit, HVAC controls 1,929 James Monroe Elementary 9,538 Exterior lighting fixture retrofit, HVAC controls 1,627 John Adams Elementary 9,043 Exterior lighting fixture retrofit, HVAC controls 1,544 John J. Pershing Elementary 2 1,583 Exterior lighting fixture retrofit, HVAC controls 2,778 La Vina Elementary 1 2,734 Exterior lighting fixture retrofit, HVAC controls 1,874 Exterior lighting fixture retrofit, HVAC controls; Lincoln Elementary 286,975 HVAC controls−EMS 19,248 Madera High 164,866 Interior/exterior lighting fixture retrofit; HVAC controls 15,228 Interior/exterior lighting fixture retrofit; HVAC controls; HVAC−chiller/boiler replacement; HVAC controls− Madera South High 1,667,751 EMS; Pumps, motors, drives 77,066 Interior/exterior lighting fixture retrofit; HVAC controls; HVAC−chiller/boiler replacement; HVAC−packaged/ split Martin Luther King Jr. Middle 1,756,732 system AC/heat pump/VRF 41,197 Millview Elementary 9,983 Exterior lighting fixture retrofit, HVAC controls 1,739 Nishimoto Elementary 3 2,837 Exterior lighting fixture retrofit, HVAC controls 3,148 Parkwood Elementary 3 3,386 Exterior lighting fixture retrofit, HVAC controls 3,458 Ripperdan Community Day 3,178 HVAC controls 1,081 Sierra Vista Elementary 1 0,035 Exterior lighting fixture retrofit, HVAC controls 1,679 Thomas Jefferson Middle 4 7,259 Interior/exterior lighting fixture retrofit; HVAC controls 5,342 Total $ 4 ,392,024 $ 2 13,737 *HVAC: Heating, ventilation, and air conditioning; EMS: emergency medical services (fire alarms); AC: air conditioning; VRF: variable refrigerant flow **Independent Study With these energy efficiency measures, the district reported a combined SIR of 1.10 and the creation of 24.60 direct job-years. In addition, the district received $292,039 in planning funds directly from the CDE, which it used for screening and audits, and program assistance. -A25- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Audit Results We audited Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CEC’s 2016 Program Implementation Guidelines and EEP Handbook. We identified the following audit issues. Sole-sourced project costs The district contracted with the following vendors:  ThinkWire Energy Services − $12,395 for solar consulting services;  US Air Conditioning Distributors − $165,719 for thermostats;  Knorr Systems − $32,581 for a pool pump control; and  Cenergistic − $129,246 for an energy conservation program. The district did not provide supporting documentation to show that it considered other vendors before awarding contracts to ThinkWire Energy Services, US Air Conditioning Distributors, Knorr Systems, and Cenergistic. Therefore, we found that the district sole-sourced these Proposition 39 contracts, totaling $339,941. PRC section 26235(c) states, in part, “A community college district or LEA shall not use a sole source process to award funds pursuant to this chapter.” PRC section 26240(h)(1) states, “The Superintendent of Public Instruction shall require local educational agencies to pay back funds if they are not used in accordance with state statute or regulations…”. PUC section 388(b) states: The Department of General Services or any other state or local agency intending to enter into an energy savings contract or a contract for an energy retrofit project may establish a pool of qualified energy service companies based on qualifications, experience, pricing, or other pertinent factors. Energy service contracts for individual projects undertaken by any state or local agency may be awarded through a competitive selection process to individuals or firms identified in the pool. The pool of qualified energy service companies and contractors shall be reestablished at least every two years or shall expire. No projected energy savings identified and/or no signed contracts We reviewed the district’s supporting documentation and determined that no contract was prepared for the services provided by Knorr Systems. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” Final project completion report submitted late The district’s final report was submitted on September 4, 2019, 22 months after the reported project completion date of November 30, 2017. -A26- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program PRC section 26240(b) states: As a condition of receiving funds from the Job Creation Fund…not sooner than one year but no later than 15 months after an entity completes its first eligible project with a grant, loan, or other assistance from the Job Creation Fund…the entity shall submit a report of its project expenditures to the Citizens Oversight Board…. Recommendation We recommend that the CDE take appropriate action to recover Proposition 39 funds that the district expended on sole-sourced project costs, in violation of PRC section 26235(c). No additional recommendation is applicable, as the Proposition 39 program has ended. District’s Response We informed the district of the audit findings and Observation via email on February 1, 2021. Sandon Schwartz, Deputy Superintendent, responded by letter dated February 10, 2021. The district’s response letter is included as Attachment C. The district’s response to Finding 1 – Sole-sourced project costs, is as follows: The District feels they complied with the spirit of sole-sourcing and in the case of the thermostats received multiple quotes from vendors before purchasing with the lower priced vendor. Think Wire − The courts have noted that the Legislature has recognized the right to hire certain special services without competitive bidding by enacting Government Code section 53060. In this case, the District selected Think Wire to conduct a solar analysis based on this government code. US Air Conditioning Distributors − As the energy projects were initiated in phases over several years, the district purchased the thermostats over a wide time frame to meet scope of the various phases. The thermostats were purchased over a two-year period following appropriate and acceptable procurement procedures. The district did not competitively bid these [thermostats] but received pricing from multiple vendors prior to initiating the first purchase order in February of 2017. These additional quotes are included as backup on the purchase requisitions. These thermostats provided the district a best value based on pricing and allowed the district to have a consistent wi-fi thermostat that could enable a functioning EMS system on a single platform throughout the district, promoting efficiency. Knorr Systems − The district purchased the VFD [variable-frequency drive]-based pool controls system for Madera South High School, as part of the Prop 39 project, from Knorr Systems. Since the cost of the product was below the bid threshold limit, the district did not receive multiple bids. -A27- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Cenergistic − The district contracted with Cenergistic in 2015 to provide energy management services. Cenergistic then hired a district employee to serve as the energy manager. The contract guaranteed savings and if contract costs exceeded savings, then the district would be refunded those costs. No other consultant would offer those [terms]. The district hired Cenergistic on a best-value basis using Government Code section 53060. The consultant was not originally funded using Prop 39 funding. The district shifted some of these expenses to our Prop 39 program in the final year of the funding cycle. The district did not respond to Finding 5 – No projected energy savings identified and/or no signed contract. The district’s response to Finding 6 – Final project completion report submitted late, is as follows: The district acknowledges and accepts this finding. Final reporting was part of the scope of the contract with IES. IES stated to the district that the report was filed late due to their ability to obtain utility data from PG&E. PG&E had changed nearly all of the meter numbers and IES was having difficulties retrieving several meters’ data even with PG&E’s help. IES ended up using one of their software programs to directly retrieve the data for us through PG&E’s servers. This setup process took longer than expected but did provide the utility information they were unable to obtain in any other manner. SCO Comment Our findings and recommendation remain unchanged. The scope of our audit was to ensure compliance with state statutes and regulations. Although the district cites using the “best value” criteria as defined in Government Code section 53060 to support its use of sole- sourced contracts, PRC section 26235(c) states: A community college district or LEA shall not use a sole source process to award funds pursuant to this chapter. A community college or LEA may use the best value criteria as defined in paragraph (1) of subdivision (c) of Section 20133 of the Public Contract Code to award funds pursuant to this chapter [emphasis added]. The CEC’s Proposition 39 “Frequently Asked Questions” document2 defines the “best value” criteria as follows: In 2014, Section 20133 of the Public Contract Code was repealed and amended. The legislation that repealed Section 20133 also added a new statute to the Public Contract Code containing a more precise definition of “best value” (Pub. Contract Code §21161). That definition has been refined several times, and the LEA should refer to the current language of Section 21161 for guidance on use of the best value criteria. 2Available under the “Program Information” tab on the “California Clean Energy Jobs Act K-12 Program – Prop 39” page of the CEC’s website. The quoted text is in the first paragraph of page 27. -A28- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program PCC section 21161 states, in part, “All contracts shall be let to the lowest responsible bidder or bidders in the manner provided in this article.” The district provided two additional quotes for the thermostats ultimately purchased from US Air Conditioning Distributors. However, the district did not identify the vendor’s name for either quote; nor did it provide documentation to show when these quotes were obtained or printed. In its response, the district indicates its reliance on the provisions of Government Code section 53060, and its own procurement policies and procedures. The district cites its compliance with these sources as a valid reason for not complying with the sole-source language of PRC section 26235(c). However, the CEC’s Proposition 39 Implementation Guidelines state that “the guidelines defer to the LEA’s own procurement regulations and procedures, as long as they reflect applicable state and local laws and regulations and do not conflict with the minimum legal standards specified above” [emphasis added]. The “minimum legal standards specified above” are PRC sections 26206(d), 26235(a)(2), and 26235(c). Therefore, we found that the district’s reliance on Government Code section 53060 and its own policies and procedures in lieu of PRC section 26235(c) was misplaced. -A29- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Mattole Valley Charter School (Mattole Unified School District) Proposition 39 Program The CEC approved Mattole Valley Charter School’s EEP for $168,197. Background The charter school used its program implementation funds for the following energy efficiency and renewable energy generation measures: Proposition 39 Energy Efficiency and Reported Share Used Renewable Energy Annual Cost School Site at School Site Generation Measures* Savings Beginnings Learning Center $ 44,935 Photovoltaic (solar) $ 2,138 Campus House 3 ,014 Interior lighting fixture retrofit 1 99 Caspar Creem Learning Center 33,025 Interior lighting fixture retrofit; HVAC–Packaged 6 66 Creekside Learning Center 18,000 Photovoltaic (solar) 1,668 Diamond View Mattole Learning Center 27,189 Interior lighting fixture retrofit; HVAC–Split system AC/heat pump 5,734 Lost Coast High Learning Center 6 ,337 Interior/exterior lighting fixture retrofit 1,962 Mattole Valley Charter-Registrar 3 ,536 Interior/exterior lighting fixture retrofit 3 80 North Coast Learning Academy 24,511 Interior/exterior lighting fixture retrofit 3,066 Resource Center 7 ,650 Interior lighting fixture retrofit 1,672 Total $ 168,197 $ 1 7,485 *HVAC: Heating, ventilation, and air conditioning; AC: air conditioning With these energy efficiency and renewable energy generation measures, the district reported a combined SIR of 1.75 and the creation of 0.85 direct job-years. In addition, the district received $51,717 in planning funds directly from the CDE, which it used for program assistance and an energy manager. Audit Results We audited Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CEC’s 2016 Program Implementation Guidelines and EEP Handbook. We identified the following audit issues. Unspent funds The charter school was awarded $51,717 in planning funds and $225,776 in implementation funds. Of those two amounts, the charter school used only $26,362 and $168,198, respectively. Therefore, the charter school has a total of $82,933 ($25,355 for planning and $57,578 for program implementation) in unspent funds. On February 2, 2021, we notified CDE of the unspent funds. Prior to issuance of this report, CDE followed up with the Humboldt County Office of Education to recover the unspent funds from Mattole Valley Charter School. The CEC’s 2016 Program Implementation Guidelines state on page 5: The SSPI [State Superintendent of Public Instruction] is responsible for administering awards to LEAs that serve grades K-12 students. These funds may be used by LEAs for energy efficiency and clean energy -A30- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program projects, related energy planning, energy training, energy management, and energy projects with related non-energy benefits. LEAs are required to submit an energy expenditure plan to the Energy Commission for consideration and approval. Funds are released to the LEA only after the Commission approves an LEA’s energy expenditure plan(s). PRC section 26240(b) states, “As a condition of receiving funds from the Job Creation Fund…the entity shall submit a report of its project expenditures to the Citizens Oversight Board.…” PRC section 26240(h)(1) states, “The Superintendent of Public Instruction shall require local educational agencies to pay back funds if they are not used in accordance with state statute or regulations....” Final project completion report submitted late The charter school’s final report was submitted on March 13, 2020, 21 months after the reported project completion date of June 30, 2018. PRC section 26240(b) states: As a condition of receiving funds from the Job Creation Fund…not sooner than one year but no later than 15 months after an entity completes its first eligible project with a grant, loan, or other assistance from the Job Creation Fund…the entity shall submit a report of its project expenditures to the Citizens Oversight Board…. Recommendation We recommend that the district return the unspent funds to the State. Although the Proposition 39 program has ended, the unspent funds must be returned. No additional recommendation is applicable, as the Proposition 39 program has ended. Charter School’s Response We informed the charter school of the audit findings via email on January 25, 2021. Shari Lovett, Director, Northern United−Humboldt Charter School (formerly the Director of Mattole Valley Charter School), responded via email on February 8, 2021, stating that Karen Ashmore, Superintendent, Mattole Unified School District, will not be providing a response. -A31- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Modesto City Elementary School District Proposition 39 Program The CEC approved Modesto City Elementary School District’s EEP for Background $3,707,593. The district used its program implementation funds for the following energy efficiency measures: Proposition 39 Reported Share Used Energy Annual Cost School Site at School Site Efficiency Measures Savings Alberta Martone Elementary $ 272,561 Interior/exterior lighting fixture retrofit $ 1 4,373 Bret Harte Elementary 62,701 Exterior lighting fixture retrofit 3,290 Burbank Elementary 29,461 Exterior lighting fixture retrofit 1,303 Catherine Everett Elementary 234,288 Interior/exterior lighting fixture retrofit; lighting controls 12,730 District Nutrition Services 147,379 Interior/exterior lighting fixture retrofit 11,941 El Vista Elementary 239,460 Interior/exterior lighting fixture retrofit 12,477 Elihu Beard Elementary 249,007 Interior/exterior lighting fixture retrofit 10,970 Enslen Elementary 190,593 Interior/exterior lighting fixture retrofit 8,920 Evelyn Hansahw Middle 74,342 Exterior lighting fixture retrofit; lighting controls 4,209 Fairview Elementary 42,267 Exterior lighting fixture retrofit 2,414 Franklin Elementary 22,998 Exterior lighting fixture retrofit 1,776 Harriette Kirschen Elementary 194,806 Interior/exterior lighting fixture retrofit; lighting controls 10,932 James Marshall Elementary 25,299 Exterior lighting fixture retrofit 1,247 John Fremont Elementary 275,072 Interior/exterior lighting fixture retrofit 14,778 John Muir Elementary 206,940 Interior/exterior lighting fixture retrofit; lighting controls 12,971 La Loma Junior High 37,236 Exterior lighting fixture retrofit; lighting controls 3,050 Lakewood Elementary 14,098 Exterior lighting fixture retrofit 8 90 Mark Twain Junior High 23,359 Exterior lighting fixture retrofit; lighting controls 2,610 Orville Wright Elementary 25,807 Exterior lighting fixture retrofit 1,933 Robertson Road Elementary 9 ,015 Exterior lighting fixture retrofit 7 65 Roosevelt Junior High 362,735 Interior/exterior lighting fixture retrofit; lighting controls 16,507 Rose Avenue Elementary 275,845 Interior/exterior lighting fixture retrofit 13,769 Shackelford Elementary 217,147 Interior/exterior lighting fixture retrofit; lighting controls 10,730 Sonoma Elementary 25,643 Exterior lighting fixture retrofit 1,374 Tuolumne Elementary 19,951 Exterior lighting fixture retrofit 8 79 William Garrison Elementary 275,830 Interior/exterior lighting fixture retrofit 14,221 Wilson Elementary 153,753 Interior/exterior lighting fixture retrofit 7,112 Total $ 3,707,593 $ 198,171 With these energy efficiency measures, the district reported a combined SIR of 1.06 and the creation of 20.76 direct job-years. In addition, the district received $230,589 in planning funds directly from the CDE, which it used for screening and audits. We audited Proposition 39 program costs to ensure compliance with the Audit Results Job Creation Fund program guidelines, as well as the CEC’s 2016 Program Implementation Guidelines and EEP Handbook. We identified the following audit issues. Unspent earned interest The district accumulated interest, totaling $22,163, on allocations it received from the Proposition 39 program. The district’s approved EEP was completed and the final report was submitted. The district applied all -A32- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program of its awarded Proposition 39 funds to all projects within its approved EEP. As the Proposition 39 program has ended and there are no remaining eligible energy projects on which the district can expend the earned interest, it should be returned to the Clean Energy Job Creation Fund. We notified CDE of the unspent earned interest on May 4, 2021. CDE responded by email on May 4, 2021, stating: Similar to the way CDE recovers interest on other funds, the district can send a check referencing the specific program and the funds will be credited accordingly. So there will not be an invoice. We sent instructions to Modesto City Elementary on how the district can return the unused interest earned on Prop 39 funds to CDE and will follow up with the district to assist with this recovery. The CEC’s 2016 Program Implementation Guidelines (“Interest Earned on Proposition 39 Funds,” page 10) state: Any interest earned on Proposition 39 funds shall be expended only toward Proposition 39 eligible energy projects. LEAs should make every effort to track interest earned from Proposition 39 allocations separately for use on Proposition 39 eligible energy projects and to facilitate auditing in accordance with PRC 26206(e) and 26240(h)(1). PRC section 26206(e) states, “All projects shall be subject to audit.” PRC section 26240(h)(1) states, “The Superintendent of Public Instruction shall require local educational agencies to pay back funds if they are not used in accordance with state statute or regulations…” Final project completion report submitted late The district’s final report was submitted on April 8, 2020, 16 months after the reported project completion date of December 15, 2018. PRC section 26240(b) states: As a condition of receiving funds from the Job Creation Fund…not sooner than one year but no later than 15 months after an entity completes its first eligible project with a grant, loan, or other assistance from the Job Creation Fund… the entity shall submit a report of its project expenditures to the Citizens Oversight Board…. Recommendation We recommend that the district return the unspent earned interest to the State. Although the Proposition 39 program has ended, the unspent funds must be returned. No additional recommendation is applicable, as the Proposition 39 program has ended. -A33- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program District’s Response We informed the district of the audit findings via email on May 4, 2021. Carole Phipps, Accountant – Capital Funds, responded via email on May 14, 2021. The district’s response to Finding 4 – Unspent earned interest, was “Acknowledged.” The district’s response to Finding 6 – Final project completion report submitted late, is as follows: JCI attempted to retrieve utility information from the Modesto Irrigation District [MID] for the report; however, due to COVID-19, MID was shut down temporarily while they reorganized to a work from home model. Once they were established it took some time to retrieve the numerous billings associated with the MCSD [Modesto City School District] project. During that time JCI was corresponding with the CEC Project Manager about the delay regularly to provide status updates and his approval. SCO Comment Our findings remain unchanged. -A34- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Mountain Empire Unified School District Proposition 39 Program Background The CEC approved Mountain Empire Unified School District’s EEP for $459,915, consisting of $45,833 for energy management services, $9,167 for training, and $404,915 for program implementation. The district used its program implementation funds for the following energy efficiency and renewable energy generation measures: Proposition 39 Energy Efficiency and Reported Share Used Renewable Energy Annual Cost School Site at School Site Generation Measures Savings Mountain Empire High $ 48,736 Exterior lighting fixture retrofit $ 4,382 Potrero Elementary 356,179 Photovoltaic (solar) 25,498 Total $ 404,915 $ 29,880 With these energy efficiency measures, the district reported a combined SIR of 1.20 and the creation of 1.77 direct job-years. In addition, the district received $114,629 in planning funds directly from the CDE, which it used for screening and audits, an energy manager, and training. Audit Results We audited Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CEC’s 2016 Program Implementation Guidelines and EEP Handbook. We identified the following audit issues. Sole-sourced project costs The district sole-sourced its contracts with IES for its energy manager and training services ($68,750), energy efficiency improvements and installation of solar systems ($497,175), and facility energy master plan services ($29,520). The district did not provide supporting documentation to show that it considered other vendors before awarding these contracts to IES. Therefore, we found that the district sole-sourced these Proposition 39 contracts, totaling $595,445. However, CEC approved only $574,544 for the district’s EEP. Because we audited only the amount approved by the CEC in the district’s final project completion report, we found that the district sole-sourced a total of $574,544. PRC section 26235(c) states, in part, “A community college district or LEA shall not use a sole source process to award funds pursuant to this chapter.” PRC section 26240(h)(1) states, “The Superintendent of Public Instruction shall require local educational agencies to pay back funds if they are not used in accordance with state statute or regulations…”. -A35- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program PUC section 388(b) states: The Department of General Services or any other state or local agency intending to enter into an energy savings contract or a contract for an energy retrofit project may establish a pool of qualified energy service companies based on qualifications, experience, pricing, or other pertinent factors. Energy service contracts for individual projects undertaken by any state or local agency may be awarded through a competitive selection process to individuals or firms identified in the pool. The pool of qualified energy service companies and contractors shall be reestablished at least every two years or shall expire. No projected energy savings identified and/or no signed contracts We reviewed the district’s contract with IES, and determined that the contract does not identify the projected energy savings. In addition, the district did not have a signed contract with IES for its facility energy master plan services. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” Final project completion report submitted late The district’s final report was submitted on July 1, 2019, 23 months after the reported project completion date of July 20, 2017. PRC section 26240(b) states: As a condition of receiving funds from the Job Creation Fund…not sooner than one year but no later than 15 months after an entity completes its first eligible project with a grant, loan, or other assistance from the Job Creation Fund…the entity shall submit a report of its project expenditures to the Citizens Oversight Board…. Recommendation We recommend that the CDE take appropriate action to recover Proposition 39 funds that the district expended on sole-sourced project costs, in violation of PRC section 26235(c). No additional recommendation is applicable, as the Proposition 39 program has ended. District’s Response We informed the district of the audit findings via email on March 11, 2021. The district did not respond to the audit findings. -A36- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Romoland School District Proposition 39 Program Background The CEC approved Romoland Elementary School District’s EEP for $839,484. The district used its program implementation funds for the following energy efficiency measures: Proposition 39 Reported Share Used Energy Annual Cost School Site at School Site Efficiency Measures* Savings Boulder Ridge Elementary $ 190,953 Interior lighting retrofit $ 3 0,422 Harvest Valley Elementary 375,467 Interior lighting retrofit; HVAC–Packaged/split system AC/Heat Pump/VRF 34,784 Mesa View Elementary 195,633 Interior lighting retrofit 35,799 Romoland Administration Office 3 3,341 Interior lighting retrofit 3,341 Romoland Elementary 4 4,090 Interior lighting retrofit 19,716 Total $ 839,484 $ 124,062 *HVAC: Heating, ventilation, and air conditioning; AC: air conditioning; VRF: variable refrigerant flow With these energy efficiency measures, the district reported a combined SIR of 1.58 and the creation of 4.70 direct job-years. In addition, the district received $42,400 in planning funds directly from the CDE, which it used for screening and audits. We audited Proposition 39 program costs to ensure compliance with the Audit Results Job Creation Fund program guidelines, as well as the CEC’s 2016 Program Implementation Guidelines and EEP Handbook. We identified the following audit issue: Ineligible expenditures We reviewed the district’s accounting ledgers and found that it received and expended $887,962 in Proposition 39 funds However, the district’s approved EEP, Number 5698, authorized only $881,884 in Proposition 39 expenditures. Therefore, the district’s expenditures, totaling $5,808, in excess of the approved EEP amount constitute ineligible expenditures. We notified CDE of the finding via email on June 14, 2021. The CDE responded by email on June 14, 2021, stating that it would contact the LEA. PRC section 26235(f) states: The Superintendent of Public Instruction shall not distribute funds to an LEA unless the LEA has submitted to the Energy Commission, and the Energy Commission has approved, an expenditure plan that outlines the energy projects to be funded. An LEA shall utilize a simple form expenditure plan developed by the Energy Commission. The Energy Commission shall promptly review the plan.…A portion of the funds may be distributed to an LEA upon request for energy audits and other plan development activities prior to submission of the plan. -A37- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program The CEC’s 2016 Program Implementation Guidelines (“Energy Planning Funds Reservation Option,” page 10) state: LEAs whose first year of eligibility was fiscal year 2013-14, the first year of the program, had the option of requesting a portion of that year’s award allocation for energy planning activities in 2013-14 without submitting an energy expenditure plan(s) to the Energy Commission. This option was available only for the fiscal year 2013-14 award allocation and was intended to be used for planning activities for subsequent fiscal years (2013-14 through 2017-18). The CEC’s 2016 Program Implementation Guidelines (“Unused Energy Planning Awards,” page 13) also state that “Any unused energy planning funds shall be applied toward implementing eligible energy project(s) approved as part of an LEA’s energy expenditure plan(s).” Final project completion report submitted late The district’s final report was submitted on November 25, 2019, 17 months after the reported project completion date of June 30, 2018. PRC section 26240(b) states: As a condition of receiving funds from the Job Creation Fund…not sooner than one year but no later than 15 months after an entity completes its first eligible project with a grant, loan, or other assistance from the Job Creation Fund…the entity shall submit a report of its project expenditures to the Citizens Oversight Board…. Recommendation We recommend that the CDE take appropriate action to recover Proposition 39 funds that the district expended on project costs that are not in compliance with the 2016 Program Implementation Guidelines. No additional recommendation is applicable, as the Proposition 39 program has ended. District’s Response We informed the district of the audit findings via email on February 16, 2021. Keith Bacon, Chief Business Official, responded by letter dated February 26, 2021. The district’s response letter is included as Attachment D. The district’s response to Finding 6 – Final project completion report submitted late, is as follows: The district regrets this tardiness of filing. There were various vendor- related issues that delayed the completion of these documents and as a result, they were submitted late. It is always the intention of the district to submit documentation within required deadlines, and this is an unusual occurrence for these to have been submitted late. In the future, we will provide a better framework [for] submissions of this type. -A38- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program The district’s response to Finding 3 – Ineligible expenditures, is as follows: The district is holding these funds in reserve to be collected by the California Department of Education (CDE) or to be utilized as instructed, once we have received guidance. A project of this magnitude is likely to have a different final expenditure total than planned and this is the result [of] such an occurrence. In future projects, we will be mindful of the planning process to ensure complete expenditure of all revenues collected for projects such as this. -A39- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program San Francisco Unified School District Proposition 39 Program Background The CEC approved San Francisco Unified School District’s EEP for $1,177,670, consisting of $205,200 for energy management services and $972,470 for program implementation. The district used its program implementation funds for the following energy efficiency measures: Proposition 39 Reported Share Used Energy Annual Cost School Site at School Site Efficiency Measures* Savings Interior lighting fixture retrofit; DHW (domestic hot water) heater; Chin (John Yehall) Elementary $ 427,470 HVAC–chiller/boiler replacement; building envelope–windows/skylights $ 3,525 Interior lighting fixture retrofit; HVAC–chiller/boiler replacement; El Dorado Elementary 545,000 building envelope–windows/skylights 4,858 Total $ 972,470 $ 8,383 *HVAC: Heating, ventilation, and air conditioning With these energy efficiency measures, the district reported a combined SIR of 1.33 and the creation of 5.45 direct job-years. In addition, the district received $723,104 in planning funds directly from the CDE, which it used for screening and audits, and program assistance. Audit Results We audited Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CEC’s 2016 Program Implementation Guidelines and EEP Handbook. We identified the following audit issues. Sole-sourced project costs The district sole-sourced its contract, totaling $32,074, with Strategic Energy Innovations for several different services, including conservation management. The district did not provide supporting documentation to show that it considered other vendors before awarding its contract to Strategic Energy Innovations. Therefore, we found that the district sole- sourced this Proposition 39 contract, totaling $32,074. PRC section 26235(c) states, in part, “A community college district or LEA shall not use a sole source process to award funds pursuant to this chapter.” PRC section 26240(h)(1) states, “The Superintendent of Public Instruction shall require local educational agencies to pay back funds if they are not used in accordance with state statute or regulations….” PUC section 388(b) states: The Department of General Services or any other state or local agency intending to enter into an energy savings contract or a contract for an energy retrofit project may establish a pool of qualified energy service companies based on qualifications, experience, pricing, or other -A40- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program pertinent factors. Energy service contracts for individual projects undertaken by any state or local agency may be awarded through a competitive selection process to individuals or firms identified in the pool. The pool of qualified energy service companies and contractors shall be reestablished at least every two years or shall expire. No projected energy savings identified and/or no signed contract We reviewed the district’s contracts with Vila Construction, and Zolman Construction & Development, and determined that the contracts do not identify the projected energy savings. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” Recommendation We recommend that the CDE take appropriate action to recover Proposition 39 funds that the district expended on sole-sourced project costs, in violation of PRC section 26235(c). No additional recommendation is applicable, as the Proposition 39 program has ended. District’s Response We informed the district of the audit findings via email on May 20, 2021. The district did not respond to the audit findings. -A41- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program San Juan Unified School District Proposition 39 Program Background The CEC approved San Juan Unified School District’s EEP Number 1895 for $683,383, consisting of $62,000 for energy management services and $621,383 for program implementation. In addition, the CEC approved the district’s EEP Number 1897 for $1,796,672. The district used its program implementation funds for the following energy efficiency and renewable energy generation measures: Proposition 39 Energy Efficiency and Reported Share Used Renewable Energy Annual Cost School Site at School Site Generation Measures* Savings EEP #1895: Interior/exterior lighting fixture retrofit; Encina Preparatory High $ 587,510 HVAC–chiller/boiler replacement $ 2 6,755 Transportation Center – San Juan Unified 3 3,873 Exterior lighting fixture retrofit 2,065 Total, EEP #1895 $ 621,383 $ 2 8,820 EEP #1897: Interior lighting fixture retrofit; Bella Vista High $ 1 ,796,672 photovoltaic (solar) $ 122,680 Total, EEP #1897 $ 1 ,796,672 $ 122,680 *HVAC: Heating, ventilation, and air conditioning With the energy efficiency measures from EEP Number 1895, the district reported a combined SIR of 1.16 and the creation of 3.48 direct job-years. With the energy efficiency and renewable energy generation measures from EEP Number 1897, the district reported a combined SIR of 1.11 and the creation of 7.55 direct job-years. In addition, the district received $536,164 in planning funds directly from the CDE, which it used for screening and audits, program assistance, and an energy manager. We audited Proposition 39 program costs to ensure compliance with the Audit Results Job Creation Fund program guidelines, as well as the CEC’s 2016 Program Implementation Guidelines and EEP Handbook. We identified the following audit issues. No projected energy savings identified and/or no signed contract The district did not have a signed contract with Innovative Construction Services for its Proposition 39 planning services. For EEP Number 1895 and EEP Number 1897, we reviewed the district’s contracts with IES and determined that the contracts do not include the projected energy savings. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” -A42- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Final project completion report submitted late For EEP Number 1895, the district’s final report was submitted on November 4, 2019, 23 months after the reported project completion date of December 31, 2017. PRC section 26240(b) states: As a condition of receiving funds from the Job Creation Fund…not sooner than one year but no later than 15 months after an entity completes its first eligible project with a grant, loan, or other assistance from the Job Creation Fund…the entity shall submit a report of its project expenditures to the Citizens Oversight Board…. Recommendation No recommendation is applicable, as the Proposition 39 program has ended. District’s Response We informed the district of the audit findings via email on May 6, 2021. The district did not respond to the audit findings. -A43- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Sunnyside Union School District Proposition 39 Program The CEC approved Sunnyside Union Elementary School District’s EEP Background for $218,192, consisting of $21,779 for energy management services, $4,356 for training, and $192,057 for program implementation. The district used its program implementation funds for the following energy efficiency measures: Proposition 39 Reported Share Used Energy Annual Cost School Site at School Site Efficiency Measures Savings Interior/exterior lighting retrofit; interior linear fluorescent relamping; Sunnyside Elementary $ 192,057 HVAC Controls–Energy Management System $ 10,056 *HVAC: Heating, ventilation, and air conditioning With these energy efficiency measures, the district reported a combined SIR of 1.11 and the creation of 1.08 direct job-years. Audit Results We audited Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CEC’s 2016 Program Implementation Guidelines and EEP Handbook. We identified the following audit issues. Unspent funds The district was awarded $272,590 in implementation funds. The district used only $227,443 of its implementation funds. Therefore, the district has total unspent funds of $45,147. On February 22, 2021, we notified CDE of the unspent funds. Prior to issuance of this report, CDE followed up with the district to recover the unspent funds. The CEC’s 2016 Program Implementation Guidelines state on page 5: The SSPI is responsible for administering awards to LEAs that serve grades K-12 students. These funds may be used by LEAs for energy efficiency and clean energy projects, related energy planning, energy training, energy management, and energy projects with related non- energy benefits. LEAs are required to submit an energy expenditure plan to the Energy Commission for consideration and approval. Funds are released to the LEA only after the Commission approves an LEA’s energy expenditure plan(s). PRC section 26240(b) states, “As a condition of receiving funds from the Job Creation Fund…the entity shall submit a report of its project expenditures to the Citizens Oversight Board….” -A44- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Public Resources Code section 26240(h)(1) states, “The Superintendent of Public Instruction shall require local educational agencies to pay back funds if they are not used in accordance with state statute or regulations…” No projected energy savings identified and/or no signed contract We reviewed the district’s contracts with IES and Trane Energy Solutions, and determined that the contracts do not identify the projected energy savings. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” Recommendation We recommend that the district return the unspent funds to the State. Although the Proposition 39 program has ended, the unspent funds must be returned. No additional recommendation is applicable, as the Proposition 39 program has ended. District’s Response We informed the district of the audit findings via email on February 22, 2021. Steve Tsuboi, Superintendent-Principal, responded by letter dated March 2, 2021. The district’s response letter is included as Attachment E. The district’s response to Finding 2 – Unspent funds, is as follows: The district agrees with this finding and currently has these funds in an identified account, pending request for return. The district’s response to Finding 5 – No projected energy savings identified and/or no signed contract, is as follows: The district agrees with the finding, although the Projected Energy Savings is located in other documents. The district provided such documents from Trane and an email response from IES and their justification. -A45- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Thermalito Union Elementary School District Proposition 39 Program Background The CEC approved Thermalito Union Elementary School District’s EEP for $590,003, which consists of $11,599 for an energy manager and $578,404 for program implementation. The district used its program implementation funds for the following energy efficiency measures: Proposition 39 Reported Share Used Energy Annual Cost School Site at School Site Efficiency Measures* Savings Interior/exterior lighting retrofit; HVAC Controls– District Office $ 14,277 Programmable/Smart Thermostats $ 924 Interior/exterior lighting retrofit; HVAC Controls– Heritage Community Day 2 0,648 Programmable/Smart Thermostats 6 46 Maintenance 1 1,510 Interior/exterior lighting retrofit 1,049 Interior/exterior lighting retrofit; HVAC Controls– Programmable/Smart Thermostats; retrofit interior lamps to Nelson Avenue Middle 176,814 LED; LED exit signs 8,813 Interior/exterior lighting retrofit; HVAC Controls– Pioneer Community Day 1 7,163 I nPterorigorra/emxmtearbioler /lSigmhtainrtg T rheetrromfiot;s tHatVsAC Controls– 6 09 Programmable/Smart Thermostats; retrofit interior lamps to Plumas Avenue Elementary 9 9,569 LED 5,748 Interior/exterior lighting retrofit; HVAC Controls– Poplar Avenue Elementary 112,442 Programmable/Smart Thermostats; retrofit interior lamps to 6,548 Interior/exterior lighting retrofit; HVAC Controls– Programmable/Smart Thermostats; HVAC– Sierra Avenue Elementary 125,981 Packaged/split system AC/heat pump/VRF 5,475 Total $ 578,404 $ 2 9,812 *HVAC: Heating, ventilation, and air conditioning; LED: light-emitting diode; VRF: variable refrigerant flow With these energy efficiency measures, the district reported a combined SIR of 1.06 and the creation of 3.24 direct job-years. Audit Results We audited Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CEC’s 2016 Program Implementation Guidelines and EEP Handbook. We identified the following audit issues. No projected energy savings identified and/or no signed contract We reviewed the district’s contract with IES, and determined that the contract does not identify the projected energy savings. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” Final project completion report submitted late The district’s final report was submitted on September 25, 2019, 19 months after the reported project completion date of February 28, 2018. -A46- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program PRC section 26240(b) states: As a condition of receiving funds from the Job Creation Fund…not sooner than one year but no later than 15 months after an entity completes its first eligible project with a grant, loan, or other assistance from the Job Creation Fund…the entity shall submit a report of its project expenditures to the Citizens Oversight Board…. Recommendation No recommendation is applicable, as the Proposition 39 program has ended. District’s Response We informed the district of the two audit findings via email on February 16, 2021. Cody Walker, Assistant Superintendent, responded via email on February 17, 2021, stating that the district does not have a response to the findings. -A47- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Allan Hancock Joint Community College District Proposition 39 Program Background The California Community Colleges Chancellor’s Office (CCCCO) approved Allan Hancock Joint Community College District’s Proposition 39 Funding Application (Form B) for $1,061,036. The district used its program implementation funds for the following renewable energy generation measure: Proposition 39 Year 1 Savings-to- Direct Share Used Renewable Energy Cost Investment Job-Years School Site at School Site Generation Measures* Savings Ratio Created ALLANH-1617-001 Lompoc Valley Center $ 1 ,061,036 20 kW PV System Total $ 1,061,036 $ 4 5,509 1.27 4.50 *kW: Killwatt; PV: photovoltaic Audit Results We audited Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CCCCO’s Proposition 39 Implementation Guidelines. We identified the following audit issues. Sole-sourced project costs The district sole-sourced its contracts with the following vendors:  JMPE Electrical Engineering Lighting Design (JMPE) − $9,200 for engineering services;  Ravatt, Albrecht & Associates Inc. − $29,265 for design and bidding construction;  John R. Byerly Inc. − $23,059 for engineering and inspection;  Tom Little Inspection − $30,515 for DSA inspection services; and  J&P Construction, Inc. − $34,513 for accessible parking lot resurfacing. The district did not provide supporting documentation to show that it considered other vendors before awarding contracts to JMPE, Ravatt, Albrecht & Associates Inc., John R. Byerly Inc., Tom Little Inspection, and J&P Construction, Inc. Therefore, we found that the district sole- sourced these Proposition 39 contracts, totaling $126,552. In addition, we found that the contract with J&P Construction, Inc., totaling $34,513, was for ineligible expenditures (see “Ineligible expenditures,” on page A50). The district signed and certified in its application that the funding would be used for the energy projects identified in its application. -A48- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program PRC section 26235(c) states, in part, “A community college district or LEA shall not use a sole source process to award funds pursuant to this chapter.” PRC section 26240(h)(2) states, in part, “The Chancellor of the California Community Colleges shall require a community college to pay back funds if they are not used in accordance with state statute or regulations…”. The CCCCO’s Proposition 39 Implementation Guidelines (“Step 9. Fully Develop Project Workscope, Schedule and Contracts for Project Implementation,” page 21) states, in part: Districts shall not use a sole-source process to award grant proceeds. Districts may use the best-value criteria as defined in paragraph (1) of subdivision (c) of Section 20133 of the Public Contract Code to award funds. Best value is defined as “a value determined by objective criteria related to price, features, functions, and life-cycle costs.” Exhibit N (Contracting “Best Practices” Fact Sheet) of the CCCCO’s Proposition 39 Implementation Guidelines states: To fully comply with that “Best Value” criteria and the prohibition against sole source contracting when utilizing [its] Prop 39 funds, a District will need to engage in a two-step process that accomplishes the following: 1. Request for Qualification (RFQ): Pre-qualifies energy project contractors based on several criteria including energy project history, team member qualifications, firm financial viability, and experience working with Community Colleges, AND 2. Request for Proposals (RFP): Identifies and evaluates the specific project workscope, schedule, and other requirements where multiple contractors (at least two, three would be better) submit proposals for District evaluation and consideration. Typically, the RFP should include the following elements and respondent submittal requirements:  Proposed workscope  Request price and life-cycle economics  Technical proposal and identification of specific equipment to be installed  Energy savings  Project approach  Schedule  Exceptions Exhibit N continues: A comprehensive RFQ/RFP evaluation process should always be used when implementing Proposition 39 funded projects. This process can either be combined into a single solicitation, or can use a two-step, separate RFQ & RFP process. -A49- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Ineligible expenditures We reviewed the invoice from Jeff Ploutz Construction, Inc. (dba J&P Construction), and determined that the district applied Proposition 39 funds to project costs not included in the application approved by the CCCCO. The district’s contractor for the solar installation project, Elevated Solar Performance, Inc., did not submit a change order for asphalt repair or indicate that it was required. In addition, the district described the scope of work as “ADA Parking Lot Resurfacing” and did not execute a contract with J&P Construction, Inc., which would have clarified the scope of work involved. Therefore, we found that $34,513 for resurfacing the accessible parking lot is ineligible for Proposition 39 funding. As discussed earlier in these audit results, we also found that this amount was sole-sourced. The district signed and certified in its application that the funding would be used for the energy projects identified in its application. The CCCCO’s Proposition 39 Implementation Guidelines (“Step 10. Energy Project Implementation,” page 22) states: Districts will be responsible for the implementation of projects funded by Proposition 39. If, after approval and during implementation of a project, the scope changes such that the energy savings, construction costs, or cost-effectiveness are significantly affected, the Chancellor’s Office will require that Districts provide a revised Project Application (Form B) documenting the change of scope.… Step 10 of the CCCCO’s Proposition 39 Implementation Guidelines also includes “adding a project not included in the approved Funding Application” in the list of significant changes. No projected energy savings identified and/or no signed contract We reviewed the district’s supporting documentation and found that no contract was prepared for services provided by J&P Construction. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” The CCCCO’s Proposition 39 Implementation Guidelines (“Step 9. Fully Develop Project Workscope, Schedule and Contracts for Project Implementation,” page 21) states, “Projects funded by awards shall require contracts that identify the project specifications, costs, and projected energy savings.” Recommendation We recommend that the CCCCO take appropriate action to recover Proposition 39 funds that the district expended on sole-sourced project costs, in violation of PRC section 26235(c). No additional recommendation is applicable, as the Proposition 39 program has ended. -A50- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program District’s Response We informed the district of the three audit findings via email on May 19, 2021. Laura Becker, Director of Business Services, responded via email on June 1, 2021. The district’s response to Finding 1 – Sole-sourced project costs, is as follows: It is the District’s belief that the contracts in question were appropriately procured at the time the contracts were signed. During the time of this project, the District moved to a new financial system and our Purchasing Supervisor’s computer hard drive [which stored most, if not all, of the procurement records] crashed.... The Business Services offices have since moved to storing all documents on a server to prevent this from re- occurring in the future. In addition, all of the Allan Hancock employees associated with this project have since retired. The District has completed an extensive search of email accounts of those employees and was unable to locate documentation to substantiate that appropriate procurement provisions were followed. The district’s response to Finding 3 – Ineligible expenditures, is as follows: The District concurs that it did not submit a revised Project Application (Form B) to the Chancellor’s Office documenting the change in scope for the additional expense of the ADA Parking Lot Resurfacing. The district’s response to Finding 5 – No projected energy savings identified and/or no signed contract, is as follows: The District has adopted the State of California Uniform Public Construction Cost Accounting (CUPCCA) informal bidding procedures. Public Contract Code 22032 states “…(b) Public projects of two hundred thousand dollars ($200,000) or less may be let to contract by informal procedures…”. The District followed the CUPCCA procurement process for the contract in question. SCO Comment Our findings and recommendation remains unchanged. Although the district adopted the CUPCCA informal bidding procedures, the scope of our audit is to ensure compliance with applicable state statutes and regulations, which require that all projects shall require contracts that identify the project specifications, costs, and projected energy savings. -A51- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Foothill–De Anza Community College District Proposition 39 Program Background The CCCCO approved Foothill–De Anza Community College District’s Proposition 39 Funding Application (Form B) for $2,726,499. The district used its program implementation funds for the following energy efficiency measures: Proposition 39 Year 1 Savings-to- Direct Share Used Energy Cost Investment Job-Years School Site at School Site Efficiency Measures* Savings Ratio Created FOOTHI-1314-005 De Anza College $ 5 45,848 Pool boiler and distribution retrofit De Anza College 1 33,326 HHW pump VFD retrofit 6 79,174 $ 5 3,215 1.64 4.00 FOOTHI-1415-006 Foothill College 1 95,548 Foothill library boiler replacement and pump upgrade with VFD 1 95,548 5 ,701 1.64 1.11 FOOTHI-1718-001 De Anza College 8 82,239 ATC central chilled water plant cooling towers 8 82,239 7 4,327 1.66 4.94 FOOTHI-1718-002 De Anza College 9 69,538 De Anza exterior LED & stelling garage LED 9 69,538 5 7,974 1.58 5.43 Total $ 2,726,499 $191,217 *HHW: Heating hot water; VFD: variable-frequency drive; ATC: Automatic Temperature Control; LED: light-emitting diode Audit Results We audited Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CCCCO’s Proposition 39 Implementation Guidelines. We identified the following audit issues. Sole-sourced project costs The district sole-sourced its contracts with the following vendors:  Gilbane Building Co. − $88,078 for construction and design management;  Axiom Engineers Inc. − $117,900 for design and professional services;  HP Inspections Inc. − $5,620 for special inspections and construction; and  Clean Harbors Environmental Services Inc. − $8,143 for cleaning and pressure washing cooling towers. The district did not provide supporting documentation to show that it considered other vendors before awarding contracts to Gilbane Building Co., Axiom Engineers Inc., HP Inspections Inc., and Clean Harbors Environmental Services Inc.. Therefore, the district sole-sourced these Proposition 39 contracts, totaling $219,741. -A52- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program PRC section 26235(c) states, in part, “A community college district or LEA shall not use a sole source process to award funds pursuant to this chapter.” PRC section 26240(h)(2) states, in part, “The Chancellor of the California Community Colleges shall require a community college to pay back funds if they are not used in accordance with state statute or regulations…”. The CCCCO’s Proposition 39 Implementation Guidelines (“Step 9. Fully Develop Project Workscope, Schedule and Contracts for Project Implementation,” page 21) states, in part: Districts shall not use a sole-source process to award grant proceeds. Districts may use the best-value criteria as defined in paragraph (1) of subdivision (c) of Section 20133 of the Public Contract Code to award funds. Best value is defined as “a value determined by objective criteria related to price, features, functions, and life-cycle costs.” Exhibit N (Contracting “Best Practices” Fact Sheet) of the CCCCO’s Proposition 39 Implementation Guidelines states: To fully comply with that “Best Value” criteria and the prohibition against sole source contracting when utilizing [its] Prop 39 funds, a District will need to engage in a two-step process that accomplishes the following: 1. Request for Qualification (RFQ): Pre-qualifies energy project contractors based on several criteria including energy project history, team member qualifications, firm financial viability, and experience working with Community Colleges, AND 2. Request for Proposals (RFP): Identifies and evaluates the specific project workscope, schedule, and other requirements where multiple contractors (at least two, three would be better) submit proposals for District evaluation and consideration. Typically, the RFP should include the following elements and respondent submittal requirements:  Proposed workscope  Request price and life-cycle economics  Technical proposal and identification of specific equipment to be installed  Energy savings  Project approach  Schedule  Exceptions Exhibit N continues: A comprehensive RFQ/RFP evaluation process should always be used when implementing Proposition 39 funded projects. This process can either be combined into a single solicitation, or can use a two-step, separate RFQ & RFP process. -A53- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program No projected energy savings identified and/or no signed contract We reviewed the district’s contracts with Environmental Systems Inc., Kitchell CEM Inc., Comfort Dynamics Inc., and Clear Blue Energy Corp., and determined that the contracts do not identify the projected energy savings. In addition, no contract was prepared for services provided by American Reprographics Co. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” The CCCCO’s Proposition 39 Implementation Guidelines (“Step 9. Fully Develop Project Workscope, Schedule and Contracts for Project Implementation,” page 21) states, “Projects funded by awards shall require contracts that identify the project specifications, costs, and projected energy savings.” Recommendation We recommend that the CCCCO take appropriate action to recover Proposition 39 funds that the district expended on sole-sourced project costs, in violation of PRC section 26235(c). No additional recommendation is applicable, as the Proposition 39 program has ended. District’s Response We informed the district of the audit finding via email on May 19, 2021. Susan Cheu, Vice-Chancellor, Business Services, responded by letter dated June 1, 2021. The district’s response letter is included as Attachment F. The district’s response to Finding 1 – Sole-sourced project costs, is as follows: Gilbane Building Co. – This contract leveraged the competitive bid award RFP No. 1073 to Gilbane for Construction Management / Program Management awarded in 2007 as part of District Measure C. This contract was separate from, but related to an existing Measure C project contract with Gilbane for the provision of long-term construction/project management services. As such, Gilbane is an integral part of District’s construction/program management services, and thus uniquely qualified. In addition, the Public Contract Code § 20652 allows us to leverage other agencies competitive bid contracts, in this case we leveraged our own competitive bid contract. By leveraging the competitive bid procurement process and existing relationship with Gilbane, they were able to begin work immediately and expedite the project. Axiom Engineers – The original agreement ($99,800) was submitted to the governing board and approved on 04/02/2018. This contract was awarded based on Government Code §53060 Special/Professional Services. Note the Board Agenda item states “… during the contracting phase, Axiom will assist in the bid process.” A subsequent change order in the amount of $18,100 was approved by the governing board on 02/04/2019. -A54- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program HP Inspectors – This contract did not exceed the District’s small purchase threshold (per Purchasing Policy BP 3140, contracts greater than $10,000 require competitive bid process) which is stricter than Federal small purchase threshold of $100,000. In addition, special/professional services are not required to go out to bid per Government Code 4525. Clean Harbors – this contract leveraged the competitive bid award RFP No. 1739 [Hazardous Materials] Waste Collection Services approved by the governing board on 12/07/2015. This contract was separate but related to the hazardous material services provided by Clean Harbors in the RFP, and awarded through the [California Uniform Public Construction Cost Accounting Act] process. In addition, this separate contract did not exceed the District’s small purchase threshold (per Purchasing Policy BP 3140, contracts greater than $10,000 require competitive bid process) which is stricter than [the] Federal small purchase threshold of $100,000. The district’s response to Finding 5 – No projected energy savings identified and/or no signed contract, is as follows: The district was under the impression that the project review by NAM [Newcomb Anderson McCormick] would suffice to meet the requirement for statement of energy savings. It acknowledges that it did not include this information in the noted contracts…. [Regarding] American Reprographics Co., due to the low dollar amount, this [contract] was not required to go to bid. SCO Comment Our findings and recommendation remain unchanged. The scope of our audit was to ensure compliance with state statutes and regulations. The district cites reliance on Government Code section 53060, Public Contract Code section 20652, and its own procurement policies to support its use of sole-sourced contracts. However, PRC section 26235(c) states: A community college district or LEA shall not use a sole source process to award funds pursuant to this chapter. A community college or LEA may use the best value criteria as defined in paragraph (1) of subdivision (c) of Section 20133 of the Public Contract Code to award funds pursuant to this chapter [emphasis added]. Furthermore, the CCCCO’s Proposition 39 Implementation Guidelines (“Step 9. Fully Develop Project Workscope, Schedule and Contracts for Project Implementation,” page 21) states, in part, These Guidelines defer to the District’s own procurement regulations and procedures as long as they reflect applicable state and local laws and regulations and are not in conflict with the minimum standards specified below:  Projects funded by awards shall require contracts that identify the project specifications, costs, and projected energy savings. -A55- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program  Districts shall follow applicable law related to contractor qualifications, licensing, and certification requirements related to the project.  Districts shall not use a sole‐source process to award grant proceeds. Districts may use the best value criteria as defined in paragraph (1) of subdivision (c) of Section 20133 of the Public Contract Code to award funds. Best value is defined as “a value determined by objective criteria related to price, features, functions, and life‐cycle costs” [emphasis added]. As noted in the body of the finding, Exhibit N of the CCCCO’s Proposition 39 Implementation Guidelines provides additional guidance for college districts on how to best comply with the Proposition 39 Program prohibition against sole-source bids. Concerning the district’s contract with Gilbane Building Co., the bidding process cited in the district’s response took place in 2006. The initial contract with Gilbane Building Co., which resulted from that bidding process, was in effect from July 1, 2008, through June 30, 2009. The Proposition 39 contract with Gilbane Building Co. was in effect from January 1, 2019, through December 31, 2019. Because the RFQ process was conducted 13 years prior to the Proposition 39 project and involved the issuance of two separate contracts for widely different time periods, we concluded that the district relied on its previous experience with this vendor rather than conducting a new bidding process. A competitive bidding process would have allowed other vendors to compete for the related energy work at the district. Therefore, although the district followed other provisions contained in state statutes related to contracting, and its own procurement regulations and procedures, we found that it did not follow the requirements of PRC section 26235(c) for its contracts with Gilbane Building Co., Axiom Engineers Inc., HP Inspections Inc., and Clean Harbors Environmental Services Inc. -A56- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Glendale Community College District Proposition 39 Program Background The CCCCO approved Glendale Community College District’s Proposition 39 Funding Application (Form B) for $1,913,134. The district used its program implementation funds for the following energy efficiency measures: Proposition 39 Year 1 Savings-to- Direct Share Used Energy Cost Investment Job-Years School Site at School Site Efficiency Measures* Savings Ratio Created GLENDA-1415-001 Advanced Tech HVAC Controls–Economizer – Glendale Community College $ 8 0,165 Electric Savings Advanced Tech HVAC Controls–Economizer – Glendale Community College 1 16,082 Gas Savings Library HVAC Controls–Economizer – Glendale Community College 1 16,082 Electric Savings Glendale Community College 1 16,082 Library HVAC Controls–Economizer – Gas Savings 4 28,411 $ 4 1,983 1.39 3.52 GLENDA-1718-001 Glendale Community College 5 99,402 Stadium Lighting Retrofit 5 99,402 $ 1 4,355 1.39 3.46 GLENDA-1718-002 Glendale Community College 1 95,232 Verdugo Gym BAS Upgrade 1 95,232 $ 1 9,389 1.39 2.00 GLENDA-1718-003 Glendale Community College 6 90,089 San Gabriel BAS Upgrade 6 90,089 $ 5 1,325 1.39 6.62 Total $ 1,913,134 $ 127,052 *HVAC: Heating, ventilation, and air conditioning; BAS: building automation system Audit Results We audited Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CCCCO’s Proposition 39 Implementation Guidelines. We identified the following audit issue. No projected energy savings identified and/or no signed contract We reviewed the district’s contracts with Rosendin Electric for the Stadium Lighting project, Sunbelt Controls for the Verdugo Gym – BAS project, and Emcor Services (Mesa Energy Systems, Inc.) for the San Gabriel – BAS project, and determined that the contracts do not identify the projected energy savings. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” -A57- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program The CCCCO’s Proposition 39 Implementation Guidelines (“Step 9. Fully Develop Project Workscope, Schedule and Contracts for Project Implementation,” page 21) states, “Projects funded by awards shall require contracts that identify the project specifications, costs, and projected energy savings.” Recommendation No recommendation is applicable, as the Proposition 39 program has ended. District’s Response We informed the district of the audit findings via email on May 20, 2021. Susan Courtey, Director of Business Services, responded by letter dated June 1, 2021. The district’s response letter is included as Attachment G. The district’s response to the audit finding is as follows: The projected and expected energy savings for the District’s energy conservation measures were included in the Energy Efficiency Measure (EEM) Matrix as part of Board Resolution No. 24-2018-2019 approved at the June 18, 2019 board meeting. The Prop 39 EEMs (1-4) were noted as such in the matrix submitted in support of the energy conservation measures. The scopes of work and the specifications that were required to be implemented by qualified contractors to generate the savings were included in the RFPs issued for each respective project. Due to the complexity of the systems and the fact that all components of the systems need to work together to achieve the optimum savings, each RFP listed very detailed scopes of work and specifications along with the expectations for the contractor’s installation and the required performance of those systems. The contractor requirements also included the commissioning and an extended guarantee for the systems. The energy savings numbers were not expressly included in the RFPs partially because it would have created confusion around whether or not a contractual savings guarantee was required by respective bidders rather than the system as a whole and more importantly would have limited the contractor’s that would have been able to respond. The college was looking for contractors with the most cost effective skilled trade labor to implement the systems as a whole. Traditional mechanical, electrical, and controls contractors don’t necessarily have in-house energy engineers and might have considered themselves disqualified by an RFP with implied energy savings guarantees. In order to make sure the most qualified contractors responded to the RFPs and at the lowest cost, the energy savings and project budgets included in Board Resolution No. 24-2018-2019 were generated by the District, prior to the projects and associated RFPs being approved by the Board. The systems covered under the agreement are complex and are a combination of following components:  The projected energy savings approved by the Board Resolution  The comprehensive specifications of the RFP  The obligations under the individual contracts  The required performance of the system -A58- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Based upon the foregoing, it is the District’s position that these components taken as whole would equate to contracts that identify project specification, costs, and projected energy savings that would fall within the intent of PRC Section 26206(d). SCO Comment Our finding remains unchanged. Although we recognize that the district participated in the program to the best of its ability, the scope of our audit is to ensure compliance with state statute and regulations, which require that the projected energy savings be identified in the awarded contract. -A59- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program San Francisco Community College District Proposition 39 Program Background The CCCCO approved San Francisco Community College District’s Proposition 39 Funding Application (Form B) for $2,483,902. The district used its program implementation funds for the following energy efficiency measures: Proposition 39 Year 1 Savings-to- Direct Share Used Energy Cost Investment Job-Years School Site at School Site Efficiency Measures* Savings Ratio Created SANFRA-1516-001 San Francisco Downtown CC Center $ 602,567 Downtown Center–Boiler Replacement San Francisco Downtown CC Center 456,138 Downtown Center–VFD add-on to CHW and HHW Pumps San Francisco Downtown CC Center 363,795 Downtown Center–Replace chiller San Francisco Downtown CC Center 132,778 Downtown Center–Replace cooling tower San Francisco Downtown CC Center 439,940 Downtown Center–Controls upgrade San Francisco Downtown CC Center 358,078 Downtown Center–AHU motor VFDs and controls San Francisco Downtown CC Center 130,606 Downtown Center–AHU motor replacement Total $ 2,483,902 $ 188,644 1.18 19.75 *VFD: Variable-frequency drive; CHW: chilled water; HHW: heating hot water; AHU: air handling unit Audit Results We audited Proposition 39 program costs to ensure compliance with the Job Creation Fund program guidelines, as well as the CCCCO’s Proposition 39 Implementation Guidelines. We identified the following audit issue: No projected energy savings identified and/or no signed contract We reviewed the district’s contract with Southland Industries, and determined that the contract does not identify the projected energy savings. PRC section 26206(d) states, “All projects shall require contracts that identify the project specifications, costs, and projected energy savings.” The CCCCO’s Proposition 39 Implementation Guidelines (“Step 9. Fully Develop Project Workscope, Schedule and Contracts for Project Implementation,” page 21) states, “Projects funded by awards shall require contracts that identify the project specifications, costs, and projected energy savings.” Recommendation No recommendation is applicable, as the Proposition 39 program has ended. District’s Response We informed the district of the audit finding via email on March 15, 2021. Marian Lam, Assistant Director of Capital Planning, responded via email on March 25, 2021. -A60- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program The district’s response to the finding is as follows: The district’s contract with Southland Industries comprises scope of work and basis of design of projected energy savings as identified by Enpowered Solutions (formerly Enernoc and Cogent Energy) and energy calculations provided by Newcomb Anderson McCormick (NAM). 1. Enpowered Solutions prepared a report for the District with energy savings measures for Prop. 39 along with project scope. The Downtown Center was one of those identified projects. 2. NAM (now Wildan Energy) assisted the District with completing all required Prop. 39 paperwork for submission to the State. NAM provided the energy calculations based on the design and submitted it and received approval for the Prop. 39 funding. 3. The design team from S&K Engineers provided engineering for the scope of the project as outlined by Enpowered, and developed plans and specifications for bidding based on the projected energy savings calculations from NAM that [were] approved by the State for Prop. 39 funding. 4. The district awarded the contract to Southland Industries. On Page 2 of 4 of the Agreement Form it is stipulated that: The parties hereto incorporate by reference herein the Contract Documents, which include: 1. The Drawings and Specifications, 2. The General Conditions and any Supplemental or Special Conditions, 3. The Bid Documents (as Defined in the Instructions to Bidders), and 4. Any documents incorporated by reference into the foregoing documents. The Energy Conservation Audit Report developed by Enpowered Solutions and the energy calculations provided by NAM are not specifically named in the contract documents but were reference documents shared with the engineer as the basis of design to create the project scope, generate drawings and specifications, and were integral in all aspects of this project. These reference documents were also shared with the contractor, Southland Industries, that constructed and executed the plans. SCO Comment Our finding remains unchanged. We agree that the district identifies the projected energy savings in the Energy Conservation Audit Report prepared by Enpowered Solutions, and in the calculations provided by NAM. However, these two documents were not referenced as part of the district’s contract documents. The scope of our audit is to ensure compliance with state statutes and regulations, which require that the projected energy savings be identified in the awarded contract. -A61- Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Attachment A— Antelope Valley Union High School District’s Response to Audit Results Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Attachment B— Children of Promise Preparatory Academy’s Response to Audit Results Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Attachment C— Madera Unified School District’s Response to Audit Results Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Attachment D— Romoland School District’s Response to Audit Results Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Attachment E— Sunnyside Union School District’s Response to Audit Results Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Attachment F— Foothill De Anza Community College District’s Response – to Audit Results Program Audit of the California Clean Energy Jobs Act Proposition 39 Program Attachment G— Glendale Community College District’s Response to Audit Results State Controller’s Office Division of Audits Post Office Box 942850 Sacramento, CA 94250 http://www.sco.ca.gov S21-39M-0001