Santa Clara County

J C OHN HIANG California State Controller April 23, 2010 Vinod K. Sharma Controller-Treasurer Santa Clara County County Government Center, East Wing 70 West Hedding Street, 2nd Floor San Jose, CA 95110 Dear Mr. Sharma: The State Controller’s Office (SCO) reviewed the costs claimed by Santa Clara County for the legislatively mandated Search Warrants: AIDS Program (Chapter 1088, Statutes of 1988) for the period of July 1, 2003, through June 30, 2004, and July 1, 2006, through June 30, 2007. Our review was limited to validating employees’ productive hourly rates claimed. The county claimed $624,601 for the mandated program. Our review disclosed that $575,080 is allowable and $49,521 is unallowable. The costs are unallowable because the county overstated employees’ productive hourly rates, as described in the attached Summary of Program Costs and Finding and Recommendation. For the fiscal year (FY) 2003-04 claim, the State made no payment to the county. Our review disclosed that $450,798 is allowable. The State will pay that amount, contingent upon available appropriations. For the FY 2006-07 claim, the State paid the county $134,950. Our review disclosed that $124,282 is allowable. The State should offset $10,668 from other mandated program payments due the county. Alternatively, the county may remit this amount to the State. If you disagree with the review finding, you may file an Incorrect Reduction Claim (IRC) with the Commission on State Mandates (CSM). The IRC must be filed within three years following the date that we notify you of a claim reduction. You may obtain IRC information at the CSM’s Web site at www.csm.ca.gov/docs/IRCForm.pdf. MAILING ADDRESS P.O. Box 942850, Sacramento, CA 94250-5874 SACRAMENTO 300 Capitol Mall, Suite 518, Sacramento, CA 95814 (916) 324-8907 LOS ANGELES 600 Corporate Pointe, Suite 1000, Culver City, CA 90230 (310) 342-5656 Vinod K. Sharma -2- April 23, 2010 If you have any questions, please contact Jim L. Spano, Chief, Mandated Cost Audits Bureau, at (916) 323-5849. Sincerely, Original signed by JEFFREY V. BROWNFIELD Chief, Division of Audits JVB/vb Attachments RE: S10-MCC-908 cc: Ram Venkatesan, SB-90 Coordinator Controller-Treasurer Department Santa Clara County Jeff Carosone, Principal Program Budget Analyst Cor-Gen Unit, Department of Finance Ginny Brummels, Manager Division of Accounting and Reporting State Controller’s Office Santa Clara County Search Warrants: AIDS Program Attachment 1— Summary of Program Costs July 1, 2003, through June 30, 2004, and July 1, 2006, through June 30, 2007 Actual Costs Allowable Review Cost Elements Claimed per Review Adjustment 1 July 1, 2003, through June 30, 2004 Direct costs: Salaries $ 302,991 $ 278,752 $ (24,239) Benefits 67,248 61,868 (5,380) Services and supplies 28,704 26,726 (1,978) Total direct costs 398,943 367,346 (31,597) Indirect costs 90,708 83,452 (7,256) Total program costs $ 489,651 450,798 $ (38,853) Less amount paid by the State — Allowable costs claimed in excess of (less than) amount paid $ 450,798 July 1, 2006, through June 30, 2007 Direct costs: Salaries $ 74,958 $ 68,857 $ (6,101) Benefits 25,471 23,398 (2,073) Services and supplies 12,105 11,436 (669) Total direct costs 112,534 103,691 (8,843) Indirect costs 22,416 20,591 (1,825) Total program costs $ 134,950 124,282 $ (10,668) Less amount paid by the State (134,950) Allowable costs claimed in excess of (less than) amount paid $ (10,668) Summary: July 1, 2003, through June 30, 2004, and July 1, 2006, through June 30, 2007 Direct costs: Salaries $ 377,949 $ 347,609 $ (30,340) Benefits 92,719 85,266 (7,453) Services and supplies 40,809 38,162 (2,647) Total direct costs 511,477 471,037 (40,440) Indirect costs 113,124 104,043 (9,081) Total program costs $ 624,601 575,080 $ (49,521) Less amount paid by the State (134,950) Allowable costs claimed in excess of (less than) amount paid $ 440,130 _________________________ 1 See Attachment 2, Finding and Recommendation. 1 of 1 Santa Clara County Search Warrants: AIDS Program Attachment 2— Finding and Recommendation July 1, 2003, through June 30, 2004, and July 1, 2006, through June 30, 2007 FINDING— The county claimed unallowable costs totaling $49,521. The costs are unallowable because the county overstated employees’ productive hourly Overstated productive rates. The county included unallowable deductions for training time and hourly rates break time in its calculation of countywide average annual productive hours. We also noted that the county claimed some salaries, benefits, and indirect costs as services and supplies. Unallowable Training Hour Deduction The county deducted training hours from regular hours worked to calculate countywide average annual productive hours. The deduction is unallowable because the county did not provide documentation substantiating the training hours that it deducted. In addition, the deducted training hours include training that benefits specific programs or employee classifications. The county’s payroll system includes a training code to track employees’ training hours. The county stated that employees charged time to the training code when they attended non-program-related training. It stated that employees charge time to this code for the following training: 1. Training required by employees’ bargaining unit agreements, training for licensure/certification requirements, and continuing education for specific job classifications such as attorneys, probation officers, real estate property appraisers, physicians, and nurses 2. California Commission on Peace Officer Standards and Training (POST) training for law enforcement personnel 3. County-required training such as new employee orientation, supervisory training, safety seminars, and software classes The county did not provide documentation substantiating the training hours that it deducted. Items 1 and 2 above identify training hours that pertain to specific programs or employee classifications. As such, it is inappropriate to deduct these hours when calculating countywide average annual productive hours. While it might be appropriate to deduct some training hours identified in item 3 above, the county did not: • Separately identify and provide supporting documentation for these training hours. • Provide documentation showing that it required the training for all county employees. • Provide documentation showing that employees did not otherwise charge the training time to specific programs. Santa Clara County Search Warrants: AIDS Program Unallowable Break Time Deduction The county also deducted employee break time from regular hours worked to calculate countywide average annual productive hours. The deduction is unallowable because the county deducted “authorized” break time rather than actual break time taken. The county’s accounting system did not consistently limit daily hours reported to 7.5 hours worked or otherwise reflect actual break time taken. In addition, actual mandated program employee timesheets show that employees did not exclude “authorized” break time when reporting hours worked. Furthermore, when calculating the break time deduction for average annual productive hours, the county did not address employees who work alternate work schedules. Duplicate reimbursed hours result when employees charge their full workday to program activities, yet the county identifies 0.5 hours daily as nonproductive time in its calculation of countywide average annual productive hours. The following table summarizes the claimed and allowable productive hours for fiscal year (FY) 2003-04 and FY 2006-07: Fiscal Year 2003-04 2006-07 Claimed productive hours (A) 1,560.65 1,537.00 Break time 111.35 110.58 Training time 24.35 25.66 Allowable productive hours (B) 1,696.35 1,673.24 Review adjustment to productive hours ([(A) – (B)] ÷ (B)) (8.00)% (8.14)% Attachment 3 provides detailed calculations of the review adjustment, which the table below summarizes: Fiscal Year 2003-04 2006-07 Total Direct Costs: Salaries $ (24,239) $ (6,101) $ (30,340) Benefits (5,380) (2,073) (7,453) Services and supplies (1,978) (669) (2,647) Total direct costs (31,597) (8,843) (40,440) Indirect costs (7,256) (1,825) (9,081) Review adjustment $ (38,853) $ (10,668) $ (49,521) The program’s parameters and guidelines state, “All costs claimed must be traceable to source documents and/or worksheets that show evidence of and the validity of such costs.” Recommendation We recommend that the county: • Properly report all salaries, benefits, and indirect costs on its mandated costs claims (i.e., the county should not report these costs as services and supplies). Santa Clara County Search Warrants: AIDS Program • Modify its payroll system to accumulate only those training hours applicable to county-required training attended by all county employees. • Deduct only actual break time taken by all county employees. If the county does not wish to track actual break time taken, it is permissible to absorb break time into the activity that the employee performs immediately before or after the break. • Maintain documentation that supports both training time and break time that it deducts from regular hours worked to calculate countywide average annual productive hours. Santa Clara County Search Warrants: AIDS Program Attachment 3— Calculation of Review Adjustment (1) (2) (3) (4) (5) (6) (7) (8) (9) Actual Costs Claimed 1 Review Adjustment Indirect Adjustment Salaries Benefits Indirect Cost Indirect to Productive (Cols. (Cols. Costs (Cols. Reimbursable Component Salaries Benefits Rate 2 Costs Hours (1) × (5)) (2) × (5)) (4) × (5)) Total Fiscal year 2003-04: Policies and procedures $ 2,561 $ 462 24.50% $ 741 (8.00)% $ (205) $ (37) $ (59) $ (301) Identify possible AIDS testing cases 182,863 34,451 24.50% 53,241 (8.00)% (14,629) (2,756) (4,259) (21,644) District Attorney’s Office 117,567 32,335 24.50% 36,726 (8.00)% (9,405) (2,587) (2,938) (14,930) Subtotal 302,991 67,248 90,708 (24,239) (5,380) (7,256) (36,875) Local health officer 3 13,379 5,278 32.59% 6,080 (8.00)% (1,070) (422) (486) (1,978) Total, fiscal year 2003-04 $ 316,370 $ 72,526 $ 96,788 $ (25,309) $ (5,802) $ (7,742) $ (38,853) Fiscal year 2006-07: Policies and procedures $ 3,100 $ 1,060 22.32% $ 929 (8.14)% $ (252) $ (86) $ (76) $ (414) Identify possible AIDS 22.32% testing cases 68,830 23,257 20,554 (8.14)% (5,603) (1,893) (1,673) (9,169) District Attorney’s Office 3,028 1,154 22.32% 933 (8.14)% (246) (94) (76) (416) Subtotal 74,958 25,471 22,416 (6,101) (2,073) (1,825) (9,999) Local health officer 3 4,284 2,521 20.74% 1,411 (8.14)% (349) (205) (115) (669) Total, fiscal year 2006-07 $ 79,242 $ 27,992 $ 23,827 $ (6,450) $ (2,278) $ (1,940) $ (10,668) __________________________ 1 Calculation differences due to rounding. 2 Indirect cost rate applied to salaries and benefits. 3 Claimed as services and supplies.