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HomeMy WebLinkAboutButte Cty Audit Report Road Fund �0�SUgpRS BUTTE COUNTY 0 7 ID'S Mme,r,ALFaWIA Audit Report ROAD FUND July 1, 2009, through June 30, 2013 THE Ca1- 0� "`. uBEKk♦.. U, Q r U. OF BETTY T. YEE California State Controller June 2016 ofwE 03 BETTY T. YEE California State Controller June 3, 2016 The Honorable Bill Connelly, Chair Board of Supervisors Butte County 25 County Center Drive Suite 205 Oroville, CA 95965 Dear Mr. Connelly: The State Controller's Office (SCO) audited Butte County's Road Fund for the period of July 1, 2009, through June 30, 2013. The county accounted for and expended Road Fund money in compliance with Article XIX of the California Constitution, the Streets and Highways Code, and the SCO's Accounting Standards and Procedures for Counties manual, except for our adjustment of$7,194. We made the adjustment because the county incurred ineligible expenditures for unsupported indirect costs. If you have any questions,please contact Christopher Lek, Interim Chief, Local Government Audits Bureau, by telephone at (916) 284-0120. Sincerely,, J Y V.Jj Y VV, BROWNFIELD, CPA Chief, Division of Audits JVB/as Attachment cc: David Houser, Auditor-Controller Butte County Mike Crump, Director of Public Works Butte County Butte County Road Fund Contents Audit Report Summary........................................................................................................................... 1 Background....................................................................................................................... 1 Objectives, Scope, and Methodology.............................................................................. 1 Conclusion......................................................................................................................... 2 Follow-Up on Prior Audit Findings................................................................................ 2 Views of Responsible Officials ........................................................................................ 3 RestrictedUse................................................................................................................... 3 Schedule 1—Reconciliation of Road Fund Balance............................................................ 4 Findingand Recommendation.............................................................................................. 5 Attachment—Butte County's Response to Draft Audit Report Butte County Road Fund Audit Report Summary The State Controller's Office (SCO) audited Butte County's Road Fund for the period of July 1, 2009, through June 30, 2013. Our audit found that the county accounted for and expended Road Fund money in compliance with Article XIX of the California Constitution, the Streets and Highways Code, and the SCO's Accounting Standards and Procedures for Counties manual, except for our adjustment of $7,194 identified in this report. Background We conducted an audit of the county's Road Fund in accordance with Government Code section 12410. The Road Fund was established by the county boards of supervisors in 1935, in accordance with Streets and Highways Code section 1622, for all amounts paid to the county out of money derived from the Highway Users Tax Fund. A portion of the Federal Forest Reserve revenue received by the county also is required to be deposited into the Road Fund (Government Code section 29484). In addition, the county board of supervisors may authorize the deposit of other sources of revenue into the Road Fund. Once money is deposited into the Road Fund, it is restricted to expenditures made in compliance with Article XIX of the California Constitution and Streets and Highways Code Sections 2101 and 2150. Objectives, Scope, The objectives of our audit of the Road Fund were to determine whether: and Methodology . Highway Users Tax apportionments received by the county were accounted for in the Road Fund,a special revenue fund; • Expenditures were made exclusively for authorized purposes or safeguarded for future expenditure; • Reimbursements of prior Road Fund expenditures were identified and properly credited to the Road Fund; • Non-road-related expenditures were reimbursed in a timely manner; • The Road Fund cost accounting is in conformance with the SCO's Accounting Standards and Procedures for Counties manual,Chapter 9, Appendix A; and • Expenditures for indirect overhead support service costs were within the limits formally approved in the Countywide Cost Allocation Plan. Our audit objectives were derived from the requirements of Article XIX of the California Constitution, the Streets and Highways Code, the Government Code, and the SCO's Accounting Standards and Procedures for Counties manual.To meet the objectives,we: -1- Battle County Road Fund • Gained a basic understanding of the management controls that would have an effect on the reliability of the accounting records of the Road Fund, by interviewing key personnel and testing the operating effectiveness of the controls; • Verified whether all Highway Users Tax apportionments received were properly accounted for in the Road Fund, by reconciling the county's records to the State Controller's payment records; • Analyzed the system used to allocate interest and determined whether the interest revenue allocated to the Road Fund was fair and equitable, by interviewing key personnel and testing a sample of interest calculations; • Verified that unauthorized borrowing of Road Fund cash had not occurred,by interviewing key personnel and examining the Road Fund cash account entries; and • Determined, through testing,whether Road Fund expenditures were in compliance with Article XIX of the California Constitution and with the Streets and Highways Code, and whether indirect cost allocation plan charges to the Road Fund were within the limits approved by the SCO's Division of Accounting and Reporting, County Cost Plan Unit. We conducted this performance audit in accordance with generally accepted government auditing standards.Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We did not audit the county's financial statements. Our scope was limited to planning and performing audit procedures necessary to obtain reasonable assurance concerning the allowability of expenditures claimed for reimbursement.Accordingly,we examined transactions on a test basis to determine whether they complied with applicable laws and regulations and were properly supported by accounting records. We considered the county's internal controls only to the extent necessary to plan the audit. Conclusion Our audit found that the county accounted for and expended Road Fund money in compliance with Article XIX of the California Constitution, the Streets and Highways Code, and the SCO's Accounting Standards and Procedures for Counties manual, except for the item shown in Schedule 1 and described in the Finding and Recommendation section of this report. The finding requires an adjustment of $7,194 to the county's accounting records. Follow-up on Prior Findings noted in our prior audit report, issued on August 17, 2011, have Audit Findings been satisfactorily resolved by the county. -2- Butte Counly Road Fund Views of We issued a draft audit report on March 16, 2016. David A. Houser, Responsible Auditor-Controller, and Mike Crump, Director of Public Works, responded by letter on April 7, 2016, agreeing with audit results. The Officials county's response arc included as an attachment in this final audit report. Restricted Use This report is solely for the information and use of Butte County 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. JEFFREY V. BROWNFIELD, CPA Chief, Division of Audits June 3, 2016 -3- Road Fund ,butte County Schedule 1-- Reconciliation of Road Fund Balance i July 1, 2012, through June 309 2013 Amount Beginning fund balance per county $ 15,956,213 18,728,967 Revenues Total funds available 34,685,180 (21,392,1.23 Expenditures Ending fund balance per county 13,293,057 f SCO adjustment: 7,194 Finding—Unsupported indirect costs 7,194 Total SCO audit adjustment Ending fund balance per audit $ 13,300,251 f The audit period was July 1,2009,through June 30,2013;however,this schedule includes only the period of July 1,2012,through June 30,2013. -4- Butte County Road Fund Finding and Recommendation FINDING— During fiscal year (FY) 2011-12 and FY 2012-13, the Road Fund was Unsupported indirect charged for unsupported indirect overhead support services costs. The costs costs for FY 2011-12 ($569,066) and FY 2012-13 ($372,000) exceeded the approved amounts in the A-87 Countywide Cost Allocation Plan in the amount of$6,370 ($569,066 minus $562,696) and $824($372,000 minus $371,176) respectively, for a total of$7,194. Road Fund money can be expended only for road or road-related purposes, as outlined in Streets and Highways Code sections 2101 and 2150. Streets and Highways Code section 2101 states: All money in the Highway Users Tax Account in the Transportation Tax Fund and hereafter received in the account are appropriate for all of the following: (a) The research, planning, construction, improvement, maintenance, and operation of public streets and highways (and their related public facilities for nonmotorized traffic), including the mitigation of their environmental effects,the payment for property taken or damaged for such purposes, and the administrative costs necessarily incurred in the foregoing purposes. Streets and Highways Code section 2150 states: All amounts paid to each county of the Highway Users Tax Fund shall be deposited in its road fund. The board may deposit in said fund any other money available for roads. All money received by a county from the Highway Users Tax Fund and all money deposited by a county in its road fund shall be expended by the county exclusively for county roads for the purposes specified in Section 2101 or for other public street and highway purposes as provided by law. Recommendation The county should reimburse the Road Fund $7,194 and establish procedures to ensure that future Cost Plan charges do not exceed the amounts approved in the A-87 Countywide Cost Allocation Plan. County's Response The county concurred with our finding. The county's response is included as an attachment. -5- Butte County Road Fluid Attachment Butte County's Response to Draft Audit Report Department of Public Works J.Michael Crump,Director 7 County Center Drive Shawn H.O'Brien,Assistant Director Oroville,CA 95965-3397 .CAI!f O R N 1 A. (530)538-7681 (FAX)538-7171 April 7,2016 Christopher Lek,Interim Chief Local Government Audits Bureau State Controller's Office Division of Audits PO Box 942850 Sacramento,CA 94250-5874 Re: Butte County Audit Report Road Fund,July 1,2009,through June 30,2013 Dear Mr.Lek: The above referenced report found in its Conclusion that an item shown in Schedule 1 requires an adjustment of$7,194 to the county's accounting records. Upon hearing of the finding at the exit conference on October 3,2014,Butte County Immediately made the correction to reimburse the Road Fund for$7,194 amount overpaid{journal J642,dated 10/34/14), The Public Works Department has been informed that the Butte County Auditor-Controller's Office and the Butte County Administration Department are working together to implement internal controls that will help prevent the overcharging of Road Funds in the future. Your performance audit is greatly appreciated and Public Works looks forward to seeing the final report. Sincerely, XGcY Mike Crump, Director,Public Works cc: David A. Houser,Paul Hahn qJ OFFICE OF THE AUDITOR-CONTROLLER Ilia :.�,. ©avid A.Houser,Auditor-Cnntraller 25 County Center Drive Ste.120 I Oroville,California 95965 T.530.53$,7607 I butfe u e u 't r utte CountyF:530.53$.7693 •CAL IFORNIA• April 7,2096 California State Controller Mr. Lek PO Bax 942860 Sacramento, CA 94260 Reference:Butte County Audit Report Road Fund 419/09-6130/13 Dear Mr. Lek: In response to the Finding for Unsupported Direct Costs,we would like to communicate that the amounts overpaid were reimbursed to the Road Fund by Journal J642 dated 90/30194 in the amount of$7,194.At this time,The Butte County Auditor-Controller Is working with Butte County Administration Department to Implement controls that prevent Road Fund$from being charged inappropriately in the future. Thank you for considering our response to the recommendation that procedures should be established to ensure that future Cost Plan charges do not exceed the amounts approved in the A-87 Countywide Cost Allocation Pian. Best Regards, D vld A. Houser Auditor-Controller cc:Mike Crump, Paul Hahn State ControlIer's Office Division of Audits Post Office Box 942550 Sacramento, CA 94250-5874 http://www.sco.ca.gov SIS-RFA-0007