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HomeMy WebLinkAboutAGENDA REPORT 1998 1216 CC REG ITEM 10HTO: FROM: DATE: MOORPARK CITY COUNCIL AGENDA REPORT Honorable City Council 3a$.µ (� (A) ITEM 0 0 0 CITY OF MOORPARK, CALIFORNIA City Council Meeting of 12--140-9F ACTION: A do-etc A Reno. No. % -155 BY:� John E. Nowak, Assistant City Manager 04 December 1998 (Council Meeting of 12- 16 -98) SUBJECT: Consider Resolution No. 98- Amending the Fiscal Year 1998 -99 Budget to make Adjustments Related to the State Controller's Gas Tax Fund Audit BACKGROUND: Pursuant to State law, cities' Gas Tax Funds are regularly audited by the State Controller's Office to assure compliance with State law and Auditor Controller Guidelines. An audit was conducted of Moorpark's FY 1996/97 Gas Tax expenditures and a number of findings were made which necessitate adjustments to the City's budget and allocation of funds. DISCUSSION: In late 1997 the State Controller's Office conducted an audit of the City of Moorpark's Gas Tax Fund for the fiscal year 1996 -97 and 1994 -95 for a maintenance yard acquisition project. These audits are regularly performed under requirements of State law. The auditor made six (6) findings that were presented to the City for review and comment in a draft audit report on July 24, 1998. The City appealed some of the findings in a letter dated 24 August 1998 and a final ruling and audit report was issued by the State Controller's Office on October 28, 1998. The audit report and a letter from the Controller's office have been provided to the Council separately. At this time there are no further appeals available to the City. 000250 ** Gas Tax Fund Audit Meeting of 16 December 1998 Page 02 Following is a summary of the findings, the City's appeal response, the final ruling and staff's recommendations: 1. Inequitable Distribution of Maintenance Facility Costs Finding: The City charged the full cost of the purchase price of the maintenance facility on Moorpark Avenue to the Gas Tax fund in FY 1994 -95. This was not allowed since non - street related activities took place there. The full purchase cost of $185,515 was disallowed. Response: The City provided detailed information on the amount of building and ground space that was used for street related activities and non - street activities (i.e., crossing guards, parks maintenance). The split was identified as building 77.6% to streets and 22.4% other, and land 83.2% streets and 16.8% other. Accordingly the City proposed to reimburse the Gas Tax fund a total of $34,115.83. Ruling: The Controller's Office ruled that the shared facilities (i.e., lunch room, bathrooms, locker rooms) had to be split half- and -half with non -Gas Tax monies. Overall the allowed split was approximately 54% Gas Tax and 46% other funds. Based on their calculations, the City is required to reimburse the Gas Tax fund by $86,450. Staff Recommendation: Staff recommends that the Gas Tax fund be reimbursed in the amount of $86,450 from the General Fund reserves. 2. Inadequate Documentation Benefits Finding: The City did documentation to verify charges to the Gas Tax Director, Administrative S, for Salaries and Fringe not maintain sufficient the personnel and benefit fund for the Public Works =cretary and Management Gas Tax Fund Audit Meeting of 16 December 1998 Page 03 Analyst was for street - related activities. A total of $167,944 was disallowed for FY 1996 -97 only. Abbeal: The City recognized that the time cards did not contain the amount of detail required by the State Controller's Office, but maintained there was sufficient other documentation to verify the validity of the charge to the Gas Tax fund. Also, while state auditors had previously reviewed personnel charges, and since this was the first time any mention of the time card documentation was made to the City, the City felt the charges should be allowed since the City had implemented the documentation requirement when notified by the auditor. Ruling: The total an disallowed since the activity documentation additional documentation requirements of State and ount of $167,944 would be requirement for personnel vas previously in and the was insufficient to meet the Federal requirements. Staff Recommendation: Staff recommends that the Gas Tax fund be reimbursed in the full amount of $167,944 from other eligible restricted funds, as specifically described later in this report. 3. Inappropriate Fund Transfers Finding: The City transferred a total of $109,002 of Gas Tax funds to the City's Equipment Replacement Fund for future replacement and purchases of vehicles and other items. Gas tax funds can be used only for street related activities and purchases and cannot be co- mingled with other funds. The full amount of the $109,002 transferred to the replacement fund was disallowed. Appeal: The City agreed to transfer the $109,002 out of the Equipment Replacement Fund and establish an equipment replacement reserve in the Gas Tax fund. 000252 Gas Tax Fund Audit Meeting of 16 December 1998 Page 04 This would have no funding impact and is only an accounting correction. Ruling: The Controller's Office concurred with the City's action. Staff Recommendation: Staff recommends that the City Council concur with the action already taken to transfer the $109,002 in Gas Tax funds from the equipment replacement reserve to an equipment replacement reserve account in the Gas Tax fund. 4. Unsupported Expenditures Finding Information was not available to verify that computers purchased for $23,055 were used only for street - related activities, and not general public works use. The full amount charged was disallowed. Appeal: The City agreed to change the amount charged to Gas Tax for the main frame computer would be reduced to match the 12.9% overhead cost and the two other computers would be allocated at the 90% gas tax rate as used for the director's and secretary's salaries. The Gas Tax fund would be reimbursed by a total of $6,561. Ruling: The Controller's office would only allow the 12.9% overhead rate to be charged to the Gas Tax fund since there was inadequate documentation to verify the amount of street - related usage. A total of $20,081 is to be reimbursed to the Gas Tax fund. Staff Recommendation: Staff recommends the Gas Tax fund be reimbursed with $20,081 from the Equipment Replacement Fund. 0042.53 Gas Tax Fund Audit Meeting of 16 December 1998 Page 05 5. Ineligible Miscellaneous Purchases Finding: The City purchased office furnishings, a digital camera, optical filing system, telephone switch upgrade, accounting software upgrade and DigAlert system modem for a total of $5,868 which was charged to Gas Tax. These were not street - related items and the use was not adequately documented. The full amount is to be reimbursed to the Gas Tax fund. Aoneal: The City agreed to delete the telephone switch and software upgrade from the gas tax charges and to reduce the percentage charged for the other items to the salary cost split. A total of $3,001 would be reimbursed to the Gas Tax fund. Ruling: The payment with gas tax funds would be permitted only at the overhead cost amount (12.9 %) absent any other supporting documentation. A total of $4,624 would have to be reimbursed to the Gas Tax fund. Staff Recommendation: Staff recommends that $4,624 be reimbursed to the Gas Tax fund from the Equipment Replacement Fund. 6. Excess Overhead Costs Ruling: The City allocated overhead funds at the rate of 15% to the Gas Tax fund while documentation only supported a 12.9% rate. The City would be required to reimburse the Gas Tax fund by $5,418 for the excess overhead costs. Appeal: The City concurred with the finding and agreed to reimburse the Gas Tax fund by $5,418. Ruling: The City's position was accepted. gQ Gas Tax Fund Audit Meeting of 16 December 1998 Page 06 Staff Recommendation: Staff recommends that the Gas Tax fund be reimbursed in the amount of $5,418 from the special funds in the same percentages as in Finding 2. As a result of the State Controller's Office rulings and final audit, the City is required to reimburse the Gas Tax fund by a total of $284,517 from other funds. This is described in more detail later in this report. The City is legally required to comply with the findings of the Gas Tax audit report. As the City Council is aware, the Administrative Services Department is below optimal staffing levels. In 1994 the City received a report from KMPG Peat Marwick, the independent auditors, stating that the Finance Division should increase by three (3) positions. While the amount of financial activity has increased over the years, there has been no increase in staffing levels due to the City's limited funding. Second, the current accounting software is cumbersome and difficult to easily obtain practical information. Much of the cost distribution calculation is performed on separate spreadsheets from the accounting files which is not only time consuming, but also limits immediate access to data by department heads. Issues concerning the software were also highlighted in the 1994 KMPG report. The City Council has appropriated funds to purchase new accounting software this fiscal year. This will greatly increase the ability for departments to access information, and for the Administrative Services Department to prepare and track overhead and indirect cost charges. A request to award a bid on the accounting software will be presented to the Council in January. Third, the pressure to utilize non - general fund revenues to offset reductions to the General Fund revenues by the State and increasing costs has increased over the years. This has become greater with the loss of the park assessment revenues. As a result, as discussed during budget reviews 0007M Gas Tax Fund Audit Meeting of 16 December 1998 Page 07 the past several years; the use of restricted funds has been pushed as far as it can go. Actions have been taken since the auditor's draft report was presented to assure that such Gas Tax findings do not occur in the future. First, employees are providing more detail on time cards to designate hours spent on street - related and other activities. Second, all vehicles are maintaining a "use log" to confirm that operation and maintenance costs are allocated on the basis of actual use. And third, an indirect cost and overhead allocation study has been budgeted in the current fiscal year. This will provide a verifiable allocation of costs among the various restricted funds. And, third the Assistant City Manager now allocates about 30% of his time to supervising financial operations. Combined with better accounting software more accurate charges will be made to the restricted funds. Also, in future fiscal years the Public Works staff time will be charged to the same special fund accounts as capital projects are being funded from which will not only provide a detail accounting of project costs, but will also free Gas Tax funds for eligible projects. Specific details for compliance with the State Controller audit report, staff is proposing that various other restricted funds reimburse the Gas Tax fund in the amount of $193,443 as follows: 1) $20,081 to be paid from the Equipment Replacement Fund to cover the costs of the computer equipment purchased. 2) Two of the Area of Contribution Funds and other traffic/ street related funds in the amount of $162,094 for the salary and benefits costs of the Public Works Director and Administrative Secretary and Management Analyst for the time spent on street related capital projects and for the related overhead expenses not previously charged to these funding sources. This would be distributed as follows: Gas Tax Fund Audit Meeting of 16 December 1998 Page 08 TSM Traffic Mitigation Local Transportation Tierra Rejada AOC Los Angeles Ave AOC AD 84 -1 $34,633 $ 7,554 $48,403 $13,535 $44,649 $13,320 3). The third source of funding would be from the Redevelopment Agency to cover salary and benefit cost for street projects within the Project Area. The total transfer from this source would be $11,268. The remaining $91,074 (for the maintenance facility purchase and the miscellaneous purchases) remain as a charge to the General Fund. This property will become an asset of the General Fund. In summary, while staff is disappointed with the inflexibility of the State Controllers Office, especially in regards to the documentation for salary and benefits item, the expenditures have been shifted to other non - general fund sources (except for the land /building purchase which is used by parks maintenance staff and miscellaneous furnishings, which are now General Fund expenditures) . In the future staff will continue to proportionally charge the Public Works Director and other department staff time to the funding source of various projects. The attached Resolution No. 98- would amend the City's budget by making the various transfers as indicated in the staff report. A resolution amending the Redevelopment Agency's budget to appropriate its portion of the reimbursement will occur at the next Agency meeting. STAFF RECOMMENDATION: That the City Council adopt Resolution No. 98- making various budget adjustments in response to the State Controller's Gas Tax Fund audit. (ROLL CALL VOTE REQUIRED) Attached: Resolution No. 98- (jMZ57. RESOLUTION NO. 98- A RESOLUTION OF THE CITY COUNCIL MOORPARK, CALIFORNIA, AMENDING BUDGET TO MAKE CERTAIN FUND VARIOUS RESTRICTED FUNDS AND THE THE GAS TAX FUND IN RESPONSE CONTROLLER'S OFFICE GAS TAX AUDIT. OF THE CITY OF THE FY 1998/99 TRANSFERS FROM GENERAL FUND TO TO THE STATE WHEREAS, the State Controller's Office conducted an audit of the City of Moorpark's Gas Tax fund; and WHEREAS, certain findings were made which required the City to reimburse the Gas Tax fund; and WHEREAS, to comply with the audit findings certain transfers from restricted funds and the General Fund to the Gas Tax fund are required; and WHEREAS, Exhibit "A" hereto describes said budget amendments. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF MOORPARK DOES HEREBY RESOLVE AS FOLLOWS: SECTION 1. A budget amendment transferring certain amounts totaling $182,175 from the Equipment Replacement Fund, Traffic Safety Management Fund, Citywide Traffic Mitigation Fund, Local Transportation Streets Fund, Tierra Rejada AOC Fund, Los Angeles Avenue Fund, and Assessment District 84 -2 Fund to the City General Fund, as more particularly described in Exhibit "A" attached hereto and made a part hereof, is herewith approved. SECTION 2. A budget amendment in the amount of $284,517 is approved for transfer from the General Fund to the Gas Tax Fund, as more particularly described in Exhibit "A" attached hereto and made a part hereof, is herewith approved. 11 + Resolution No. 98- Page 02 SECTION 3. The City Clerk shall certify to the adoption of this resolution and shall cause a certified resolution to be filed in the book of original Resolutions. PASSED AND APPROVED this 16th day of December 1998. Patrick Hunter, Mayor ATTEST: Deborah S. Traffenstedt, City Clerk ("Z59 Resolution No. 98- Exhibit "A" BUDGET AMENDMENT DETAIL SECTION 1. FUND ACCOUNT NUMBER AMOUNT General Fund 100.801.1057.000.9801 ($284,517) Gas Tax Fund 240.801.1057.000.3992 $284,517 SECTION 2. FUND ACCOUNT NUMBER AMOUNT Equipment Replacement 403.801.1057.000.9801 ($ 20,081) Traffic Safety Mgmt 201.801.1057.000.9801 ($ 34,633) Traffic Mitigation 202.801.1057.000.9801 ($ 7,554) Local Transportation 203.801.1057.000.9801 ($ 48,403) Tierra Rejada AOC 211.900.1057.000.9801 ($ 13,535) Los Angeles Ave. AOC 211.901.1057.000.9801 ($ 44,649) AD 84 -2 210.711.1057.000.9801 ($ 13,320) General Fund 100.801.1057.000.3992 $182,175 ig"