CPA~ · conversation on May 1, 20 17. Hilda Flores, Chief of Accounting and Procurement, agreed with the audit results. Ms. Flores declined a draft audit report and agreed that we

State of California California State Transportation Agency DEPARTMENT OF TRANSPORTATION

Memorandum Making Conservation a California Way oflife.

To: JOHNHOOLE Date: June 13, 2017 Acting Division Chief Division of Local Assistance File: P1594-0028

y From: MARSUE MORRILL, CPA~

Chief External Audit - Local Governments Audits and Investigations

subject: INDIRECT COST RATE PROPOSAL AUDIT- SAN BERNARDINO ASSOCIATED GOVERNMENTS

At the request of the California Department of Transportation (Cal trans), Audits and Investigations (A&I), the State Controller's Office (SCO) performed an audit of San Bernardino Associated Governments' (SANBAG) Indirect Cost Rate Proposal (ICRP) for fiscal years (FY) 2014115 and FY 20 15/16.

The purpose of the audit was to determine whether the ICRP was presented in accordance with Title 2 Code of Federal Regulations Part 225 (Superseded by 2 CFR 200), and Cal trans Local Assistance Procedures Manual (LAPM) Chapter 5.

The audited indirect cost rates are as follows:

Rate Type* Fiscal Year Proposed Rate Audited Rate Division

Fixed w/CatTy 2014115 98.44% 98.44% Transportation Forward

Fixed w/Carry 2015116 71.66% 71.66% Transportation Forward

*Base: Total direct salaries, wages and fringe benefits

There is no corrective action plan required.

Ifyou have any questions, please contact Tami Gill, Audit Manager, at (916) 323-7899.

Attachment

"Provide a safe. sustainable, integrated and effic ient /ranspor/a lion sys/em 10 enhance California seconomy and livability "

John Hoole June 13 , 2017

. Page 2

c: Rodney Whitfield, Director, Financial Services, Federal Highway Administration Tashia Clemons, Director, Program Development, Federal Highway Administration Kara Magdaleno, Administrative Program Assistant Planning and Finance,

Federal Highway Administration Veneshia Smith, Financial Program Manager, Federal Highway Administration Roberto Rodrigues, F.I.R.E & Program Review Coordinator, Federal Highway

Administration Erwin Gojuangco, Acting Chief, Policy Development and Quality Assistance, Division of

Local Assistance, Caltrans Sean Yeung, Senior Transportation Engineer, Office of Local Assistance, District 8, Cal trans Lisa Gore, Associate Accounting Analyst, Division ofAccounting, Cal trans Cannen Wills, Audit Analyst, Division of Local Assistance, Cal trans Tami Gill, Audit Manager, External Audits - Local Governments, Audits & Investigations,

Cal trans Office Chron p1594-0028

"Provide a safe, sustainable, integrated and efficient transportation sysiem to enhance California seconomy and livability"

SAN BERNARDINO ASSOCIATED GOVERNMENTS

Audit Report

INDIRECT COST RATE PROPOSAL AUDIT OF CALTRANS CONTRACT NO. 77A0044

(Audit Request No. P1594-0028)

July 1, 2014, through June 30, 2016

BETIYT. YEE California State Controller

May 2017

BETIYT. YEE California State Controller

May19,2017

MarSue Morrill, Chief External Audits-Local Governments Audits and Investigations California Department of Transportation 1304 0 Street, Suite 200, MS 2 Sacramento, CA 95814

Dear Ms. Morrill:

The State Controller's Office audited the indirect cost rate proposals (ICRPs) of San Bernardino Associated Governments (SANBAG). The audit period included JCRPs for fiscal year (FY) 2014-15, and FY 2015-16. The audit was perfo1med at the request of the California Department of Transportation (Cal trans) Audits and Investigations.

The purpose of the audit was to determine whether the ICRPs were presented in accordance with Title 2, Code ofFederal Regulations, Part 225, and the Caltrans Local Assistance Procedures Manual, Chapter 5. SANBAG management is responsible for fair presentation of the ICRPs.

We determined that the SANBAG accounting system appeared adequate to properly capture costs and that the project costs were allowable, reasonable, and in compliance with applicable federal and state laws and regulations, and the fiscal provisions stipulated in the contract. In addition, payments to the SANBAG were made in a timely manner, were in accordance with contract provisions, and were properly approved by Caltrans contract officers.

If you have any questions, please contact Andrew Finlayson, Bureau Chief, by telephone at (916) 324-6310.

Y V. BROWNFIELD, CPA Chief, Division of Audits

JVB/rg

cc: Tami Gill, Audit Manager External Audits-Local Governments Audits and Investigations (via email)

San Bernardino Associated Governments Indirect Cost Rate Proposals

Contents

Audit Report

Summary...... ........ ... .. ................ .. .... .......... .......... ....... .. ............................................... .... .. . 1

Background ........................................ .............................................................................. ..

Objectives, Scope, and Methodology ............ .. ...................... ................. .... .. ........ .. .. .. .... ..

Schedule 2- Summary of Direct Costs, Indirect Costs, and Carry-Forward

Schedule 3-Summary of Direct Costs, Indirect Costs, and Carry-Forward

Conclusion.......................................................................................................................... 3

Views of Responsible Officials................ ...... .. ..... ............................. ..... ................ .... ....... 3

Restricted Use .... .. . . .. . . . ...... .......... ... . . . .. ... .... .... ... . ........ .... ....... ........... ... .... .... ....... ... ... ... ....... 4

Schedule 1-Summary of Proposed and Audited Rates ..... ... ............... .. .. ...... .. .... .... . ........ 5

Fiscal Year 2014-15 ...................................................................................... 6

Fiscal Year 2015-16 ...... ............ ... ............. .. .. ................. ..... ........ ............. ... .. 7

San Bernardino Associated Governments Indirect Cost Rate Proposals

Audit Report Summary

Background

Objectives, Scope, and Methodology

The State Controller's Office (SCO) audited the indirect cost rate proposals (ICRPs) of San Bernardino Associated Governments (SANBAG). The audit period included ICRPs for fiscal year (FY) 2014-15 and FY 2015-16.

The purpose of the audit was to determine whether the ICRPs were presented in accordance with Title 2, Code of Federal Regulations, Part 225 (2 CFR 225), and the California Department ofTransportation's (Caltrans) Local Assistance Procedure Manual (LAPM), Chapter 5. SANBAG management is responsible for fair presentation of the ICRPs.

We determined that the agency's accounting system appeared adequate to properly capture costs and that the project costs were allowab le, reasonable, and in compliance with applicable federal and state laws and regulations, and the fi scal provisions stipulated in the contract. In addition, payments to the agency were made in a timely manner, were in accordance with contract provisions, and were properly approved by Caltrans contract officers.

SANBAG is the council of governments and transportation planning agency for San Bernardino County. SANBAG is responsible for cooperative regional planning and furthering an efficient multi-modal transportation system countywide. SANBAG serves the 2. 1 million residents of San Bernard ino County.

As the County Transportation Commission, SANBAG supports freeway construction projects, regional and local road improvements, train and bus transportation, railroad crossings, call boxes, ridesharing, congestion management efforts, and long-term planning studies. Interagency Agreement No. 77A0044, dated June I, 2014, between the SCO and Ca\trans, which provides that the SCO will perform audits of proposed ICRPs submitted to Caltrans from local government agencies to ensure compliance with 2 CFR 225 (formerly Office of Management and Budget Circular A-87) and Caltrans LAPM, Chapter 5. SANBAG administers Measure l , the half-cent transportation sales tax approved by county voters in 1989.

We performed the audit at the request of Caltrans (Audit Request No. P 1594-0028). The authority to conduct this audit is given by.

We conducted the audit to determine whether:

• The agency's ICRP is in compliance with the cost principles prescribed in 2 CFR 225;

• The agency's ICRP is in compliance with the req uirements for ICRP preparation and application identified in the Caltrans LAPM, Chapter 5;

-1­

San Bernardino Associated Governments Indirect Cost Rate Proposals

• The agency has a sufficient financial management system to properly manage federal- and state-funded P,rojects; and

• The agency has procurement policies and procedures that are m compliance with the 2 CFR 225.

The audit period is as follows: Proposed Rate

Period Rate TYJ?<? July 1, 2014 to June 30, 2015 98.44% Fixed July l , 201 5 to June 30, 2016 7 1.66% Fixed

For the selected samples, errors found will not be projected to the entire population.

To achieve our audit objectives, we:

• Reviewed the agency' s written policies and procedures relating to accounting systems, procurement, and project/contract management;

• Interviewed employees, completed an internal control questionnaire, and performed a system walk-through in order to gain a limited understanding of the agency's internal controls, accounting systems, timekeeping and payroll systems, and procurement and bil ling processes;

• Performed limited tests of controls on a judgmentally selected sample of direct costs and indirect costs to confirm and validate existing documented processes and procedures are functioning as designed;

o Direct Costs

Sample: $15,01 0 in salaries and benefits

Population: $ 11 ,5 18,641 in salaries and benefits

o Indirect Costs

Sample: $10,368 in salaries and benefi ts

Population: $3, 109,20 I in salaries and benefi ts

• Tested the costs and financial accounting systems to ensure that the systems can identify projects, activities related to projects, direct costs, and indirect costs, as indicated by the agency's written policies and procedures and internal control interviews;

• Assessed the internal control system related to the ICRP for FY 2015-15 and FY 2015-16, based the results ofthe review ofwritten procedures and policies, internal control interviews, and test of controls;

• Judgmentally selected a sample of indirect costs reported in the lCRP to determine whether the amounts claimed are supported and are reasonable, allowable, and allocable, in accordance with 2 CFR 225;

• Judgmentally selected a sample of direct salaries and benefits reported in the ICRP to determine whether the amounts claimed are adequately supported and are in compliance with 2 CFR 225;

-2­

San Bernardino Associated Governments Indirect Cost Rate Proposals

Conclusion

Views of Responsible Officials

• Determined whether payments to contractors were made in a timely manner, and were billed to Caltrans subsequent to payment;

• Verified whether the actual indirect costs recovered by the agency were of the Caltrans approved indirect cost rate; and

• Verified whether the agency invoices to Caltrans for approved projects are in compliance with the Caltrans Local Assistance Procedure Manual, Chapter 5.

We conducted this performance audit in accordance with the 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. The scope of the audit was limited to select financial and compliance activities.

We did not audit SANBAG's financial statements. We limited our audit scope to planning and performing audit procedures necessary to obtain reasonable assurance that the proposed ICRP was in accordance with the 2 CFR 225 and Caltrans LAPM, Chapter 5. In addition to developing appropriate auditing procedures, our review of internal control was limited to gaining an understanding of the transaction flow, accounting system, and applicable controls to determine the department's ability to accumulate and segregate reasonable,, allowable, and allocable indirect and direct costs.

We determined that SANBAG's accounting system appeared adequate to capture costs and that the project costs were allowable, reasonable, and in compliance with applicable federal and state laws and regulations and the fiscal provisions as stipulated by the contract. In addition, payments to contractors were made in a timely manner, were in accordance with contract provisions, and were properly approved by Caltrans contract officers.

We discussed our audit results with the agency's representatives during an exit conference conducted by telephone on July 8, 2016, and fol low-up conversation on May 1, 20 17. Hilda Flores, Chief of Accounting and Procurement, agreed with the audit results. Ms. Flores declined a draft audit report and agreed that we could issue the audit report as final.

-3­

FFREY V. BROWNFIELD, CPA

San Bernardino Associated Governments Indirect Cost Rate Proposals

Restricted Use This report is solely for the information and use of SANBAG; Caltrans; and the SCO. It is not intended to be and should not be used by anyone other than these speci fied parties. This restriction is not intended to limit di stribution of this report, which is a matter of public record.

I.._

Chief, Division of Audits

May 19, 2017

-4­

San Bernardino Associated Governments Indirect Cost Rate Proposals

Schedule 1­Summary of Proposed and Audited Rates

July 1, 2014, through June 30, 2016

Division Fiscal Year Proposed Rate Audited Rate Difference Reference

Transportation 20 14-15 98.44% 98.44% $ Schedule 2 Transportation 2015-1 6 7 1.66% 71.66% $ Schedule 3

-5­

San Bernardino Associa ted Governments Indirect Cost Rate Proposals

Schedule 2­Summary of Direct Costs, Indirect Costs, and

Carry-Forward; Fiscal Year 2014-15

Proposed Amount

Audited Amount

Audit Ad justment Reference

Direct costs: Direct salaries Direct fringe benefits

Total direct costs:

s 2,797,518 2,678,064

$ 5,475,582

$

$

2,797,518 2,678,064 5,475,582

$

$

Indirect costs: Indirect salaries Indirect benefits Indirect expenses:

Communication Utilities Training Maintenance of Equipment Insurance Building Operating Expense Rental of Equipment Prin ti ng-Internal Offi ce Expense IT Services and Software Subscriptions Postage Meeting Expense Records Storage Printing-Misc Professional Services Other Service Charges Auditing County Charges SANBAG Vehicle Travel - Non-Employee Travel Allowance Mileage Rcimb/SANBAG Travel -Other Travel -Metrolink Advertising lnventorial Equipment Capital Outlay Depreciation Consulting Fees

Subtotal indirect costs before carry-forward adjustment: Carry-forward from fiscal year 20 I0-11 & 2011-12 Total indirect costs after carry-forward adjustment:

$

$

$

1,110,090 1,035,754 1,953,736

50,756 56,000 36,400

1,400 409,300 315,000

36,000 26,080 40, 160

4,315 14,100

13,500 5,000

392,490 400

115,000 11,304 1,500

195,000

1,360 9,600

200 10,000 46,354

162,517

4,099,580 1,290,596 5,390,176

$

$

$

1,110,090 1,035,754 1,953,736

50,756 56,000 36,400

1,400 409,300 315,000 36,000 26,080 40,160

4,315 14,100

13,500 5,000

392,490 400

115,000 11,304 1,500

195,000

1,360 9,600

200 10,000 46,354

162,517

4,099,580 1,290,596 5,390, 176

$

$

$

Total indirect costs Total direct costs

Indirect cost rate

$ $

5,390,176 5,475,582

98.44%

$ $

5,390,176 5,475,582

98.44%

$ $

0.00o/o

-6­

San Bernardino Associated Governments Indirect Cost Rate Proposals

Schedule 3-­Summary of Direct Costs, Indirect Costs, and

Carry-Forward; Fiscal Year 2015-16

Proposed Amount

Audited Amount

Audit Adjustment Re ference

Direct costs: Direct salaries Direct fringe benefits

Total direct costs:

$

$

3, l 98,527 3, 124,64 l 6,323, 168

$

$

3,198,527 3, 124,64 1 6,323,168

$

$

Indirect costs: Indirect salaries Indirect benefits Indirect expenses:

Communication Utilities Training Maintenance of Equipment Insurance Building Operating Expense Rental of Equipment Printing-Internal Office Expense IT Services and Software Subscriptions Postage Meeting Expense Records Storage Printing-Misc Professional Services Other Service Charges Auditing County Charges SANBAG Vehicle Travel - Non-Employee Travel Allowance Mileage Reimb/SANBAG Travel-Other Travel-Metro link Advertising lnventorial Equipment Capital Outlay Depreciation Consulting Fees

Subtotal indirect costs before carry-forward adjustment: Carry-forward from fiscal year 20 I 0-1 1 & 2011 ­12 Total indirect costs after carry-forward adjustment:

$

$

$

959,002 957,264

2,6 14,635 39,340 62,400 57,545

412,800 315,000

40,000 16,100 54,850

4,634 11 ,900

35,000 9,000

654,538 5,000

271,000 187,077

1,500 73,000

1,750 16,500

11,500 1,684

162,517 170,000

4,530,901

4,530,901

$

$

$

959,002 957,264

2,614,635 39,340 62,400 57,545

412,800 315 ,000 40,000 16, 100 54,850

4,634 11,900

35,000 9,000

654,538 5,000

271,000 187,077

·1,500 73,000

1,750 16, 500

11,500 1,684

162,517 170,000

4,530,901

4,530,90 1

$

$

$

Total indirect costs Total direct costs

Indirect cost rate

$ $

4,530,901 6,323, 168

71.66%

$ $

4,530,901 6,323, 168

71.66%

$ $

0.00%

-7­