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2 Redevelopment Agency Reviews Property Tax Audits State Mandated Cost Audits Other Local Government Audits 2013 State Controller’s Conference with County Auditors DoubleTree Hotel Sacramento SCO Audits

3 Presented by: JEFFREY V. BROWNFIELD, CPA, CHIEF DIVISION OF AUDITS (916) WALTER BARNES, CHIEF SPECIAL AUDITS (916) STEVEN MAR, CPA, CHIEF LOCAL GOVERNMENT AUDITS BUREAU (916) JIM L. SPANO, CPA, CHIEF MANDATED COST AUDITS BUREAU (916) SCO Audits

4 Division of Audits - Overview RDA Asset Transfer Reviews Property Tax Audits State Mandated Cost Audits Other Local Government Audits SCO Website Questions Agenda

5 On or before January 1, 2015, the Controller shall develop internal control guidelines to prevent fraud and detect financial errors and post to the SCO website Input from: – League of California Cities, –California State Association of Counties, –California Special Districts Association, and –California State Association of County Auditors AB 1248 – Controller: Internal Control Guidelines Applicable to Local Agencies

6 Review Universe 402 Agencies Final Reports Issued 87 Reports In-Process 121 Total Dollar Findings $3.4 Billion Anticipated Completion Date December 31, 2014 RDA Asset Transfer Review Update and Results

7 COMMON FINDINGS: Unallowable transfers of fixed assets (buildings, property, parks, etc.) to the City, County, City and County or other local agency (generally an EDC) Transfers of housing assets (including Low/Mod assets) directly to the Housing Agency Assets not transferred (still on the former RDA’s books) to the successor agency Other unallowable transfers –cash transfers, including bond proceeds to the City, County, City and County or other local agency RDA Asset Transfer Review Update and Results (continued)

8 1.Can the counties remove ERAF prospectively beginning with fiscal year or depending on timing? 2.If a prospective adjustment is allowed, how will the SCO handle prior year audits where the SCO noted an audit finding? 3.Can the counties use the Contra Costa method or the SCO method to distribute unitary taxes? Property Tax ERAF and Unitary Apportionment Corrections

9 SCO Role in the Mandate Process –Division of Accounting and Reporting –Division of Audits –Interaction with the Commission on State Mandates (CSM) –Interaction with counties and county representatives Filed County Claims FY claims $56 Million FY claims$113 Million FY claims$234 Million FY ,032 claims$167 Million State Mandated Cost Audits

Published County Audits –14 audits (consisting of approximately three years of claims) –$65 million in claimed costs and $15 million in adjustments (primarily ineligible costs), a 23% error rate Budget Act Funding for Local Agencies –$48 million for FY through FY claims April 30, 2013, Deficiency for Local Agencies - $1.9 billion –$720 million for funded programs –$380 million for unfunded programs –$800 million for 15 years Proposition A payment plan (FY and prior years) State Mandated Cost Audits (continued)

11 Outstanding County Appeals (Incorrect Reduction Claims) with the CSM: –14 filed in the following years (7 are for mental health programs): 2005 – – – – – – – 1 Pending Mandates Redetermination –Sexually Violent Predators Program Effective FY New Mandated Programs –FY Tuberculosis Control Effective FY –FY California Public Records Act Effective FY Alternatives to Filing a Mandate Claim State Mandated Cost Audits (continued)

12 Links to Audit and Oversight Reports, and More Information Controller's Redevelopment Asset Reviews Controller's Audits of State and Local Agencies Controller's Revenue Audits Controller's Oversight of Independent Auditors' Audits of Local Agencies Search for Additional Audits Information on Ordering Printed Copies of Controller's Audits SCO Website

13 Questions