STAFF REPORT

SUBJECT: Receive FY 10/11 Audit Reports and Management Letter

MEETING DATE: September 6, 2012 AGENDA ITEM: 5 STAFF CONTACT: Bobbi Didier RECOMMENDATION: Receive the Measure A Audit reports and management letter prepared by Moss, Levy & Hartzheim, LLP regarding FY 2010-11 compliance with the provisions, requirements, and voter mandates specified in the Measure A Investment Plan and Ordinance Number Five. SUMMARY: At the August 2nd meeting of TTAC, SBCAG presented the FY 2010-11 Measure A Audit reports and management letter prepared by our independent auditors. Some TTAC members expressed concern that expenditures reported for their jurisdictions toward meeting the 5-year Alternative Transportation minimum expenditure requirement appeared to be understated. SBCAG’s auditor contacted staff from Goleta, Lompoc, and Solvang to verify these expenditures and the audit report has been revised as reflected in Table 1. The audit management letter reported that two agencies were not in compliance with the requirement to hold Measure A funds in a separate account. The County and the City of Goleta have since submitted letters indicating that these non-compliance issues have been addressed. Staff intends to present the 2010-11 audit report to the SBCAG board at its September 20th meeting. DISCUSSION: Measure A Ordinance Number Five, adopted by county voters in November 2008, requires that no less than annually, SBCAG conduct and approve an independent fiscal audit of the expenditure of all revenues raised by Measure A. The scope and content of the audit was developed with the assistance of the Citizens’ Oversight Committee. The audit includes;

1. Evidence that the expenditures of revenues is in accordance with the Measure A Investment Plan.

2. Verification that Measure A funds and interest earned are deposited in a separate account for each city and county.

3. Validation that no more than one percent of Measure A revenues is used for administrative staff salaries and benefits (SBCAG).

4. Cities and County compliance with Maintenance of Effort and Alternative Transportation requirements.

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Alternative Transportation Expenditures At the August 2nd meeting, representatives from Solvang, Lompoc and Goleta raised concerns that the audit figures for Alternative Transportation were inaccurate for their respective entities. SBCAG indicated a willingness to contact the auditor to see if they could revisit the documentation for Alternative Transportation for those entities without incurring additional audit costs. Following the August TTAC meeting SBCAG contacted the auditors who indicated they did not see a problem with working to correct possible misstatement of expenditures by the affected jurisdictions. SBCAG staff contacted Lompoc, Goleta and Solvang to request that they work with the auditors to provide any new information necessary to arrive at the correct Alternative Transportation figures. Table 1 depicts the revised audited Alternative Transportation figures for Goleta, Lompoc and Solvang. Table 1: Alternative Transportation Compliance (revised and audited) FY 2010-11 This table depicts the local jurisdictions’ first year progress toward meeting their five year Alternative Transportation requirements. Changes that have been made in the audit reports since the August TTAC meeting are shown in the “Revised” columns.

Jurisdiction

Required % of

Investment (each year of

5 year period)

PRIOR % of

Investment FY 10-11

(1st year of 5 year period)

PRIOR (Year 1 of 5 )

Actual Dollars Spent FY 10-

11

REVISED % of

Investment FY 10-11

(1st year of 5 year period

REVISED (Year 1 of 5 )

Actual Dollars Spent FY 10-11

Buellton 5% 1.10% $ 3,087 N/A N/A

Carpinteria 10% 2.86% $ 17,000 N/A N/A

Goleta 10% 0% $ 0 0.18% $ 2,083

Guadalupe 5% 0% $ 0 N/A N/A

Lompoc 15% 1.58% $ 27,400 23.48% $ 407,401

Santa Barbara 10% 32.07% $ 885,727 N/A N/A

Santa Maria 15% 1.32% $ 47,796 N/A N/A

Solvang 15% 0% $ 0 77.96% $ 239,785

Unincorporated

North Santa

Barbara County

10% 4.18% $ 116,173 N/A N/A

Unincorporated

South Santa

Barbara County

10% 17.67% $ 481,340 N/A N/A

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Non-compliance Issues The audit management letter reported that the City of Goleta and County of Santa Barbara were not in compliance with the requirement to deposit Measure A funds and interest earnings in a separate fund. The city and the County have subsequently submitted letters indicating that these non-compliance issues have been corrected. SBCAG staff made the decision to delay taking the audits to the SBCAG board until the issues relating to reporting of Alternative Transportation expenditures and non-compliance were resolved. SBCAG staff anticipates presenting the final audits to the SBCAG board at its September 20th meeting. As a means to address TTAC’s concerns and improve the audit process, SBCAG staff has prepared the attached “Measure A Audit Review Process” this document will serve as a guideline for future audit communication with TTAC and jurisdiction finance staff. Attachments: Measure A Audit Review Process Compliance Letters from the City of Goleta and County of Santa Barbara

MEASURE A AUDIT REVIEW PROCESS

Following is a statement of responsibilities and a recommended sequence of audit and review activities to ensure the accuracy and timely reporting of Measure A Maintenance of Effort and Alternative Transportation compliance.

Responsibilities of Auditor

To review and verify Maintenance of Effort and Alternative Transportation compliance.

To verify that the expenditures of revenues were in accordance with the Measure A Investment Plan.

To validate that Measure A funds and interest earned were deposited in a separate account for each city and county.

Responsibilities of City and County staff

To ensure that all Measure A revenues have been expended in accordance with the Measure A Investment Plan.

To ensure that all Measure A funds and interest have been deposited in a separate account.

To ensure that all expenditures to be considered in determining compliance with Maintenance of Effort and Alternative Transportation requirements have been properly coded and communicated to the appropriate finance staff of each entity receiving funds.

Audit Review Process

1. SBCAG notifies finance and public works staffs of the Measure A Audit timeline in advance of audit staff commencing audit. Jurisdiction staffs are to develop internal reporting systems to ensure proper coding of Alternative Transportation and Maintenance of Effort expenditures.

2. Auditor requests information from each local agency necessary to determine compliance with Measure A Ordinance requirements including Maintenance of Effort and Alternative Mode expenditures. Finance and public works staffs work with auditors to ensure accurate reporting.

3. SBCAG presents DRAFT Measure A Audits to TTAC for review. TTAC representatives review audited figures with their finance staff to validate accuracy. If errors are detected, SBCAG must be notified within 14 days of receipt. The auditors will then be notified. Cities and County must provide validation of error and correct data. Auditor will make revisions to the audit reports as appropriate.

4. DRAFT Measure A audits will be presented, with any necessary revisions, to TTAC for final review.

5. SBCAG presents DRAFT Measure A Audits to the Citizen’s Oversight Committee. Committee submits letter to SBCAG board commenting on draft audit report and whether the provisions, requirements and voter mandates specified in the Ordinance and Investment Plan have been properly carried out.

6. SBCAG finalizes Measure A Audits with audit firm and receives FINAL MEASURE A AUDIT copies.

7. SBCAG presents FINAL MEASURE A AUDITS and CITIZENS’ OVERSIGHT COMMITTEE LETTER to SBCAG Board.

8. SBCAG ensures non-compliance issues, reported by the auditor and/or Citizen’s Oversight Committee, are resolved.

County Of Santa Barbara

Renée E. Bahl Terri Maus-Nisich Dennis Bozanich

Assistant County Executive Officer Assistant County Executive Officer Assistant to the County Executive Officer rbahl@co.santa-barbara.ca.us tmaus@countyofsb.org dbozanich@co.santa-barbara.ca.us

Executive Office

August 7, 2012

Santa Barbara County Association of Governments Attn: James Kemp, Executive Director 260 N. San Antonio Road, Ste. B Santa Barbara, CA 93110 Re: FY 2010/2011 Measure A Audit – SBCAG and Audit Letter dated June 12, 2012 Dear Mr. Kemp:

The County of Santa Barbara has reviewed the Measure A Audit letter for FY 2010/2011 prepared by Moss, Levy and Hartzheim LLP dated June 12, 2012, and has taken action on the following:

Verification that Measure A funds and interest earned are deposited in a separate account

for each City and County.

Result: During our examination of the County of Santa Barbara’s accounting records, it was noted that the Measure A funds and interest were not deposited in a separate account. Although the County tracked their Measure A funding through various documentation suitable for a financial engagement, Ordinance Number Five requires Measure A funding to be held in a separate account. The County is currently in the process of creating a separate fund specifically for Measure A.

The County has responded to the issue described in the above finding to comply specifically with the Measure A Ordinance. All Measure A funds and interest are now tracked in separate accounts for the County of Santa Barbara. These accounts are: Measure A North, Measure A South, Alternate South, and Alternate North. This effort will bring the County of Santa Barbara into compliance with the Measure A Ordinance as described above.

As noted by your auditor, prior to these actions being taken, standard accounting practices were utilized that accounted for all Measure A revenue and interest received by the County since this revenue source commenced.

If you have any questions or need additional information please contact me or Scott McGolpin, Public Works Director, at (805) 568-3010.

Chandra L. Wallar

County Executive Officer

105 East Anapamu Street, Room 406

Santa Barbara, California 93101

805-568-3400 • Fax 805-568-3414

www.countyofsb.org

Sincerely,

Chandra Wallar County Executive Officer

Cc: Renee Bahl, Assistant County Executive Officer Scott D. McGolpin, Public Works Director Eric Pearson, Interim Deputy Director, Transportation Mark Paul, Deputy Director of Finance and Administration

Encl