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HomeMy WebLinkAboutMINUTES - 08111998 - C110 TO: BOARD OF SUPERVISORS FROM: Finance Committee Contra Gayle B. Uilkema �i0' 'r +`r Jere Canciarnilla DATE: August 11, 1998 County ;SUBJECT: Audit of County Internal Financial Controls for fiscal years 1995-96 and 1596-97. Specific Request(s) or Recommendation(s) & Background & Justification RE90M IME,NDATIONS 1. Accept this report on Internal Financial Controls for fiscal years 11995-96 and 1996-97. 2. In future years, refer the annual audit reports to the Finance Committee for review of report and review of fallow-up responses. a: BACKGROUND On ,lune 1, the Finance Committee reviewed the audit report prepared by Macias, Gini and Company for fiscal year 1996-97. The Committee heard testimony from staff of the Auditor-Controller and County Administrator Departments. The Committee reviewed both the substance of the report and the follow-up procedures. The Committee took the following actions: 1. requested that the audit report be reconsidered upon the receipt of responses from the various Departments; and 2. requested that staff provide the preceding audit report for year 1995-96 and indicate the subsequent actions taken by the County. Can August 3, the Finance Committee reviewed both the 1996-97 and 1995-96 audit reports and department responses. Continued on Attachment: X.YES Signature: Recommendation of County Administrator Recommendation of Board Committee Approve Other Signature(s): Action of Board on: AU&Wt 11, 1998 Approved as Recommended x Other Vote of Supervisors: I HEREBY CERTIFY THAT THIS IS A TRUE AND CORRECT COPY OF AN ACTION TAKEN X Unanimous(Absent) AND ENTERED ON THE MINUTES OF THE Ayes: Noes: BOARD OF SUPERVISORS ON DATE SHOWN. Absent; Abstain: Contact:Tony Enea(335-1094) Attested: August 11., 1998 cc: County Administrator Phil Batchelor,Clerk of County Counsel the Board of Supervisors Treasurer-Tax Collector and Court qministrator Auditor-Controller B DEPUTY Audit of County Internal Financial Controls for fiscal years 1996-96 and 1996-97 6111198 Page 2 Attachment 1 includes the audit report and the responses to the report by subject area from the following Departments: Treasurer- Tax Collector investment Compliance Audit Auditor- Controller Investment Compliance Audit' Hospital Fund Fixed Assets Employee Benefits Payable Small Business Protection Act Implementation of New Accounting Standard Community Development grantee Performance Report' Public Works Davis-Bacon Act Social Services Administrative Controls over Eligibility The process used by the CAO staff to follow-up on the report is presented below. 1. May 26 memo sent to appropriate Departments requesting response(see attached memo). 2. July 22 second memo sent to Departments that have not responded (see attached memo). 3. July 27-29 calls to Departments that have not responded. KPMG Peat Marwick prepared the Audit report in 1995-96, which appears as attachment 2. Last year, the Administrator's Office provided the Board of Supervisors and the appropriate Departments with the report and invited comments. The report was deemed to have presented no significant problems. Follow-up actions to the issues raised by the report are presented below. Welfare Reform Administrative and financial changes caused by Welfare Reform are actively and continually being planned and implemented by Social Service and other affected Departments. Year 2000 The Information Technology department is actively working on the Y2K project. The Board and Finance Committee have received progress reports on the subject. The Finance Committee has included a recommendation to the Board on the subject to be considered at the August 11 Budget Hearing. Financial and Accounting A new finance system has been discussed by;the Finance Committee System and is another item included as part of the improvements in financial processes being presented to the Board on August 11. The top priority automation project has been the Human Resources/Payroll system currently being implemented. MIS Auditors The position of management Information Officer has remained vacant because of budget problems and more recently, because of a classification study of similar positions. Recruitment for a person will begin in the near future. Community Services The Department followed the recommendation to hire a consultant to assess and implement new internal system controls. Year End Closing Process One person has been designated in the general Accounting Division to issue accrual forms and log departmental responses. Audit of County Internal Financial Controls for fiscal years 1995-96 and 1996-97 8111198 Page 3 Accounting for the Federally- Health Services has been prudently conservative in preparing Qualified Health Centers revenue estimates since revenue allocations are subject to Programs federal and state legislative action and not estimated service casts. Self Insurance Fund An additional $1,200,000 was transferredto the Medical Liability Insurance Fund in 1997-98, with plans for a similar amount in 1998- 99. General Fixed Asset Account All Court fixed assets destroyed by the fire have been deleted from Group the inventory. Replacement assets are nearly completed as the lost insurance payment has recently been paid and account reconciled. The Committee requested that staff report back to the Committee on October 19 on two items. First, the status of the trust to hold assets and earnings of the deferred compensation plan. And second,the status of the County Treasurer and Treasury Oversight Committee policy regarding the assessment of the effect of withdrawals on the stability and predictability of investments. ATTACIRIEN:t 1 COUNTY OF CONTRA COSTA. Memorandum on Internal Control Structure For the Year Ended June 30, 1997 Partners Mt. Diablo Plaza Kenneth A. Macias 2175 N.California Boulevard Ernest J.Gini Suite 620 Walnut Creek,CA 94596 Macias,Gini&Company Casfliletl Public: Account-Is 510.274.0190 510.274•3819 FAX January 16, 1998 To the Honorable Board of Supervisors of the County of Contra Costa: Under generally accepted auditing standards, auditors are encouraged to report various matters + concerning an entity'.s internal control structure noted during an audit, and are required to report certain of those matters. Matters that are required to be reported are significant deficiencies in the design or the operation of the internal control structure that, in the auditor's judgment, could adversely affect the organization's ability to record, process, summarize and report financial data consistent with the assertions of management in the general-purpose financial statements. As part of our audit of the general-purpose financial statements of the County of Contra Costa (the County) for the year ended June 30, 1997, we considered the County's internalcontrol structure in determining the scope of our audit procedures for the purpose of rendering an opinion on the general- purpose financial statements. While our purpose was not to provide assurances on the internal control structure, certain matters came to our attention that we want to report to you. These matters, along with our recommendations, are described in the accompanying memorandum. A material weakness is a significant deficiency in which the design or operation of one or more of the internal control structure elements does not reduce to a relatively low level the risk that errors or fraud in amounts that would be material in relation to the general-purpose financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control structure would not necessarily disclose all matters in the internal control structure that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses as defined above. However, none of the matters described in the accompanying memorandum is believed to be a material weakness. The accompanying memorandum is intended solely for the use of management and the County Board of Supervisors (the Board). This restriction is not intended to limit the distribution of this letter and the accompanying memorandum, which, upon acceptance by the Board, are a matter of public record. To the extent that the Board intends to rely upon this letter and the accompanying memorandum, such reliance should take into account the limited basis on which our recommendations were developed, as described above and the limitations inherent in the internal control structure. 1 OFFICE LOCATIONS Sacramento + Los Angeles + San Francisco Bay Area County of Contra Costa January 16, 1998 In addition, the Board should understand that the criteria used by us in considering the internal control structure could differ significantly from the criteria the Board might be using for its purpose. While performing the County's single audit procedures, we noted no material instances of noncompliance. However,we did find certain immaterial instances of noncompliance, which are included in the accompanying memorandum under the caption Single Audit Comments. We wish to express our appreciation for the courtesies and cooperation extended to our representatives during the course of their work. We would be pleased to discuss these recommendations in greater detail or otherwise assist in their implementation. Very truly yours, MACIAS,GINI&.COMPANY LLP 11 Certified Public Accountants 2 MEMORANDUM ON INTERNAL CONTROL STRUCTURE INVESTMENT COMPLIANCE AUDIT In the wake of the Orange County bankruptcy, legislation was advanced in the hopes of preventing future losses of public money. This new legislation resulted in comprehensive investment reform that became effective on January 1, 1996. A cornerstone of the legislation is the requirement for creation of an oversight committee in each California county. While the oversight committee does not have the authority to direct individual investment decisions, select individual investment advisors,or impinge on the day-to- day operations of the County Treasury, it does have the duty of recommending investment policies,determining fund withdrawal requirements and monitoring investment activities. As part of the monitoring function, Article 6, Section 27134 of the California Government Code requires County Treasury Oversight Committees to cause an annual audit to be conducted for the purpose of determining the Treasurer's compliance with investment policies. During our limited review of the County's compliance with its investment policy, we noted no such "annual audit" had been performed. We understand that the County's Treasury OversightCommittee has scheduled the Internal Audit Division of the Auditor-Controller's office to complete such an audit by March 1998. We recognize the new legislation is unspecific regarding the year in which these annual audits should commence. However, based on our experience with other counties and,our discussions with the Senate State and Local Government Committee, the intent of the legislation was to begin these audits in the year the law became effective,i.e. fiscal 1995-96. We strongly recommend that the County's Treasury Oversight Committee cause an annual audit to be performed as required by Article 6, Section 27134 of the California .Government Code. Such an audit will improve the County's investment monitoring function, and help to ensure compliance with the investment policy and legislative requirements. HOSPI'T'AL FUND FIXED ASSETS While performing our fixed assets testing we noted the detail supporting schedule for Hospital Fund construction in progress did not reconcile to the County's general ledger system. The County's Hospital Fund construction activity is maintained using electronic spreadsheets outside of the G=eneral Accounting function in the General Services Department. General Services maintains the records for all construction outlays, however, does not include or track activity related to interest capitalization. As a practical matter,the County should maintain one complete record of its construction activity that agrees directly to the general ledger system. Also, we recommend the County reconcile its fixed assets and accumulated depreciation detail supporting schedules to the general ledger system on a routine basis. 3 EMPLOYEE BENEFITS PAYABLE The County's liability for employee benefits payable at June 30, 1997 represents accrued vacation leave. Portions of this liability relating to employees paid out of the County's General and Special Revenue funds are not expected to be fully liquidated in the following fiscal year and are recorded in the General Long-Term Obligations Account Croup. Under Governmental Accounting Standards Board Statement No. 16 (GASB 16) -- Accounting for Compensated Absences, for governmental funds,the current portion of the County's employee benefits payable should be accrued and reported in the fund, not in the General Long-Term Obligations Account Group. In the past the County has had difficulty determining how much of the liability is current. However, GASB 16 requires government entities to make reasonable estimates of these liabilities using the criteria in the statement. We recommend the County perform a study to develop historical trends for annual amounts typically paid out to employees for vacation leave. This study can serve as the basis for determining the current portion of the employee benefits payable and will assist the County in conforming with the requirements under GASB 16. SMALL BUSINESS JOB PROTECTION ACT OF 1996 In August 1996, Congress passed the Small Business Job Protection Act of 1996 (the "Act"), which requires the County to set up trusts to hold assets and earnings of the deferred compensation plans for the exclusive benefit of the participants. Prior to this Act, all amounts of compensation deferred under these plans, all property and rights purchased with such amounts, and all income attributable to such amounts, property or rights remained solely the property and rights of the County, subject only to the claims of the County's general creditors, until made available to the participant or other beneficiary. The County should determine whether its plan meets the requirements of the Act. In the event the existing plan does not meet such requirements, the County must establish'a new trust by January 1, 1999. REQUIRED IMPLEMENTATION OF NEW ACCOUNTING STANDARD In March 1997, the Governmental Accounting Standards Board issued Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. This statement establishes fair value standards for certain investments, which have readily determinable fair values. Governmental entities will be required to report these investments at fair value, which is the amount at which a financial instrument could be exchanged in a current transaction between willing parties and is generally measured by quoted market prices. Changes in fair value of investments (i.e., both realized and unrealized gains and losses) will be recognized and reported as part of investment income. Purchase premiums and discounts will be eliminated the first time that investments are adjusted to fair value. We recommend County staff familiarize themselves with this new standard. 4 NEW AUDITING STANDARD ON FRAUD The accounting profession recently released a new auditing standard for reporting and detecting fraud, effective for the year ending June 30, 1998, entitled — Consideration of Fraud in a Financial Statement Audit (SAS No. 82). This standard was developed in (response to the growing public and government expectation that auditors should be able to find fraud. In theory auditors have always been responsible for reporting on activities that could affect the accuracy of the financial statements; however, the new standard provides a' detailed set of guidelines and risk factors that must be considered as part of our basic approach to the audit. Auditors are now required to identify potential exposures to fraud and how clients plan to eliminate there. The new standard focuses on two basic types of fraud: (1) fraudulent financial reporting (e.g., manipulation, falsification, or alteration of accounting records or supporting documentation) and (2) misappropriation of assets (e.g., embezzlement, stealing assets or causing payment for goods/services not received). Auditors are now required to explicitly evaluate information that may have been only intuitively considered in the past. For example,going beyond the evaluation of risk factors that relate to the client's internal controls and reporting processes, and exploring the client's operating,regulatory and business environments. We suggest that management prepare for changes in next year's audit process by gaining an understanding of the risk factors involved and preparing for some of the questions that will be asked during future audits. Management should consider documenting examples of where fraud or potential fraud has occurred, illustrating the problem and how the County dealt with it. This type of documentation not only demonstrates the County's proactive response to problems but can also be used in training sessions to prevent future incidents. As your auditors we are responsible for planning and performing the audit to obtain reasonable assurance that the financial statements are free of material misstatement whether caused by error or fraud.However,management is ultimately responsible for adopting sound accounting policies and establishing and maintaining internal controls that will record, process, summarize and report transactions properly within the financial statements. We loop forward to working with you to further improve and refine the County's financial accounting and reporting processes. SINGLE AUDIT COMMENTS Under the revised Office of Management and Budget Circular A-133 audit f ndings, for purposes of the Single Audit Act, are defined as either(1) material noncompliance with the provisions of laws, regulations, contracts, or grant agreements, or(2) questioned costs which are greater than $10,000 for a major program compliance requirement. During our Single Audit procedures we noted no audit findings as defined above, however, we did note certain other matters, which are briefly described hereunder. 5 GRANTEE PERFORMANCE REPORT The County's funding under the Community Development Block Grant Program requires a Grantee Performance Report(GPR)be filed within ninety days of the close of the program fiscal year. During our testing we noted this report was filed one week after the deadline. We understand that the delay resulted from personnel changes made within the Community Development Department (CDD) and that the report was not significantly late. However, we suggest that management within the CDD reemphasize the importance of filing the GPR within the required time frame. ADMINISTRATIVE CONTROLS OVER ELIGIBILITY We noted that two Aid to Families with Dependent Children(AFDC)case files out of the total of forty case files selected for testwork were missing the signature of the supervisor on the Statement of Facts For Cash Aid and Food Stamps form (JA-2). Federal and County policies require the supervisor to sign or initial form JA-2. We recommend that the supervisor sign form JA-2 to indicate the review was performed. The signature substantiates the evaluation of the client's eligibility for assistance. A missing signature may indicate that a review has not been performed and can result in possible eligibility errors. Further, the supervisor's'signature serves as a review process control that helps the AFDC program meet the..compliance requirements set forth by the federal government. REPORTING REQUIREMENTS Federal awards received by the County from pass-through entities should be identified, by the pass-through entity's assigned contract number, on the Schedule of Expenditures of Federal Awards(SEFA). This information was not available and therefore not included in the County's SEFA for the fiscal year ended June 30, 1997. To the extent practical, the County should also identify in the SETA the total amount of federal assistance provided to subrecipients. We recommend that the County incorporate these items into the federal financial assistance inventory forms,which are disseminated to departments annually. DAVIS-BACON ACT COMPLIANCE Under the Davis-Bacon Act, the County is required to monitor wages paid to laborers employed by contractors on construction projects financed through federal assistance to ensure that they are not less than the prevailing wages set by the State of California Department of Industrial Relations. During our Single Audit testing we noted the County only monitors construction projects that are ongoing for more than thirty days. We recommend the County review its policy to ensure it is effectively monitoring all construction contracts as required under the Davis- Bacon Act. We suggest the monitoring system focus on the financial significance of projects instead of using a"number of days"threshold. 6 C O N T R A C O S T A C O U N T Y OFFICE OF THE COUNTY ADMINISTRATOR Administration Building 651 pine Street, 11th Floor Martinez, CA 94555 DATE : May 26, 1998 TO: Dennis Barry, Community Development Director Ken Corcoran, Auditor-Controller John Cullen, Social Service Director Barton Gilbert, General Services Director Leslie Knight, Human Resources Director Al Lomeli, Treasurer-Tax Collector Mike Walford, Public Works Director FROM: Phil Batchelor, County Administrator I SUBJECT: Financial Compliance Audit Performed by Macias, Gini & Company On May 20, 1997 the Board of Supervisors approved a contract with the subject contractor to perforin audits of the County' s general purpose financial statements and Federal financial assistance programs for the period June 1, 1997 through May 30, 2000 . Attached is a copy of the contractor' s "Memorandum on Internal Control Structure" as a result of audits conducted for the fiscal year ended June 30, 1997 . The audits revealed no significant problems but did point out several minor non-compliance issues . Designated departments with responsibility for these issues should provide a response as to the actions being taken to correct the noted deficiencies : Issue Departments Investment Compliance Audit Auditor-Controller Treasurer-Tax Collector Hospital Fund Fixed Assets Auditor-Controller Health Services Employee Benefits Payable Auditor-Controller Human Resources Issue Departments Small Business Job Protection Act Auditor-Controller Required Implementation of New Auditor-Controller Accounting Standard Treasurer-Tax Collector New Auditing Standard on Fraud Auditor-Controller Grantee Performance Report Community Development Administrative Controls over Social Service Eligibility Reporting Requirements Auditor-Controller Davis-Bacon Act Compliance General Services Public Works ' Please provide your responses to this office by June 30, 1998 . Thank you for your personal attention to this request. cc: Board of Supervisors OFFICE OF THE COUNTY ADMINISTRATOR C Q N T R A C 0 S T A C O U N T Y Administration Building 651 Pine Strut, 11th Floor Martinez, CA 94553 DATE : July 22, 1998 TO: Dennis Barry, Community Development Director ` Ken Corcoran, Auditor-Controller Barton Gilbert, General Services Director Leslie Knight, Human Resources Director FROM: Phil Batchelor, County Administrator SUBJECT: Financial Compliance Audit Performed by Macias, Gini & Company Your response to our May 26, 1998 request has not been received. If your response is in transit please disregard this memo. If not, please prepare your response and forward to this office as soon as possible. Responses were due June 30, 1998 . JUL-24-1998 16:48 CO CO CC PUDITOR 1 925 646 1554 P.01 Office of COUNTY AUDITOR-CONTROLLER Contra Costa County Martinez, California June 30, 1998 TO: Phil Batchelor, County Administrator FROM: Kenneth J. Corcoran, Auditor-Controller By: Jack B. Cooper Jr., Principal Auditor SUBJECT: Response to Macias,Gini& Company Management Letter dated January 16, 1998 This is to provide you with our Office's response to comments and recommendations contained in the Macias, Gini &Company Management Letter dated January 16, 1998, as relating to the audit for the year ended June 30, 1997. The management letter topics are summarized below, and are followed by our responses: R-;WSTMENT COMPLIANCE AUDIT RgcomnnendationsJComments The County's Investment Oversight Committee(Committee) should secure an annual audit of the activities of the Committee and the County Treasurer, as prescribed by Government Code Section 27134. s onse: The Committee requested that the Internal Audit Division of the Office of the County Auditor- Controller perform the required audit for the initial period of July 1, 1996 through December 31,1997. Annual audits will be performed for subsequent calendar years. The Internal Audit Division completed its audit on March 31, 199'8. The Chairperson of the Committee requested that the report be kept in draft form until the Committee met on June 5, 1998. At their meeting on lune 5, 1998,the Committee accepted the report'without change. The Committee has subsequently responded to the recommendations in the report and bath the report and the response have been accepted by the Board of Supervisors. Post4t°Fax Note 7671 date"','y. pages► From �w�3iI' do. t Co. , Phono phone+ / Fax k . ,rbPo / p y tea'fir" G�,a�'t�'"rM/ �tur'IW ol�+Cs � IG.*,{� ��{np��►� i1111�fYYIlifYlr�1 ! '� � JUL-24-1999 16:46 CC CO CO AUDITOR 1 925 646 1554 P.02 Phil Bachelor, County Administrator June 30, 1998 Respowe to Audit Management Letter HOSPITAL FUND FDMD ASSETS RecommendationslComments The County should maintain one complete record of its construction activity that agrees directly to the general ledger system.. The County should reconcile its fixed assets and accumulated depreciation detail supporting schedules to the general ledger system on a routine basis. Response: r The General Accounting Division of the Office of the County Auditor-Controller will maintain a complete subsidiary record of all fixed asset construction projects that agrees with the County's general ledger. Some fixed asset construction activity records are maintained by the General Services Department. The General Accounting Division will incorporate this information in their subsidiary record. Fixed assets & accumulated depreciation will be reconciled to the County's general ledger on an annual basis. ENTLOYEE BENEFITS PAYABLE Recommendations/Comments The County should comply with Government Accounting Standards Board Statement No. 16 (GASB 16) -Ac counting for Compensated Absences and report the current portion of employee benefits payable as a current liability in the appropriate fund, rather than the General Long-Term Obligations Account Group. To serve as a basis for determining the current portion of employee benefits payable, the County should perform a study to develop historical trends for annual amounts typically paid out to employees for vacation leave. Response. In subsequent discussions with staff from Macias, Gini &Co., they have agreed that none of the employee benefits payable liability for governmental fund types are required to be recognized as current under GASB 16. The County may continue to recognize all such obligations in the General Lang-Term Obligations Account Group provided: (1)based on its experience,that such obligations will not.be claimed until future periods, and (2)claims made within the next 12 months will be liquidated from future resources. We believe that at June 30, in all material respects, all compensated absences accruals meet these conditions,and thus, are properly reported as long-term obligations. 2 JUL-24-1998 16:49 CO CC CC AUDI7OR 1 925 646 1554 P.03 Phil Ba;helor, County Administrator June 30, 1998 Respon>e to Audit Management Letter SMALL BUSINESS JOB PROTECTION ACT OF 1996 Recommendations/Comments The Small Business Job Protection Act of 1996(Act)requires the County to set up trusts to hold assets and earnings of the deferred compensation plans for the exclusive benefit of the participants. The County should comply with this requirement by January 1999. Response: w The County hes been working with ITT Hartford to develop a trust agreement to comply with the Act. The draft agreement was sent to County Counsel for review on May 18, 1998. After approval by County Counsel it will be submitted to the Beard of Supervisors. We anticipate timely compliance with the;Act. REQUIRED ifMTLEMENTATION OF NEW ACCOUNTING STANDARD RecorrrunendationslComments Effective for the County's fiscal reporting year 1997-98, GASB Statement No. 31 will require the County's investments to be reported at fair value and the changes in their fair value to be recognized as part of investment income. County staff should familiarize themselves with this new standard. Response: Staff from the Offices of the County Auditor-Controller and Treasurer-Tax Collector are aware of this requirement. Implementation will be complex and challenging. Some staff have attended seminars on the new requirements. The Auditor-Controller has ordered the recently published GASB 31 Implementation Guide, The 1997-98 Comprehensive Annual Financial Report(CAFR)will be in compli, mce with this new standard. 3 TOTAL P.03 J'UL-24-1996 16:50 CC CC CO AUDITOR 1 525 646 1554 P.01 Phil Bachelor, County Administrator June 30, 1998 Response to Audit Management Letter NEW AUDITING STANDARD ON FRAUD R ecommendationsfComments The American Institute of Certified Public Accountants recently released a new auditing standard for reporting and detecting fraud, effective for the year ending June 30, 1998, entitled Statements on Auditing Standards (SAS)No. 82 Consideration of Fraud in a Financial Statement Audit. Auditors are now required to identify potential exposures to fraud and how clients plan to eliminate them. The new standard provides a detailed set of guidelines and risk factors that must be considered as part of the auditor's basic approach to the audit. Management should prepare for this change in the audit process by gaining an understanding of the risk factors involved and preparing for some of the questions that will be asked during future audits. Management should consider documenting examples of where fraud or potential fraud has occurred, illustrating the problem and how the County dealt with it. Response. As our extemal auditors have indicated, this new standard requires them to perform additional procedures to identify potential County exposures to fraud and how County management plans to eliminate them. County management will cooperate fully with audit staff in fulfillment of this new requirement. The Internal Audit Division of the Office of the County Auditor-Controller is available to provide information to departments about fraud risks and prevention. REPORTING REQUYRENENTS RecomsnendationslComments The County should include the pass-through entity's assigned contract number and the total amount of federal assistance provided to sub-recipients on the federal financial assistance inventory request forms which are disseminated to departments annually. Res op nse: The Int=-nal Audit Division of the Office of the County Auditor-Controller will incorporate columns for this additional information on this year's request forms and will call attention to these new items of informaion in their cover memo to the departments. 4 TOTAL P.01 TREASURER-TAX COLLECTOR 625 COURT Street, Room 100 — 102 Martinez, CA 94563 GATE: June 17, 1998 TO: Phil Batchelor, County Administrator FROM: Alfred P. Lomeli, Treasurer-Tax Collector SUBJECT: FINANCIAL COMPLIANCE AUDIT PERFORMED BY MACIAS, GIN[ & COMPANY This is in response to your May 26, 1998 memo on the above subject. The following are the issues pertinent to the Treasurer-Tax Collector and responses to each: ISSUE: INVESTMENT COMPLIANCE AUDIT RESPONSE: The audit report for the period of July 1, 1996 through December 31, 1997 and treasury responses were submitted and accepted by the Board of Supervisors on June 2, 1998. This complies with Article 6, Section 27134 of the California Government Code. (Documents are attached -- Exhibit 1) ISSUE: REQUIRED IMPLEMENTATION OF NEW ACCOUNTING STANDARD RESPONSE: The Treasurer's Office reports market valuations of its investment portfolio in the quarterly investment report. Treasury staff is awaiting detailed instructions on data: to be reformatted in the C.A.F.R. to comply with Governmental Accounting .Standards BoardStatement No. 31. Two quarterly investment report pages are attached for illustration. (Exhibit 2) If you have any questions, please do not hesitate to contact us. APL:CVJ:gm Enclosures :Co"TRA COUNTt7JU998 OFCOUNTyTRATOR TO:, BOARD OF SUPERVISORS Contra FROM: Alfred P. Lomeli,Treasurer-Tax Collector ��r ' ` L Costa DATE: June 2, '1998 � s j...rt�1t,,#�ltl,! Su"CT: AUDIT REPORT ON THE COUNTY TREASURY fJ KCIFIC REOUE#T(S)OR RECOMMENDATIONS)i BACKGROUND AND JUSTIFICATION RECOMMENDATION{S): ACCEPT the audit from the County Auditor-Controller on the activities of the County Treasurer and the Treasury Oversight Committee as required by Government Cade Section 27134, ACCEPT the Treasurer's Response to the above audit. IBAC1 ROtJNI lR ASON(S)FOR RECOMMENDATION(S): Per Government Code section 27134 and at the request of the Treasury Oversight Committee, the County Treasury was audited by the County Auditor- Controller for the period of July 1, 1996,through December 31, 9997. This audit and the responses were discussed at length at the Treasury Oversight Committee meeting of May 5, 1998. The County Treasurer and Treasury Oversight Committed members agreed to the recommendations and responses that are part of this document and are being submitted for approval by the Board of Supervisors. c "`t CONTINUED ON ATTACHMENT: X YES SIGNATURE: RECOMMENDATION OF COUNTY ADMINISTRATOR -RECOMMENOATION OF BOARD COMMITTEE APPROVE ...,..,,.OTHER 1"A R ACTION of BOARD ON. _ .Tu 2 R 2 i 2(J-4$ APPROVED AS RECOMMENDED x OTHER . +OT!of#'tJfiERmons I HEREBY CERTIFY THAT THIS IS A TRUE -.�..UH7l'NlitrOlt#(ASSENT_ ""._,,,,,,�, AND CORRECT COPY OF AN ACTION TAKEN AYES: NOES: - AND ENTERED ON THE MINUTES OF THE BOARD ASSENT; ABSTAIN: OF SUPERVISORS ON THE DATE SHOWN. f Clarissa V. Javier (646-4115) iCRtBL Llinty Auditor-Controller PHIL BATCHELOR.CLERK OF THE BOARD OF C: County Administrator SUPERVISORS DCOUNTY ADMINISTRATOR County Treasurer-Tax Collector Treasury Oversight Committee BY .DEPUTY (SIT 1) Office of COUNTY AUDITOR-CONTROLLER Contra Costa County Martinez, California March 31, 1998 TO: Diane E. Meade, Chairperson, Treasury Oversight Committee FROM: Kenneth J. Corcoran, Auditor-Controller . - Audit Stam: Leo D. Schmall, CIA, Senior AujCA4� r Karen M. Watkins, CIA, Staff Auditor Andrea De Lany, Auditing Assistant SUBJECT: Examination of the Activities ofthe County Treasurer and the Treasury Oversight Committee as Required by Government Code Section 27134 I. SCOPE OE-EXAMINATION We have examined the activities of the County Treasurer(Treasurer) and the Treasury Oversight Committee(Committee) as requested by the Committee and as required by Government Code Section 27134. Our examination covered the period of July 1, 1996, through December 31, 1997, and included such tests and other auditing procedures as we considered necessary to: 1. .Determine the extent of compliance with Government Code Sections 27131 through 27132.4 which govern the establishment, membership and meetings of the Committee. 2. Determine the extent of compliance with Government Code Section 27133 which governs the establishment, review and monitoring of investment policy. 3. Determine the extent to which the quality of the Treasurer's investment portfolio complied with applicable laws and administrative requirements governing investments, including Government Code Section 53601 ,governing authorized investments and the County's Investment Policy. 4. Determine if internal controls were adequate to ensure the safeguarding of investments under the Treasurer's control. 5. Determine if the Treasurer has contracted with financial entities for investment services and safekeeping and restricted investing transactions to brokers and dealers allowed by the County's Investment Policy. 6. Evaluate the accuracy of the Treasurer's Quarterly Investment Report as of December 31, 1997. 7. Determine the extent to which investments subject to the Treasurer's control were sold before maturity. Diane E. Measle, Chairperson, Treasury Oversight Committee March 31, 1998 Examination of the Activities of the County Treasurer and the Treasury Oversight Committee as Required by Government Code Section 27134 H. SL AR Y AND CONCLUSIONS As a result of our examination, we have concluded that in all material respects: 1. The establishment, membership, meetings and other activities of the Committee were in compliance with applicable laws, except that the Treasurer should submit nominations for all Committee membership changes to the Board of Supervisors for appointment as noted in Section III.B. 2. The establishment, review and monitoring of the County's Investment Policy were in compliance with the law except that the Policy should include additional criteria for the withdrawal of funds as noted in Section III.C. The Policy should also specify the distribution of the Treasurer's Quarterly Investment Report to the Committee and any other required distributions, citing the appropriate Government Codes as noted in Section III.E. 3. The quality of the Treasurer's investment portfolio met or exceeded the requirements set forth in Government Code Section 53601, in other applicable laws and in the County's Investment Policy, except that the Policy should include Local Agency Investment Fund (L.A.I.F.) investments and other legal investments the Treasurer deems appropriate as noted in Section III.A. 4. Internal controls were adequate to ensure the safeguarding of investments under the Treasurer's control 5. The Treasurer has contracted with financial entities for investment services and safekeeping and has transacted investments with eligible brokers and dealers. 6. Except for the minor misclassifications noted in Section IIID. the Treasurer's Quarterly ;Investment Report was accurate as of December 31, 1997. 7. Our review of all investment dispositions during two months of the quarter ending December 31, 1997, found only one sale of an investment under the Treasurer's control before maturity. It had reached its investment goal earlier than projected. 2 Diane E. Meade, Chairperson, Treasury Oversight Committee March 31, 1998 Examination of the Activities of the County Treasurer and the Treasury Oversight Committee as Required by Government Code Section 27134 III. FINDINGS AND RECOMMENDATIQNS A. Need to Include L.A.I.F. Investments in the-County's Investment Policy Condition: The Treasurer has for many years invested in the State's Local Agency Investment Fund (L.A.I.F.) as allowed by Government Code Section 16429.1. However, the County's Investment Policy does not include this as an allowable investment. It only',refers to investments allowed by Government Code Section 53601. Criteria: Government Code Section 27133(x) requires the investment policy to include"a list of securities or other instruments in which the county treasury may invest, according to law, including the maximum allowable percentage by type of security." Effect: The Treasurer has made substantial investments which were not authorized by the County's Investment Policy that was approved by the Board of Supervisors. Cause. We believe that L.A.I.F. investments were omitted from the County's Investment Policy due to an oversight. This County's Investment Policy focused on Government Code 53601 investment instruments and did not address other code sections that could affect the Treasurer's investment decisions. Recommendation: The Treasurer should seek to amend the County's Investment Policy to include L.A.I.F. investments and other legal investments the Treasurer deems appropriate. B. Need to Submit All Chances in Committee Membership to the Board of Supervisors Condition: The County Superintendent of Schools was appointed as a Committee member. Subsequently, he designated a Deputy Superintendent to serve on the Committee in his place. The Treasurer did not submit the nomination of the Deputy Superintendent to the Board for confirmation. Also,because the change was not submitted to the Board, the Clerk of the Board did not receive the information and could not update the records kept in that office. Criteria: Government Code Section 27131 specifies that treasury oversight',committee members shall be nominated by the treasurer and confirmed by the board of supervisors. Government Code Section 54972 requires the clerk of the board to maintain records for all appointees to boards, commissions and committees. Effect: The Deputy Superintendent of Schools was not officially a member of the Committee. Cause,: The Treasurer believed that anyone designated by the County Superintendent of Schools was officially appointed to the Committee. 3 Diane E. Meade, Chairperson, Treasury Oversight Committee March 31, 1998 Examination of the Activities of the County Treasurer and the Treasury Oversight Committee as Required by Government Code Section 27134 III. FINDINGS AND RECOMMENDATIC?NS (CONTINUED) B. Need to Submit All Changes in Committee Membership to the Board of Supervisors( ontinued) Recommendation: Upon our notice, the Treasurer has submitted the nomination of the Deputy Superintendent of Schools for appointment to the Committee and the Board has made the appointment. The Treasurer should submit nominations for all future Committee membership changes to the Board for appointment. C. Need to Specify Criteria for Agency Withdrawal of Funds Condition: The County's Investment Policy does not adequately address the criteria for the withdrawal of funds by all agencies. For withdrawal of funds by non-mandated depositors the policy requires either investment maturity or authorization from the governing board of the local agency. The Policy does not require the Treasurer to assess the effect',of an agency's withdrawal on the remaining investments in the County Treasury. Criteria: Government Code Section 27133 (h) requires a county's investment policy to contain criteria for considering requests to withdraw funds from the Treasury, including"an assessment of the effect of a proposed withdrawal on the stability and predictability of the investments..." Effect: The County's Investment Policy is not in full compliance with the Government Code. If it became prudent for the Treasurer to delay an agency's withdrawal of funds, the decision may appear arbitrary. au : Since the Treasurer has had a conservative and diversified portfolio, he did not anticipate any material negative impact from the withdrawal of funds by any agency. The language in the policy had been considered sufficient to meet legal requirements. Recommendation: The Treasurer should seek to amend the County's investment Policy to include criteria for the withdrawal of funds by any agency including an assessment of the effect of the withdrawal on the remaining investments in the County Treasury. 4 Diane E. Meade, Chairperson, Treasury Oversight Committee March 31, 1998 Examination of the Activities of the County Treasurer and the Treasury Oversight Committee as Required by Government Code Section 27134 III. ATI N D D. Need to-R-mdew and CorrW Detail R 'n he v en R to Ensrt Aouracv Condition: Three investments in the detail report supporting the quarterly investment report were not in their correct category. All three misclassifications involved Federal Home Loan r Mortgage Corporation(FHLMC) investments. Two were classified under the Federal Horne Loan Bank(FHLB)category and one was classified under a Federal National Mortgage Association(FNMA) category. In each case the investment was purchased prior to our audit period. All three categories involved were unrestricted by Government Code Section 53601, so this was not a material misstatement of the investment portfolio. Criteria: The detail reports supporting the quarterly investment report are a',primary accounting tool to manage the Treasurer's investments. Therefore, these reports should accurately reflect the investment portfolio at all times to support daily decisions and monthly and quarterly reporting cycles. F The FHLMC investment category was understated by $16,000,000 as of December 31, 1997,with a corresponding overstatement of$6,000,000 in FHLB and $10,000,000 in FNMA investment categories. to rse: The Treasurer stated that the investment accounting software did not have a batch review screen until recently, so misclassifications that did not affect the totalinvestments could not be detected. Staff now reviews the accuracy of daily postings to these detail reports and also completes month-end reconciliations of fund totals to the Auditor-Controller's control reports. Recommendation: The Treasurer should cgrrect these postings to properly state investment categories and continue the review of daily postings to detect such misclassifications in the future. S Diane E. Meade, Chairperson, Treasury Oversight Committee March 31, 1998 Examination of the Activities of the County Treasurer and the Treasury Oversight Committee as Required by Government Code Section 27134 III. FIND ATION C NT E. Need to rr Reporting R§quirements in the!Qguntv's Inve tmen olio ±fin iti :0: The Investment Repots Section of the County's Investment Policy incorrectly references Government Code Section 16481.2 Which pertains to reporting requirements of the State Treasurer. It does not specify distribution of the reports to the Board or the Committee. However, both the Board and the Committee have been regularly receiving the Treasurer's Quarterly Investment Reports. Criteria: Government Code Section 53646 requires reports to the Board. Govemment Code Section 27I33(e) requires that a county treasurer's investment policy shall include: "A requirement that the county treasurer provide the county treasury oversight committee with an investment report as required by the board of supervisors." Effect: The County's Investment Policy floes not comply with the controlling Government Code provisions regarding reporting requirements, au e: There appears to have been an oversight or misinterpretation of the Government Code when drafting and approving the Investment Report Section of the County's Investment Policy. Recommendation: The County's Investment Policy should, be revised to specify the distribution of the Treasurer's Quarterly Investment Report to the Committee and any other required distributions, citing the appropriate Government Codes. IV. STATUS QF MQR AUDIT REC9MMENDATIMNS This is a new review and therefore there are no prior audit recommendations to review. We appreciate the excellent courtesy and cooperation extended to us by you and the Committee and the Treasurer and his staff during the course of our review. KJC/LDS:kw 6 _... . ..__...... ... ............ ........ ........................ ... _. ........ ..................... Treasurer-Tax Collector's Office 625 Court Street, Room 100-102 Martinez, CA 94553 DATE: April 30, 1998 TO: Treasury Oversight Committee FROM: Alfred P. Lomeli, Treasurer-Tax Collector SUBJECT: EXAMINATION OF THE TREASURY OVERSIGHT COMMITTEE'S AND THE COUNTY TREASURER'S COMPLIANCE WITH GOVERNMENT CODE SECTION 27930 THROUGH 27137 —TREASURER'S RESPONSE Following are the Treasurer's response and proposed solutions to Section III of the Auditor's findings and recommendations: A. INCLUSION OF L.A.I.F. INVESTMENTS IN COUNTY POLICY Proposed insert on Page 5--January 9997 policy in authorized investments section. GOVERNMENT CODE 16429.9 LOCAL AGENCY INVESTMENT FUND (See attached copy of the law) B. CHANGES IN COMMITTEE MEMBERSHIP TO THE BOARD OF SUPERVISORS Problem resolved. Solution: Refer to Board Order of March 17, 9958 attached. C.1 WITHDRAWAL OF FUNDS BY MANDATED TREASURY PARTICIPANTS Proposed insert on Page 15—January 1997 policy. The withdrawal of mandated deposits in the treasury shall coincide with investment maturities, and or authorized sale of securities by authorized personnel of the local agency. Except for funds In the California State Local Agency Investment Fund, a five (5) business days' notificationIs required. C-2 Proposed insert on Page 15—January 1997 Policy: Criteria for requests for withdrawal of both mandated and non mandated funds to access the effect of a proposed withdrawal on the stability and predictability of the Investments in the County Treasury. Since each pool participant generally has its own investment portfolio and only the cash portion is invested on a "pooled basis", any withdrawal, in part or in whole from the County Treasury by any participant(s) will have no impact, or will have a negligible effect on other participants and on the treasury pool as a whole. Criteria for withdrawal assessments are not currently necessary based on the present composition of pool participants with each agency having their own directed investment portfolios. C.3 Proposed Title Change on Page 15 W-January 1997 Policy, FROM. Non-Mandated deposits into the treasury TO: Non-Mandated deposits and withdrawals in the treasury. D. ACCURACY OF DETAIL OF QUARTERLY INVESTMENT REPORTS Problem: Misclassification of government agency securities: FHL MC and FHLB Solution: 1. Refer to attached copy of correction for$10 and $5 million; $1 million was called in January 21, 1998. 2. Treasury staff now reviews daily investment classifications E. REPORTING REQUIREMENTS IN THE COUNTY'S INVESTMENT POLICY Proposed insert on Page 13—January 1997 Policy: The Treasurer shall render a quarterly report"... to the Chief Executive Officer, the internal auditor, and the legislative body of the local agency . . . (Government Code 53848). In addition, the County Treasurer will provide. ."The County Treasury Oversight Committee with an investment report as required by the Boardof Supervisors". [Government Code 27133 (e)] APL:gm BOARD OF SUPERVISORS OF CONTRA COSTA COUNTY, CALIFORNIA Re: Authorizing Investment of County Monies in Local Agency Investment Fund RESOLUTION NO. 771= WHEREAS, pursuant to Chapter 730 of the Statutes of 1976. Section 16424.1 was added to the California Government Code to create a Local Agency Investment fund in the State Treasury for the deposit of money of a local agency for purposes of investment by the State Treasurer; and WHEREAS, the Board of Supervisors does hereby find that the deposit and withdrawal of money in the Local Agency Investment Fund in a+ccordance with the provisions of Section 16429.1 of the Government Code for the pusposes of invest- ment as stated therein is in the best interests of the County of Contra Costa. NOW, THEREFORE, BE IT RESOLVFD that the Board of Supervisors does hereby authorize the deposit and withdrawal of County monies in the Local Agency In- vestment Fund in the State Treasury in accordance with the provisions of Section y 16429.1 of the Government Code for the purpose of investment as stated therein. BE IT FURTHER RESOLVED that the following County Officers or their successors in office shall be authorized to order the deposit or withdrawal of monies in the Local Agency Investment Fund: Edward W. Leal, Treasurer-Tax 4 -- Collector; Alfred P. Lomeli, Assistant Treasurer-Tax Collector; David Dezell, Investment Supervisor. PASSED AND ADOPTED by the Board of Supervisors of the County of Contra Costa, State of California, orkebruary Eat 1977 � by the following. vote: AYES: Supervisors J. P. Keruiy, N. C. Fanden, R. I. Schroder, K. If. Iiasseltine and W. N. Boggess. NOES: Supervisors None. ABSENT: Supervisors Mone. U Bog9m ATTEST: JAMES R. OLSSON, Clerk �' ~ Board of Supervisorsra rrman, Board of SvftlOVisors ] ) CM71FIED COPY t cortmorfs that this t*a Coli, trite !! 1tincorrect eaff of the that ai dorur,r�:Whtri+ to ca (l;e in tar otitof anQ that it ws� pta;.ad h e,:uyja3 by the IIaarQ at Deputy 6uparviaars of Cor!ra t. -ta 6-uinty. California. an cc: /state Treasurer the date shown.AIVIr-T: J. It. OLSSON. County County Treasurer—Tax Collector Clark t3eputr Cts la Clerk at sold board a[Supervisors, County Auditor—Controller $ 1977 County Administrator osY RESOLUTION NO. 77)-07 III. A Pgl .. Local Agency Investment Fund § 16429.1. Existence and appropriation of fund; Investment and distribution of deposits There is in the State Treasury the Local Agency Investment Fund, which fund is.hereby created. Notwithstanding Section 13340,all money in the fund is hereby appropriated without regard to fiscal.years to carry out the purpose of this section. The Controller shall maintain a separate account for each governmental unit having deposits in this fund. Notwithstanding any other provisions of law,a local governmental official,with the consent of the govern- ing body of that agency, having money in its treasury not required for immediate needs, may remit the money to the Treasurer for deposit in the Local Agency Investment Fund for the purpose of investment. Notwithstanding any other provisions of law, an officer of any nonprofit corporation whose membership is confined to public agencies or public officials, or an officer of a qualified quasi-governmental agency, with the consent of the governing body of that agency, having money in its treasury not required for immediate needs, may remit the money to the Treasurer for deposit in the Local Agency Investment Fund for the purpose of investment. Notwithstanding any other provision of law or of this section, a local agency • * * with the approval of its governing body, may deposit in the Local Agency Investment Fund proceeds of the issuance of bonds, notes, certificates of participation, or other evidences of indebtedness of the * * * agency pending expenditure of the proceeds for the authorized purpose of their issuance. In connection with these deposits of proceeds, the Local Agency Investment Fund is authorized to.receive and disburse moneys, and to provide information, directly with or to an authorized officer of a trustee or fiscal agent engaged by the local agency. the Local Agency Investment Fund is authorized to hold investments in the name and for the account of that trustee or fiscal agent, and the Controller shalt maintain a separate account for each deposit of proceeds. The local governmental unit,the nonprofit corporation,or the quasi-governmental agency has the exclusive determination of the length.of time its money will be on deposit with the Treasurer. The trustee or fiscal agent of the local governmental unit has the exclusive determination of the length of time proceeds from the issuance of bonds will be on deceit with the Treasurer. The Local Investment Advisory Board shall determine those quasi-governmental agencies which qualify to participate in the Local Agency Investment Fund. The Treasurer may refuse to accept deposits into the fund if, in the judgment of the'Treasurer, the deposit would adversely affect the state's portfolio. The Treasurer may invest the money of the fund in securities prescribed in Section 16430. The Treasurer may elect to have the money of the fiend invested through the Surplus Money Investment Fund as provided in Article 4 (commencing with Section 16470) of Chapter 3 of Part 2 of Division 4 of Title 2. Money in the fund shall be invested to achieve the objective of the fund which is to realize the maximum return consistent with safe and prudent treasury management. An instiuments of title of all investments of the fund shall remain in the Treasurer's vault or be held in safekeeping under control of the Treasurer in any federal reserve bank, or any branch thereof, or"the Federal Horne Loan Bank of San Francisco, with any trust company, or the trust department of any state or national bank. Immediately at the conclusion of each calendar quarter, all interest earned and other increment derived from investments shall be distributed by the Controller to the contributing governmental units or trustees or fiscal agents, nonprofit corporations, and quasi-governmental agencies in amounts directly proportion- ate to the respective amounts deposited in the Local Agency Investment Fund and the length of time the amounts remained therein. An amount equal to the reasonable costs incurred in carrying out the provi- sions of this se ctiem, not to exceed a maximum of one-half of I percent of the earnings of this fund, shall be deducted from the earnings prior to distribution. The amount of this deduction shall be credited as reimbursements to the state agencies having incu�•rtxi costs in carrying out the provisions of this sectio. 'lite Treasurer shall prepare for distribution a monthly report of investments made during the pnercding month. As used in this section, `Vocal agency,,, -local governmental snit,,, and "local governmental.official" includes a campus or other snit and an official, respectively, vj the.California State University who deposits mineys in funds described in Sections 89721, 89722, and 89725 of the Education Crate. Amended Stats 1983 ch 751 12; Stats 1941 ch 676§ i (SB bid). Amended Stats 1943 ch 857 § 1 (AS 2062). Awnded Stats 1494 ch 519 11 (A0 3112). Amendments 1983 Amentiment.(1) Added "Notwithstanding Section 13340." in the first paragraph; (2)substituted -Controller".for "State Controller-in the find and tenth paragraphs; (3)substituted "the"for"such"after-needs, remit" in the second and third paragraphs,before"deposit would" in the sixth paragraph,and after"length of tune"in the tenth paragraph; (4)substituted I-rreasurer"for"State Treasurer" whenever it appears and "freasurer's" for "State Treasurer's".in'the ttlrtth'paragraph;and (5)amended the tenth paragraph by(a)deleting"and shall be deposited in the(general Fund"at the end of the first sentence;and(b)adding the second senteW. 1"I Amendments Added(I)the fourth and sixth paragraphs and (2)"or trustees or fiscal agents"after-governmental units"in the first sentence of the twelfth paragraph. 15"43 Amendment.(1)Substituted "a local government official.with"for"an officer of any nonprofit corporation whose membership is confined to public agencies or public officials,or an officer of a qualified quasi-8ovtmmentat-agmcy.with the" in the second paragraph; (2)added the third paragraph; and (3)substituted "one-half" for "one-quarter".its tf)e second last paragraph. 1944 Am"endmene in addition to making technical changes,(1)deleted "local"after-indebtedness of the"in the fourth Paragraph'.and(2)added the last paragraph. III . A. Pg2 TO: BOARD OF SUPERVISORS Contra rf '� FROM: Alfred P. Lomeli,Treasurer-Tax Collector r Cost ,� C, February 27, 1998 ;°^ r. EOUnr DAT€: ' SUEJECT: TREASURY OVERSIGHT COMMITTEE SPECIFIC REOUEiT(fj OR RECOMMENOATIONIS)t SACKOROUND AND JUSTIFICATION RECOM�+lEl NDATION( }: ACCEPT the resignation of Joseph A. Ovick, Ed,D.,from the Treasury Oversight Committee and APPOINT Ellen Elster, Deputy Superintendent for the Contra Costa County Office of Education to fill Dr. Ovick's unexpired term which ends April 30, 2000. The Cleric of the Board has already posted the notice for this vacancy. .. ACKGROUNI3IREASON{.S)FOR RECOMMgNt DAIIQNfSI: Joseph A. Ovick, Ed.D.,wrote a letter informing the Treasurer-Tax Collector that Mrs. Elster would be the Contra Costs County Office of Education's representative on the Treasury Oversight Committee. The reason for this request was that Mrs. Elster is now responsible for all the financial and business aspects of the agency. CONTIHU€D ON ATTACHMENT: -YES SIGNATURE: r.✓ t. i �' -RECOMMENDATION OF COUNTY AOMIMISTRATOR ,,...._.RECOMMENDATION OF SOARO COMMITTEE -APPROVE -OTHER I ACTION OF SOARD ON ._Mph (Z.._1998 APPROVED AS RECOMMENDED X OTHER YOTt OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A TRU€ .._UNANIMOUS(ABSENT - ,..�.,, AND CORRECT COPY OF AN ACTION TAKEN A.YCS: NOES: AND ENTERED ON THE MIHUTES OF THE BOARD ASSENT: ABSTAIN: OF SUPERVISORS ON THE DATE"OWN. ATTESTED. M*rch 17, 1948 Contacts Clarissa v. Javier (646-4115) PHIL SAYCHELOR.CLERK OFTHE BOARDOf cc: County Administrator SLIOERVISOR AND COUNTY AOMINISTRATOR Treasurer-Tax Collector ISI . B. B .DCPUTv r r y r r r r r r r r r r r r r r r r N N an N N fr+ N N tri N r rA W N N N N N N N + tt ja W N N On N w ON N N dA V r W d N d ♦ bt 6t + b8 Ci bbygbYbdidl2 W 4Kfl Q6 dhbO � .•.. d +. o. Clcs � ca ('} Yw .w. o i (ry°i Gy ii W O £x CS J .�t "•. •'.. C! `*.QQ 'e "•. C?`w "^.QQ "r.j�`�.Qd"•»O ". `... +�•�•• "„� ",,,,QQ •'r "v. C`'. "`. 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N N N V, N N N N N N w N N J W w w w N w J J a N u W N N N N w N N d Y W W m N i i } W N W m C 'Id ►J @ w b O � i N W N r W N • W b W N J N m W i d i w N •' r d a, d Y d d � W y d b @ d b .•• r3 d ►f @ Y d y W y w � b d W S u • p m • • d i N u r '� � d N d • • .. b N w Ci w w N .. ` �BaSN r w Q • ♦C • C w • C t a t w \ "., C '�. .,, `•�. •.. ... `.. •.. `... \ •,. C,+i`f .t ``.,.`� .i„g '�++TyEq� rw. "f..S+�. w 'rte. i .� J t•o d O d w w N W O d d O b O b y O O O O �O , "80 w W • • m b O b O Vt v u • i m d J d w y w N y W w d @ $y d W 1J b J 1y' i • d w !+ N u N d 6 O N N d @ w • • • m @ O O d b Vt • ,O Y b w W b N to ,E b • • ,O S w �I O 8 d 6 b m m • m m m m m • • m • • b m i• {�(�qqq� w i }l .atK w w w w w w w w w N V. N 6n w yw w yw �w7� i 3 O, G'2 M M tG O O W O r i J 8 o W w d N • m , kf F w a J • i J m m m N J w F (l, F O J d • • i y � d w r V O ,® d ,O O r r+ • b t0 O +-= O w O w r N }• b y tD W ,9 r ,O r V1 O W O N O N. d W d r Y yyy44 ND I to w w w w w N w N w w w i w N N N N an N a w J J d w N w N w N w an N N N W N N N to V N Y w N t w.(j q ry N W N N N b N ap O b r m } N i w F w F e0 W m F m w W W W W W 8 N LN W m • • • N N a i , N W e +O b • V y �}0 @ ►+ i F N r N w b +w d N W N w W w W N V', @ N N N F W w W 't w N } N a J W b d N , J , , !a0 y rr H 0 (} 0 a 0 d W O i O F d J O N d i 0 0 d 0 0,0 b 0 0 a 10 J O N 8 0 0 b 8 V a O F d w b N 0 V, d N 0 0 C 4 d b i O w @ b 0 f W N n W p r r N N W W i N ♦+ W i i w N W W W N N N W F V1 F N N N W N N N r w V1 d N N W 1d d iT W d 1J t! W V W 6 V1 O r r 8 O N N Y7 ,6 to w m O V O to u, V1 O@ O /, J4 J J'�6 G@ O w r W N O J b N t0 N b • O w W w 0 O O b ✓ W N ►- d m w J • d O N b t0 b i a�• O d 0 W N d b d b Y tf d d r b J d d N d O N O J th J b N d m d r@ u b w@ w w m • w O O O , i N w d O O w d d tj W {7 m d • O i d O b d d • O r b N O w O w b w d W d b w i w b b d d f • O Vf m y W O d 0 0 O wto 0 w O d O r b O b m O a d a d N b d d d d J O N O W d ill o, J W O b b f N 0 3C R L' m O O O O d m O a O O O N O w d w p tf, O w O N d b O a O w O d O N 8 0 0 0 6 b d w O 0 0 0 0 W O N 8 0 0 W O to b d 0 0 0 • O O b N d J O • 8 O@ O f W 0 ♦ . gp N d b O @ ~ N rs b V b w W N b V m b r w t6 1 W O N O W O N O r d N W N `+ N ►. W i N . N w a O w O d@ • i , • N i d w O W N W 9 W ,6 W N W 1+ W N w „ O N d N F .y .7 6 W N " N Q 4 6 . O J'O O w ,0 i • W N d w d w d O d m d V d w J • N ,0 to F V W W V N N N d N V tit • W M W i,w b • to a w N e y{ y4 v �' M W • dN i N@ • Nb • w r 6 i N flu N V W w W W J IJ b W N N N w O W ►' ..i W •'N w d • , ` O• O J- d• Vf• O• O- 8• O+ N N rN N e • r N N@ M O d O Y b d b d b w O V d W O W N • N W O w d w 0 W d N 0 N to ,/ N N O N O ♦ t v • , O M b 111 d to d W b V d N b d@ ►+ d N b N b • 6 i it • O d b ri b N 0 ill O W d fl,�iS tN d W , d • f t q O d 0 m 0 d d d a ze d O d N !! N ,6 to @ W c . d w O J@ N d N 0 0 a E d • b O b O d O b b O 6 O O O b d O 8 O b t d t , H iCCq+ d v b J is b 8 N G N d @@ O d w d O 0 8@ m 8 d d N@ o b Yt d@ Cf is O d 0 • b 0 O } b N 0 8 0 0 d O d O d@ O W d@ O d a ++ b N a 0@ O O O O O O O W O N d O . f , fA i • i O i N W m i O i W W uJ ►+ W p. i N i , 1 N }P^l • N W • • i N d • ,p W , Iwi a N' •' GS •- to Y! td O fff N H tq d7 h7- •• H- iR IO 07f • , s i w d w • . b N W J N w W W I�p+1 W N ~d w ± O � w (7 N J Ni O•i 6 ,O L� � � d w � � � O p � N O � RI m ± d , � 9`�•Y6 H W f t N V W W w W r✓ W W , ` b • w w i w W V N w a N � Y r ♦ d w t ti i W W d W • N N i r O • w d d b w N N N N i w N +i } d w d fw ro r a • d • W • • ,y J w f W w , ` W • • O M d N N O W b N N J Y O 8 N O N W w d N N N w W b i W w • N , W J t , y Ft d d O O d N O N } d d 0 , w • , J ie 5L' W N III . D. Classification Error of Freddie Mac t ' N L" N 0 t11 to to 0 N L" iq W N 611 w to t H lt9 C J J a J CS a J Ot 9 G' d a C� u+ A. L" Ilk co W ea arr lr� N t� .# C0 N to ♦ f H w 0 N eYl C* r) Y w w w r f_} i` w urf o oD {H? w A. to inn 1 M .`. 0 OttJd d dtl2dMwHM+b •-- dt} .-• 0"000" F N tt w NQ WGSW ►i rraN�ld4�rs t-+ N #f wpW Np 1 M � � a.�ti+.C'd�'Vf� � w�vl�at�b ot� � �� � a•�w�tn� + � tti H +#„ t8 to T9t iii m ty'y tb to L$ +4 tD *'i a* id iLl 1 �. f1J tO ilD f15 O�w� +O t7D CD S a J fO a �q to B7 O O coon � O��'tO�M�t�w � O d Y M i t9St to MHO04M i. M#"}N(?yd69d N w N oil tj Y CD N w O O N O H a Y d 0 a to M CD w to 4A 0%) T CDH A Oi tri + . to in •.+7 w Ct to 0�0 OS SSSIn+++ ; # OZ t H 0 E w 5b W w w W pf w w w W y w w w w 1 + w r w r C! w W r w w w w w t w w w w w w W w w # � w W w w tj w W w W L7 ai to at to r � t-1 t- IV d c. w t ryn V J a W J lis tp rh r a N w CD w + H � aa: vs Y+ Md6 %0 +. tO ai. .ara+• aa* ra JP w JiJ+Tar. 1 u� m m at CO 0 m Ch #ii a Co 01 a th s to P O 2 dY Owd%0C .A w :' dittdtO0i## Oid i dY Owowow t".Sa CSW OWOa0w 0w OYOY Oi45 Oa OW 00011 d J OCDOV/OwBCti 4YOwdwdOl Oa OwdWOY t tRl to "d, to Zn r 0 LA i to LTl 471 t71 to IJ1 N IJI + ✓Qti OL + 01 it1 tri 01 191 U1 tit Ot Y rA N / lA N t N 6R { t11 O+t91 th O+tis t ;^w�+ Jw t {71Y f Jd W A arP NO f tAA , thadONNNN i ww / W w s cDw + wwOltriW tD t �t Ti'Z" dd , s. m + tAG100 Nd C10 f tAt91 + Nd0O000d : Q4 , J J + -ata t wOm0♦ d t wj,'y Q t71d t a1w 1 tROdtOw000 r tDCO # O1O� OQOOO 1 (A VI 1 ul0 Otild 1 ;qy ti I t 1 1 1 1 i 3 t tt 0 tiT0 + 0%0t 1 NN wW w I ww + WW MNNNN + to to t 0 t 10"0 t YNwwNN , (]� I . t . I . r . ,. r . } . r . t . f ilk 7t %00 t MN t dOrwtDOdO t "1"111 t 00%vOOtAdd f 00 + OO t tna + tDOOOC,id # wo / Nd f NtA"W wwod I wo t OOW00 i.iT01 # dO r OO t N♦ f utdw Od►d t td.7 O1O f tiw til + ut9Nt11 .#itD t !OF t W OthdOddd + Cid + OO + >+tA + tiiOtAdt4d ! `•. +od t s O f mO^ONO W O : 00 : 00^00000 t OO f 00 f &O I mO&O d I 0 -9d NO ♦ OOOwOOO OO 00 Y CI 010 t wo^ QW 0 1 +�` N d , tnd , rOJdtOOO1d # Wi0 r OOItOOOOO , Od , OO 1 ad t JOJOwO I W C. wo s wd s Edda dCDC7CDd t NO i ODOw00d00 / 00 f 00 s tA0 1 OOwOwO I d r 00 1 OOW Ow 0OO t "0 t W0000000 1 00 , CSO s l.{d 1 dONOwd ! f�C)f w i t ►� 0 # ,A # m W 1D W 1 {T� of Y,i t, tG Ot Sr Cp Nt•i# H9 W+.i}w 0 # tw w w I W f W I 1 d + N # dt .w 00 0 1 I wtGN8 ONOC " tCdritKo 1 # C0iww !1 0Dar- V » a- w t , OOO1 t9 W O N0 %00 wwtn%00000 f 00 t l +%0 6 w0wO#C0% Ww»�tO+s.wD 4dWOIOJ trt I ww t w WQW^O # y ..l Qi + ww # OCD 61Lw JOOI CiI # CDN # to ONw0000 t NtA , Nsr t til,► t to ttM1 tRvw 4% 0» 0. 0Os 0. 4Atw» J» t0A00OSS $-*%0 eiW.Q0OW 0 06OOat t OW # ONdWUtCD s WJ 1 ON 4 OOitANadwW 4 009 # ONOM0000 40" 40W I WV i OtoOJOd ON # OJ t O00*4000d t 06t 0io : 00 : 000000 : ; 0++ 4/ 0O•oI000OdflO0OOOd 1dOOrO0O t70 -M # O0O006 0O04 0 W "W } Oa. + 0tAthOltlD+D1O♦ 4 OO t OIUIOO0000 100 $ 00 + OOi # d0O00d + H 1 1 1 # + t 1 { 1 1 f # # t t ! { t 1i# + + # tp # !• a tit # a , J + N s fiTt' w i OS f N aF 1 w # W t0 OL N + til t tp t w 1 W ON 01 1 jY x f 117• t1# tli N- # # tri» t)l» Vi» to» , » t 915» f » I go. W• 0. Iw CS m W + Os + O# + 60 lwlwl#�t N W".t,r' #x O t,p CD + 1 W I w 0 w w # w # CD / W I a. WOt d to t w I N N #• Tit + Qt 7 tit t Of 0wof t� , 1 f # # # + 1 I r d► 1 1 1 + t t w I Y t # w s M I M W t M # t4 M tt + # e to # O 1M 1 W 1 till MI o► # J►tp i a. P' w # t7 of + d a t 11► N N M t W. , M N r N # N + 611#,1Y t W ih J # w {i�t�it # a t W N ,1► w + /► # tt w O L1 t to t tx # Ol Ot f J Oi to t d* O + W 0 1 w N O N e W O + N CD O 0 H d 4 a 0 + 1-1 tD N w I Co 0 t 0 w O O + 01 0 t to W 1 0 io of N 01 ill. D. Correction of Freddie Mac :0 p s* ;00 w u3 to cfs vs to rn 41,41 In to cn tr: 0 v# r H w tin A vt ILA 11AN m A Q w N H O d A H ONt sM. r tO (7 w W (} N (h IIA "� Q {dot 0 .-. 0+i d ••• O .••. 0 1"y 0 H#�CPS ... w 7d •-• d H O to / 417 W H tpt�3 i.T H w ti¢ H W W GS N�Ny, w 0 rt EY N w t C`7 + W N +' , }y t..tiJ" w."M/ 8 '2'i `y+�a X15 1 0 H C C N C r C1 r M N +c+ 0#�y� a xy H� ^�., y �.�'A�,.Vs H e r�►�}j �.Itl°��..til^�`�. H e� #3- tri O+C 44 , afro ttl{ so ID tyl to 0%H #0 00 ^a to + `a tut ri — d "•' d d7Cf t •C7 N N ^0 00CDv3triPO01 W�W 1i f 0th +n 0 w N W0 w w('�w O w�y d wt9 %0 0 Wy t Ol 1"3 W O 0 H M H tO 0 u't 1 %00 d C►°3 d Ks 417 C9 O 4 r'Lt' to w ID co N w 64 0 W N 0 Cf4 t H H SC ; 9D •17 # 00�r rt }s # # � 41413 # 41"3 (n w W NI sxi W .3 c Y fWtt Rh-4 +3j,," w to L71 A w N cc co .4 t pp yto co to 0302 $ N Nw A WwYM d Nw J WwNrW r O wY A Wr Ww 1 �+'H +'fit iCA OS +3A MA Ot W A A +TAmA ..2A N YA Q A I tiix 3ti' 0t1� +`tf iM 41M 41:3 W } 41141 N Ot Ot 1 4113 W f`l. 1;W " rsN Ot�Ot71Wa ON c7tnoscd OOt wI'D 0t0 I )s1I jni 0 .4 0 w 0 tn ""' O .�) 00OYdM Ou+ 0w Ow t #41 . 01zt 0" 0.3 d .3 OW 0w0Y 041141 OrOM [ W 1#4 mS N tl# t 00 t Ot 4104 t3#iri # Ltt V i #fl N t /R 09 i m at 0 0 4131 W 1 0%A i %A 0 # 0 ILA 4 at t11 O%-4 1 415.+L1 f . . 1 . . . x , r . . I . . 1 . . . . . # # . 1 1 1yCS TS i7 tC to iM A 4 W x AO9 Ln % t AA / A A 1 Od 4 00WWN0 1 ON 1 Im t Ot CO 1 OW W 4 A N t NW t +-+O3 �d t a.t Ol t ..3 Ct f 0109 1 Mr1,14 t3sNt7 t W N t W t.# t N W t OtWtAa t K" Q l N1T t wowo t 400 # 400 I W^ t 0000WOI.NN YO 1 w d t A 0%D0 t 4100 # to0 1 04 / 000000 # 00 i 00 I.a.#tG i 0000 L+3 t +� t H 41413 t 1 t Mr t Yw r 1 1 1 1rI r P'}(5 f w w i w t.a is I Asn I A 41141 , N ttr i w r tJ N►,�N 1 # , .a -Iw t o 411# N N wM t a, ILA i 400IL"LA 1 %00 1 %00 , wN 1 O-dNNwd # YY # ww I.tltA 4 tDOILA A 1 try 0 tq si +i x N30 i W 000 ! ,p.0 1 A O t 03•«3 1 00.3 -3wo i 01--3 + Ch t:Or t 030 W w A 441E t o `I:? t W d w 0 1 4341 O 1 4131 C3' t Ot V# / d 47 ilt U9 Y d I W O t W d / Ol N 4 4131 C7 A 6141 1 `'.. Wim" wd 1 tOd 4 AOA 0 1 ^O i A +t? / trt0 t ddddt31C7 i the 1 O't0 I.art0 f wOW O l (!3 W 0 t NQ # W dtO0 ! dd 1 00 # at0 # dOddChd 1 Od 100 t Yd 1 1 0 OCJ f W 0 t .TOd0 t 00 t d0 # 00 1 di�000d # MO # MO t AO t ddNO t V3 G Vld ti aN0. 11 o. owO« : 00 : 00 Ct. i1 O. d. : 00 : 000000 001Od00dd // W. O. tF .W 0 11 w0" r1 Od. d0. i[ Q?^0 00 OOdd OO 00 10 000000 $40 4100 %Do 30O0 0m 41410 i W to 1 l8 f tO tO i IO r 410 i t f w r Y 1 tO 1 10 t w t tD r 1 ID 1 410 I t(! tF3 + 4113 w t 410 w t 0. 41 0 wd 0 1 CD I W t 0 Y I tLi 0 1 t w . • N f " A t ♦ 1 N 1 d6Ntl1N t i 41 0'•f + tAwN t H l+9 4 1341- 1 N Q- } »I- t *.i w + • w t • w +. t 01 1 0`1 t •• t ai►w s t. {•} Tstw + wA } O3410&AA t r41Q 1 w4113 1 rtai t 0#�0NfAw t Nw t N}.1 i :wtit i d9bt09A t ra0%0 t 041/# t pUi t r0 t 0a0a "iw t Wfiri t 61ith t Ci+!t t 9i3i+1w t t tb it. t dA t N NO W t 404 t +"t Ch I IM 4h t 0004AW" s 0.4 t 0 d + tApJ It N0#4130 + WQ- 1 +IJt- 0- 41 +3* + .J- t 0>- t O• ,p.. d» t O• t Ci- r 41:7'* + 4131• .t- t OD W / w4A t 0 W O^.3 1 C6sh. t *4 r min + 000010 r 0at # 0at t W w + 0W 0 W 1 6004 4 OM 1 0"041141 1 caw t -aw 1 Nat 1 000/ 00% + 009 r Oat t wN x c7rd• t �+�' }-{ OD a9 1 0 f.3 t 0 W 0 0 t d of I Qat 1 cc t 000000 t O N t O N 41 0. r d Ita 0 ILAt CD. s 0. , O • 0. t d• t .i• r 0• t 0. 0. 0. t 0. t 0. # 0 / 0• d. f H W W t 04.19 t diff 00 41 0Ol t +309 1 00 t "/:70 000 I Oitt t dto I to # 060W t pC t6w 1 d0 1 0000 + 1 d I CD..1 1 dd t CiOCiOC9d 1 Oct 00 4 0+6 t OOdr 4 tp tH[F 1 , t 1 1 t �.y � V t N / N 1 1 1 iF t A t r 1 w ty Qt iC 1 -1 1 W OD a W , 410 1 -i 1 N A 0 # A / 4► t A l r + GU> Tj u7 N 1 I to- try• / - r N- r f - 4 1 to` c - t to' 4113 / 1 0 J # to t 413E 131 { W t W 4 , #341 th 4 d , 0 1 Q t N W 0% i 410 t 40 t O'S t 414141 W I ("� f^a• t!! -.1 1 A I 410 4111 # 0 1 d t W I al 410 t�N 1 4131 t ilt t «.3 t C3 A } •• rt 41,/3 r 4 } ,"1. r t f { t Q Sal (lir t • t . t . 4 " 4 1i s,T r tO t It�LD i,7 t d t Z7 I r1 t (�l Lll Q a1[[33 Vi 1 w i Y / W t W W 4 j"3 d g N 1 OS 4 r .J t d t d / W r yr't W 11'+41 J R'w / w l w 1 r♦ #. W w 0 i �1' ti 4 N tQ 4 1G N i N t 41,3 f [ + t t 3b i ♦ W L4 N .� },7r�` t o w r - s i w 1 + 1 t + t i t ! w • •. 6.7` 1 40. tm i 1 t0 Q # Q W I w t w t / + W' t W t W• t W 410 t T a+ + G3 a i w O + Ci w t 641 t tit i 0 y d 0 0 O O t d i 1.3 d i eA Q i 411E►+ N H Vi 1 Co 41 00 t Q f v 1 0 I 0 0 0 4 06 41 0 r tri0 1 0 9A "3 III. D. ClasSifiCatiOn Correction of FHLMC a co N th co u', r. .- 0) to css vy C14 is rn ri eo ct e s tv rs .r r t r r •- rs .- o o r ;r? f O U to m a txi a C14 cwv r: tv Ci rs ci rcr+i tXi . ci ci cv t�U. a 0 r` cvtia ',' C> eesenor +na rs � r c`v as cv ct eo o r- us r4 c? n cc! rn + a 40 Cl u> r r ' C� 0 04 -° off CV cv +nv ri r} xa cs� C tv ra cos u'i e3oc� cnv a us •- cne�ry c car ccs •cr *� v N r, co 0 o a ua t8> C r- — t%— r ]C t r U.) r:ni uy °° •- •a r=Ca 0 v t7i r`r7 us Ci OD r> w r q CO 01 .- m rr � r a § 08888 008 § § 880 0 co ID 0 t*�r � v �a5 "t cst000mau"? *� us u> +�i sGs r- .- a~i r:tri m wn ' .- er`co C fl cv tw ti ri er`sr. rn W) 11 as C) N P- N -W to (13 M t.., N Gf r C4 N r try N r r ui t� 2 P. ooI-- W V a � � o � �taLno � p mu'Ste o q m U�r f11, m �-^ C5 CO to tJ � CS C„1 r'j X73 � ��„ r„ kn 'V' M vi v o ,�' � ci tC! to h 40 m QS �{�g a 8 Li l a t7' V' W C3 to 0 tr7 '�- C7 tl C7 N r-_i,;, '� � t[7 f�7 A N SO 8 "0` w �/? p> �-•'r- tXj M!} } t�7'rT 'tl'r i�+ r` {~ry C<3 N in et CV QS i'� � 0 4m N Ci CLD t'V yMa� tom+ •- a C� � r tuj ftp tC! tf3P � (s�7 �3 vY• r• � iE7 Z !� C411 ti V C>V N tJi CO N N 01 — eq N M "W r r N U- d a 04 a CJ y} i43 � p a 0 Q: V) U t> �' .d a o 4o E y u d CL 5 0m 0 ptiQ w .felQ wU Qtelt tK O C t6 Q if4G y LL O i6 `7 h� LL IU + ` LL a " M ac z co E C6 �+ am U. U.. uo A Z i= cl) t w Ci civ v . co �cr CJ � � v i� (EXHIBIT 2) ......... _.._.__.. ..._....... ...._. ....... ........ .......... ............ .......... ...._....._. ........ ......... _ ....... ........_...............__.. .. tri NN < In O O 0 O nM1tI 1anN f� Ih r to J O Iri r p IIn O O C; O � n r0 pNp 1f � W N W W ' W ' � y wN h Ifl . h tJ1 r It tX1 a n �-+ Olt it h M 11 CL �' W go fet It "i � • It x 0 K OC it N S co O . e . f1 11 tJ fl it .? I-W N 40 a G r st7 Q M y�h Y[00 Y . d It `{S N IL 6 _ Il I!'t�M r kS it cn Q M 97 : 8 P� 8 r N It N it IL' n, t9.p$O OOOOtYf$WIpf 66CD O' {S1L Mpn C[OS ' d it Q¢ It IA ix I.S N a a 7 O" •O O d CQ t[ CT I1 _I `G M 0 It O Ii ix N If N 11 r x D 0. 11 .Q Ifm 11 1t U It it k * # k 11 i1 W W W ' I=C5 trio r Irid r OO6db O OO r 00 11 pp !{ Y O N b 0 0 r N r 0 0 Q 0 d 0 0 r b 0 I I P b !i w J-- Q 6 r a b Q 4= r c n dO*O40 . .DO . 0 QQCYO��ttOO r 00 It 140 if Stl IrtOOQ r Irih OOOOO67O6 . 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Y W w fYJ r-0N AE 14 "'+ u'!d a P'.a N O N 0 IV O N U a to V I. Y 2cg +-MSM a MMMMMM NN N = Cc M Vim! H 0 A S S a M 0 ~ 1`' 6 G p y o u � <( J ta 29 h t $ rL ce W u 1� W x U w cj +- In N 6 b 0110 w hL3 {►3�. uj b F d` 0` a ol a Q C.�- w 11D W 0 V.M- d y W . O it`d d� J'a J,`,#4 J`....+`.. w O af oll�yp. . ��yp, ti 6 «v r zo Ig-..h7 ~ tJ.7h(3 ltj 6Jhtom3t - N tJw wG v 1�0fJ 6 ' u u J r II. J LM z y CWU I/t PCJ N 1 a �t C 21 ......_...._. .. _ _ ..... ....... ......... ....._..._. ......... ........ ..... _ .......................... .............. ..... . ................................................... CONTRA COSTA COUNTY PUBLIC WORKS DEPARTMENT DATE: June 16, 1998 TO: Phil Batchelor, County Administrator FROM: J. Michael Walford, Director SUBJECT: Financial Compliance A erformed by Macias, Gini &'Company This is our response to the financial compliance audit. The only issue that may relate to Public Works is compliance with the Davis-Bacon Act. We follow rules and regulations established by the Federal Highway Administration (FHWA)when managing projects involving federal funds. FHWA requires that all projects that are wholly or partially funded with federal funds, regardless of contract amount or duration, comply with the Davis-Bacon Act. Our compliance efforts include requiring the contractor and its subcontractors to submit certified payroll information and interviewing employees on the job. The frequency and the number of employees interviewed are dependent on the contract amount and the duration of the project. Caltrans audits all projects involving federal funds to insure compliance with all federal and state requirements. Since forfeiting all federal participation is the consequence of having non-compliance items that cannot be corrected, we place heavy emphasis on following the rules and regulations established by Caltrans and FHWA.', If you have any questions, please call Maurice Shiu at 3-2251 or Bud Murphy at 3- 2321. JMW:MMS:drg gladrn1n\\98-6:fnanc1a1 audit cc: Scott Tandy,CAC? B.Murphy,Construction CON TRA COSTA COUNTY - RECEPEE JOIN 181998 OFFICE OF COUNTYADMlN1STRATOR CONTRA COSTA COUNTY SOCIAL SERVICE DEPARTMENT TO: Phil Batchelor, County Administrator DATE: July 2, 1998 FROM: John Cullen, Director7yZ____ cc: Bob Hofmann SUBJ: Financial Compliance Audit Performed by Macias, Gini & Company - "ADMINISTRATIVE CONTROLS OVER ELIGIBILITY" The Financial Compliance Audit noted two Aid to Families with Dependent Children (AFDC) case records in which the Statement of Facts for Cash Aid and Food Stamps, JA-2 forms, were not signed by a supervisor. As a matter of policy, each JA-2 must be signed by a supervisor before cash aid is authorized. A reminder to staff about this existing department policy will be entered in our "Monthly Bulletin." CONTRA COSTA COUNTY RECEIVED JUL4 7 1998 OFFICEOF COUNTY ADMINISTRATOR Contra Human Resources Costa Department County/ o 1 Administration Bldg. V L.1 t 1 Y °° 651 Pine Street Martinez;California 94553-1292 DATE. July 28, 1998 TO. Phil Batchelor, County Administrator FROM.: LeslOP-Knight, Director of Human Resources r SUBJECT: Financial Compliance Audit Performed by Macias, Gini & Company This is in response to your memorandum of July 22, 1998 referencing the aforementioned subject matter. It is my understanding in our discussions with the Auditor-Controller's Office that there is no matter in this audit which pertains to the ',Human Resources Department. Thank you. LTK:dn cc: Dennis Barry Ken Corcoran Barton Gilbert Tony Enea OFFICE OFC0W91,Q0=WY0INISTRATOR C 0 N T WW N R6SBUFO 'REP C C U N T Y 98 JUL 23 PM 3: 48 Administration Building 651 Pine Strut, 11th Floor Martinez, CA 94555 DATE: July 22, 1998 TO: Dennis Barry, Community Development Director Ken Corcoran, Auditor-Controller Barton Gilbert, General Services Director eLeslie Knight, Human Resources Director FROM: Phil Batchelor, County Administrator _7 r SUBJECT: Financial. Compliance Audit Performed by Macias, Gini & Company Your response to our May 26, 1998 request has not been received. If your response is in transit please disregard this memo. If not, please prepare your response and forward to this office as soon as possible. Responses were due June 30, 1998 . ATTACHMENT 2 INTEROFFICE MEMO CONTRA COSTA COUNTY COUNTY ADMINISTRATOR'S OFFICE 651 Fine Street, Eleventh Fluor Martinez, CA 94553 Telephone: 335-1086 Fax: 335.1098 TO: Supervisor Mark DeSaulnier Supervisor Jim.Rogers Supervisor Gayle B. Uilkema Supervisor Donna Gerber Supervisor Joe Canciamil.la FROM: Phil Batchelor, �J County Administrator SUBJECT: 1996 Annual Management Letter DATE: March 19, 1997 Attached is a copy of the annual management letter by KPMG Peat Marwick. I have gone over the letter with the managing partner, Denise Price. It appears we have no significant problems pending. If you have questions, please give me'a call. attachment cc: Ken Corcoran, Auditor Controller John Cullen, Director of Social Service Steve Steinbrecher, Director of Formation Technology Dr. William Walker, Director of Health Services Joe Tonda, Risk Manager Scott Tandy, Chief Assistant County Administrator Tony Enea, Senior Deputy County Administrator Dean Lucas, Deputy County Administrator Jeanne Maglio, Chief Clerk of the Board _... _ Peat MarwickLLP One Kaiser Plaza Oakland,CA 94612 January 31, 1997 The Honorable Board of Supervisors County of Contra Costa, California We have audited the general purpose financial statements of Contra Costa,'County for the year ended June 30, 1996, and have issued our report thereon dated November 20, 1996. In planning and performing our audit of the general purpose financial statements of the Contra Costa County, we considered the internal control in order to determine our auditing procedures for the purpose of expressing our opinion on the general purpose financial statements and not to provide assurance on internal control. We have not considered internal control since the date of our report. During our audit we noted certain matters involving internal control and other operational matters that are presented for your consideration. These comments and recommendations, all of which have been discussed with the appropriate members of management, are intended to improve internal control or result in other operating efficiencies and are summarized as follows. Welfare Reform In the summer of 1996, Congress passed and the President signed the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 radicallytransforming the nation's welfare system. For 60 years the welfare system has been driven by a simple principle - financially support families who meet certain deprivation criteria by providing them a 'check from the government. The new law represents a shift in philosophy which provides time-limited aid to disadvantaged families with the expectation that recipients will work and become self- sufficient. This will create a fundamentally new framework and mindset for the government agencies running the programs- including Contra Costa County. In the past, the design of federal programs left relatively little discretion' to the state and local governments of how to run the system. The responsibility will now be in the hands of the State to determine how much of the resources and control will be passed on to the local communities and counties. The State of California is in the process of developing its plan which will drastically change the way all counties conduct business. The ultimate outcome as of today is unknown. However, it is believed that more County staff will be expected to become job coaches and counselors; collaborations with other service providers will be needed; partnerships with the private sector to hire welfare recipients will be needed; soon Kt-H Firm of KhmvrtPnhi MarwirY Gaardear . _._..... ....11... .. ........ ..........._......... .._. .._.... .. ._....... .........._. ....._._.. ........................... .. . ............................................................................ PW Peat Marwick LLP The Honorable Board of Supervisors County of Contra Costa, California January 31, 1997 Page 2 communication and accountability will be critical in order to track individuals over their lifetimes as they enter, leave and reenter the welfare program; and available funding will be reallocated to areas such as employment preparation and job placement for the welfare recipients. y Contra Costa County management is well aware that welfare reform will significantly change its operations in the near future and has begun planning for this devolution. We note that organizational restructuring, business process reengineering, performance measurement, and information technology improvement efforts will be key to the County's ability to meet the new demands that are imposed on it. Year 2000 Issue The Year 2000 issue is global, affecting businesses as well as governments - including Contra Costa County. The basic problem is that software running on many computers use only the last two digits to designate the year. When computers were a new technology and disk storage space was expensive, programmers designed systems to assume the century was 1900. If not reprogrammed to read all four digits of the year, systems may either shut down in confusion or, perhaps worse,may calculate and produce erroneous outcomes. Government agencies run millions of mathematical calculations based upon dates stored by software programs that could falter as systems try to read 2000 and beyond. For example, dates are used to calculate eligibility or expirations or installments - entitlements, interest and penalties on delinquent taxes, court docket scheduling, parole and sentencing, long-term debt management, pension benefits - to only name a few, which may be vulnerable to this 44millenniumbug„ In addition, government computers exchange data continually with other federal, state, and local government systems, as well as those of the private sector, such as banks and vendors. The opportunities for incorrect data flowing back and forth are enormous. Resolving the Year 2000 issue requires extensive examination of computer;applications, the replacement or reprogramming of systems, and comprehensive testing to ensure that applications Can successfully process 21 st Century dates. __.. ......... 111.1 _ .. ....... .__...._. ..........................._....... __. ......... ......... _111.1. ....._... ...._..._.... _........ .......... .. ..................................... Peat Marwick LLP The Honorable Board of Supervisors County of Contra Costa, California January 31, 1997 Page 3 Software used by many governments was written decades ago with computer languages that are now nearly obsolete and often written for unique applications. bate information is deeply embedded in lines of code readable only by the computer. Programers will have to perform full-scale line-by-line assessments of the software in order to add four-digit capabilities. Fewer people today maintain the skills needed to understand this coding as programmers have moved to more sophisticated software packages and networks. Labor cost for these individuals will continue to increase as the window of opportunity to reprogram critical software applications declines. Replacing old systems with new ones is also costly, however significant efficiencies in government operations may be realized. According to industry estimates, the actual conversion to become Year 2000 compliant may represent only 10 to 20 percent of the total effort. The critical component - testing - will actually consume most of the resources. 45 to 55 percent of the total effort. With so much of the code being modified, testing must be performed to ensure that the programmer does not break something that was not previously broken. Certifying those changes is essential to continuing normal processing. The remaining 25 to 35 percent of the effort is estimated for planning. The County is intimately aware of the Year 2000 situation and has indicated that it is approximately 55 percent complete in its overall effort to resolve this issue for internal, county-wide computer applications. We strongly encourage that the County strive to complete the remaining 65 percent within the next 12 to 18 months. As long as the systems are not Year 2000 compliant, the County is at risk that its computer systems may shut down or produce erroneous results. Financial and Accounting Systems County Departments report financial information to granting agencies throughout the year regarding programs funded by state and federal governments. Such reporting is required at levels more detail, and in differing formats, than that provided by the County's current finance system. Accordingly, Departments have built and are maintaining separate accounting systems(i.e. shadow systems) for grant reporting to meet their particular needs. The tendency to build individual technology systems to meet particular needs often results in difficulties sharing information, repeat entries of the same information, unnecessary duplication of effort, and harriers to effectively communicate tar those outside of the AMR Peat Marwick LLP The Honorable Board of Supervisors County of Contra Costa, California January 31, 1997 Page 4 Departments who also have responsibilities to the granting agencies. Technology to provide Departments efficient and effective tracking and reporting of program activities utilizing data already captured in a core finance system is available, however, the County's system does not currently have this capability. Another limitation of the current finance system is found in the annual reporting process of all County operations. The system does not have a reporting module to prepare the Comprehensive Annual Financial Report. Accordingly, financial data in the system is downloaded into a personal computer based reporting package to prepare the report. A significant amount of time is incurred by County staff in the download process due to software limitations. Finance systems on the market are available which encompass a reporting package. The County recognizes the limitations of its current finance system and is currently evaluating the costs and benefits of making a change. Investment in technology is expensive, however, maintaining current technology is necessary to meet the ever growing demand for more responsive and efficient government. We support the County's evaluation of its financial system needs. We suggest that the County move quickly on its decision process and consider that a more efficient and effective system could be implemented in conjunction with addressing the previously mentioned Year 2000 issue. MIS Auditors As noted in our prior year management letter, the County does not have management information systems (MIS) auditors on its internal audit staff. The County's operations are extremely dependent on information systems processing. The need to critically evaluate and monitor the control environment is even more elevated with the Year 2000 issue, the need for a new finance system, and the information technology that will be required to implement welfare reform. Technology advancements, including the increasing access to information on the Internet, increases the importance of protecting the security and sensitivity of information. MIS auditing is a highly specialized skill and can only be delivered by auditors trained and experienced in information processing capabilities and systems controls. :Changes in, and the complexity of, technology requires an investment in people, including an investment in MIS auditors,not only subsequent to system changes but also during planning and testing of Peat Marwick LLP The Honorable Board of Supervisors County of Contra Costa, California January 31, 1997 Page 5 changes prior to implementation. The County recognizes this need and is currently developing the position's specifications. We recommend that establishing the MTS audit function be given high priority by the County. Community Services In the fall of 1996, KPMG was hired to perform a preliminary assessment of potential financial exposures specifically related to the Community Action, Child Development, and the Housing and Energy Divisions of the Community Services Department. As a result.of the work performed, we reported to the Acting Director of the Department certain findings, observations, and recommendations that addressed disallowed and/or potentially disallowable costs, compliance with grants, and problems with respect to grant reporting in a report dated November 15, 1996. In this report we suggested, and continue to suggest, that a detailed evaluation of the financial exposures and internal controls over the expenditure, reporting and budgeting processes of the entire Community Services Department be performed. This assessment should be focused to more fully assess the .Department's funding risks and identify steps to improve its internal controls and reporting to the various funding agencies. Year End Closing Process At year end, General Accounting sends a memo to all County departments providing instructions regarding the due dates for submission of information to the Auditor- Controller's Office necessary for year end accounting transactions to be accrued. No structured follow-up is performed by General Accounting to ensure that all departments complied with the instructions. The recording of year end accruals is necessary for the financial statements to present the operations of the County in accordance with generally accepted accounting principles. We suggest that General Accounting require a designated individual in each department to certify that their department has provided to the Auditor-Controller's Office information regarding all unpaid goods and services received and revenue earned but not yet received as of year end for the necessary accounting transactions to be recorded. Peat Marwick LLP The Honorable Board of Supervisors County of Contra Costa, California January 31, 1997 Page 6 Accounting for the Federally-Qualified Health Centers Program The County participates in the Federally-Qualified Health Centers (FQHC) program. This program provides Medi-Cal reimbursement for the various clinics that the Health Services Department operates throughout the County and is subject to cost-based reimbursement for y the costs incurred.in serving beneficiaries of the Medi-Cal program. The County currently recognizes revenue for the FQHC program based on 75% of its projected cost of services. Any interim program payments exceeding the revenue recognized are deferred. The deferral of interim payments has led to a build-up of deferred revenue related to the FQHC program which could be recognized as revenue. In addition, receivables are not recorded for actual payments in excess of interim payments. This accounting methodology is conservative and, as cost reports are subsequently settled, the County may experience swings in revenue recognition as a result. We recommend that management review the revenue recognition methodology and consider a methodology that is based on current allowable costs and establish receivables which represent future cash inflows. Appropriate allowances estimated for denied coverage, however, would need to be determined and recorded. Such a methodology would more properly match current revenues with the cost of services currently performed. Self-Insurance Fund The County increased its estimate of potential malpractice liability by $10 million in its Medical Liability Insurance Fund during fiscal 1936 which resulted in a retained deficit of $7 million at June 30, 1996. No charges for services to the funds which will ultimately pay for the related liability were recorded during the year. Deficits in internal service funds do not need to be charged back to the other funds responsible for the liability in any one year as long as such adjustments are made over a reasonable period of time. We suggest the County budget appropriately to cure the deficit in its Medical Liability Insurance Fund. Feat Marwick LLP The Honorable Board of Supervisors County of Contra Costa, California January 31, 1997 Page 7 General Fixed Asset Account Group During fiscal 1996 certain general fixed assets of the County were destroyed by fire. The detail accounting records of the County's General .Fixed Asset Account Group have not been properly revised. We recommend that during fiscal 1997 the County appropriately delete the individual fixed assets destroyed and record the individual fixed assets purchased in order to maintain accurate data. Our audit procedures are designed primarily to enable us to form an 'opinion on the financial statements, and therefore may not bring to light all weaknesses in policies or procedures that may exist. We aim, however, to use our knowledge of the County's organization gained during our`work to make comments and suggestions that we hope will be useful to you. We would be pleased to discuss these comments and recommendations with you at any time. This report is intended solely for the information and use of the Board of Supervisors, and management of the County and should not be used for any other purpose. This restriction is not intended to limit distribution of this letter, which is� a matter of public record. Very truly yours, CONTRA COSTA COUNTY REDEVELOPMENT AGENCY DATE: July 29, 1998 TO: Phil Batchelor, County Administrator FROM: Jim Ken y Dep ect edevelopment SUBJECT: nano` ompliance Audit Performed by Macias, Gini &. Company This responds to your May 26, 1998 request for a response to the minor non-compliance issue noted in the above single audit. In the audit, it was noted that the County Community Block Grant "Program, administered by this department, had failed to file the Grantee Performance Report within 90 days of close of the program fiscal year. The following constitutes our response. The necessity to submit the Grantee Performance Report on time has been underscored by Management by Program Staff. The personnel changes that caused the late filing are novo in the past. Experienced personnel are in place. The CDBG Program Manager has developed a Master Schedule for reporting requirements that include the Grantee Performance Report. This Master Schedule will act as a management tool for herself and for the Division Manager to assure future compliance. If you have any questions, please feel free to call on me at (925) 335-1255. JK:sl cc: Dennis Barry Anil Comelo Belinda Smith File oAs1\0798\t atehe1.mem ATTACHMENT 2 INTEROFFICE MEMO CONTRA COSTA COUNTY COUNTY A.D MIINISTRi TOR'S OFFICE 651 Pine Street, Eleventh Floor Martinez, CA 94553 r Telephone: 335-1086 Fax: 335-1098 TO: Supervisor Mark DeSauhuer Supervisor Jim Rogers r Supervisor Gayle B. Uilkema Supervisor Donna Gerber Supervisor Joe Canciamilla FROM: Phil Ba.tchelor, County Administrator SUBJECT: 1996 Annual Management Letter DATE: March 19, 1997 Attached is a copy of the annual management letter by KPMG Peat Marwick. I have gone over the letter with the managing partner, Denise Price. It appears we have no significant problems pending. If you have questions, please give me a call. attachment cc: Ken Corcoran, Auditor Controller John Cullen, .Director of Social Service Steve Steinbrecher, Director of Information Technology Dr. William Walker, Director of Health Services Joe Tonda, Risk Manager Scott Tandy, Chief Assistant County Administrator Tony Enea, Senior Deputy County Administrator Dean Lucas, Deputy County Administrator Jeanne Maglio, Chief Clerk of the Board Peat MarwlCk LLP One Kaiser Piaza Oakland, CA 94612 January 31, 1997 The Honorable Board of Supervisors County of Contra Costa, California We have audited the general purpose financial statements of Contra Costa County for the year ended June 30, 1996, and have issued our report thereon dated November 20, 1996. In planning and performing our audit of the general purpose financial statements of the Contra Costa County, we considered the internal control in order to determine our auditing procedures for the purpose of expressing our opinion on the general purpose financial statements and not to provide assurance on internal control. We have not considered internal control since the date of our report. During our audit we noted certain matters involving internal control and other operational matters that are presented for your consideration. These comments and recommendations, all of which have been discussed with the appropriate members of management, are intended to improve internal control or result in other operating efficiencies and are summarized as follows: Welfare Reform In the summer of 1996, Congress passed and the President signed the .Personal Responsibility and Work Opportunity Reconciliation Act ©,f 1996 radically transforming the nation's welfare system. For 60 years the welfare system has been driven by a simple principle - financially support families who meet certain deprivation criteria by providing them a check from the government. The new law represents a shift in philosophy which provides time-limited aid to disadvantaged families with the expectation that recipients will work and become self- sufficient. This will create a fundamentally new framework and mindset for the government agencies running the programs-including Contra Costa County. In the past, the design of federal programs left relatively little discretion to the state and local governments of how to rein the system. The responsibility will now be in the hands of the State to determine how much of the resources and control will be passed on to the local communities and counties. The State of California is in the process of developing its plan which will drastically change the way all counties conduct business. The ultimate outcome as of today is unknown. However, it is believed that more County staff will be expected to become job coaches and counselors; collaborations with other service providers will be needed, partnerships with the private sector to hire welfare recipients will be needed; soon Member firm of KlynviM Pant MMWM�GnerAebr �s Peat Marwick LLP The Honorable Board of Supervisors County of Contra Costa, California January 31, 1997 Page 2 communication and accountability will be critical in order to track individuals over their lifetimes as they enter, leave and reenter the welfare program.; and available fimding will be reallocated to areas such as employment preparation and job placement for the welfare recipients. Contra Costa County management is well aware that welfare reform will significantly change its operations in the near future and has begun planning for this devolution. We note that organizational restructuring, business process reengineering, performance measurement, and information technology improvement efforts will be key to the County's ability to meet the new demands that are imposed on it. Year 2000 Issue The Year 2000 issue is global, affecting businesses as well as governments - including Contra Costa County. The basic problem is that software running on marry computers use only the last two digits to designate the year. When computers were a new technology and disk storage space was expensive,programmers designed systems to assume the century was 1900. If not reprogrammed to read all four digits of the year, systems may either shut down in confusion or, perhaps worse,may calculate and produce erroneous outcomes. Government agencies run millions of mathematical calculations based upon dates stored by software programs that could falter as systems try to read 2000 and beyond. For example, dates are used to calculate eligibility or expirations or installments - entitlements, interest and penalties on delinquent taxes,court docket scheduling, parole and sentencing, long-term debt management, pension benefits - to only name a few, which may be vulnerable to this "millennium bug". In addition, government computers exchange data continually with other federal, state, and local government systems, as well as those of the private sector, such as banks and vendors. The opportunities for incorrect data flowing back and forth are enormous. Resolving the Year 2000 issue requires extensive examination of computer applications, the replacement or reprogramming of systems, and comprehensive testing to ensure that applications can successfully process 21 st century dates. Peat Marwick LL The Honorable Board of Supervisors County of Contra Costa, California January 31, 1997 Page 3 Software used by many governments was written decades ago with computer languages that are now nearly obsolete and often written for unique applications. Date information is deeply embedded in lines of code readable only by the computer. Programmers will have to perform full-scale line-by-line assessments of the software in order to add four-digit capabilities. Fewer people today maintain the skills needed to understand this coding as programmers have moved to more sophisticated software packages and networks. Labor cost for these individuals will continue to increase as the window of opportunity to reprogram critical software applications declines. Replacing old systems with new ones is also costly, however significant efficiencies in government operations may be realized. According to industry estimates, the actual conversion to become Year 2000 compliant may represent only 10 to 20 percent of the total effort. The critical component r testing - will actually consume most of the resources. 45 to 55 percent of the total effort. With so much of the code being modified, testing must be performed to ensure that the programmer does not break something that was not previously broken. Certifying those changes is essential to continuing normal processing. The remaining 25 to 35 percent of the effort is estimated for planning. The County is intimately aware of the Year 2000 situation and has indicated that it is approximately 55 percent complete in its overall effort to resolve this issue for internal, county=-wide computer applications. We strongly encourage that the County strive to complete the remaining 65 percent within the next 12 to 18 months. As long as the systems are not Year 2000 compliant, the County is at risk that its computer systems may shut down or produce erroneous results. Financial and Accounting Systems County Departments report financial information to granting agencies throughout the year regarding programs funded by state and federal governments. Such reporting is required at levels more detail, and in differing formats, than that provided by the County's current finance system. Accordingly, Departments have built and are maintaining separate accounting systems (i.e. shadow systems) for grant reporting to meet their particular needs. The tendency to build individual technology systems to meet particular needs often results in difficulties sharing information, repeat entries of the same information, unnecessary duplication of effort, and barriers to effectively communicate tor those' outside of the �t M Peat Marwick a P The Honorable Board of Supervisors County of Contra Costa, California January 31, 1997 Page 4 Departments who also have responsibilities to the granting agencies. Technology to provide Departments efficient and effective tracking and reporting of program activities utilizing data already captured in a core finance system is available, however, the County's system does not currently have this capability. Another limitation of the current finance system is found in the annual reporting process of all County operations. The system does not have a reporting module to prepare the Comprehensive Annual Financial Report. Accordingly, financial data in the system is downloaded into a personal computer based reporting package to prepare the report. A significant amount of time is incurred by County staff in the download process due to software limitations. Finance systems on the market are available which encompass a reporting package. The County recognizes the limitations of its current finance system and is currently evaluating the costs and benefits of making a change. Investment in technology is expensive, however, maintaining current technology is necessary to meet the ever growing demand for more responsive and efficient government. We support the County's evaluation of its financial system needs. We suggest that the County move quickly on its decision process and consider that a more efficient and effective system could be implemented in conjunction with addressing the previously mentioned Year 2000 issue. MIS Auditors As noted in our prior year management letter, the County does not have management information systems (MIS) auditors on its internal audit staff. The County's operations are extremely dependent on information systems processing. The need to critically evaluate and monitor the control environment is even more elevated with the Year 2000 issue, the need for a new finance system, and the information technology that will be required to implement welfare reform. Technology advancements, including the increasing access to information on the Internet, increases the importance of protecting the security and sensitivity of information. MIS auditing is a highly specialized skill and can only be delivered by auditors trained and experienced in information processing capabilities and systems controls. Changes in, and the complexity of, technology requires an investment in people, including an investment in MIS auditors,not only subsequent to system changes but also during planning and testing of IT Peat Marwick LLP The Honorable Board of Supervisors County of Contra Costa, California January 31, 1997 Page 5 changes prior to implementation. The County recognizes this need and is currently developing the position's specifications. We recommend that establishing the MIS audit function be given high priority by the County. Community Services In the fall of 1996, KPMG was hired to perform a preliminary assessment of potential financial exposures specifically related to the Community Action, Child Development, and the Housing and Energy Divisions of the Community Services Department. As a result.of the work performed, we reported to the Acting Director of the Department certain findings, observations, and recommendations that addressed disallowed and/or potentially disallowable costs, compliance with grants, and problems with respect to grant reporting in a report dated November 15, 1996. In this report we suggested, and continue to suggest, that a detailed evaluation of the financial exposures and internal controls over the expenditure, reporting and budgeting processes of the entire Community Services Department be performed. This assessment should be focused to more fully assess the Department's funding risks and identify steps to improve its internal controls and reporting to the various funding agencies. Year End Closing Process At year end, General Accounting sends a memo to all County departments providing instructions regarding the due dates for submission of information to the Auditor- Controller's Office necessary for year end accounting transactions to be accrued. No structured follow-up is performed by General Accounting to ensure that all departments complied with the instructions. The recording of year end accruals is necessary for the financial statements to present the operations of the County in accordance with generally accepted accounting principles. We suggest that General Accounting require a designated individual in each department to certify that their department has provided to the Auditor-Controller's Office information regarding all unpaid goods and services received and revenue earned but not yet received as of year end for the necessary accounting transactions to be recorded. l Peat Marwick LLP The Honorable Board of Supervisors County of Contra Costa, California January 31, 1997 Page 6 Accounting for the Federally-Qualified Health Centers Program The County participates in the Federally-Qualified Health Centers (FQHC) program. This program provides Medi-Cal reimbursement for the various clinics that the Health Services Department operates throughout the County and is subject to cost-based reimbursement for the costs incurred.in serving beneficiaries of the Medi-Cal program. The County currently recognizes revenue for the FQHC program based on 75% of its projected cost of services. Any interim program payments exceeding the revenue recognized are deferred. The deferral of interim payments has led to a build-up of deferred revenue related to the FQHC program which could be recognized as revenue. In addition, receivables are not recorded for actual payments in excess of interim payments. This accounting methodology is conservative and, as cost reports are subsequently settled, the County may experience swings in revenue recognition as a result. We recommend that management review the revenue recognition methodology and consider a methodology that is based on current allowable costs and establish receivables which represent future cash inflows. Appropriate allowances estimated for denied coverage, however, would need to be determined and recorded. Such a methodology would more properly match current revenues with the cost of services currently performed. Self-Insurance Fund The County increased its estimate of potential malpractice liability by $'10 million in its Medical Liability Insurance Fund during fiscal 1996 which resulted in a retained deficit of $7 million at June 30, 1996. No charges for services to the funds which will ultimately pay for the related liability were recorded during the year. Deficits in internal service funds do not need to be charged back to the other funds responsible for the liability in any one year as long as such adjustments ,are made over a reasonable period of time. We suggest the County budget appropriately to cure the deficit in its Medical Liability Insurance Fund. AWN Peat Marwick up The Honorable Board of Supervisors County of Contra Costa, California January 31, 1997 Page 7 General Fixed Asset Account Group During fiscal 1996 certain general fixed assets of the County were destroyed by fire. The detail accounting records of the County's General Fixed Asset Account Group have not been properly revised. We recommend that during fiscal 1997 the County appropriately delete the individual fixed assets destroyed and record the individual fixed assets purchased in order to maintain accurate data. Our audit procedures are designed primarily to enable us to form an opinion on the financial statements, and therefore may not bring to light all weaknesses in policies or procedures that may exist. We aim, however, to use our knowledge of the County's organization gained during our'work to make comments and suggestions that we hope will be useful to you. We would be pleased to discuss these comments and recommendations with you at any time. This report is intended solely for the information and use of the Board of Supervisors, and management of the County and should not be used for any other purpose. This restriction is not intended to limit distribution of this letter, which is- a matter of public record. Very truly yours,