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Home My WebLink AboutMINUTES - 12092008 - C.43 TO: -,0 BOARD OF SUPERVISORS SEL Contra �.E � FROM: David Twa, - = . ..... `,' �� ra.mi„ Costa County Administrator xp, o� DATE: December 9, 2008 °s� �oU County SUBJECT: Transfer from Designation for Litigation and Audit Exceptions for EHSD SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION RECOMMENDATION: AUTHORIZE the Auditor-Controller to reduce the Designation for Litigation and Audit Exceptions; and AUTHORIZE the transfer of appropriations in the amount of$156,119 to the Employment and Human Services Department for payment to the State Employment Development Department (EDD) as reimbursement of disputed costs paid on behalf of the County. FISCAL IMPACT: This transaction will reduce the General Fund reserve in the Designation for Litigation and Audit Exceptions by $156,119. BACKGROUND: On August 21, 2000, EHSD filed an Incident Report (IR)with EDD alleging a contractor misapplied federal program Funds and was grossly negligent in the maintenance of its fiscal records. The IR was triggered by a fiscal monitoring review covering the period covering fiscal year 1999-2000. Taking the requisite corrective action, as a pass through agency, EHSD initially withheld payment of the claimed costs and contracted a CPA firm to review records. As a good faith gesture the EHSD Director directed the department staff to pay the disputed costs in the interim. EHSD was subsequently reimbursed by EDD after paying $156,119. An audit conducted by a Certified Public Accountant (CPA) later classified the $156,119 paid as a disallowed cost. EHSD has yet to secure repayment CONTIN D ON ATTACHMENT: ✓Yes . No SIGNATURE: I V _=:V4 -RECOMMENDATION OF COUNTY ADMINISTRATOR R OMMENDATION OF BOARD COMMITTEE — APPROVE OTHER SIGNATURE(S) ACTION OF BOARD ON i�- E1� �1 J CR�� APPROVED AS RECOMMENDED OTHER VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A TRUE AND CORRECT COPY OF AN ACTION TAKEN AND ENTERED ON MINUTES � UNANIMOUS(ABSENT r�r1L OF THE BOARD OF SUPERVISORS ON THE DATE SHOWN._ ) AYES: NOES: ABSENT: ABSTAIN: ATTESTED: DAVID TWA,CLERK OF THE BOARDS Or Contact: Lisa Driscoll,335-1023 AND COUNTY ADMINISTRATOR cc: County Administrator's Office(Driscoll,Sansoe) Auditor-Controller — Employment&Human Services-Fiscal BY: �j�— v v — �_ DEPUTY Page 2of2 EDD initiated the WIA Debt Collection process against EHSD due to the drawn out length of the resolution process (spanning approximately 8 years). The likelihood of EHSD securing reimbursement diminishes the longer the Iresolution process takes. EHSD does not have WIA funds (from the disputed period) to return to EDD. Recently, EDD stated that they would schedule an administrative hearing on this matter which would likely result in EHSD being required to pay EDD the disputed amount. By paying the debt owed to EDD, the issue of disputed amounts becomes a local issue solely between the contractor and EHSD. In addition, the Department of Labor, the ultimate source of WIA funds, will no longer have a fiduciary interest in the issue. We are continuing to work with a CPA to reconstruct records. However, this agreed upon procedure is going slowly and records are not always available. In the event EHSD secures repayment of all or part of the $156,119, EHSD will return the amount to the Audit and Litigation Fund. y Memorandum To: Lisa Driscoll,County Finance Director From: Michael Roetzer,Director of Administration,Employment and Human Services Date: November 4,2008 Re: EDD Debt Collection The State of California Employment Development Department(EDD)has initiated a debt collection action against the Employment and Human Services Department(EHSD). This debt collection, in the amount of$156,119, stems from an 8 year long dispute between EHSD(on behalf of the Workforce Development Board which is funded under the Workforce Investment Act)and Worldwide Educational Services(WES),a contractor. The dispute arose when an audit disallowed certain payments made to WES. EDD has known of the outstanding amount for several years but is now demanding payment. EHSD continues in its efforts to recover the disputed funds from WES. At the time when payments to WES were in dispute,EHSD was prohibited by Department of Labor(DOL)regulations from keeping the disputed Workforce Investment Act(WIA)funds in a contingency account pending resolution of the dispute with WES. There have been various activities over the past eight years to resolve the dispute;however,EDD recently stated that they were unwilling to wait longer for repayment and stated they would set a date for an administrative hearing. We have been advised by County Counsel that we would be unlikely to prevail at the administrative hearing. EHSD exercised due diligence in carefully following the mandates of the Workforce Investment Act as well as entering into EDD's dispute resolution process. Unfortunately this dispute has spanned more than 8 years without resolution and EDD is now demanding repayment of the disputed amount. We are asking that the payment of$156,119 be made from the Audit and Litigation Fund maintained by the County Administrator's Office. Background: On August 21,2000,EHSD filed an Incident Report(IR)with EDD alleging WES misapplied federal program funds and was grossly negligent in the maintenance of its fiscal records.The IR was triggered by a fiscal monitoring review of WES for the period covering fiscal year 1999- 2000. At the time, WES refused to allow EHSD monitors access to the relevant accounting records. Taking the requisite corrective action,as a pass through agency, EHSD initially withheld payment of the WES claimed costs and contracted a CPA firm to review WES's records. As a good faith gesture the then EHSD Director directed the department staff to pay WES the disputed costs in the interim. EHSD was subsequently reimbursed by EDD after paying WES$156,119. An audit conducted by a Certified Public Accountant(CPA)later classified the$156,119 paid to WES as a disallowed cost. EHSD has yet to secure repayment from WES. . EDD initiated the WIA Debt Collection process against EHSD due to the drawn out length of the resolution process(spanning approximately 8 years). The resolution process included numerous hours expended by County Counsel staff and contracts with several CPA firms . Assessment: The likelihood of EHSD securing reimbursement from WES diminishes the longer the resolution process takes. EHSD does not have WIA funds(from the disputed period)to return to EDD. Recently,EDD stated to County Counsel that they would schedule an administrative hearing on this matter which would likely result in EHSD being required to pay EDD the disputed amount. By paying the debt owed to EDD,the issue of disputed amounts becomes a local issue solely between WES and EHSD. In addition,the Department of Labor,the ultimate source of WIA funds,will no longer have a fiduciary interest in the issue. We are continuing to work with a CPA to reconstruct records. However,this agreed upon procedure is going slowly and records are not always available. In the event EHSD secures repayment of all or part of the$156,119 from WES,EHSD will return a like amount to the Audit and Litigation Fund. You may wish to contact Cynthia Schwerin, County Counsel,at 925. 335.1874 for information about contacts with EDD or call meat 925.313.1582 for questions regarding the history of this matter. CC: Joe Valentine Ralph McGee Dorothy Sansoe Cynthia Schwerin Ron Stewart CONTRA COSTA COUNTY ESTIMATED REVENUE ADJUSTMENT TIC 24 ACCOUNT CODING BUDGET UNIT: 0005 - Revenue -General County REVENUE ORGANIZATION ACCOUNT REVENUE ACCOUNT DESCRIPTION INCREASE <DECREASE> 0005 8981 Fund Balance Available 156,119 00 TOTALS 156,1191001 01 00 APPROVED EXPLANATION OF REQUEST AUDITOR-CONTRO LER: To initiate trasfer of funds from Designation of Litigation BY: A16tzu ` Z" t' DATE � � and Audit Exceptions to EHSD for reimbursement of ,eO�UN DMINISTRAT . disputed Worldwide Education Services costs. BY: DATE a.a BOARD OF SUPERVISORS: AYES: Gioia,Uilkema,Piepho,Bonilla&Glover NOES: none ABSENT: none ABSTAIN: none /� � /U/Z;.� ,County ,Finance Director. 1-1 /20108 SIGNATURE TITLE DATE /� REVENUE ADJ. RAOO S L BY:1-- DATE JOURNAL NO. -�s( l AUDITOR-CONTROLLER USE ONLY CONTRA COSTA COUNTY FINAL APPROVAL NEEDED BY: APPROPRIATION ADJUSTMENT QX BOARD OF SUPERVISORS - r T1C 27 COUNTY ADMINISTRATOR j ACCOUNT CODING BUDGET UNIT: 0583-,Workforce Develoment Board EXPENDITURE ORGANIZATION SUB-ACCOUNT EXPENDITURE ACCOUNT DESCRIPTION <DECREASE> INCREASE 5601 2479• Other Departmental Expenses 156,119 00 . i 0990 6301 Reserve for Contingencies 156,119 00 I 0990 6301 Appropriable New Revenue 156,119 00 t i TOTALS156,119 00 ;�, 312,238 00 APPROVED EXPLANATION OF REQUEST AUDITOR-CONTROLLER: To initiate trasfer of funds from Designation.of Litigation BY; ✓'t �It ��` '��' DATE �� and Audit Exceptions to EHSD for reimburseni6nt of r7'ADMINISTRATn.. disputed Worldwide Education Services costsDATE 14 3 a o Y j i BOARD OF SUPERVISORS: AYES: Gioia,Uilkema,Piepho,Bonilla&Glover NOES: none ABSENT: none ABSTAIN: none INV; -- - 1 i 1 ,County Finance Director. 11 /20/0 S G AT RE TITLE DAT �-1 APPROPRIATION APOO BY: C>n9 DATE 10gh ADJ.JOURNAL NO. i (Deputy) I Rev a CONTRA COSTA'COUNTY 'ESTIMATED REVENUE ADJUSTMENT TIC 24 ACCOUNT CODING , BUDGET UNIT: 0005 - Revenue -General Count . REVENUE ORGANIZATION ACCOUNT REVENUE ACCOUNT DESCRIPTION INCREASE ,<DECREASE> 0005 8981 Fund Balance.Available 156,119 00 i i TOTALSI 156,119 00, 0 00 APPROVED EXPLANATION OF REQUEST of funds from Designation of Litigation ation AUDITOR-CONTROLLER: J 1 To initiate trasfer g ,I 9 BY; ��c'tt,(.it� Gi-�� DATE ��l �!C � and Audit Exceptions to EHSD for reimbursement of E6UN '�DMINISTRAT�2: disputed Worldwide Education Services costs.i BY: c,e, c DATE /1 A,1 0 BOARD OF SUPERVISORS: ------------ AYES: Gioia,Uilkema,Piepho,Bonilla&Glover NOES: none ABSENT: none ABSTAIN: none (',County Finance Director 11 /20(08 E TITLE REVENUE ADJ. , RAOO •� BY: 1 o� DATE t2/q/0 JOURNAL N0. i