San Joaquin Council of Governments - Fiscal Year 2017-18
P1580-0028
Issued: 5/14/2019
At the request of the Independent Office of Audits and Investigations, the California Department of Finance, Office of Audits and Evaluations (Finance) completed an audit of the San Joaquin Council of Governments' (SJCOG) Indirect Cost Allocation Plan (ICAP) for fiscal year 2017 /18. The purpose of the audit was to determine whether the ICAP was presented in accordance with Title 2 Code of Federal Regulations (CFR) Part 200 and Caltrans Local Assistance Procedures Manual (LAPM) Chapter 5. In addition, the audit was performed to determine whether SJCOG had an adequate financial management system, which includes procurement, in accordance with 2 CFR 200 and LAPM Chapter 10. The complete audit report is attached.
Based on the audit, Finance determined that SJCOG's ICAP was not in compliance with 2 CFR 200. Finance found weaknesses in SJCOG's financial management system and identified unallowable costs that impacted the indirect cost rate. In addition, Finance identified unallowable overpayments to SJCOG in two fiscal years totaling $535,042. Below is the audited indirect cost rate. SJCOG will need to reconcile their FY 2017 /18 billings to the California Department of Transportation (Caltrans) using the audited rate and reimburse Caltrans the difference.
Rate Type
Indirect Cost
Previously Accepted Rate
168.29%
Audited Rate
160.69%
In addition, SJCOG will need to reimburse Caltrans for the overpayments identified above.
Please provide our office with a corrective action plan addressing all the recommendations in the audit report, including time lines, by July 17, 2019.
SJCOG Response to Audit Findings
Based on the procedures performed and evidence obtained, it was determined SJCOG's
2017-18 ICAP was not in compliance with 2 CFR 200 and LAPM. Weaknesses were
identified in SJ COG' s financial management system's ability to accumulate and
segregate reasonable, allowable, and allocable project costs as noted in Finding#!.
Additionally, as described in Finding #2, unallowable costs were identified that
impacted the 2017-18 ICAP rate and recommend a rate change decrease of 7 .6 percent
as identified in Table 1 below. No change to the fringe benefit rate was identified.
Further, a review of the 2017-18 actual direct labor costs as noted in Finding #3 could
impact SJCOG's ICAP for 2019-20 when submitted.
Table 1- Summary of Accepted and Audited 2017-18 ICAP and Fringe Benefit Rates*
Rate Type
ICAP
Accepted Rate
168.29%
Audited Rate
160.69%
Difference
(7.60%)
Rate Type
Fringe Benefit
Accepted Rate
62.02%
Audited Rate
62.02%
Difference
(0%)
*The ICAP and Fringe Benefit Rates submitted by SJCOG was approved by Caltrans on April 26, 2018.