HomeMy WebLinkAboutCC AG PKT 2015-01-12 #A EAi
AGENDA STAFF REPORT
DATE: January 12, 2015
TO: Honorable Mayor and City Council
THRU: Jill R. Ingram, City Manager
FROM: Victoria L. Beatley, Director of Finance/City Treasurer
SUBJECT: RECEIVE THE INDEPENDENT ACCOUNTANTS'
REPORT ON APPLYING AGREED-UPON
PROCEDURES FOR COMPLIANCE WITH EMPLOYEE
PAYROLL ALLOCATION PERCENTAGES (AUP)
SUMMARY OF REQUEST:
That the City Council receive and file the Independent Accountants' Report on
Applying Agree-Upon Procedures for Compliance with Employee Payroll
Allocation Percentages.
BACKGROUND AND ANALYSIS:
Beginning with the FY 2013-2014 budget, Finance staff updated the presentation
of the information related to how employee payroll was being allocated. The new
format is titled "Position Allocation Plan".
As the new document was being prepared, each position was evaluated as to the
allocation of time for various functional responsibilities. For example, the Director
of Finance position was fully allocated to the General Fund. As a result of this
evaluative process, several allocations were changed. Continued refinements
were made during the preparation of the FY 2014-2015 budget.
When the Audit Committee (Committee) met with the outside auditors to discuss
the annual audit, the Committee requested that the audit firm provide
suggestions and quotes for additional work. The audit firm provided a list of
several options, one of which was a payroll allocation study. The Committee
recommended that the City pursue this option. The City Manager concurred with
the recommendation and requested a report from the auditors regarding payroll
allocation.
The first page of the report highlights the purpose of the AUP and the procedures
that were performed by Lance, Soil & Lunghard, LLP (LSL) staff assigned to this
project. Thirty City staff positions were randomly selected. Each of the positions
is identified separately in the report along with the findings, if any.
Agenda Item A
Table 1 on page 12 of the report summarizes the allocation for each position that
was reviewed and the recommended allocation based upon the testing
procedures performed. The AUP conclusively determined that the General Fund
is bearing too much of the financial burden for many of the 30 positions tested.
Additionally, the report shows that the Water Fund is also over-burdened, but that
the Sewer Fund is significantly under-burdened. Some additional
recommendations, which begin on page 12 of the report, are suggested for
consideration.
Once the City Council receives the report, staff will implement the recommended
changes for the positions that require changes. One final note, when the FY
2014-2015 Budget was prepared, one of the changes made in the Position
Allocation Plan was to shift some of the cost for the EOC Corporal from the
General Fund to the Water and Sewer Funds. Since this AUP work was in
process at the time, the change in allocation for that position was not made.
ENVIRONMENTAL IMPACT:
There is no environmental impact related to this item.
LEGAL ANALYSIS:
There is no legal analysis required for this item.
FINANCIAL IMPACT:
There is no financial impact relating to the receipt of this report. The cost of the
work for the agreed upon procedures audit is $4,500 and was paid from account
number 001-019-44000 Non-departmental Contract Professional Services.
RECOMMENDATION:
That the City Council receive and file the Independent Accountants' Report on
Applying Agree-Upon Procedures for Compliance with Employee Payroll
Allocation Percentages.
SUBMITTID ,, NOTED AND APPROVED:
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Victoria L. Beatley, i I Ingram, City ger
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Director of Finance/City Treasurer
Attachments:
A. Independent Accountants' Report on Applying Agree-Upon Procedures for
Compliance with Employee Payroll Allocation Percentages.
Page 2
CITY OF SEAL BEACH
Independent Accountants' Report on Applying Agreed-Upon Procedures
For Compliance with Employee Payroll Allocation Percentages
For the Period
July 1, 2013 through June 30, 2014
•David E.Hale,CPA,CFP •Deborah A„Harper,CPA
,r •Donald G.Slater,CPA •Gary A.Cates,CPA
LS L •Richard K.Kikuchi,CPA •Michael D.Mangold,CPA
•Susan F.Matz,CPA •David S.Myers,CPA
CERTIFIED PUBLIC ACCOUNTANTS
•Bryan S.Gruber,CPA
MeA Division of LSL,CPR.
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INDEPENDENT ACCOUNTANTS' REPORT ON
APPLYING AGREED-UPON PROCEDURES
To the Honorable Mayor and Members of the City Council
City of Seal Beach, California
We have performed the procedures enumerated herein, which were agreed to by the management of the
City of Seal Beach (the City), solely to assist the City in verifying the accuracy of Employee Payroll
Percentage Allocations to the General Fund, Water Fund, and Sewer Fund for the period July 1, 2013
through June 30, 2014. The engagement to apply agreed-upon procedures was performed in
accordance with attestation standards established by the American Institute of Certified Public
Accountants. The sufficiency of the procedures is solely the responsibility of the management of the
City of Seal Beach. Consequently, we make no representations regarding the sufficiency of the
procedures described herein either for the purpose for which this report has been requested or for any
other purpose.
The procedures performed and the results obtained from the performance thereof were as follows:
1. Procedure Performed: We obtained a listing of all employees who's payroll is allocated over multiple
funds and reviewed three pay periods of payroll allocation reports to ensure that the listing was
complete.
Findings: No findings were noted as a result of the procedures performed.
2. Procedure Performed: We judgmentally selected a sample of 30 employees and tested the
allocation from the Personnel Action Form to the Payroll Distribution Reports. The sample was
chosen based on the employees' payroll allocation outside the General Fund, job title, and finally
based on our judgment of possibly being a position that provides services that are outside the
General Fund.
Findings: No findings were noted as a result of the procedures performed.
3. Procedure Performed: Of the sample selected in procedure 2 above, we inquired with each of the
30 employees' Supervisors as to the approximate amount of time that each selected employee
worked on each fund. We inquired as to how the allocation percentages were determined and tested
all calculations for reasonableness and accuracy. In addition, we reviewed supporting documentation
of work performed by the employee to test the allocation percentages.
Findings: Based on the test work performed, the City's allocation methods for 21 of the 30
employees selected were outside our expectations and calculations. See Table 1 for a summary of
these findings. Our recommendations are as follows:
Employee Sample #1 (Marine Safety Officer) - is responsible for the maintenance and training of
staff and the maintenance of equipment. As a Marine Safety Officer, their primary function is
supervision. They typically oversee Beach and Operations. If there are any water quality issues,
they participate in warning the beach goers of dangerous waters. They help by posting warnings
signs as well as physically warning various people on the beach of the dangerous waters. Seal
Beach had approximately 15 warnings during Fiscal Year 13/14 and 1 beach closure due to a sewage
leak, 6.66%. For daily function this accounted for less than 1% of their time during the year
Lance, Soil &Lunghard, LLP 203 North Brea Boulevard Suite 203 Brea, CA 92821 TEL 714,672.0022 Fax 714.672.0331 www.lslcpas.com
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City of Seal Beach, California
(1 /365 = .0002%), therefore the payroll allocation of 100%to the Tidelands Fund seems reasonable..
No exceptions noted.
Employee Sample #2 (CS Coordinator) - reviews all staff programs and are responsible for setting
up registration for children when the City puts on special events, and for reviewing special event
permits (carnivals, etc.). All of their work is done through parks and recreation. They do not get
involved with anything that is Water Fund or Sewer Fund related; therefore the payroll allocation of
100%to the General Fund seems reasonable. No exceptions noted.
Employee Sample #3 (Director of Community Development) - is responsible for overseeing multiple
divisions within Community Development and Community Services. They are involved with all
projects related to Public Works, Community Development (which oversees the Building division),
Planning, Code Enforcement, Housing and Community Services (which oversees Parks and
Recreation programs and activities). This includes various projects for the General Fund, Water
Fund, and Sewer Fund. They examine the staff report and are responsible for the environmental
compliance involved in all projects(architecture, billing codes, etc.) Two projects that they are heavily
involved in are the Water Easement Project and the Beverly Manor Project. They spend
approximately 5-10 hours on these two projects a week(currently). Starting in July 2014; they started
recording their activity on their Outlook Calendar. It was noted that per their calendar,
3.5 hours per week of a 5 week population was spent on the Water and Sewer Fund
(Los Cerritos Wetlands Authority). As a percentage, this amounts to approximately 9% of their
current work. In addition to this, they spend approximately 4 hours per week reviewing staff reports;
2 hours for Sewer, 2 for Water. This is a total of approximately 7.5 hours per week spent on the
Water and Sewer Fund, amounting to 19% of their workweek. 1% variance to actual allocation
(10% to Water Fund, 10% to Sewer Fund) is deemed de minimus. In order to substantiate the
estimated work load, we obtained a Construction in Process (CIP) Summary Schedule from the
5 year Capital Improvement Program (2013/2014 through 2017/2018) from the Director of Public
Works. We noted that out of 34 projects that were approved for 2013-2014 budget, 27 relate to the
General Fund (79%), 5 relate to the Water Fund (15%) and 2 relate to the Sewer Fund (6%). This
estimated allocation is within a 5% variance which we consider in line with the payroll percentage
allocation of 80% to the General Fund, 10% to the Water Fund and 10% to the Sewer Fund.
No exceptions noted.
Employee Sample #4 (Account Clerk#1) — is a part-time cashier. Their primary function is to take
payments through the mail and at the counter. The bulk of payments made through the mail are utility
payments (water and sewer related). In addition, the collected payments at the counter range from
water payments, business licenses, and recreation to building and planning. The cashier function is
centralized, meaning that they receive all sorts of payments for the different functions of the City
(Tennis Center, Police Department, etc.). We obtained the Cash Receipts Summary for the general,
water and sewer fund for June 2014 and noted that $2,010,673 of cash receipts (79%) for
June 2014 related to the General Fund, $484,250 of cash receipts (13%) related to the Water Fund,
and $287,247 of cash receipts (8%) related to the Sewer Fund. Things to consider is the volume of
utility payments is far more than the combined general city cash collections. Based on the
information noted above and small fluctuations of cash receipts from month to month, we
recommend an allocation to be 70% to the General Fund, 20% to the Water Fund and 10% to
the Sewer Fund. A report to verify the total cash receipts volume and identify the number of receipts
for utilities versus other cash receipts could produce an even greater amount toward Water and
Sewer. We did not identify such a report at this time.
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Employee Sample #5 (Director of Finance) - oversees the Finance Department which includes
payroll, all cash functions, utility billing, and accounts payable. They also review and sign the Agenda
Packets for all departments (which include information for the General, Water, and Sewer Fund).
They partook in the Beverly Manor Emergency last April, which directly relates to the Water Fund.
This included overseeing the people working the emergency. The Director of Finance also worked
with WEROC to make sure everything was reported as a local emergency. They had an EOC type of
roll during this emergency. This position is also responsible for reviewing the final budget, which
includes a responsibility to attend the CIP Quarterly Meetings that discusses all CIP Projects. Since
this positions' role spans to the entire City's fiscal needs directly, the allocation should be related to
the financial net position of each fund. As of fiscal year ending June 30, 2013, the net position totaled
$145,776,947 for the entire City, of which $100,536,250 or 69% related to the governmental activities
(non water and sewer), $24,587,508 or 17% related to the business-type activities—water only, and
$45,239,697 or 14% related to business-type activities — sewer only. We would recommend an
allocation for this position to be 70% General Fund, 15%Water Fund, 15% Sewer Fund.
Employee Sample #6 (Accounting Technician #1) — is part-time and is a "floater" for the City's
Finance Department. Currently, this position's main tasks include working on business licenses,
utility users tax, and transient occupancy taxes. Based on the information noted above, we
recommend an allocation of 100%to the General Fund.
Employee Sample #7 (Accounting Technician #2) - is a full time employee and works 100% with
accounts payable for the entire City. Accounting Technician #2 processes all bills which include bills
relating to the General, Water, and Sewer Funds. They run all accounts payable related items. They
review purchase orders, signs for products, and pay City bills. This position is directly related to
expenditures of the City; therefore we reviewed the expenditures for fiscal year ending June 30, 2013,
from the Statement of Activities in the Comprehensive Annual Financial Report. The expenditures for
the entire City were $36,008,235, which included $30,219,917 or 84% of the Governmental activities
(non Water and Sewer), $4,267,840 or 12% of Business-type - Water Utility only and $1,520,478 or
4% of Business-type — Sewer Utility only. We recommend an allocation for this position to be
85%to the General Fund, 10%to the Water Fund,and 5%to the Sewer Fund.
Employee Sample#8 (Accountant) - reconciles bank statements (mostly General Fund related) and
takes care of all of the project accounting and interest allocation. Cash balances at June 30, 2013,
were 72% Governmental Activities (non-water and sewer), 19% Business-activities (Water fund only)
and 9% Business-type Activities (Sewer fund only). They also work with all CIP Projects. This
includes verifying that all invoices coming in are accurate and that they are in line with the budget in
order to ensure that the City does not go over budget. They also perform journal entries and CIP
transfers and reconciliations relating to all CIP Projects. They attend CIP meetings once a quarter in
order to ensure that all projects are on pace to be completed by their target end date. We reviewed
the CIP Summary Schedule by Project type in the 5 year Capital Improvement Project budget which
noted that $7,725,200 (52%) of expenditures is budgeted for the City-wide (non-water and non-
sewer), $3,330,000 (22%) for the Water Fund, and $3,890,000 (26%) for the Sewer Fund. In
conclusion, approximately 52% of current year Capital Improvement project expenditures are for the
General Fund, 22% for the Water Fund, and 26% for the Sewer Fund. Based on the information
noted above,we recommend a blended allocation for this position due to the cash activity and
the CIP activity to be 60% to the General Fund, 20% to the Water Fund, and 20% to the Sewer
Fund.
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Employee Sample #9 (Accounting Technician #3) — is currently allocated 5% to the General Fund
because up until recently, they helped with cashiering (taking in cash receipts related to Water,
Sewer, Recreation, Business Licenses, Parking Permits, etc.). Due to the fact that they were
covering the Counter, they should allocate at least a portion of their time to the General Fund
because most cash receipting done at the Counter is for General Fund related items. As of
April 2014, they only deal with Utility Billing. The prior 5% allocation to the General Fund should be
disregarded and changed to 0%. We Obtained the Cash Receipts Summary for the Water and Sewer
Fund for June 2014 and noted that $338,341 and $145,909 of cash receipts (63%) related to the
Water Fund, and $80,430.29 and $206,817 of cash receipts (37%) related to the Sewer Fund. Based
on this sample calculation and the cash receipts fluctuation from year to year,we recommend
that 60% of the Account Technician's time should be allocated to the Water Fund and 40%
should be allocated to the Sewer Fund.
Employee Sample#10 (Finance Manager)— reviews payroll and accounts payable across all funds.
The Finance Manager spends time engaged in all of the funds. They also prepare the budget.
During Year-End, they review the CAFR and prepare the MD&A. In addition to this, they prepare all
charts in the CAFR throughout all of the funds. They also review the Agenda Items and Budget
Amendments when the Director of Finance is absent. The Finance Manager also attends all Council
Meetings. Since this positions' role spans to the entire City's fiscal needs directly, the allocation
should be related to the financial net position of each fund. As of fiscal year ending
June 30, 2013, the net position totaled $145,776,947 for the entire City, of which $100,536,250 or
69% related to the governmental activities (non-water and sewer), $24,587,508 or 17% related to the
business-type activities — water only, and $45,239,697 or 14% related to business-type activities —
sewer only. We would recommend an allocation for this position to be 70% General Fund, 15%
Water Fund, 15% Sewer Fund.
Employee Sample#11 (Account Clerk#2)— is a part-time cashier. Their primary function is to take
payments through mail and at the counter. The bulk of payments made through the mail are utility
payments (water and sewer related). In addition, the collected payments at the counter range from
water payments, business licenses and recreation to building and planning. The cashier function is
centralized, meaning that they receive all sorts of payments for the different functions of the City
(Tennis Center, Police Department, etc.). We obtained the Cash Receipts Summary for the general,
water and sewer fund for June 2014 and noted that$2,010,673 of cash receipts (79%)for June 2014
related to the General Fund, $484,250 of cash receipts (13%) related to the Water Fund, and
$287,247 of cash receipts (8%) related to the Sewer Fund. Things to consider is the volume of utility
payments is far more than the combined general city cash collections. Based on the information
noted above and small fluctuations of cash receipts from month to month, we recommend an
allocation to be 70% to the General Fund, 20% to the Water Fund and 10% to the Sewer Fund.
A report to verify the total cash receipts volume and identify the number of receipts for utilities versus
other cash receipts could produce an even great amount toward Water and Sewer. We did not
identify such a report at this time.
Employee Sample #12 (Accounting Technician / Payroll) — handles petty cash, prepares Warrant
Presentations for Council and prepares the Investment Report for Council. Their main function is
payroll. They process payroll for all employees who work at the City. They also create new vendors
and create purchase orders in Finance for various vendors. Approximately 50% of their time is spent
processing payroll. This includes the actual processing of payroll, the submission of taxes, PERS
calculation, and deferred compensation preparation. We obtained Employee Distribution by Title and
Department Report. Auditor calculated average percentage allocation for all employees of the City
and concluded that approximately 91% of total time is allocated to the General Fund, 6% is allocated
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To the Honorable Mayor and Members of the City Council
City of Seal Beach, California
to the Water Fund, and 3% is allocated to the Sewer Fund (they spend 50% of their time on this). We
inspected the 2013 Government Wide Statements and took a percentage of total expenditures for the
General Fund (84%), Water Fund (12%) and the Sewer Fund (4%). Since they spend approximately
half of their time processing payroll and half of their time doing Finance related activities, we took the
weighted average of this (50%) and combined it with the calculation noted above (50%). We
recommend an allocation to be 85% to the General Fund, 10% to the Water Fund, and 5% to
the Sewer Fund.
Employee Sample#13 (Director of Public Works)—is responsible for overseeing the main functions
of the City: Maintenance and Capital Function. They oversee all water operations, set the rates, and
prepare the master file for the Water Fund. They oversee the day to day sewer activities as well,
which is a lot less to oversee than the day to day Water Activities. Daily sewer activities include rate
setting, emergency response, reporting requirements, and waste district requirements. In relation to
the General Fund, they are responsible for the operation of parks, buildings, streets, the
transportation system, administration of the engineering group, and private development. Private
development takes up a large part of their time. We obtained a project listing from the Director of
Public Works. They are responsible for overseeing all Capital Improvement Projects. Verified that
$7,725,200 (52%) of expenditures is budgeted for the City-wide (non-water and non-sewer),
$3,330,000 (22%) for the Water Fund, and $3,890,000 (26%) for the Sewer Fund. In conclusion,
approximately 52% of current year Capital Improvement project expenditures are for the
General Fund, 22% for the Water Fund, and 26% for the Sewer Fund. We recommend an
allocation to be 50% to the General Fund, 30%to the Water Fund, and 20% to the Sewer Fund,
which includes a 10% increase to the water for the daily activities and a 10% decrease to the
Sewer Fund.
Employee Sample #14 (Deputy Director of Public Works) — is responsible for overseeing the
City Yard. They oversee the maintenance and utility services for the City and of the daily operations
of the City Yard. They supervise the Chief Water Operator and Maintenance Supervisor. With
regards to water, they are on 2 Regional Boards: the Municipal Water District of Orange County(they
represent the City) and the Orange County Water District. With regards to sewer, they supervise the
day to day maintenance activities and manage the City contract for sewer cleaning. They do repair
work for the 3 Sewer Lift Stations as well. The Deputy Director of Public Works manages 6 other
maintenance contracts within the City. The bulk of the Deputy Director of Public Works' time(at least
half) is spent with General Fund related items. Although the City did not have support for the
allocation, we determined based on our interviews and understanding of the department
structure that the current allocation of 50% to the General Fund, 25% to the Water Fund, and
25% to the Sewer fund is an appropriate and reasonable allocation, this was all based off
inquiry.
Employee Sample #15 (City Engineer) — runs the engineering functions of the City. The City
Engineer oversees all Water and Sewer Projects. All Project Managers report to the City Engineer.
The City Engineer executes all Water, Sewer, General Fund, and Transportation projects. The City
Engineer does not attend regional meetings, which explains why the City Engineer is allocated less
time to water and sewer than the Deputy Director of Public Works is allocated. The City Engineer
works closely with the Director of Public Works when dealing with private development permits
(General Fund). The City Engineer oversees all Capital Projects in the General Fund as well. We
verified that $4,543,480 of expenditures is budgeted for the General Fund, $3,330,000 for the Water
Fund, and $3,890,000 for the Sewer Fund. In conclusion, 52% of current year Capital Improvement
project expenditures are for the General Fund, 22%for the Water Fund, and 26%for the Sewer Fund.
Due to the City Engineer's responsibilities of overseeing all projects as well as overseeing all water
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and sewer activities, we determined an allocation of 50% to the General Fund, 25%to the Water
Fund,and 25%to the Sewer Fund is an appropriate and reasonable allocation.
Employee Sample #16 (Assistant Engineer) — reports directly to the City Engineer. The Assistant
Engineer handles the day to day operations of almost all of the Capital Improvement Projects within
the City. The Assistant Engineer calls contractors, processes payments, and runs various
calculations. The Assistant Engineer also attends various meetings regarding the projects he
manages. One of the Assistant Engineer's main functions is initiating and completing the Grading
Permit process. We obtained a listing of grading permits and noted that the Assistant Engineer
initiated all of these permits. These permits are all General Fund related. Water projects are typically
more intricate and complicated than sewer projects and the Assistant Engineer has eight years of
experience, therefore he focuses more on water and the Associate Engineer focuses more on sewer.
Although the City didn't have documented support for the allocation,we determined based on
inquiry and structure of the department that the current allocation of 60% to the General Fund,
20% to the Water Fund and 20% to the Sewer Fund is reasonable and proper. The increase in
the General Fund allocation from the City Engineer is directly related to the grading permits, which
are all General Fund related.
Employee Sample#17 (Associate Engineer) — reports directly to the City Engineer. The Associate
Engineer handles the day to day operations of almost all of the Capital Improvement Projects within
the City. The Associate Engineer calls contractors, processes payments and runs various
calculations. The Associate Engineer also attends various meetings regarding the projects he
manages. One of The Associate Engineer's main functions is initiating and completing the grading
permit process. The Associate Engineer handles a bit more sewer projects than the Assistant
Engineer. Water projects are typically more intricate and complicated than sewer projects and the
Associate Engineer only has two years of experience. Although the City didn't have documented
support for the allocation, we determined based on our inquiry and understanding of the
structure of the department that an allocation for the Associate Engineer would be 60% to the
General Fund, 20% to the Water Fund, and 20% to the Sewer Fund. The increase in the General
Fund allocation from the City Engineer is directly related to the grading permits, which are all General
Fund related.
Employee Sample #18 (Executive Assistant) — reports directly to the Deputy Director of Public
Works. The Executive Assistant is the main customer service representative at the City Yard. The
Executive Assistant handles all inbound calls for service requesting information, which involve the
Water calls complaining about water pressure and other various issues. They estimate that 75% of
the complaints that come in are for water, and 25% of the complaints are for sewer. The Executive
Assistant is also responsible for the Water Quality Report, managing the fueling of various vehicles,
ensures that all uniforms for all of the staff get washed in a timely manner, preparing documents to
invoice for all damages to City property, and putting together work orders to be completed at the yard,
which is one of their main duties and accounts for a little over half of their workload. Most of these
work orders concern the General Fund. They are also responsible for making sure that all employees
turn in their time sheets at the yard. We obtained the Work Order Summary list for March 2014 and
verified that most of the work orders in this sample relate to the General Fund (98%). In addition, the
timecards and uniforms that the Executive Assistant is responsible for involve 6 full time employees
and 2 part time employees in for the Water Fund (approx. 72%) and 3 full time employees for the
Sewer Fund (approx. 28%). Based on the above information, we determined a blended
allocation for the Executive Assistant should be 50% to the General Fund, 35% to the Water
Fund, and 15%to the Sewer Fund.
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Employee Sample#19(Maintenance Services Supervisor#1)—reports to the Deputy Director and is
the Landscape Contract Manager for the City. The Maintenance Services Supervisor manages tree
trimming, landscape maintenance, street sweeping, elevator maintenance, and pest control. All
contracts he manages are funded by the General Fund. The Maintenance Services Supervisor is not
involved in any Sewer or Water related projects or contracts. We obtained a listing of the
Maintenance Services Supervisor's current contracts. These contracts include landscape
maintenance, tree trimming, elevator maintenance, street sweeping, and pest control. Based on the
above information, we determined an allocation of 100% to the General Fund for the Maintenance
Services Supervisor is accurate and reasonable. No exceptions noted.
Employee Sample #20 (Maintenance Services Supervisor #2) — reports to the Deputy Director of
Public Works. The Maintenance Services Supervisor manages a variety of functions and oversees all
functions relating to the Storm Drain. This was verified by inspecting the Public Works Department
Organization Chart. The Maintenance Services Supervisor manages the daily operations of the
Sewer System. There are 7 sewer pump stations throughout the City and he is required to maintain
constant maintenance on these pumps (cleaning, etc.). The Maintenance Services Supervisor also
works on building facilities and street maintenance. The Maintenance Services Supervisor does not
do anything water related. All of their work is done either in the General Fund or the Sewer Fund as
they only have a Sewer Certification and do not have a Water Certification. Based on the above
information, we determined an allocation for the Maintenance Services Supervisor is accurate and
reasonable. Although the City didn't have documented support of their allocation, we
determined based on our inquiry and understanding of the structure of the department that
the current allocation of 60% to the General Fund and 40% to the Sewer Fund is reasonable
and proper.
Employee Sample #21 (Senior Maintenance Worker #1) — reports to the Maintenance Services
Supervisor and is responsible for filling pot holes and occasionally performs beach clean-up
procedures. The Senior Maintenance Worker mainly works on projects in the General Fund; however
the Senior Maintenance Worker assists with daily sewer rounds as needed. Sewer rounds include
checking on the 7 sewer pumps, as well as going through a checklist and making sure all tasks sewer
related have been checked off. For December 2013 and June 2014: the Senior Maintenance Worker
did not assist in any daily sewer sounds. We obtained a detail of all work orders for March 2014
which includes the cost, hours spent on each job, and employee assigned to each job. We
determined that the Senior Maintenance Worker worked on 7 out of 37 projects and all related to the
General Fund. The Senior Maintenance Worker also covers loose manholes in the street. Based on
the above information and sample pulled from the daily rounds and work order detail, we
determined an allocation for the Senior Maintenance Worker should be 100% to the General
Fund.
Employee Sample #22 (Senior Maintenance Worker #2) — reports to the Maintenance Services
Supervisor. The Senior Maintenance Worker performs Maintenance on the 7 sewer pumps
throughout the City (cleaning, etc.). The Senior Maintenance Worker is also responsible for monthly
electrical checks regarding the City's sewer system. The Senior Maintenance Worker is involved in
removing and installing pumps. The Senior Maintenance Worker flushes and cleans the sewers as
well. They also spend a lot of time on various plumbing issues at households throughout the City.
With regards to the General Fund, they respond to building facility requests and storm drain
maintenance. We obtained a detail of all work orders for March 2014 which included the cost, hours
spent on job, and employee assigned to job. We determined that the Senior Maintenance Worker
only worked on 4 out of 37 projects on the detail (11%) relating to the General Fund. They also
perform daily sewer rounds. The Senior Maintenance Worker performed 4 out of 30 rounds for
June 2014 (13%). Samples pulled were indicative of the Senior Maintenance Worker's correct
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To the Honorable Mayor and Members of the City Council
City of Seal Beach, California
allocation. We determined an allocation for the Senior Maintenance Worker of 25% to the
General Fund and 75%to the Sewer.
Employee Sample #23 (Water Services Supervisor) — is the Chief Water Operator. The Water
Services Supervisor runs the water system. They report to the Deputy Director of Public Works. The
Water Services Supervisor is responsible for overseeing daily operations and supervising the various
crews. The Water Services Supervisor submits testing reports, supervises water samples, and
attends Regional Meetings relating to Water. The Water Services Supervisor also can back-up as
supervisor to the men who complete the sewer rounds. The Water Services Supervisor performed 2
out of 30 rounds for June 2014 (7%) and 2 out of 31 rounds for December 2013 (6%). Overall, the
Water Services Supervisor typically only works on the sewer related items during emergencies.
Based on the information above, auditor believes the current payroll allocation for the Water Services
Supervisor of 95% to the Water Fund and 5% to the Sewer Fund is accurate and reasonable.
No exceptions noted.
Employee Sample #24 (Senior Water Operator) — is one of two Senior Water Operators that report
to the Water Services Supervisor. The Senior Water Operator oversees daily operations. The Senior
Water Operator performs preventive maintenance, turns valves, flushes tubes, and fixes water mains
when they break. They visit all reservoirs and wells every day to make sure they are running
properly. With regards to the Sewer Fund, they can back-up with the daily sewer rounds when
needed. The Senior Water Operator performed 3 out of 30 rounds for June 2014 (10%) and 2 out of
31 rounds for December 2013 (6%). Based on the information above, we determined an allocation
for the Senior Water Operator of 95% to the Water Fund and 5% to the Sewer Fund is accurate and
reasonable. No exceptions noted.
Employee Sample#25 (Senior Maintenance Worker#3) — is primarily responsible for General Fund
related items and conducts building maintenance, fixes pot holes, helps pick up trash, helps install
street signs, and helps out at the beach (Tidelands-General Fund). The Senior Maintenance Worker
also works on graffiti removal. With regards to the Sewer Fund, the Senior Maintenance Worker
assists with sewer daily rounds on an as needed basis and during emergencies. The Senior
Maintenance Worker performed 1 out of 30 rounds for June 2014 (3%) and 0 out of 31 rounds for
December 2013. We obtained the Work Order Detail list for March 2014. The Senior Maintenance
Worker worked on 7 projects, all relating to the General Fund. Based on the information above,we
determine an allocation for the Senior Maintenance Worker to be 95% to the General Fund
(which includes 10%to Tidelands)and 5%to the Sewer Fund.
Employee Sample#26 (Senior Maintenance Worker#4)—The Senior Maintenance Worker is mainly
focused on building facility maintenance. The City has 3 sewer lift stations on the beach. The Senior
Maintenance Worker assists with the maintenance of these lifts (General Fund). This is one of their
main duties. The Senior Maintenance Worker rarely performs daily sewer rounds. The Senior
Maintenance Worker did not perform any sewer rounds for the months of December 2013 and
June 2014. Based on the daily sewer rounds inspected and inquiry with the Director of Public
Works,we determined an allocation to be 100%to the General and 0% to the Water and Sewer
funds.
Employee Sample #27 (City Clerk) — is responsible for preparing the City Minutes as well as the
City's Agenda Reports. The City Clerk also works on every project approved by the City in that they
keep records of all of the contracts and files notices of completion when the project is complete. The
City Clerk is responsible for many of the Public Records Requests by the City's constituents. There
are many requests that get sent to the City for Water Consumption Reports. The City Clerk also
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To the Honorable Mayor and Members of the City Council
City of Seal Beach, California
ensures that all information that is to be made public is posted on the City website. Per inquiry with
the City Clerk, the Council Minutes take the City Clerk a couple hours to prepare, and the Agenda
Reports take the City Clerk a couple days to prepare due to the extensive approval process. The City
Clerk processes projects and contracts, mails out all signed contracts to contractors, and keeps track
of all needed insurance information. We obtained the Public Records Request report and noted that
approximately 10% of requests stem from the Water Fund (250 Council minutes out of 2,527 Council
minutes). We obtained a project listing from the Director of Public Works. Noted that out of 34
Capital Improvement Projects worked on in the current year, approximately 2 were Sewer (6%), 5
were Water(15%) and 29 were from the General Fund (79%). The current payroll allocation of 80%
to the General Fund, 10% to the Water Fund, and 10% to the Sewer Fund seems reasonable. No
exceptions noted.
Employee Sample #28 (City Manager) — is responsible for City Council support, executive
management support, policy development, and to oversee every department in the City. Due to the
State-wide drought, the City Manager's attention on the Water Fund has increased significantly. The
City Manager oversees all staff who oversee various operations, departments, emergencies, etc. The
City Manager helps oversee staff, attends meetings with co-applicants, and attends DWP
subcommittee meetings. Per inspection of the City Council Minutes, the City Manager is involved in
all aspects of the City, including the General Fund (Lampson Avenue Median Project), Water Fund
(Beverly Manor Project), and the Sewer Fund (Sewer Lining Project) projects. Since this positions'
role spans to the entire City's fiscal needs directly, the allocation should be related to the financial net
position of each fund. As of fiscal year ending June 30, 2013, the net position totaled $145,776,947
for the entire City, of which $100,536,250 or 69% related to the governmental activities (non water
and sewer), $24,587,508 or 17% related to the business-type activities—water only, and $45,239,697
or 14% related to business-type activities — sewer only. We determined an allocation for this
position to be 70%General Fund, 15%Water Fund, 15%Sewer Fund.
Employee Sample#29 (Assistant City Manager)—main functions and duties are in line with the City
Manager's as well as handling the PIO function of the City. The Assistant City Manager performs
many of the same duties that City Manager performs and stands in and acts as Acting City Manager
when the City Manager is out. The Assistant City Manager works with the City Council and City
Manager on developing policies and recommendations for the various functions of the City. The
Assistant City Manager also oversees the Solid Waste Contract. The Assistant City Manager is
involved with the NPDES Storm Water Outreach Program where they perform various activities in
order to teach people how to dispose of household waste products. The Assistant City Manager has
collaborated with the Mayor and has made presentations for this project, has gone door to door
handing out flyers, and has attended breakfasts on these issues. The Assistant City Manager is also
responsible for dealing with any and all issues brought up by the City's constituents. The Assistant
City Manager oversees the City's website as well. Both the Assistant City Manager and City Manager
are involved in many CIP Projects including the Beverly Manor, Marina Avenue Storm Drain, the
Sewer Lining Project, and the DWP Project at 1st and Marina. The Assistant City Manager helped out
this year and was responsible for overseeing the emergency at Beverly Manor. They are the City's
Risk Manager, and made sure that all insurance issues were taken care of in response to this
emergency. Since this position's role spans to the entire City's fiscal needs directly, the allocation
should be related to the financial net position of each fund. As of fiscal year ending June 30, 2013,
the net position totaled $145,776,947 for the entire City, of which $100,536,250 or 69% related to the
governmental activities (non water and sewer), $24,587,508 or 17% related to the business-type
activities—water only, and $45,239,697 or 14% related to business-type activities—sewer only. We
determined an allocation to be 70% General Fund, 15%Water Fund, 15% Sewer Fund.
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City of Seal Beach, California
Employee Sample #30 (Police Corporal) — the Police Corporal is in charge of the Emergency
Operations Center (EOC) and all EOC planning. This potentially involves sewer and water related
catastrophes as well. All of the Police Corporal's duties are outlined in the current EOC Plan. The
Police Corporal is responsible for overseeing everything on the checklists located on pages 97-169 of
the EOC Plan which include, but are not limited to chemical spills and contaminated water
emergencies. The Police Corporal is responsible for assessing the City pumps for safety as well as
the water storage facilities for potential threats. Per discussion with the Police Chief, the current EOC
Plan is 9 years old and the Police Department has hired outside Consultants to come in and develop
a new EOC Plan. This Plan is expected to be finished in the current Fiscal Year. The Police
Corporal also runs the Neighbor for Neighbor program. The Police Corporal goes out into the
community to teach people how to deal with various emergencies (earthquake with the absence of
water, etc.) The City recently had a roof blow off at the Beverly Manor, and the Police Corporal
assessed the situation. The Police Corporal spent a lot of time contacting Allied resources to look for
best practices for emergency protective measures for the unsecured facility. The Police Corporal
also runs the Volunteer Corp. This Corp has over 150 employees. Noted that emergencies related to
fire hydrant breaks amounted to 34 during the 13/14 Fiscal Year. Based on inquiry with the Police
Chief and a detailed analysis of the EOC Plan, auditor determined that the current allocation of the
Police Corporal time of 100% to the General Fund is proper and reasonable. Although we
determined that the current allocation is reasonable and proper, this was all based off inquiry. No
support for was available. No exceptions noted.
4. Procedure Performed: We reviewed each employee's Personnel Action Form and corroborated
each employee's payroll allocation percentage to each fund (per the PAF) to the Payroll Distribution
Report for three pay periods.
Findings: Based on the test work performed, we noted that the Personnel Action Forms for 2 out of
the 30 selected employees did not include a payroll allocation percentage by fund, but were allocated
to different funds. Per our test work detailed on procedure number 3, these two employees were
properly allocated to the different funds. We recommend the PAF to be updated.
5. Procedure Performed: We compared the Cost Allocation Plan to the City's allocations of overhead
and payroll allocations.
Finding: See table 2 for findings related to this procedure.
6. Procedure Performed: We compared the Cost Allocation Plan, replacing the 2012 amounts with the
current 2014 amounts to the City's allocations of overhead and payroll allocations.
Finding: See table 3 for findings related to this procedure.
Additional Recommendations
Although the individual sampling did discover some recommended changes to the allocation percentages,
these did not cover any related overhead cost associated with those employees'time. It is recommended
that the Cost Allocation Plan be used for overhead allocations, which include payroll costs and indirect
overhead costs. Prior to using the 2011 Cost Allocation Plan, the plan should be reviewed in detail for the
methodologies. Some methodologies used for the 2011 Cost Allocation Plan should be adjusted for the
City of Seal Beach, such as the depreciation inclusion throughout the governmental funds. Governmental
funds do not capture depreciation therefore these should not be distributed to City funds. Utilizing a Cost
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To the Honorable Mayor and Members of the City Council
City of Seal Beach, California
Allocation Plan will be able to properly capture all cost, direct and indirect, in the most cost effective
manner.
We also noticed flat overhead cost being used for the Water fund and Sewer fund totaling $378,500 a
year, which are outdated. These flat rates were not able to be supported with any detail, since they were
created many years ago. We recommend these overhead charges to be reviewed and replaced with a
new Cost Allocation Plan.
Conclusion
We were not engaged to, and did not conduct an audit, the objective of which would be the expression of
an opinion on the specified elements, accounts or items. Accordingly, we do not express such an
opinion. Had we performed additional procedures, other matters might have come to our attention that
would have been reported to the City.
This report is intended solely for the use of the City and is not intended to be, and should not be, used by
anyone other than this specified party.
August 1, 2014
Brea, California
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