_________________________________
David E. Sundstrom, Auditor-Controller
1.
POLICY
All County departments/agencies and districts
governed by the Board of Supervisors shall determine,
document and claim reimbursement for "costs
mandated by the State." Claims for reimbursement
are to be prepared by the affected entities, reviewed
by the Auditor-Controller, and filed with the State
Controller. Annual reimbursement claims for costs
incurred during the previous fiscal year and estimated
claims for costs to be incurred during the current
fiscal year must be filed with the State Controller’s
Office (SCO) and postmarked on or before January
15 following the fiscal year in which the expenditures
occurred. Initial reimbursement claims (first-time
claims) for reimbursement of costs of a previously
unfunded mandated program must be filed within 120
days from the date of issuance of the claiming instructions
by the SCO for the program.
1.1
Purpose
To maximize County recovery of the costs
of State-mandated functions and to sufficiently
document those costs to avoid potential audit
disallowances.
1.2
Authority
1.2.1
State Constitution
Article XIII B, Section 6, of the
California Constitution (Proposition
4, November 6, 1979). Since 1979, legislative
changes to State-mandated programs have
been made annually.
1.2.2
Government Code Sections 17500 through
17630
The sections in this chapter of the
Government Code provide for the implementation
of Section 6 of Article XIIIB of the
California Constitution by defining
the procedures for reimbursements to
local agencies for costs mandated by
the State. Sections 17525-17533 establish
the role of the Commission on State
Mandates to act as a quasi-judicial
body in accordance with the requirements
of Section 6 of Article XIIIB. Sections
17615 and 17616 describe the establishment
of a system of state mandate apportionments
to streamline the reimbursement process.
1.2.3
Board Resolution
Board of Supervisors' Resolution No.
82-162 dated February 2, 1982 authorizes
the Auditor-Controller to prescribe
the accounting policies for all offices,
departments, and institutions under
the control of the Board of Supervisors.
1.3
Definitions
1.3.1
State-Mandated Costs
Any increased costs which the County
is required to incur after July 1, 1980,
as a result of any State statute enacted
on or after January 1, 1975, or any
executive order implementing any State
statute enacted on or after January
1, 1975, which mandates a new program
or higher level of service of an existing
program. Reimbursable mandated costs
are subject to limitations. (See Section
3.2.4.)
1.3.2
Commission on State Mandates (COSM
or Commission)
A quasi-judicial body that receives,
hears, and decides on test claims, adopts
Parameters and Guidelines, establishes
statewide cost estimates and hears and
decides on incorrect reduction claims.
The Commission was created in 1985,
and has seven members.
1.3.3
Test Claim
The administrative procedure available
to County departments/agencies seeking
reimbursement for a law or an executive
order believed to contain a State mandate.
Filing a test claim with the COSM is
the first step in the reimbursement
process. The Commission holds a hearing
to decide by majority vote whether or
not a reimbursable mandate exists. A
successful test claim filed by a local
entity establishes the right to claim
for all local agencies similarly situated.
1.3.4
Parameters and Guidelines
Parameters and Guidelines for claiming
are developed by the test claimant when
the COSM determines that a mandate exists.
The Parameters and Guidelines describe
allowable program costs and other requirements
of claiming, and must be adopted by
the COSM.
1.3.5
Statewide Cost Estimate
An estimate of costs associated with
a particular mandate, performed via
a survey of eligible claimants by COSM
staff. After approving the costs, the
Commission requests funding, generally
through a claims bill, that is subject
to legislative review and approval.
1.3.6
Claiming Instructions
Claiming instructions are developed
and issued by the State Controller for
State-recognized mandates. Claiming
instructions set forth deadlines, provide
descriptions of allowable costs, and
provide forms to local agencies who
are then able to file actual and estimated
claims with the State Controller.
1.3.7
Indirect Cost Rate Proposal (ICRP)
A specific form of department indirect
cost rate calculation that conforms
to state and federal regulations, terminology,
and preparation methodologies. ICRPs
are specifically addressed by OMB Circular
A-87, Attachment E. An ICRP rate is
stated as a percentage that represents
the ratio of total department indirect
costs and County Wide Cost Allocation
Plan (CWCAP) costs to a base (e.g.,
salaries.) That percentage can then
be applied to the base amount (e.g.,
salaries) of a function, program, or
activity, within the department to determine
its total indirect costs.
1.3.8
Field Audit
An on-site review of supporting documentation
done by the SCO. Not all claims are
field audited. A claim is subject to
audit by the Controller no later than
two years after the end of the calendar
year in which the claim is filed or
last amended. If no funds are appropriated
for the program for the fiscal year
in which the claim is made, the time
for the State Controller to initiate
an audit commences from the date of
the initial payment of the claim.
1.3.9
Deficiency Appropriation
A deficiency appropriation occurs
when the State Budget does not appropriate
enough funds for reimbursement to a
particular mandated program. The State
Controller must make a request for a
deficiency appropriation to cover the
shortfall.
1.3.10
State Mandate Apportionment System
The State Mandate Apportionment System
(SMAS) is a method of paying certain
mandated programs as apportionments.
This method is utilized whenever a program
has been approved for inclusion in SMAS
by the COSM.
1.3.11
Countywide Cost Allocation Plan (CWCAP)
A complex cost study that allocates
the costs of County support departments
(such as Public Facilities and Resources
Department/Facilities Operations, Auditor-Controller,
Data Systems, and the County Executive
Office) to operating program departments,
for claiming and reimbursement purposes.
The CWCAP is compiled under the guidelines
established by the Federal Government
for claiming Federal reimbursements
under Office of Management and Budget
(OMB) Circular A-87, "Cost Principles
for State and Local Governments."
This publication can be accessed on
the OMB website at the following address:
http://www.whitehouse.gov/omb/grants/index.html.
1.3.12
California State Association of Counties
(CSAC)
An organization which assists member
counties in obtaining reimbursement
for their mandated costs. The County
of Orange is a CSAC member.
2.
RESPONSIBILITIES
2.1
Responsibilities of Departments/Agencies
and Districts Governed by the Board of Supervisors
County departments, agencies, and districts
governed by the Board of Supervisors are responsible
for the following State-mandated cost-related
functions:
Identify reimbursable mandated costs.
Implement procedures for documenting
mandated costs.
Prepare claims for reimbursement from
the State. Gather and maintain proper
documentation to support claim for possible
audit or further review by the SCO.
Submit accurate and timely claims to
the Auditor-Controller Financial Reporting/Mandated
Costs Unit for reviewing and filing with
the State.
Analyze legislation and executive orders
that affect them, and determine if a reimbursable
mandate exists.
Consult with the Auditor-Controller
Financial Reporting/Mandated Costs Unit
and the California State Association of
Counties (CSAC) to analyze prospective
test claims, and to determine if a test
claim should be filed. If a test claim
is necessary, prepare it for submittal
to the COSM.
It is the responsibility of the Auditor-Controller
Financial Reporting/Mandated Costs Unit to
provide departments/agencies and districts
assistance with:
Determining whether reimbursement may
be obtained for costs under a particular
State mandate.
Establishing documentation requirements
and procedures.
Reviewing all claims being submitted
to the State for reimbursement of mandated
costs (see Section 3.4), and filing these
claims with the State.
Coordinating State audits of County
claims by assisting auditors, attending
audit entrance and exit conferences, and
compiling audit report replies.
Coordinating responses to the Commission’s
requests for developing Statewide Cost
Estimate Surveys.
Coordinating and notifying departments/agencies
and districts of workshops and meetings
regarding State mandated cost claiming.
3.
PROCEDURES
3.1
Determining Mandates
3.1.1
Identifying a Mandate
Departments/agencies and districts
governed by the Board of Supervisors
review legislation and executive orders
that affect them to determine if the
statute at issue contains a reimbursable
mandate. To determine if a mandate is
reimbursable, it must meet the following
criteria:
3.1.1.1
Minimum Requirements for a Reimbursable
Mandate
Statute was enacted after
1975.
Statute contains a new program
or higher level of service
in an existing program which
must be performed by a local
agency.
The program is a governmental
service to the public, or
a situation unique to government.
Meeting the above criteria
indicates that a mandate may
exist. Further research and
review is required. The Auditor-Controller
Financial Reporting/Mandated
Costs Unit and the CSAC should
be notified at this time.
3.1.1.2
Disclaimers of a Reimbursable
Mandate
Even though a mandate may exist,
it may be disclaimed due to constitutional
or statutory disclaimers. The
following criteria should be used:
Did a local agency request
the legislation?
Does the law in question
create or eliminate a crime
or infraction, or change a
penalty?
Does the law or regulation
affirm a court action?
Does the law or regulation
implement a federal mandate?
Does the law or regulation
implement a voter approved
mandate?
Does the law or regulation
lead to offsetting cost savings?
Does the law or regulation
provide that a fee may be
charged that will offset the
cost?
Answering "yes" to
the above questions means that
there may be limitations in
pursuing the mandate. With the
exception of A and B, which
are constitutionally provided
for, however, a "yes"
answer to the remaining questions
should not automatically lead
to the conclusion that the mandate
is disqualified.
3.1.2
Identifying Increased Costs
After determining that a mandate exists,
potential increased costs need to be
identified to determine whether to pursue
a test claim. The Government Code provides
that a mandate must increase costs by
more than $200 in a fiscal year to be
pursued. Increased costs are identified
as:
Costs originating with the implementation
of the mandate.
Costs of increased levels of efforts.
3.1.3
Filing a Test Claim
Test claims are submitted to and heard
by the COSM in Sacramento. Any local
agency can file a test claim on behalf
of all local agencies in the State.
The lead claimant is the first agency
to file the test claim documents with
the Commission. The Commission votes
to deny or find a mandate, and a written
decision is prepared which must be affirmed
by the Commission. If the decision is
unfavorable to the test claimant, a
lawsuit may be filed in Superior Court.
If the decision is favorable, the Parameters
and Guidelines process is initiated.
The ruling applies to all County governments,
not just to the test claimant.
3.1.4
Parameters and Guidelines
Parameters and Guidelines are prepared
by the test claimant and submitted to
the Commission staff within 60 days
of the written decision. Parameters
and Guidelines are the basis upon which
claims will be paid. After the Parameters
and Guidelines have been adopted, the
Commission must adopt an estimate of
statewide costs resulting from the mandate.
Statewide Cost Estimates exceeding $1,000,000
are reported to the Legislature and
the amount is included in a local government
claims bill.
The overall process of filing the initial
test claim to approving the mandate
takes approximately 12 months.
3.2
Types of Claims
There are four types of claims for costs
mandated by the State:
3.2.1
Reimbursement Claim
Initial reimbursement claims are first-time
claims seeking reimbursement of costs
for one or more prior fiscal years of
a program which was previously unfunded.
Claims are due 120 days from the date
when claiming instructions are issued
by the SCO for the program.
Annual reimbursement claims are for
mandates that have been previously funded
and are for costs incurred in the prior
fiscal year. These claims must be filed
by January 15 following the fiscal year
in which costs were incurred for the
program.
3.2.2
Estimated Claim
Estimated Claims are filed with the
SCO during the fiscal year in which
the mandated costs are to be incurred.
Estimated claims may be filed in conjunction
with an initial reimbursement claim,
annual reimbursement claim, or singularly
at other times.
3.2.3
Entitlement Claim
An Entitlement Claim is filed with
the SCO for the sole purpose of establishing
or adjusting a base year entitlement
for a mandated program that has been
included in the State Mandate Apportionment
System (SMAS). When the claims are approved
and a base year entitlement amount is
determined, the claimant will receive
an apportionment reflective of the program’s
current year costs.
3.2.4
Incorrect Reduction Claim
An Incorrect Reduction Claim is a
claim filed with the COSM when a local
agency believes a reimbursement claim
has been incorrectly reduced by the
State Controller. The Commission has
legal authority to reverse or sustain
all or part of the State Controller’s
reductions.
3.3
Filing a Reimbursement Claim
3.3.1
Claiming Instructions
Claiming Instructions are prepared
by the State Controller and describe
specific requirements for filing a claim.
For the most part, the Controller’s
claiming instructions are identical
to the Parameters and Guidelines that
have been approved by the Commission.
The claiming instructions indicate the
amount of money appropriated for each
mandate and provide an individual set
of filing guidelines and forms required
for filing the claim.
3.3.2
Claimable Costs
Claimable costs consist of both direct
and indirect costs. These include the
following:
Direct labor and benefits
Services and supplies directly
attributable to the mandate
Department/agency indirect costs
Countywide indirect costs (CWCAP)
3.3.3
Documentation
For the claim to be considered properly
filed, the claim must include supporting
documentation as specified in the instructions
to substantiate the costs claimed. In
addition, the claimant must explain
the labor activities performed by each
employee for whom costs were claimed.
It is very important to have good time-keeping
records. Detailed timesheets are the
preferred supporting documentation for
claiming labor costs. Refer to the mandate
instructions for specific source documentation
requirements. Also refer to OMB Circular
A-87, Attachment B, Section 11.
3.3.4
Record Retention
For auditing purposes, the State requires
that documentation to support actual
costs claimed must be retained for a
period of two years after the end of
the calendar year in which the reimbursement
claim is filed or last amended. In addition,
documentation should be retained until
the claim has been fully reimbursed
by the State, and all audit adjustments
have been resolved.
3.4
Claims Review Assistance by the Auditor-Controller
Financial Reporting/Mandated Costs Unit
All claims filed by departments/agencies
shall be reviewed by the Auditor-Controller
Financial Reporting/Mandated Costs Unit before
mailing to the State. The Unit will assist
by:
Providing departments/agencies and districts
with claiming instructions and/or Parameters
and Guidelines.
Providing assistance on the preparation
of claims.
Reviewing completed claims for accuracy
and documentation.
Signing the certification on all claims.
Mailing claims to the State.
Monitoring the status of claims filed
with the State.
Allocating the CWCAP portion of the
funds received from the State, and preparing
the journal voucher for distribution of
funds to the departments/agencies and
districts.
3.5
Deadlines
In order to obtain 100% reimbursement of
costs, annual claims must be mailed by January
15 following the fiscal year in which the
expenditures occurred. First-time claims must
be filed within 120 days from date of issuance
of the claiming instructions. Claims filed
within one year of the deadline will be reduced
by a late penalty of 10%, not to exceed $1,000.
Claims filed more than one year after the
deadline will not be accepted.
3.6
Claim Reduction
Reimbursement claims submitted to the SCO
undergo a desk audit review. Departments/agencies
may be called during this period to answer
clarifying questions or to provide additional
information for the claim. The State Controller
may reduce the claim if they think that it
is incorrect.
After payment has been made, a claim may be
field-audited by the State Controller’s
Field Audits Division. Should the State Auditor
feel that an excessive amount has been claimed,
or that funds claimed for activities are not
covered under the mandate, the SCO will reduce
the claim. The SCO sends a letter to the claimant
advising of the reduction and requesting that
the claimant remit a warrant to the State
for the amount due. Failure to do so results
in the SCO offsetting the amount from the
next payment due to the claimant for state-mandated
cost programs.
If the County does not concur with a claim
reduction taken by the SCO, the County has
the option to file an Incorrect Reduction
Claim (see Section 3.2.4) with the COSM and
argue for restoration of the reduction. If
the Commission’s action is unsatisfactory,
the department/agency can file suit in Superior
Court.
3.7
Claim Payment
Effective July 1996, the State Controller
is required to pay any eligible claim within
60 days of the filing deadline or 15 days
after the appropriation is provided, whichever
is later.
Interest is due if the Controller’s
payment is more than 365 days after the adoption
of the Statewide Cost Estimate for an initial
claim made, or beginning on the 61st day following
a claiming deadline, whichever is later.
Legal