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Controller
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Treasurer
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Tax
Collector
Internal
Audit
Sonoma
County
Grant Audit:
County of Sonoma District Attorney’s Office
California Department of Insurance
Automobile Insurance Fraud Program
June 30, 2013
Audit No: 3111
Report Date December 10, 2013
Internal Auditor's Report Page
Introduction and Background... 1 ‐ 2
Objective and Scope ... 3
Procedures and Results... 4
Observations and Recommendations... 5
Management’s Response ... 6
Supplemental Schedules:
Schedule of Revenues and Certified Expenditures ... 7 Schedule of Approved Budget to Expenditure Report... 8 Schedule of Reported Expenditures to Certified Expenditures... 9 Schedule of Costs Claimed, Certified, Questioned
and Recommended Disallowed ... 10
Appendix A: Management Response Letter ... 11
Table of Contents
County of Sonoma District Attorney's Office California Department of Insurance
Automobile Insurance Fraud Program Audit No. 3111
For the Fiscal Year Ended June 30, 2013
Introduction and Background
Introduction
We have completed an audit of the County of Sonoma District Attorney’s Office Automobile Insurance Fraud Program grant awarded by the California Department of Insurance for the period July 1, 2012 to June 30, 2013. We conducted our audit in accordance with the International
Standards for the professional Practice of Internal Auditing (Standards), and in accordance with
certain sections of the California Insurance Code and Code of Regulations. These standards require that we identify, analyze, evaluate, and document sufficient information and evidence to achieve our audit objectives. We believe that the evidence obtained provides a reasonable basis for the results, observations, and recommendations contained in our report.
The primary purpose of our engagement is to conduct an audit of the Program, as required by law, and to certify that Automobile Insurance Fraud Program expenditures as reported to the State were made for the purposes of the Program as specified in Section 1872.8 of the California Insurance Code, California Code of Regulations Section 2698.67, the guidelines in the Request for Application and the County Plan.
We would like to thank management and staff for their time, information, and cooperation throughout the engagement.
Background
The Sonoma County District Attorney’s Office is responsible for prosecution of public offenses in Sonoma County and institutes proceedings for the arrest of persons charged with public offenses, and advises the County Grand Jury. The Automobile Insurance Fraud Program is administered by the Sonoma County District Attorney’s Office.
The District Attorney’s Office participation in the California Department of Insurance Automobile Insurance Fraud Program first began in FY 2009/10, and as specified in Section 1872.8 of the Insurance Code and the Request for Application’s County Plan Program Strategy, is tasked to actively seek out insurance fraud within the jurisdiction of the County of Sonoma. The primary goal of the grant is to provide funding for the investigation and vertical prosecution of Automobile Insurance Fraud cases referred to the Office of the District Attorney by area insurance firms and the Fraud Division. The Sonoma County District Attorney’s Office is located at the County of Sonoma Hall of Justice Building, 600 Administration Drive, Room 212‐J, Santa Rosa, California 95403.
Introduction and Background
The California Department of Insurance distributed program funding totaling $50,000 to the Sonoma County District Attorney’s Office Automobile Insurance Fraud Program for the period July 1, 2012 to June 30, 2013. During the period of the audit, the grant funds were used to partially fund one Deputy District Attorney and one District Attorney Investigator, as well as audit expenses made for the purposes of the Automobile Insurance Fraud Program.
Objective and Scope
Objective
The primary objective of this audit was to determine if the County of Sonoma Automobile Insurance Fraud Program expenditures were made for the purposes of the program as specified in Section 1872.8 of the Insurance Code, California Code of Regulations Section 2698.67, and the Request for Application’s County Plan Program Strategy.
Scope
The audit was for the period July 1, 2012 to June 30, 2013. The scope of our work included the following:
o A preliminary survey to update our knowledge of the operating environment; identify changes in laws and regulations, systems, personnel and organization structure
o A risk analysis to identify significant risks of non compliance with policies, procedures or laws, loss or misuse of assets and inefficiencies in processes
o A review and evaluation of internal controls designed to ensure compliance with the above requirements and to adequately reduce the risk identified
o Tests of compliance to gain assurance that the internal control system is functioning as intended and is achieving its design objectives.
Procedures and Results
Procedures
We performed the procedures outlined below solely to assist the County in meeting the certification requirement of Code of Regulations Section 2698.67. The District Attorney’s Office is solely responsible for the Program and for compliance with statutory requirements related to the program. The procedures were as follows:
1. Obtained a copy of the Program’s grant award agreement and attached application to verify the existence and amount of funding available and to be disbursed to the District Attorney’s Office.
2. Verified the total grant funds received and deposited by the District Attorney’s Office. 3. Traced the personnel costs and operating expenditures reported to the State on the Annual
Financial Report to the applicable supporting documentation to verify that the costs reported were accurate and made for the purposes of the Program.
4. Determined whether the amount of grant funds received exceeded expenditures reported to the State.
5. Verified that the various report submission deadlines were complied with.
Results
As a result of our testing we are able to certify that $10,528 of the expenditures reported by the Sonoma County District Attorney’s Office for the Automobile Insurance Fraud Program as of June 30, 2013 were made for the purposes of the Program as specified in Section 1872.8 of the Insurance Code, California Code of Regulations Section 2698.67, and the Request for Application’s County Plan Program Strategy.
Observations and Recommendations
Observations
1. For the audit period, total certified expenditures made for the purposes of the Program were $10,528, which was $39,472 less than the $50,000 in disbursements received from the State. The failure to fully utilize grant funds indicates that the DA’s Office overestimated Auto Insurance Fraud grant related expenditures or that the DA’s Office did not have the staff to adequately address the needs of the Auto Insurance Fraud Program. Pursuant to Section 2698.64(c) of the California Code of Regulations, this excess of funds received will be refunded to the state. The actual total expenditures made for the purposes of the Program amounted to 21.1% of the final grant award and funds received of $50,000. 2. The $10,528 of expenditures certified as made for the purposes of the Program was $240
less than the $10,768 in expenditures reported to the State on the annual Financial Report. This overstatement of expenditures was the result of both the Deputy District Attorney and DA Investigator positions each being overstated by 1 hour of salaries and benefits. The District Attorney’s Office review process in place did not detect this error.
3. The DA’s Office has a Deputy District Attorney and several DA Investigators who work part time on the Auto Insurance Fraud Program activities. The majority of the DA’s Auto Insurance Fraud activities are driven by referrals from the Department of Insurance (DOI). As a result of limited DA staff and DOI referrals, $3,028 was incurred for DA staff salaries and benefits, related to Auto Insurance Fraud Program activities. The remaining $7,500 was incurred for an audit required by Section 2698.67 of the California Code of Regulations.
Recommendations
1. The DA’s Office should try to better anticipate Auto Insurance Fraud grant related expenditures and/or ensure that the staff levels are adequate to address the needs of the Auto Insurance Fraud Program.
2. Going forward, the District Attorney’s Office should implement an improved review process to better insure that the reports and worksheets used to prepare the annual report are themselves maintained accurately and completely.
3. For future years, management should perform an analysis to determine whether the current staffing levels for the Auto Insurance Fraud Program are sufficient to meet the program goals and objectives.
Management’s Response
Management’s Response1. The District Attorney’s Office is analyzing the historical experience of Sonoma County Auto Insurance Fraud cases. The Office will evaluate and adjust the amount of future requested grant awards in consideration of workload and planning efforts to improve the District Attorney’s fraud unit.
2. In FY 2013/14, the District Attorney’s Office implemented TimeSaver cost codes that will capture, track, and allow for improved monitoring of staff hours attributed to grant activities. This function will better insure that payroll data used to prepare the annual report is maintained accurately.
3. In addition to the analysis of historical workload, the District Attorney’s Office is considering the extension of grant‐approved activities, including outreach to the community and joint investigations with other law enforcement agencies, in the continuing development of the fraud unit. Planning efforts will likely adjust current staffing levels to meet program goals and objectives.
Supplemental Schedules
County of Sonoma District Attorney's Office California Department of Insurance Automobile Insurance Fraud Grant
Schedule of Revenues and Certified Expenditures For the Year Ended June 30, 2013
Revenues State $ 50,000 County Match ‐ Total 50,000 Certified Expenditures State 10,528 County Match ‐ Total 10,528 Excess (Deficiency) of
Supplemental Schedules
County of Sonoma District Attorney's Office California Department of Insurance
Automobile Insurance Fraud Grant
Schedule of Approved Budget to Expenditure Report For the Year Ended June 30, 2013
Variance
Personnel Services
Salaries and Benefits $
Approved Budget
39,623 $
Expenditure Under (Over)
Report Budget
3,268 $ 36,355
Total Personnel Services 39,623 3,268 36,355
Operating Expenses
Operating Expenses 10,377 7,500 2,877
Total Operating Expenses 10,377 7,500 2,877
Equipment
Equipment ‐ ‐ ‐
Total Equipment Expenses ‐ ‐ ‐
Supplemental Schedules
County of Sonoma District Attorney's Office California Department of Insurance
Automobile Insurance Fraud Grant
Schedule of Reported Expenditures to Certified Expenditures For the Year Ended June 30, 2013
Audited Variance Expenditure Expenditures Over (Under)
Personnel Services
Salaries and Benefits $
Report 3,268 $ Certified 3,028 $ Report (240)
Total Personnel Services 3,268 3,028 (240)
Operating Expenses
Operating Expenses 7,500 7,500 ‐
Total Operating Expenses 7,500 7,500 ‐
Equipment
Equipment ‐ ‐ ‐
Total Equipment Expenses ‐ ‐ ‐
Supplemental Schedules
County of Sonoma District Attorney's Office California Department of Insurance
Automobile Insurance Fraud Grant
Schedule of Costs Claimed, Certified, Questioned, and Recommended Disallowed
For the Year Ended June 30, 2013
Claimed Costs
Audited Claimed Recommended
Costs Costs Costs For
Category Classification Claimed Certified Questioned Disallowance
Personnel Services $ 3,268 $ 3,028 $ 240 $ 240
Operating Expenses 7,500 7,500 ‐ ‐
Equipment ‐ ‐ ‐ ‐
Kanchan Charan, Audit Manager County of Sonoma
Office of the Auditor -Controller-Treasurer-Tax Collector MANAGEMENT'S RESPONSE
The Office of the District Attorney is in receipt of the Automobile Insurance Fraud Program report for Fiscal Year 2012113. Reponses to the recommendations are as follows:
Recommendation 1:
The DA's Office should try to better anticipate Auto Insurance Fraud grant-related expenditures and/or ensure that staff levels are adequate to address the needs of the Auto Insurance Fraud program. Response 1:
District Attorney's Office is analyzing the historical experience of Sonoma County Auto Insurance Fraud cases. The Office will evaluate and adjust the amount of future requested grant awards in
consideration of workload and planning efforts to improve the District Attorney's fraud unit. Recommendation 2:
Going forward, the District Attorney's Office should implement an improved review process to better insure that the reports and worksheets used to prepare the annual report are themselves maintained accurately and completely.
Response 2:
In FY 2013114, the District Attorney's Office implemented TimeSaver cost codes that will capture, track, and allow for improved monitoring of staff hours attributed to grant activities. This function will better insure that payroll data used to prepare the annual report is maintained accurately.
Recommendation 3:
For future years, management should perform an analysis to determine whether the current staffing levels for the Auto Insurance Fraud Program are sufficient to meet the program goals and objectives. Response 3:
In addition to the analysis of historical workload, the District Attorney's Office is considering the extension of grant-approved activities, including outreach to the community and joint investigations with other law enforcement agencies, in the continuing development of the fraud unit. Planning efforts will likely adjust current staffmg levels to meet program goals and objectives.
