More money troubles: Audit shows Modesto owes Caltrans $229,304

Modesto owes Caltrans $229,304 after a state audit determined the city did not adequately track some of its labor costs and sought payment for other costs that were not eligible for reimbursement.

Modesto will use nearly $163,000 from its general fund —which primarily pays for public safety —for the repayment. Modesto needs to repay the California Department of Transportation by no later than Dec. 28, according to a city report.

The City Council approved the repayment at its Tuesday meeting. The item was on the consent portion of the meeting agenda, which means the council approved it and other consent items without discussion.

Interim City Manager Joe Lopez said this matter was vetted before the council meeting. He said Modesto is discussing more items at council committees before they come to the council. The meetings are open to the public.

“We had a very thorough discussion at the Audit Committee meeting about this,” Lopez said.

The audit covered Modesto’s 2008-09 through 2014-15 budget years for federal funding the city received through Caltrans for road and traffic projects.

The audit determined the city did not provide adequate documentation for about $1 million in indirect labor costs for some of its employees who worked on these projects and it sought reimbursement for a liability surcharge, which is not allowed. A formula converted the roughly $1 million into part of what Modesto owes Caltrans.

Acting Finance Director DeAnna Christensen said the state conducted the audit from February 2016 through April 2017. She said Modesto changed how it tracks these indirect labor costs more than a year ago once it learned there was a problem and had stopped seeking payment for the liability surcharge before that.

She said the Finance Department is auditing the Utilities, Public Works and Community and Economic Development departments to ensure they are tracking the indirect labor costs as required.

The audit covered 51 grant-funded projects. Three dozen of them have been completed and the rest are ongoing. Christensen did not know how much federal money Modesto received for the projects.

This story was originally published December 1, 2017 at 2:50 PM with the headline "More money troubles: Audit shows Modesto owes Caltrans $229,304."