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An Audit Report on Fees at the Department of Agriculture

September 2017

Summary Analysis

The Department of Agriculture (Department) set its fees at a level that exceeded the amounts necessary to recover its direct and indirect costs. From January 1, 2016, through December 31, 2016, for its agriculture and consumer protection cost-recovery programs, the Department’s revenues ($27.3 million) exceeded its expenditures ($20.8 million) by 31 percent ($6.5 million).

In addition, the Department did not have formal processes for monitoring its expenditures for its cost-recovery programs to determine whether its fees were set appropriately to recover costs. As of March 17, 2017, the Department had not compared its actual revenues and expenditures to evaluate whether it set its fees appropriately.

The Department’s fee schedule, which went into effect on January 1, 2016, was based on a cost-recovery rate analysis (rate analysis) that the Department completed for its agriculture and consumer protection cost-recovery programs in September 2015. As part of its rate analysis, the Department included a $4.6 million contingency estimate that was not based on specific actual expenditures or projected costs; therefore, it was not a direct or indirect cost that the Department is required to recover.

The Department consistently applied its methodology for estimating direct labor costs and those estimates were based on supported amounts. However, the Department did not clearly define and document its methodology for estimating its operating and indirect costs. It also did not consistently maintain support for its estimates of operating and indirect costs, and auditors identified errors in some of the Department’s estimates.

 Jump to Overall Conclusion

According to a comparison the Department performed at the request of the State Auditor’s Office, for January 1, 2016, through December 31, 2016, the Department’s $27,291,919 in revenues exceeded its $20,799,685 in expenditures for its agriculture and consumer protection cost-recovery programs by $6,492,234 (31 percent).

As of March 17, 2017, the Department had not compared its actual revenues to its actual expenditures for its cost-recovery programs, and as a result, it did not evaluate whether it set the fees that went into effect on January 1, 2016, appropriately to recover costs. It is important that the Department has processes in place for monitoring fee levels for its cost-recovery programs because the factors it considered when developing its cost estimates may change. Without regular monitoring, the Department cannot evaluate and, if necessary, update its fee structure on a timely and regular basis when its actual direct and indirect costs change.

Jump to Chapter 1 

Although the Department consistently applied its methodology for estimating direct labor costs and those estimates were based on supported amounts, the Department did not clearly define and document its methodology for estimating its operating and indirect costs.

•   For its operating costs, the Department included a $4.6 million contingency estimate, and it also did not consistently maintain support for its other estimated operating costs. For 11 of 15 other types of operating cost estimates reviewed by auditors, the Department was unable to provide adequate support for certain components of its estimates. Auditors also identified errors in some of the Department’s estimates of operating costs.

•   The Department did not consistently maintain adequate support for its indirect cost estimates and auditors identified errors in some of the Department’s calculations. In addition, the Department did not prepare an indirect cost-recovery plan that could have helped it more accurately identify and allocate indirect costs as part of its rate analysis.

Jump to Chapter 2-A 

After the Department estimated total costs for each strategy in its rate analysis, it reviewed its fee structure, projected how many times it would collect each type of fee, and adjusted individual fee amounts as it determined necessary to recover those estimated costs. However, the Department did not clearly define or document its methodology for setting fees.

Jump to Chapter 2-B 

Graphics, Media, Supporting documents

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