REPORT/RECOMMENDATION TO THE BOARD OF SUPERVISORS
OF SAN BERNARDINO COUNTY
AND RECORD OF ACTION
January 23, 2024
FROM
ENSEN MASON, Auditor-Controller/Treasurer/Tax Collector
SUBJECT
Title
Memorandum of Understanding with the Franchise Tax Board
End
RECOMMENDATION(S)
Recommendation
Approve Memorandum of Understanding with the State of California Franchise Tax Board (State Agreement No. 98812), including non-standard terms, for the Court-Ordered Debt Collections Program to facilitate the collection of fines, penalties, forfeitures, restitution, and other fees at a cost not to exceed 15% of any and all monies collected on cases assigned for the three-year period of February 1, 2024, through January 31, 2027.
(Presenter: John Johnson, Assistant Auditor-Controller/Treasurer/Tax Collector, 382-7005)
Body
COUNTY AND CHIEF EXECUTIVE OFFICER GOALS & OBJECTIVES
Operate in a Fiscally-Responsible and Business-Like Manner.
FINANCIAL IMPACT
Approval of this item will not result in the use of additional Discretionary General Funding (Net County Cost). The State of California Franchise Tax Board (FTB) charges a maximum administration fee of 15% on all monies collected on behalf of the County, pursuant to Revenue and Taxation Code (RTC) section 19282. This cost is then reimbursed to the County from the collection revenues of the Superior Court under Penal Code section 1463.007. There is no share of local cost for the collection costs of the FTB’s Court-Ordered Debt Collections Program (FTB-COD).
BACKGROUND INFORMATION
The FTB operates the FTB-COD program to collect unpaid court ordered fines, penalties, restitution, and other fees, which is made available only to local governments. Due to its inherent powers under the RTC, the FTB can perform several collection actions without additional court approval. FTB-COD is one of 16 collection program activities recommended by the Judicial Council of California (JCC) pursuant to Penal Code section 1463.007. FTB-COD is separate from the FTB Interagency Tax Intercept Program, which allows agencies to intercept debtors’ state tax refunds.
The Auditor-Controller/Treasurer/Tax Collector - Revenue Recovery Division (Department) has employed the collection enforcement remedies of FTB-COD since 1999 as part of its comprehensive Court collection program. The Department finds FTB-COD a useful tool to supplement collection efforts when all other available actions have been exhausted.
On January 26, 2021 (Item No. 18), the Board of Supervisors (Board) approved Agreement No. 21-76 with the FTB from February 1, 2021, through January 31, 2024, for its FTB-COD. From 2021 to 2023, FTB-COD generated $800,721 in collections at a cost of $112,933, for an average administration fee of 14%.
On June 22, 2021 (Item No. 20), the Board approved Agreement No. 21-469 with the Superior Court of California, County of San Bernardino for collection services effective July 1, 2021, which requires the County to refer collection program accounts to the FTB-COD once collection efforts have been exhausted.
The recommended Memorandum of Understanding (MOU) with FTB will enable the Department to continue to submit accounts to FTB-COD for another three-year term. Under the provisions of the MOU and pursuant to RTC section 19282, the State will charge up to a 15% administrative fee on any monies collected.
The MOU is in the State’s standard format which omits certain County standard contract terms. The FTB is unwilling to negotiate these terms. The missing terms include the following:
1. The MOU does not require the FTB to indemnify the County, as required by County Policy 11-07.
• The County standard contract indemnity provision requires the contractor to indemnify, defend, and hold the County harmless from third-party claims arising out of the acts, errors, or omissions of any person.
• Potential Impact: The FTB is not required to defend, indemnify, or hold the County harmless from any claims arising from FTB’s negligent or intentional acts. If the County is sued for any claim, the County may be solely liable for the costs or defense and damages.
2. The MOU does not require the FTB to meet the County insurance standards.
• The County standard contract requires contractors to carry appropriate insurance at limits and under conditions determined by the County’s Risk Management Department.
• Potential Impact: The MOU does not include County standard insurance requirements. This means that the County has no contractual assurance that the FTB will be financially responsible for the claims that may arise under the MOU, which could result in expenses to the County.
The Department recommends approval of the MOU, including non-standard terms, since the FTB-COD is a JCC recommended collection activity and required pursuant to the terms of the County’s MOU with the Superior Court.
PROCUREMENT
Not applicable.
REVIEW BY OTHERS
This item has been reviewed by County Counsel (Kristina Robb, Deputy County Counsel, 387-5455) on December 18, 2023; Risk Management (Loretta Acuña, Staff Analyst, 386-9039) on December 19, 2023; Finance (Penelope Chang, Administrative Analyst, 387-4886) on December 27, 2023; and County Finance and Administration (Paloma Hernandez-Barker, Deputy Executive Officer, 387-5423) December 29, 2023.