An independent audit commissioned by three Northern California cities identified $10.7 million in non-allocable overhead costs in Santa Clara County's proposed law enforcement services contract. The findings, released by the City of Cupertino, recommend removing those costs from the county's cost allocation methodology, which would increase Cupertino's annual bill from about $19 million to $25.4 million.
The audit, conducted by Vasquez & Company LLP, classified $10.7 million of the proposed $11.9 million in overhead and departmental support costs as non-allocable to the cities under California Government Code Section 51350. Those costs include countywide administrative functions, investigative headquarters and specialized units, records division baseline capacity, personnel and training, and fiscal administration and IT services.
Under state law, counties are prohibited from charging cities for general overhead costs or costs that would be incurred regardless of whether the city contract exists. The audit concluded that the county has failed to demonstrate that the majority of proposed overhead costs meet this legal standard. The county shifted from transparent hourly billing rates to an opaque annual cost-per-position model without sufficient justification, relying heavily on case counts that do not account for case complexity or actual resource consumption, the audit found.
"We have a fiduciary responsibility to our residents and taxpayers to ensure compliance with the law," said Kitty Moore, Mayor of Cupertino. "We also recognize and appreciate the Sheriff's deputies who serve Cupertino and provide our community with excellent public services every day."
The cities of Cupertino, Saratoga, and Los Altos Hills face similar cost implications from the new contract proposal. Both cities are prepared to engage in good-faith negotiations with Santa Clara County to develop a revised cost proposal that complies with state law, request formal reconciliation of proposed costs to actual services, and propose a staffing-based allocation methodology consistent with practices used by other California counties.