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Findings 26 findings
F1
Page 36
The AWA has lost sight of transparency as a core value as demonstrated by the way AWA publishes information for the ratepayers. Information is made available on their website, but much of it is either incomplete, confusing, erroneous, or illegible. Efforts to check and cross-check data found consistent discrepancies and errors. Established published reports were modified and prior reports replaced with no explanation of the changes.
F2
Page 36
The AWA is not sufficiently transparent with its ratepayers about the costs of current employee compensation. From 2010 through 2017, management salaries increased on average of 48%, over twice the rate of hourly employees. The practice of annually granting relatively substantial increases will impact rate increases for ratepayers in the future. The GM and AGM salaries both increased over 50% during the review period. While employee concessions were in place, the AGM’s salary was increased by 24.2% in 2016 and another 34.7% in 2017. The increases in the management salaries significantly exceed what would be expected by economic variables, decreases in revenues and the increased debt.
F3
Page 36
The AWA financial reporting and auditing process is not done according to industry standards. The AWA publishes an “Annual Audit” on its website in lieu of a Comprehensive Annual Financial Report. The title on the published document is “Audited Financial Statements.” 28 The “Audited Financial Statements” do not contain a cover letter that indicates the report was transmitted to the Board i. A transmittal letter is a feature of all “GFOA-awarded” CAFRs There is no evidence that the “Audited Financial Statements” are reviewed by, or formally transmitted to, the Board
F4
Page 37
The AWA’s finances are grossly mismanaged, with numerous errors identified in the millions of dollars. Total Operating Revenues and Expenses reported to the SCO do not match the amounts contained in the “Audited Financial Statement.” Total Operating Revenues and Expenses indicated in AWA Budgets do not reflect the amounts indicated in the correlated “Audited Financial Statement.” From 2009 through 2017, Total Operating Revenues vs Expenses show a surplus of $11.0 million according to AWA budgets. Yet the “Audited Financial Statements” for the same period indicate that there was actually a shortfall of $20.9 million, a difference of over $30 million. The 66013 reports do not match data reported in the annual budgets. When errors are corrected in financial reports, they are not disclosed per Audit Standard 154. “Actual” values of Total Operating Revenues reported in budget documents are one example of budget data that has changed in arrears. Erroneous reports and frequently changing formats inhibit AWA management’s ability to manage the budget and the debt.
F5
Page 37
The AWA converted to a new finance system without in-house expertise. Requirements were not specified and data from the old system was not migrated and is now unavailable. There is not a single repository for financial data.
F6
Page 37
Departments do not have a defined budget dedicated to and managed by the department head, leaving managers with no budget control or reporting mechanism to inform the decision process.
F7
Page 37
A significant portion of capital project costs are budgeted to operational expenses. This creates a condition where the implementation and ongoing cost of a project are obscured from the ratepayers.
F8
Page 37
A ‘formal’ operations reserve has not existed in prior years and there is not a reserve currently reflected in the budget. Although there is a stated goal of contributing $100,000 per year to the reserve, there is no formal process to assure compliance.
F9
Page 37
The lack of an operating reserve policy creates a condition where decisions become reactive in the near term rather than proactive planning for the long term.
F10
Page 37
The AWA employs hardworking personnel who are dedicated to the highest level of customer service. 29
F11
Page 38
A number of the recommendations cited in the 2018 Ad Hoc Organizational Study Committee report were of high value. The GM was not held accountable for resolving issues raised in the ad hoc report.
F12
Page 38
Hourly employees agreed to modify the 2008 to 2012 MOU and accepted substantial wage and benefits concessions after the downsizing and again from 2014 to 2016 in an effort to help AWA maintain financial viability while management salaries increased.
F13
Page 38
The AWA failed to adequately communicate management raises and responsibilities.
F14
Page 38
The May 2014 Board meeting, designated to discuss and approve the new AGM position, was placed in recess prior to addressing the issue. The meeting reconvened after the public and employees had left the Board room. Board members dispute this account. Since Board meeting minutes are “action minutes” there is no detailed written record available to refute corroborated testimony.
F15
Page 38
The Clerk of the Board does not produce and publish detailed minutes of board meetings. Action minutes are produced but there is no follow up to provide details to the public.
F16
Page 38
The job description for the AGM was created to fit the internal candidate instead of drafting the job description to match the needs of the organization. The job description was changed at least twice more as the perceived role and responsibilities changed. The need for the AGM position and the corresponding responsibilities remains in a state of flux.
F17
Page 38
The AWA has a work environment where there exists offensive, abusive and persistent discourteous treatment of employees, characterized by degrading, demeaning and rude remarks; taking credit for other employee’s ideas; little to no positive reinforcement; and a lack of confidentiality regarding employee issues.
F18
Page 38
The AWA does not have standard processes and procedures for capital planning and project management.
F19
Page 38
Ongoing analysis of project cost and benefit to assure original assumptions is not conducted.
F20
Page 38
Project cost tracking is not subject to rigorous reporting and tracking practices and procedures. Capital projects are not assigned and tracked by a single general ledger account number. Projects are identified by account number, job number, job name, funding source or any combination thereof.
F21
Page 38
The AWA does not perform a project post-mortem.
F22
Page 38
The AWA does not accurately track and report project cost, benefit or operational effectiveness. 30
F23
Page 39
The AWA has failed to provide consistent and unambiguous information to the ratepayers on capital project cost and benefit due in part to the fact that AWA management does not know.
F24
Page 39
The AWA does not adhere to a standard for capital project evaluation. Business case development is not consistent and does not address a cost benefit analysis.
F25
Page 39
The AWA does not have processes and procedures in place for project management. Project schedules have been produced, but these are high level timelines that estimate engineering and design, bid, construction and closeout. The day-to-day project status is managed with various status reports, but there is no mechanism to apply the impact of delays and changes to the overall project.
F26
Page 39
AWA management adheres to the notion that engineering and/or operations personnel are designated as project managers of a given project.
Recommendations 15
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R1Page 39The AWA Board should determine if the AWA is currently being managed to their satisfaction. The Board should evaluate: if the magnitude of the errors identified by the grand jury in published AWA financial documents are deemed ‘acceptable.’ if the work culture endured by AWA employees allows them to best serve the ratepayers. if the lack of accurate capital spending and reporting is detrimental to the financial health of the organization. [F1, F3, F4, F5, F7, F10, F11, F12, F13, F14, F17, F20, F22, F23]
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R2Page 39The AWA Board should consider engaging a Business Analyst in a contract or permanent role by January 1, 2020. This type of position is primarily responsible for process analysis, generating new ideas and essentially implementing them to insure proper functioning across all departments. The analyst’s responsibilities would include but not be limited to: Strategic Planning – Evaluation of strategic activities Business / Operation Model Analysis – Identification and evaluation of policies and procedures of the organization Process Definition & Design – This analysis includes business process modeling, often the outcome of process definition and design IT & Technology Business Analysis – Encompasses the rules as well as needs for technical systems and integration [F5, F6, F18, F19, F20, F21, F22, F23, F24, F25, F26]
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R3Page 39The AWA Board should commission a forensic financial audit of the Agency by October 1, 2019. The financial mismanagement outlined in this report makes it clear that a fundamental review of the financial status of the agency is necessary for the protection of the ratepayers. A thorough review is also necessary to assure conformance with both 31 accounting and legal standards. The magnitude of the financial errors uncovered far exceeds the cost of an audit. [F1, F3, F4, F6]
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R4Page 40By January 1, 2020, the AWA should engage financial and/or legal professionals to determine if erroneous financial data historically reported to the SCO needs to be corrected. If it does need to be corrected, staff should work with SCO staff to correct erroneous historical data in accordance with SCO processes. [F1, F3, F4, F6]
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R5Page 40The AWA should standardize all of their financial processes to conform to standard accounting practices by January 1, 2020. The problems with accounting and budgeting practices are persistent as evident by similar recommendations made by the 2011/12 grand jury and the failure to make proper disclosures when financial reports are modified. [F3,
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R6Page 40The grand jury recommends that the Springbrook financial system be fully evaluated and re-implemented after developing detailed requirements. A Business Analyst is best suited to oversee this activity. AWA does not have the required expertise on-staff. [F1, F3, F4,
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R7Page 40The AWA Board should oversee the development of the CAFR with guidelines as follows, when preparing the next annual report: Day-to-day AWA finances should be managed based on audited/auditable information. At the end of the fiscal year, the financial status of the AWA should be finalized. The finalized financial data should be compiled and submitted for audit. After the audit is completed, the results of the audit, along with the audited financial information, are compiled into a Comprehensive Annual Financial Report. The audit results are presented to the Board. The CAFR is formally transmitted and presented to the Board. Soon after transmittal to the Board, the CAFR should be posted on the AWA website. [F3, F4]
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R8Page 40The AWA Board should require the staff to present the CAFR annually, including a comparison of information between the Budgets and the CAFR. The currently available document should be presented to the Board by August 1, 2019; annual presentations should become a standard practice. [F3, F4]
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R9Page 40The AWA should acquire membership in the GFOA by October 1, 2019, implement GFOA standards for compiling the CAFR and strive to be awarded the GFOA’s “Certificate of Achievement for Excellence in Financial Reporting” to improve transparency in financial reporting. [F3, F4]
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R10Page 40This grand jury recommends that the Board revisit the February 2018 Ad hoc Organizational Study Committee report and recommendations. The Board should take authority and responsibility to assure an effective way of managing conflict is implemented, which is vital to the continued health of AWA. 32 The AWA Board should evaluate the benefit of in-house versus outsourcing the human resources and payroll functions pursuant to modern business practices. The standard ratio of HR to employees is one for every 150 employees. The Board should consider placing the safety coordinator position in Operations The management team should be re-evaluated in terms of competence, roles and responsibilities, and activities that don’t correspond to AWA’s core business. [F10, F11, F12, F13, F14, F15, F16, F17]
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R11Page 41The AWA Board should consider the use of a professional grant management consultant to oversee Agency grants. [F11]
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R12Page 41Establish practices and procedures for Capital Project development, funding, implementation and tracking. This should at a minimum include: Business case development including ROI and/or NPV and a threshold for what is an acceptable timeframe to realize benefit. Evaluation of business cases including validation of cost assumptions. Critical evaluation of grants to ensure grant funds are used to advance AWA’s core business and/or regulatory requirements. Project management processes including detailed project plans with dependencies identified. Acceptance testing criteria. Post mortem evaluation and reporting. Ongoing tracking and reporting of project effectiveness and cost [F18, F19, F20, F21, F22, F23, F24, F25, F26]
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R13Page 41The grand jury recommends suspension of all capital projects until such time as finances are reviewed, corrected and evaluated, and capital project processes and procedures can be developed and implemented. Projects in process should be evaluated in light of apparent misreporting of cost and benefit to ensure that the needs of the business and ratepayer investment is properly addressed. Exceptions should include only those projects required by state or federal agencies to meet regulatory compliance. [F18, F19, F20, F21, F22, F23,
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R14Page 41The grand jury recommends that the Clerk of the Board produce complete and clear minutes of Board meetings. Board meetings are recorded and should be transcribed to provide a complete and permanent record to the public. [F14, F15]
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R15Page 41The grand jury recommends that the Board’s complete response to these findings and recommendations be posted on the AWA website at the same time as they are transmitted to the presiding judge and grand jury, as a demonstration of the AWA’s commitment to transparency. [F1, F2] 33
Observations 1
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OB1 Page 93The grand jury noted that the inmates involved in both the POOCH dog training program and those working on the prison newspaper were very enthused about being able to participate in those programs. The grand jury did not witness any specific evidence of contraband, but it seems unlikely that a large group of people on an announced and limited official tour would encounter illegal materials. During the interviews, examples of contraband within the facility were described and the ex-staff acknowledged that contraband control remains a problem. While the grand jury was being processed through the Main Control building, several people were being processed in and out, including employees and contract employees. Employees were often carrying coolers, backpacks, and other personal effects. According to MCSP Operating Procedure MC 156, “Allowable Employee Property,” employees are permitted to bring in one hand carried item such as a cooler or backpack. However, the items being carried by employees were not “thoroughly inspected” as required by MC 156. Review of Documents Several documents were requested from the staff at MCSP. All requests were promptly fulfilled. MCSP staff provided an informative booklet during the tour and copies of the Mule Creek Post were handed out during the tour. OIG reports on medical facility inspections were also reviewed. Of note are the results of medical inspections. The most recent data available, from the OIG’s Inspection Cycle 5 (the most recent inspection), indicated that MCSP received an overall grade of “Inadequate,” though there was improvement noted from the Cycle 4 inspection. In Cycle 4, only one of the thirteen areas inspected received a rating of “Adequate.” In the Cycle 5 inspection, three of the thirteen areas received an “Adequate” rating, indicating some 85 improvement. The inspections look at fifteen “indicators” but two of them are not applicable to MCSP. The results of the inspection are included in Table 1. Table 1 Inspection Results from “Cycle 5”, July 2018 Inspection Indicator Rating Access to Care Inadequate Diagnostic Services Inadequate Emergency Services Inadequate Health Information Management Inadequate Health Care Environment Adequate Inter- and Intra-System Transfers Inadequate Pharmacy and Medication Management Inadequate Preventive Services Adequate Quality of Nursing Performance Inadequate Quality of Provider Performance Inadequate Specialized Medical Housing Inadequate Specialty Services Inadequate Administrative Operations Adequate (secondary) Inspection Indicators Not Reviewed Prenatal and Post-Delivery n/a Reception Center Arrivals` n/a Specific statistics on the number of ambulance transports for emergency medical treatment were not included in the information provided to the grand jury, but there is no evidence that this issue has changed. 86 Accreditation The pamphlet provided to grand jury members by MCSP during the tour (revised February, 2019) contains information about MCSP being accredited by the American Correctional Association (ACA). However, during the tour, the grand jury was verbally told by staff that MCSP had severed ties with the ACA due to the cost of membership. Water Issues There have been a series of five reports in the Ledger Dispatch newspaper outlining issues around contaminants from MCSP getting into Mule Creek. While the official position of MCSP is that the issue does not exist, the Central Valley Regional Water Quality Control Board is now involved. Enough evidence exists documenting contamination that there will be further action to quantify and determine the source of the contamination. This is a serious issue for the residents of Amador County and should be monitored as more information becomes available. Newspaper reports and grand jury interviews with former employees of MCSP point to potentially serious problems with the sewage system under the aging facility, but this grand jury did not have the resources to conduct further investigation.
No Responses Found 1
Government entities assigned to respond to this report. No response documents have been linked in our database.
Amador Water Agency
Special District