Response of the Board of Directors of the Herald Fire Protection District to the*

The District lacks adequate internal accounting controls sufficient to ensure against misappropriation. <b>Response to Finding 1:</b> The Grand Jury has identified a number of areas in which the District's internal accounting controls appear deficient to ensure against misappropriation of funds. Notably, the Grand Jury has not identified any actual misappropriation and, to date, actual instances of misappropriation of funds or resources have not been demonstrated to the Board. Based on circumstances unforeseen at the time that the Grand Jury Report issued, it has been exceedingly difficult for the Board to conduct an in-depth inquiry and develop a full understanding of the nature of the District's internal accounting controls. In the period following the issuance of the Grand Jury Report, the Board accepted the resignations of its full-time Fire Chief, its full-time administrative assistant, and three sitting Board members.² Examination of the records of the District finds them to be in substantial disarray, and in the period since receipt of the Grand Jury Report, the District has lacked qualified staff to take on the laborious task of comprehensively reviewing, sorting, and analyzing the District's records. Notwithstanding the above, it is clear to the Board, if only based on the deficiencies in recordkeeping, that the Grand Jury has raised appropriate serious concerns regarding the level and nature of the District's internal controls. ¹ The Grand Jury has requested that the Board respond to Findings 1, 2, 3, and 4, and to their related

Since 2008, the District's finances have not been audited in accordance with generally accepted auditing standards, as required by law. <b>Response to Finding 2:</b> The Board shares the Grand Jury's concern relating to the thoroughness and quality of past audits of the District's finances. The Board does not, itself, possess the necessary financial expertise to determine whether the audits that it has received since 2008 have met generally accepted auditing standards, but based on interactions that the Board has had with its prior auditing firm since the issuance of the Grand Jury Report, the Board is deeply concerned that prior audits may not have met the requisite standards. D. <b>Recommendation 2:</b> The county auditor should conduct an immediate audit of the District's financial statements and conduct all future annual audits of the District's finances, as required by law. Response to Recommendation 2: The District would welcome an immediate audit, and future audits, by the County. However, the District has received conflicting information regarding the prospect that the County will perform a financial audit. Immediately after issuance of the Grand Jury Report, the District contacted the County Finance Department regarding whether it was willing and able to conduct such an audit, and was advised that this is not a service that the County was able to provide at this time. The County advised the District that it would be necessary for the District to continue to procure its audits independently. Most recently, however, at its 00019271.5 Honorable Robert C. Hight September 29, 2014 meeting on September 23, 2014, the County Board of Supervisors ordered its staff to conduct a limited financial review of the District "as soon as possible." As noted, the District welcomes such a review or audit. Meanwhile, the District has sought out, and contracted for, auditing services from a highly respected accounting firm, Richardson & Company. Given its obligation to obtain independent audits of its finances, and noting that it may take several months for the County to complete any review or audit, the District is continuing to move forward through the independent auditing process with all due haste. E.

The District has not adopted or implemented personnel policies compliant with the Firefighters Procedural Bill of Rights with respect to punitive actions against full-time firefighter employees, and District staff lacks knowledge of the Act's requirements. <b>Response to Finding 3:</b> The Board shares the Grand Jury's concern that its policies and procedures, including personnel policies and procedures, are not fully up-to-date and may be vague or deficient in clearly setting forth how the District will comply with all State and federal personnel laws and regulations. The Board concurs that its prior (now resigned) administrative staff may have lacked knowledge of important personnel laws and regulations. The Board also acknowledges the District's obligation to comply, in appropriate circumstances, with the Firefighter's Bill of Procedural Rights. The Board is determined to develop and implement updated personnel policies that are fully consistent with the rights of the District's staff. F.

The District has failed to timely review and update, as appropriate, District governance policies. Response to Finding 4: As set forth in the above Response to Finding 3, the Board shares the Grand Jury's concern that its governance policies are outdated and may be deficient. The Board has a critical interest in assuring that it conducts its affairs, in all respects, in a manner that is consistent with applicable laws and regulations. The Board desires to improve relations with the public and to promote public confidence by enacting and implementing effective and compliant governance policies. H. <b>Recommendation 4:</b> The District should comprehensively review and update as appropriate all District governance policies, including the District's Master Plan. Response to Recommendation 4: With competent administrative staff in place to support the Board's development of updated governance policies, the Board fully intends to comply with this