Fall River Mills Community Services District Reason for Inquiry:

During the Grand Jury investigation the District Manager submitted his verbal resignation to the Board of Directors, and left his position on March 22, 2004. The Board of Directors has employed a new District Manager.

During the Grand Jury investigation it was reported that several board meetings were cancelled due to a lack of a quorum. The Grand Jury reviewed the minutes for January through December 2003 and determined that three meetings out of twelve were cancelled due to lack of a quorum. To encourage attendance the board changed its monthly meeting time and day to accommodate one of its members.

The District does not have a Policy and Procedures Manual. At the time of the investigation, the District staff were reviewing a Policy and Procedures Manual from another water district. After personalizing the manual to the District, it will be presented to the board for adoption.

The former District Manager had never received a performance appraisal during his 25 years of employment with the District.

The former District Manager reported he used his personal vehicle to conduct District business for approximately one year, due to a lack of funding for District vehicle repairs. During this time, the former District Manager used the District’s gas card to fuel his vehicle in lieu of claiming reimbursement for mileage. The former District Manager used the District vehicle for the remainder of his employment.

The District continues to maintain accounts that are significantly past due. In the fiscal year 2001/2002 annual audit of the District, it was recommended that old accounts be aggressively collected or “written off” as bad debt. The District has not implemented this recommendation.

In the 2000/2001, 2001/2002 and 2002/2003 annual audits, the auditing firm noted that the District’s bond agreements require that certain amounts be maintained by the District as reserve or restricted cash to meet current interest and principal requirements. The audit report reviewed by the Grand Jury recommended accounts for note funds, reserve funds, operation and maintenance funds, and a surplus fund. The District has not implemented this

During the interviews, employees and board members told the Grand Jury that payroll advances were seldom used. However, the auditing firm provided a ledger prepared by the District showing 39 payroll advances during fiscal year 2002/2003. In all of the annual audits reviewed by the Grand Jury, the auditing firm recommended discontinuing the practice of payroll advances. The District has not implemented this recommendation.

The District has no formal policy for purchasing those items needed for the District’s use. The District maintains several open charge accounts at various local businesses.

The District uses two cellular phones for general communication. The Grand Jury reviewed three months of cellular phone bills and found that they were in excess of $300 per month.

The District has no long-term Master Water Plan. A Master Water Plan is an engineering study of the water system that includes preliminary plans with scheduling and cost estimates for future system maintenance, repairs, equipment replacements, and major capital improvements. A plan helps ensure that the community’s present and future water quality and supply needs are met in an efficient and economical matter. This practice allows the District to properly prepare and budget for its future needs.

The District does not maintain an accurate subsidiary ledger of customer deposits. This list shows customer deposits since the 1970’s. All annual audits reviewed by the Grand Jury recommended that the District update the customer deposit ledger. The District has not implemented this recommendation.

The District does not maintain an accurate subsidiary ledger of inventory and does not have a process in place for an annual inventory. The fiscal year 2002/2003 audit recommended the District keep a year-end fiscal inventory and maintains an inventory subsidiary ledger. The District has not implemented this

The District has had to sell off a portion of its investments each year to service the District’s operating expenses. This is depleting the cash balance of the District. The District does not generate sufficient revenue to cover debt service on the 1973 and 1979 bonds and the 1973 Drought Relief loan. The debt service for fiscal year 2003/2004 is $42,782.00. Annual audits reviewed by the Grand Jury recommended that the District take the steps necessary to generate sufficient revenue to cover debt service and operating expenses without depleting cash reserves. The District increased water and sewer rates by 15% in August 2001 and by 20% in November 2003. The former District Manager and the Auditors stated that the rate increases would be insufficient to cover the District’s expenses.

For the fiscal years ended June 30, 2001, 2002 and 2003, the District had an excess of expenses over revenue of $84,912, $70,034 and $82,041 respectively.