Santa Clara County Grand Jury • 2005-2006

2005-2006 Santa Clara County Civil Grand Jury Report Independent Special Districts – Oversight Falls Far Short!

Published: June 01, 2006 26 pages
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Findings and Recommendations 9 findings

F1
The special districts reviewed in this report are essentially invisible to County government and to the public, thereby making effective oversight and accountability impossible. The Board of Supervisors, LAFCO, the Controller-Treasurer, and County audit functions all appear to have no active continuing role in district oversight.
Related Recommendations (1)
R1
should be made publicly available. ISSUES RELATED TO INDIVIDUAL DISTRICTS 5. The budget management processes of Guadalupe-Coyote and Loma Prieta Resource Conservation Districts do not appear to meet prudent financial practices that best serve the public interest. The Districts should create plans containing up-to-date, and measurable objectives. The District budget should be structured and managed in accordance with these District plans. 6. The Guadalupe-Coyote and Loma Prieta Resource Conservation Districts have not held elections for board members in at least the last four years. Vacant board positions are most often filled by appointment by the BOS with minimal public review. The BOS should promote public elections. If that is not possible, the BOS should openly recruit fully qualified and competent candidates and conduct an interview/selection process in a manner similar to that used to select managerial-level county employees. 2 7. Each of the four Districts examined has a substantial discretionary reserve balance which the Grand Jury was unable to assess for lack of accepted criteria and management justification. The reserves of each special district should be reviewed regularly and adjusted in accordance with the criteria established under Recommendation 3c. 8. The non-property tax revenues of the Saratoga Cemetery District are nearly sufficient to fund that District solely as an enterprise district. The status of the District should be re-evaluated. 9. The South Santa Clara Valley Memorial District’s internal financial statements contain numerous errors and offer no comprehensible audit trail of District activities. If District management cannot remedy these serious shortcomings immediately, the BOS should replace the existing board with persons who can effectively oversee District affairs. This board should hire, using accepted County procurement procedures, a qualified outside management firm to conduct operations.
F2
LAFCO provides little guidance or impetus for the efficient management or streamlining of special districts. It only issues periodic generic service review reports containing information largely supplied by the districts themselves. Reasons for continued existence of districts appear never to be questioned or re-validated.
Related Recommendations (1)
R2
LAFCO should refocus its efforts and coordinate with the management-audit agent referenced in Recommendation 1. Efforts should more effectively provide performance, management, and fiscal evaluations, based upon community needs and benefits, including consolidation and/or dissolution recommendations for districts where appropriate. 17
F3
Prudent County financial oversight and accountability of districts appear to be lacking. 3a. Proposed annual budgets of Districts appear to receive little to no review in terms of performance and management from the County. 3b. Property tax revenues are apportioned to special districts in an automatic, ongoing manner, almost as entitlements. No justifications for continued full allocations occur, even if sufficient reserves or other revenues are readily available to cover justified district expenses. 3c. The County does not monitor, nor does it have guidelines for determining, prudent levels or management of financial reserves for special districts.
Related Recommendations (1)
R3
The Grand Jury recognizes that the authority to oversee and control budgets, reserves, and functions of special districts rests by current statute with the boards of independent districts. The BOS should work with state legislative representatives to implement changes to the appropriate state laws to authorize the following detailed recommendations, perhaps using the precedent of the intended BOS oversight in the Santa Clara Valley Water District Act as a model. 3a. The BOS should implement a review process that examines budget details, including income and previous year actual expenditures against projections. This should include evaluating accomplishments against measurable objectives, and the value added by each district to the community. Management audits performed on a regular basis would aid in this process. 3b. The management-audit agent to be appointed under Recommendation 1 should require districts to justify their annual budgets in terms of plans, projected costs, and history of actual expenditures. These justifications should not rely on formulaic property tax allocations. 3c. The BOS should form a panel, including financial management expertise from local industry and other government agencies. This panel should advise on establishing prudent best-practice guidelines for financial reserve management. These guidelines should include quantitative actuarial approaches, along with policy practices to define appropriate reserve levels. The management-audit agent in Recommendation 1 should review special districts in the County for compliance with these reserve guidelines. 18
F4
Special districts are essentially invisible to the public. Mechanisms are lacking to inform and engage the public affected directly by special districts so they can understand and judge the appropriateness, effectiveness, and efficiency of district activities. For example, there is no breakdown on property tax bills of the allocations to individual special districts.
Related Recommendations (1)
R4
4a. The County Assessor’s website must be improved significantly in terms of usability. The property tax bill should have a pointer to the Assessor’s website to make it easier, using best practices from e-commerce, for individuals to understand in detail how their tax dollars are spent. 4b. The results of analyses by the management-audit agent in
F5
The budget management processes of Guadalupe-Coyote and Loma Prieta Resource Conservation Districts do not appear to meet prudent financial practices that best serve the public interest. No annual and long-range work plans containing specific measurable goals could be found. It is impossible to determine what, if any, demonstrable added value these two districts contribute.
Related Recommendations (1)
R5
Design, vet, and maintain annual and long-range district plans, such as described under Public Resource Code § 9413. These plans should contain complete, up-to-date, and measurable objectives. The district budget should be structured and managed in accordance with these district plans.
F6
The Guadalupe-Coyote and Loma Prieta RCDs have not held elections for board members in at least the last four years. Vacant board positions, including uncontested re-election and mid-term vacancies, are most often filled by appointment by the BOS, 19 despite the fact that the legislature (in Public Resources Code § 9314) encourages public election of district directors. In practice, elections are considerably more expensive than appointments.
Related Recommendations (1)
R6
If the BOS is unwilling to make routine public election of board members economically affordable, then the appointment process should be made more accountable to the public. This means the BOS should openly recruit fully qualified and competent candidates and conduct an interview/selection process in a manner similar to that used to select managerial-level county employees. Lobbyists should be excluded from any such appointments.
F7
Each of the four districts examined has a substantial discretionary financial reserve balance which the Grand Jury was unable to assess for lack of accepted criteria and management justification.
Related Recommendations (1)
R7
The reserves of each special district should be reviewed regularly and adjusted in accordance with the criteria established under Recommendation 3c.
F8
The revenues of the Saratoga Cemetery District, other than property taxes, are nearly sufficient to fully fund that District as an enterprise district (or as a stand-alone business).
Related Recommendations (1)
R8
The Saratoga Cemetery District should be evaluated to determine if its status warrants change to be solely an enterprise district.
F9
The South Santa Clara Valley Memorial District’s internal financial statements contain numerous errors and provide no comprehensible audit trail of District activities. Meetings with District management confirmed, but provided no resolution of, these problems. 20
Related Recommendations (1)
R9
If South Santa Clara Valley Memorial District management cannot remedy these serious shortcomings immediately, the BOS should replace the existing Board with persons who can effectively oversee District affairs. This Board should hire, using accepted County procurement procedures, a qualified outside management firm to conduct operations. PASSED and ADOPTED by the Santa Clara County Civil Grand Jury on this 16th day of May, 2006. ________________________________ Thomas C. Rindfleisch Foreperson 21

Conclusions 28