San Joaquin County Self-Governing Special Districts

Published: July 06, 2017 11 pages

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Findings and Recommendations 4 findings

0 The San Joaquin County Auditor-Controller performs minimal review of audits which can result in fraud being overlooked due to inadequate staffing. Recommendation

Related Recommendations (1)

0 The Auditor-Controller increase the number of auditors on staff within the financial audit department and budget accordingly for the subsequent fiscal year. 2.0 Fiduciary Responsibilities and Oversight Independent self-governing special districts answer only to their board of directors and must follow applicable state laws. Each district develops self-generated by-laws to guide their boards regarding the operation and oversight of their district. Guides to develop these by-laws were not found. California Government Code section 26881(see

1 Due to the lack of tools and guidelines, there are board members who do not understand their district’s financial reports.

Related Recommendations (1)

1 By Dec. 31, 2017, the Auditor-Controller develop, adopt and implement a list of best practices regarding financial reports to guide board members of independent self-governing special districts. 3.0 Embezzlers can be creative Written policies/procedures are required and must be followed in order to fight fraudulent activity, both in the private and public sector. Board members of independent self-governing special districts need to ensure that by-laws include requirements concerning receipt and disbursement of funds with adequate supporting documentation. Special districts in the Central Valley have had several instances of embezzlement:  Falsifying employee time sheets causing over payment;  Creating non-existent employees;  Authorizing payment to vendors for services or products never performed or received;  Abusing credit cards; and  Funneling money to friends and family for services not performed. Circumventing written policies and procedures can lead to embezzlement. Lack of oversight by the independent self-governing special district board of directors and/or staff can have the same result. Enforcement of policy can only be accomplished by boards of directors monitoring the work of bookkeepers and general managers. When staff is not actively monitored, neglect can lead to resentment and feelings of entitlement. “I am doing all the work and deserve a bonus,” can be a personal justification to embolden someone to commit fraud.

1 The San Joaquin County independent self-governing special districts can be subject to fraud due to lack of oversight and the lack of documentation required for accounts payable.

Related Recommendations (1)

2 The Board of Supervisors direct independent, self-governing special districts to review and revise fact sheets to include financial acumen of board candidates and provide financial training for all board members.

F2.1

Due to the lack of tools and guidelines, there are board members who do not understand their district’s financial reports.

No recommendations for this finding

Conclusions 1

CL1

Property tax apportionment is the primary source of funding for independent self-governing special districts. This money comes from the taxpayers within the special districts’ regions; therefore, residents have some authority over these funds. Merely entrusting the appointed or elected board directors with a blind leap of faith is not good business practice. The public is allowed and should be encouraged to attend special district board meetings. When the public does not attend meetings, the board operates with impunity. Independent self-governing special districts’ functions are to protect and monitor areas that directly affect public health and safety. It is imperative that these tax dollars allocated are monitored closely and used wisely. Careful financial oversight, along with knowledgeable, trustworthy directors and staff will protect the limited funding in these independent self- governing special districts’ cookie jars. Disclaimer Grand Jury reports are based on documentary evidence and the testimony of sworn or admonished witnesses, not on conjecture or opinion. The Grand Jury is precluded by law from disclosing such evidence except upon the specific approval of the Presiding Judge of the Superior Court, or another judge appointed by the Presiding Judge (Penal Code section 911. 924.1 (a) and 929). Similarly, the Grand Jury is precluded by law from disclosing the identity of witnesses except upon an order of the court for narrowly defined purposes (Penal Code sections 924.2 and 929). Response Requirements California Penal Code sections 933 and 933.05 require that specific responses to all findings and recommendations contained in this report be submitted to the Presiding Judge of the San Joaquin County Superior Court within 90 days of receipt of the report. The San Joaquin County Auditor Controller shall respond to all findings and recommendations in this report within 60 days of receipt of this report and the San Joaquin County Board of Supervisors shall respond to all findings and recommendations within 90 days of receipt of this report, where applicable. Mail or hand deliver a hard copy of the response to: Honorable José L. Alva, Presiding Judge Superior Court of California, County of San Joaquin 180 E. Weber Avenue, Suite 1306 Stockton, CA 95202 Also, please email the response to: Ms. Trisa Martinez, Staff Secretary to the Grand Jury at grandjury@sjcourts.org Appendices Appendix I California Government Code section 26881: The county auditor, or in counties that have the office of controller, the auditor-controller shall be the chief accounting officer of the county. Upon order of the board of supervisors, the auditor or auditor-controller shall prescribe, and shall exercise a general supervision, including the ability to review departmental and countrywide internal controls, over the accounting forms and the method of keeping the accounts of all offices, departments and institutions under the control of the board of supervisors and of all districts whose funds are kept in the county treasury. Appendix II California Government Code section 26909: (a)(1) The county auditor shall either make or contract with a certified public accountant or public accountant to make an annual audit of the accounts and records of every special district within the county for which an audit by a certified public accountant or public accountant is not otherwise provided. In each case, the minimum requirements of the audit shall be prescribed by the Controller and shall conform to generally accepted auditing standards. (2) Where an audit of a special district's accounts and records is made by a certified public accountant or public accountant, the minimum requirements of the audit shall be prescribed by the Controller and shall conform to generally accepted auditing standards, and a report thereof shall be filed with the Controller and with the county auditor of the county in which the special district is located. The report shall be filed within 12 months of the end of the fiscal year or years under examination. (3) Any costs incurred by the county auditor, including contracts with, or employment of, certified public accountants or public accountants, in making an audit of every special district pursuant to this section shall be borne by the special district and shall be a charge against any unencumbered funds of the district available for the purpose. (4) For a special district that is located in two or more counties, the provisions of this subdivision shall apply to the auditor of the county in which the treasury is located. (5) The county controller, or ex officio county controller, shall effect this section in those counties having a county controller, or ex officio county controller. (b) A special district may, by unanimous request of the governing board of the special district, with unanimous approval of the board of supervisors, replace the annual audit required by this section with one of the following, performed in accordance with professional standards, as determined by the county auditor: (1) A biennial audit covering a two-year period. (2) An audit covering a five-year period, if the special district's annual revenues do not exceed an amount specified by the board of supervisors. (3) An audit conducted at specific intervals, as recommended by the county auditor, that shall be completed at least once every five years. (c)(1) A special district may, by unanimous request of the governing board of the special district, with unanimous approval of the board of supervisors, replace the annual audit required by this section with a financial review, in accordance with the appropriate professional standards, as determined by the county auditor, if the following conditions are met: (A) All of the special district's revenues and expenditures are transacted through the county's financial system. (B) The special district's annual revenues do not exceed one hundred fifty thousand dollars ($150,000). (2) If the board of supervisors is the governing board of the special district, it may, upon unanimous approval, replace the annual audit of the special district required by this section with a financial review in accordance with the appropriate professional standards, as determined by the county auditor, if the special district satisfies the requirements of subparagraphs (A) and (B) of paragraph (1). (d) Notwithstanding the provisions of this section, a special district shall be exempt from the requirement of an annual audit if the financial statements are audited by the Controller to satisfy federal audit requirements. Appendix III California Government Code section 29741: The auditor shall audit and allow or reject claims in lieu of, and with the same effect as, allowance or rejection by the board of supervisors in any of the following cases: (a) Expenditures which have been authorized by purchase orders issued by the purchasing agent or other officer authorized by the board. (b) Expenditures which have been authorized by contract, ordinance, resolution, or order of the board. (c) Expenditures under any statute authorizing payment of public aid or assistance which have been ordered by the board. (d) Expenditures for charges incurred by the county pursuant to the provisions of Chapter 3 (commencing with Section 29600) of this division. (e) Refunds of unearned business license fees, permit fees and similar fees authorized by resolution of the board of supervisors.

Agency Responses 1

Government agencies' official responses to this report's findings and recommendations. Click on a response to see the structured breakdown.

San Joaquin County Board of Supervisors

September 07, 2017 • 11 pages • 5 responses • Score: +4 (+4, 1, 0) View Details ▾

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5 responses to findings and recommendations

0 The San Joaquin County Auditor-Controller performs minimal review of audits which can result in fraud being overlooked due to inadequate staffing. Recommendation

Response: Agree Score: +1

2: Agree. The San Joaquin County EMS Agency concurs with this finding and has taken action to facilitate the creation of a single countywide dispatch center through the inclusion of fire dispatch standards and cost control measures in the requests for proposals (RFPs) issued for emergency ambulance service in 2005 and 2014. Finding F1.3: There is disagreement as how to organize, operate and fund a single countywide fire dispatch capability. This has led to a failure to pursue creation of a single countywide fire dispatch center.

Response: Will Implement

Score: +1

3: The recommendation will be implemented. By December 31, 2017, the San Joaquin County EMS Agency will seek the cooperation of the two fire dispatch governing bodies to form a task force to explore the possibility of creating a single countywide EMS and fire dispatch center. The San Joaquin County EMS Agency did request that the City of Stockton explore utilizing a single countywide EMS and fire dispatch center throughout the period of time the County and the City were engaged in dispatch and EMS litigation (2006-2010). Also, the San Joaquin County EMS Agency sought cooperation of the city fi...

1 Due to the lack of tools and guidelines, there are board members who do not understand their district’s financial reports.

Response: Agree Score: +1

1: Agree. Finding F2.2: AVL on all fire vehicles and AVL capability at dispatch centers can reduce response times.

1 The San Joaquin County independent self-governing special districts can be subject to fraud due to lack of oversight and the lack of documentation required for accounts payable.

Response: Agree Score: +1

1: Agree. The San Joaquin County EMS Agency is aware of the disagreements regarding EMS Policy No. 3202. However, the EMS Agency's goal in adopting medical control policies such as EMS Policy No. 3202 is to design a system to effectively and efficiently deliver medical care to acutely ill and injured patients. Although the EMS Agency routinely solicits input from stakeholders during public comment periods prior to adopting or revising such policies, the goal is not necessarily consensus. In 1980, the state legislature adopted the EMS Act, which charged local EMS agencies with planning, implem...

Response: Implemented

Score: 0

1: The recommendation has been implemented. On May 9, 2017, the Board of Supervisors adopted a policy requiring public interviews of candidates for appointment or reappointment of at-large positions that are not district representatives to the Housing Authority of the County of San Joaquin, in addition to the Stockton Port District and the San Joaquin Regional Transit District, based on the significant decision-making authority of these boards. 4.0 Board training is not mandated. Finding F4.1: Members of the Board of Commissioners of the Housing Authority of the County of San Joaquin are not r...