Gjr1994-1995 Final Report*

A Joint Venture exists between Sutter, Yuba and Nevada Counties for shared costs and utilization of a weight truck.

The department staffing is adequate to meet the mission needs. Adequate services are not impaired by budget constraints.

Further budget reductions may hamper this department's function of its mission.

Personnel perform their duties in a timely and efficient manner.

Department personnel were professional and cooperative in aiding the County Committee during the course of the investigation.

Meals are prepared off-site and transported by county employees to the facility.

The classroom has two computers, ample supplies, and a small library.

Community volunteers have been recruited to teach gardening, landscaping, bicycle repair, wood shop. and home repair.

The recidivism rate is not available.

This department operates within its budget each year.

PERINATAL OUTREACH PROGRAM A. Pregnancy testing B. Pregnancy counseling C. Referrals to obstetricians D. Education E. Limited transportation assistance

BIKE SAFETY PROJECT A. Bike safety education B. Bike helmets for eligible children

OPEN TO THE PUBLIC A. 8:00 a.m. to 5:00 p.m. Monday through Friday B. Wednesday evenings Immunization Clinic til 7:00 p.m. The goal of the Yuba County Health Department is to protect and promote health and prevent disease and injury, through building and maintaining strong partnerships within the community. SCOPE: was limited to departmental policies, procedures and The scope practices. PROCEDURE: . . . . The Grand Jury made an on-site visitation, toured the facility, and interviewed the director. 1994-95 Yuba County Grand Jury Final Report DISCUSSION: The health department has one nurse that goes to Fremont Hospital once a week to talk to new Yuba County moms about health and immunization The department also recently received new for their new-borns. ultraviolet lights for the waiting room and examining rooms, which will help prevent the spread of TB germs and also helps prevent the spread of other viruses. FINDINGS: All findings have been substantiated by current documentation and by observation and interviews by no less then two (2) members of the Grand Jury, P.C. § 916.

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Yuba County Environmental Health Department

Yuba County Grand Jury

Office of Emergency Services U.S. Forestry Service

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(10) M.O.U. dated 7 28 86 (11) M.O.U. dated 6-1-87 (signed by all district employees) (12) M.O.U. dated 2-6-89 (13) Agenda for regular meeting of Board of Directors dated 2 6.95 (14) District agenda dated 1-26-95 covering "Discussion of Retirement Plan Contributions" presented by Attorney John Felder. (15) Agenda for Board of Director's meeting of 1-3 95. (16) Copy of "Personnel Policy Manual". The grand Jury members were also permitted to view any other documents felt to be relative to the issues involved. As noted above, this included a review of the "Personnel Police Manual" (issued to all employees) and containing relative data as well as excerpts from pertinent LR.C. Regulations Contact was made with the Yuba County District Attorney in regards to the complainants query concerning the alleged embezzlement and theft of District Last is by a former Water District employee, and the disposition of the charges. 1994-95 Yuba County Grand Jury Final Report The current Water District Officer Supervisor, as well as the General manager, were telephonically contacted on several occasions as additional questions arose during preparation of this report. These employees were extremely courteous and demonstrated considerable expertise in the performance of their duties and the overall operations of the Water District. All questions posed were answered in precise terms and furnished all information necessary in order to complete this report. The District's financial books and accounts are based upon the uniform system of accounting for Public Utilities as prescribed by the Division of Local Government Fiscal Affairs of the State of california. Proprietary funds are maintained on the accrual basis of accounting wherein revenues are recognized in the period earned and expenses are recognized in the period incurred. Everyday accuracy and accountability of fiscal management is maintained internally by the Office Manager under the direct supervision of the District Manager and the Secretary to the Board of Directors. A yearly audit is conducted (at a very reasonable charge) by the accounting firm recognized for its experience and expertise in the field of Water District finances, rules, regulations and other pertinent requirements. The Grand Jury was favorably impressed with the quality and format of the audit procedure. In reviewing the "Discussion" portion of this report, as well as the overall complexity of the operations, it is somewhat startling to understand that the Yuba County Wall District is accountable and responsible for the handling of water supplies, etc. for 29%, (or almost 1/3) of the land area contained in Yuba County, with a permanent staff of only 7 employees. FINDINGS: All "Findings" have been substantiated by current documentation and by observations and interviews made by no fewer than 4-members of the Grand Jury, P.C. § 916. (1) The Yuba County Water District's main office in Brownsville is a fairly new building, well-maintained and equipped. Files, records, documents, policies, correspondence and similar material is stored in an above average manner with very rapid and efficient retrieval system. 1994-95 Yuba County Grand Jury Final Report The office staff appears very knowledgable and were able to locate, discuss, explain and adequately respond to all Grand jury requests and questions. The employees were courteous and frank, despite the lengthy meeting and the obvious, but unavoidable, disruption to their ordinary tasks and disciplines. (2) The District's new Water Treatment Plant, which was constructed approximately 2-years ago at a cost of approximately 2-million dollars, is in mint condition "State of the Art" facility. The plant relies on modern computer enhanced technology and techniques to supply the water needs of its more than 800 customers in a healthy, safe, efficient and economical manner. All facets of the plant, its operation and its output are monitored by experienced operators in accordance with established State, Federal, County and District regulations and requirements. Although it is too detailed to present all aspects of the plant in this report, it is noteworthy that the other Water Districts in the State have toured this facility from the viewpoint of its being the most advanced and efficient system of its kind, and one worthy of duplication at other locations. The plant itself is immaculate, and from a cursory review is obviously a source of pride and accomplishment for the District. A Maintenance Shop is located on its premises, and the Grand Jury was advised that all but the most major of problems are, or could be, repaired "on site". A "Fail Safe" computer monitors the operational functions of the plant and telephones (sequentially if necessary) employees with verbal information on any existing or possible malfunction or operating difficulties. Tours of this facility are available and several schools have taken advantage of this opportunity to allow their students to learn how the system operates and to get an idea of the complexities involved in the furnishing of potable water. (3) Complaints received via letter to the Grand Jury dated November 1994 concerning the following issues. (a) QUESTIONABLE HANDLING AND DISPOSITION OF TAXES DUE ON PAYMENTS MADE TO THE EMPLOYEE'S DEFERRED COMPENSATION PLAN. The District has a deferred compensation plan, which is in compliance with Internal Revenue Code § 457. (This plan differs, essentially, from most such plans in that there are no penaltic. for early withdrawal and age is not a factor for release of funds). 1994-95 Yuba County Grand Jury Final Report Under the terms of this plan, the District contributes 10% of the base wage of each permanent employee. Contributions are made on a voluntary basis by plan participants who, in fact, still receive the 10% District contribution even if (the employee) do not contribute any monies of their own. Under the agreement authorized by the Revenue Code, no employees may contribute over 25% of their yearly base salary, or a maximum of $7,500.00 per year, whichever is the lesser amount. (This 25% includes the amount the District contributes.) This maximum amount is increased to $15,000.00 for the last 3 years before the participant attains normal retirement age. Employer (District) contributions to the plan for the year ending 6 30 94 were $22.458.00. The Water District initiated this Deferred Compensation plan as a supplement to regular retirement income in 1985. The motivation for this action, by the District, lay in their concern for their employees welfare and their sense of responsibility in helping provide for their future. The plan was set up and handled by a well-known Deferred Compensation Plan carrier from its inception in 1985 until approximately January, 1994. At the latter time, the District determined they could receive an approximate 3.5% higher income interest rate by changing carriers. Accordingly, the District switched their account to the I.C.M.A. retirement Corporation in mid January 1994. In January, 1995, a routine memorandum to all agencies represented by I.C. M. A. was received by the District. This memo alerted the District to the fact that Social Security Taxes, State Disability Insurance Taxes, and State Unemployment Insurance Taxes had to be paid on the amount of Deferred Compensation contributed for each employee. During the 10 years since its inception, this issue (taxes to be paid), had never been raised by any party. As matter of fact, the District had pointedly brought up at the Plan's inception the issue that they (the District) would contribute no more than their percentage share to the plan and that any other expenses would be borne by the employees. The initial Memorandum of Understanding approved by the District Board's motion of 8-5-85, and providing an initial 4% District contribution, states the following: Article 10: "The District shall not be responsible for paying income taxes or any other taxes or charges which may become due upon adoption of a retirement plan, or which may become required at any time during which any such plan is in effect," 1994-95 Yuba County Grand Jury Final Report Article 11: "The District shall not be liable for any losses incurred by employees as a result of any retirement plan, whether as a result of early withdrawal, changes in relevant laws or regulations, poor investment practices, bankruptcies, negligence on the part of District employees, or for any other reason whatsoever." This 1985 M.O.U. was updated on 7-28-86 by increasing the District's contribution by an additional 2% and, except for this revision, all other provisions relating to the M.O.U. pertaining to the Supplemental Retirement plan were to remain in full force and effect. On 6-1-87 a revised M.O.U. was re-evaluated as to cost of living adjustments and reviewed for the benefits currently afforded the This revision raised salaries by 3% and District employees. increased the District's contribution to the Deferred Compensation This document reaffirmed all provisions of the Plan by 2%. Personnel Policy M.O.U. of 7-1-85 and the M.O.U. of 7-28-86. This M.O.U. was signed by all current District employees and attested by 2-members of the District's Board of Directors. On 2-6-89 a revised M.O.U. was presented to and accepted by the District's employees without dissent. Under the revised terms, the District's contribution to the Deferred Compensation Plan was raised to 10% of the employee's base salary. Articles 8 and 9 reflected the same waiver of calms as defined under all previous M.O.U.'s. As soon as the District was informed of the possible regulations pertaining to the collection of taxes due on Employee Deferred Compensation contributions, it arranged, at the District's cost, for the services of the Law Firm of Stewart, Humphreys, Burchett and Sandleman to review (for the benefit of the employees and the District) documents and regulations relating to the 457 plan and to render an opinion on the questions regarding the taxes on the plan contributions. On 1-20-95 Attorney John Felder, of the above noted Law Firm, replied with his legal opinion concerning these issues. there are 2- significant paragraphs of particular interest contained in the lengthy opinion rendered by the attorney. These are: "Once there is a determination that contributions to the 457 plan are subject to F.I.C.S. withholding, the question becomes who is responsible for payment of the taxes, the District, the employee, or both. I.R.C. § 3101 places a tax on the employee while I.R.C. § places a similar tax on the employer. For Federal taxes purposes, both the District and the employee would be liable for the tax..." 1994-95 Yuba County Grand Jury Final Report On 1-26-95 Attorney John Felder presented a discussion of what he had determined regarding the Retirement Plan contributions to the All employees. plus 2-union District staff. entire Water representatives (Laborers Local #185) attended. There was a question-and-answer period, during which time it was possible for all parties in attendance to address any problems they might have with the tax situation and the legal opinions the Attorney had submitted. On 2-6-95 a District personnel meeting included a presentation by Laborers Local #185, regarding the Retirement/Pension package. There were also committee reports on the taxes relative to the Deferred Compensation Plan. Based on these series of meetings, employee input opportunities, Union input opportunities and the Attorney's Opinion the District Office Supervisor (at the Board's direction) notified each employee that: "Social Security taxes, State Disability Insurance taxes, and the State Unemployment Insurance taxes" are to be paid on the amount of deferred compensation that the Districts contributes for each employee. Without conceding any liability. the District agreed to pay the "employer's" share of the Social Security taxes (7.65%) and the State Unemployment taxes for each employee. However all employees had to pay their share of the Social Security taxes (7.65%) and the full amount due on the S.D.I. taxes. The letter further stated that the District offered to pay the "Employee's" share from District funds and to permit either payment in full, or repayment by employees over 12 months maximum period at an interest rate of 6%. The amount owed by each employee was collected by the District and sent to the appropriate parties by April 15,1995. The undercharge of these taxes was calculated for a 3-year period as prescribed by regulations, even though the plan has been in effect for approximately 10 years. (b) ALLEGED DISCREPANCY OF APPROXIMATELY $8,000.00 IN WATER SALES TO THE CITY OF YUBA CITY. The Yuba County Water District has a long standing agreement for selling surplus water to the City Of Yuba City at a rate of $10.00 per acre foot. This basic rate, according to the agreement, is to be modified by (3/4) three-fourths of the Consumer Price Index Change, computed back to the date that the base rate went into effect. 1994-95 Yuba County Grand Jury Final Report In February, 1995, the District discovered, on its own initiative, that its last 2-billings to Yuba City were inadvertently computed on the basis of 100% rather than the 75% of the C.P.I. change. Consequently Yuba City was over billed a total amount of $8,685.00. This amount will be refunded to Yuba (ity as a credit on their next billing (June, 1995). (c) AN ALLEGED EMBEZZLEMENT OF DISTRICT FUNDS AND MISUSE OF DISTRICTS CREDIT CARDS AND FACILITIES. In the Fall (September or October) of 1990, during a routine internal review, it was discovered that a District employee had allegedly misappropriated Water District funds by apparently fraudulent means. After a thorough review and proper employee's ser vices actions, the were administrative terminated. Subsequently, following a more detailed audit and review of expenditures, the District procedures and accounting uncovered what it felt was an alleged gross misappropriation of funds by this employee. This matter was brought to the attention of the Board of Directors for the Water District, legal representatives and the Auditing Company's accountant. After considerable and very thorough discussions and hearings, a determination was reached by all parties involved that no further legal or civil action be taken against the accused employee. This decision was not made lightly, but only after the most detailed and knowledgeable review that was possible. In view of the economics involved, and matters of evidentiary nature, this appears to have been a very intelligent response to a very distasteful affair.

operating budget is $518,390.00, and its net revenue indicates a similar amount. This results in a zero balance deficit for this period, and is indicative of the efficient and economical operation of this complex organization. District water supply is a non-mandatory type service and individuals or commercial users may elect to use their own well water and/or other personal sources (springs, rain collection, etc..). At the current time the District receives approximately 4500 acre feet of surplus water generated through their Miner Ranch Creek source. This surplus is sold to the city of Yuba City, at a reasonable rate, which generates additional funds and allows the District to keep its water use rates low for its own area customers. The Yuba County Water District is governed by a five (5) member Board of Directors. elected by division, who set District policy. Subject to the Board's direction, the overall operation and administration of the District is conducted under the authority of the General Manager/Secretary. Field operations (both domestic and irrigation systems) are overseen by overall Manager/Superintendent, who shares ın assistant the Office operations are, in general, the responsibility of administration. the office supervisor. This person also supplies administrative support, and serves to satisfy the requirements for an auditor as set forth in § 30582 of the California Water Code. 1994-95 Yuba County Grand Jury Final Report Once annually the Districts financial records are audited by an independent accounting firm selected by the Board of Directors. The District also employs a full-time Clerk Typist and three (3) Water System Specialists. Additional to this permanent staff of seven (7) employees, the District employs, on a part time or contract basis, whatever other temporary positions and/or consultants which may deemed necessary. SCOPE: A Grand Jury Committee consisting of four (4) members conducted limited examinations of the District's: (1) Budget, (2) Manpower status, (3) Organization, (4) Operation procedures, (5) Activities, (6) Facilities, (7) Resources, (8) Future Plans. Additionally, the Grand Jury instigated an "in-depth" investigations of the complaints alleged to the in a littler received by this body pertaining to the variety of concerns as expressed under this Report's "Reasons for Investigation". PROCEDURE: Four (4) members of the grand Jury reviewed all pertinent factors as listed under the "Scope of the Investigation". These members met with the Yuba County District's Manager, Office Manager, Filtration plant operator and one (1) member of the Board of Directors. This meeting was held in the District's main office on April 4, 1995. The group conferred for aproximately 3 to 4 hours and in addition to vary detailed discussions regarding all aspects of the Jury's concerns were also supplied with documents and reports as well as Legal Opinions in support of questions, concerns and issues which were raised. The Grand Jury members were very impressed with the honest, candid, open and forthright manner in which they were received and the way in which their queries were addressed. Responses from the District personnel were unhesitant and demonstrated a very thorough and detailed appearing knowledge of their District, its operations, its staff, its budget, its problems and other peripheral issues. Following the office discussion the group reformed at the District's new (two (2) years old) Water Treatment Plant, which is located approximately five (5) miles north of Brownsville off Forbstown Road. The Plant operator, District manager and the member of The Board of Directors led the group on a complete and compressive tour of the facility and its equipment. The mechanics and the operation were explained, and all questions from the Jury members were addressed quickly and fully. Visual demonstrations and technical process were also presented and adequately explained in laymen's terms by the Plant operator. 1994-95 Yuba County Grand Jury Final Report DISCUSSION: As stated above, under the "Procedure" portion of this report, four (4) members of the Grand Jury met with representatives of the Water District on April 4, 1994 from 9:30 a.m. until approximately 2:00 p.m., at both their Headquarters office and their Water treatment Plant. In supplementing the verbal discussions enumerated above, and to develop the additional information necessary to compile this report, the Grand Jury members were furnished with copies of the following: (1) The 1993-94 Fiscal year audit (2) The 1994-95 Fiscal year Operational budget (3) The current "Table of Organization" for the District (4) Attorney John M. Felder's report of 1 20-95, regarding 457 Deferred Income Plan and Liability for employment taxes. (5) District Water rates effective 9-15-94 (6) Correspondence between the Water District and the City of Yuba City. (7) Calculation sheet for the Yuba City water billing. (8) Excerpts from the Board of Director's meeting held 2-21-95. (9) Memo of Understanding approved by Board of Directors on 8-5 85. (10) M.O.U. dated 7 28 86 (11) M.O.U. dated 6-1-87 (signed by all district employees) (12) M.O.U. dated 2-6-89 (13) Agenda for regular meeting of Board of Directors dated 2 6.95 (14) District agenda dated 1-26-95 covering "Discussion of Retirement Plan Contributions" presented by Attorney John Felder. (15) Agenda for Board of Director's meeting of 1-3 95. (16) Copy of "Personnel Policy Manual". The grand Jury members were also permitted to view any other documents felt to be relative to the issues involved. As noted above, this included a review of the "Personnel Police Manual" (issued to all employees) and containing relative data as well as excerpts from pertinent LR.C. Regulations Contact was made with the Yuba County District Attorney in regards to the complainants query concerning the alleged embezzlement and theft of District Last is by a former Water District employee, and the disposition of the charges. 1994-95 Yuba County Grand Jury Final Report The current Water District Officer Supervisor, as well as the General manager, were telephonically contacted on several occasions as additional questions arose during preparation of this report. These employees were extremely courteous and demonstrated considerable expertise in the performance of their duties and the overall operations of the Water District. All questions posed were answered in precise terms and furnished all information necessary in order to complete this report. The District's financial books and accounts are based upon the uniform system of accounting for Public Utilities as prescribed by the Division of Local Government Fiscal Affairs of the State of california. Proprietary funds are maintained on the accrual basis of accounting wherein revenues are recognized in the period earned and expenses are recognized in the period incurred. Everyday accuracy and accountability of fiscal management is maintained internally by the Office Manager under the direct supervision of the District Manager and the Secretary to the Board of Directors. A yearly audit is conducted (at a very reasonable charge) by the accounting firm recognized for its experience and expertise in the field of Water District finances, rules, regulations and other pertinent requirements. The Grand Jury was favorably impressed with the quality and format of the audit procedure. In reviewing the "Discussion" portion of this report, as well as the overall complexity of the operations, it is somewhat startling to understand that the Yuba County Wall District is accountable and responsible for the handling of water supplies, etc. for 29%, (or almost 1/3) of the land area contained in Yuba County, with a permanent staff of only 7 employees. FINDINGS: All "Findings" have been substantiated by current documentation and by observations and interviews made by no fewer than 4-members of the Grand Jury, P.C. § 916. (1) The Yuba County Water District's main office in Brownsville is a fairly new building, well-maintained and equipped. Files, records, documents, policies, correspondence and similar material is stored in an above average manner with very rapid and efficient retrieval system. 1994-95 Yuba County Grand Jury Final Report The office staff appears very knowledgable and were able to locate, discuss, explain and adequately respond to all Grand jury requests and questions. The employees were courteous and frank, despite the lengthy meeting and the obvious, but unavoidable, disruption to their ordinary tasks and disciplines. (2) The District's new Water Treatment Plant, which was constructed approximately 2-years ago at a cost of approximately 2-million dollars, is in mint condition "State of the Art" facility. The plant relies on modern computer enhanced technology and techniques to supply the water needs of its more than 800 customers in a healthy, safe, efficient and economical manner. All facets of the plant, its operation and its output are monitored by experienced operators in accordance with established State, Federal, County and District regulations and requirements. Although it is too detailed to present all aspects of the plant in this report, it is noteworthy that the other Water Districts in the State have toured this facility from the viewpoint of its being the most advanced and efficient system of its kind, and one worthy of duplication at other locations. The plant itself is immaculate, and from a cursory review is obviously a source of pride and accomplishment for the District. A Maintenance Shop is located on its premises, and the Grand Jury was advised that all but the most major of problems are, or could be, repaired "on site". A "Fail Safe" computer monitors the operational functions of the plant and telephones (sequentially if necessary) employees with verbal information on any existing or possible malfunction or operating difficulties. Tours of this facility are available and several schools have taken advantage of this opportunity to allow their students to learn how the system operates and to get an idea of the complexities involved in the furnishing of potable water. (3) Complaints received via letter to the Grand Jury dated November 1994 concerning the following issues. (a) QUESTIONABLE HANDLING AND DISPOSITION OF TAXES DUE ON PAYMENTS MADE TO THE EMPLOYEE'S DEFERRED COMPENSATION PLAN. The District has a deferred compensation plan, which is in compliance with Internal Revenue Code § 457. (This plan differs, essentially, from most such plans in that there are no penaltic. for early withdrawal and age is not a factor for release of funds). 1994-95 Yuba County Grand Jury Final Report Under the terms of this plan, the District contributes 10% of the base wage of each permanent employee. Contributions are made on a voluntary basis by plan participants who, in fact, still receive the 10% District contribution even if (the employee) do not contribute any monies of their own. Under the agreement authorized by the Revenue Code, no employees may contribute over 25% of their yearly base salary, or a maximum of $7,500.00 per year, whichever is the lesser amount. (This 25% includes the amount the District contributes.) This maximum amount is increased to $15,000.00 for the last 3 years before the participant attains normal retirement age. Employer (District) contributions to the plan for the year ending 6 30 94 were $22.458.00. The Water District initiated this Deferred Compensation plan as a supplement to regular retirement income in 1985. The motivation for this action, by the District, lay in their concern for their employees welfare and their sense of responsibility in helping provide for their future. The plan was set up and handled by a well-known Deferred Compensation Plan carrier from its inception in 1985 until approximately January, 1994. At the latter time, the District determined they could receive an approximate 3.5% higher income interest rate by changing carriers. Accordingly, the District switched their account to the I.C.M.A. retirement Corporation in mid January 1994. In January, 1995, a routine memorandum to all agencies represented by I.C. M. A. was received by the District. This memo alerted the District to the fact that Social Security Taxes, State Disability Insurance Taxes, and State Unemployment Insurance Taxes had to be paid on the amount of Deferred Compensation contributed for each employee. During the 10 years since its inception, this issue (taxes to be paid), had never been raised by any party. As matter of fact, the District had pointedly brought up at the Plan's inception the issue that they (the District) would contribute no more than their percentage share to the plan and that any other expenses would be borne by the employees. The initial Memorandum of Understanding approved by the District Board's motion of 8-5-85, and providing an initial 4% District contribution, states the following: Article 10: "The District shall not be responsible for paying income taxes or any other taxes or charges which may become due upon adoption of a retirement plan, or which may become required at any time during which any such plan is in effect," 1994-95 Yuba County Grand Jury Final Report Article 11: "The District shall not be liable for any losses incurred by employees as a result of any retirement plan, whether as a result of early withdrawal, changes in relevant laws or regulations, poor investment practices, bankruptcies, negligence on the part of District employees, or for any other reason whatsoever." This 1985 M.O.U. was updated on 7-28-86 by increasing the District's contribution by an additional 2% and, except for this revision, all other provisions relating to the M.O.U. pertaining to the Supplemental Retirement plan were to remain in full force and effect. On 6-1-87 a revised M.O.U. was re-evaluated as to cost of living adjustments and reviewed for the benefits currently afforded the This revision raised salaries by 3% and District employees. increased the District's contribution to the Deferred Compensation This document reaffirmed all provisions of the Plan by 2%. Personnel Policy M.O.U. of 7-1-85 and the M.O.U. of 7-28-86. This M.O.U. was signed by all current District employees and attested by 2-members of the District's Board of Directors. On 2-6-89 a revised M.O.U. was presented to and accepted by the District's employees without dissent. Under the revised terms, the District's contribution to the Deferred Compensation Plan was raised to 10% of the employee's base salary. Articles 8 and 9 reflected the same waiver of calms as defined under all previous M.O.U.'s. As soon as the District was informed of the possible regulations pertaining to the collection of taxes due on Employee Deferred Compensation contributions, it arranged, at the District's cost, for the services of the Law Firm of Stewart, Humphreys, Burchett and Sandleman to review (for the benefit of the employees and the District) documents and regulations relating to the 457 plan and to render an opinion on the questions regarding the taxes on the plan contributions. On 1-20-95 Attorney John Felder, of the above noted Law Firm, replied with his legal opinion concerning these issues. there are 2- significant paragraphs of particular interest contained in the lengthy opinion rendered by the attorney. These are: "Once there is a determination that contributions to the 457 plan are subject to F.I.C.S. withholding, the question becomes who is responsible for payment of the taxes, the District, the employee, or both. I.R.C. § 3101 places a tax on the employee while I.R.C. § places a similar tax on the employer. For Federal taxes purposes, both the District and the employee would be liable for the tax..." 1994-95 Yuba County Grand Jury Final Report On 1-26-95 Attorney John Felder presented a discussion of what he had determined regarding the Retirement Plan contributions to the All employees. plus 2-union District staff. entire Water representatives (Laborers Local #185) attended. There was a question-and-answer period, during which time it was possible for all parties in attendance to address any problems they might have with the tax situation and the legal opinions the Attorney had submitted. On 2-6-95 a District personnel meeting included a presentation by Laborers Local #185, regarding the Retirement/Pension package. There were also committee reports on the taxes relative to the Deferred Compensation Plan. Based on these series of meetings, employee input opportunities, Union input opportunities and the Attorney's Opinion the District Office Supervisor (at the Board's direction) notified each employee that: "Social Security taxes, State Disability Insurance taxes, and the State Unemployment Insurance taxes" are to be paid on the amount of deferred compensation that the Districts contributes for each employee. Without conceding any liability. the District agreed to pay the "employer's" share of the Social Security taxes (7.65%) and the State Unemployment taxes for each employee. However all employees had to pay their share of the Social Security taxes (7.65%) and the full amount due on the S.D.I. taxes. The letter further stated that the District offered to pay the "Employee's" share from District funds and to permit either payment in full, or repayment by employees over 12 months maximum period at an interest rate of 6%. The amount owed by each employee was collected by the District and sent to the appropriate parties by April 15,1995. The undercharge of these taxes was calculated for a 3-year period as prescribed by regulations, even though the plan has been in effect for approximately 10 years. (b) ALLEGED DISCREPANCY OF APPROXIMATELY $8,000.00 IN WATER SALES TO THE CITY OF YUBA CITY. The Yuba County Water District has a long standing agreement for selling surplus water to the City Of Yuba City at a rate of $10.00 per acre foot. This basic rate, according to the agreement, is to be modified by (3/4) three-fourths of the Consumer Price Index Change, computed back to the date that the base rate went into effect. 1994-95 Yuba County Grand Jury Final Report In February, 1995, the District discovered, on its own initiative, that its last 2-billings to Yuba City were inadvertently computed on the basis of 100% rather than the 75% of the C.P.I. change. Consequently Yuba City was over billed a total amount of $8,685.00. This amount will be refunded to Yuba (ity as a credit on their next billing (June, 1995). (c) AN ALLEGED EMBEZZLEMENT OF DISTRICT FUNDS AND MISUSE OF DISTRICTS CREDIT CARDS AND FACILITIES. In the Fall (September or October) of 1990, during a routine internal review, it was discovered that a District employee had allegedly misappropriated Water District funds by apparently fraudulent means. After a thorough review and proper employee's ser vices actions, the were administrative terminated. Subsequently, following a more detailed audit and review of expenditures, the District procedures and accounting uncovered what it felt was an alleged gross misappropriation of funds by this employee. This matter was brought to the attention of the Board of Directors for the Water District, legal representatives and the Auditing Company's accountant. After considerable and very thorough discussions and hearings, a determination was reached by all parties involved that no further legal or civil action be taken against the accused employee. This decision was not made lightly, but only after the most detailed and knowledgeable review that was possible. In view of the economics involved, and matters of evidentiary nature, this appears to have been a very intelligent response to a very distasteful affair.