Rio Linda/elverta Community Rio Linda Water District Received*

R1a

The district should provide to auditors all district policies and procedures before an audit is performed. Auditors should verify that all disbursements made during the year comply with the district's procedures. The audit should include a random sampling of travel expense reports, including credit card usage. The District will implement that portion of this recommendation involving providing its auditor all relevant policies and procedures. The District will not implement the rest of recommendation #1a because adequate internal controls are in place to address this issue, the additional cost to have an auditor verify each transaction will be too costly, these recommendations are inconsistent with normal auditing procedures and the amount of money spent on travel is less than $7500.00 per year which is not "material" to the District's financial statements. General Manager/Secretary: Directors: David J. Andres Doug Cater, President Robert Blanchard, Vice-President Jerry Wickham Mary Harris Mel Griffin مِ س

R1b

The Sacramento County Director of Finance should schedule regular, selective reviews of district audit reports for completeness and financial impact on ratepayers, and report any anomalies to the respective water district board of directors. The District has no objection to this additional review. This recommendation will not be implemented because the District does not have the legal authority to direct the Sacramento County Director of Finance to review District audits.

R1c

The California State Government Code Section 2609 [sic] should be amended to eliminate Section 2609(f) [sic] providing for audits to be performed less frequently than once a year. The code should require all districts to perform annual audits. The District currently has a financial audit performed on an annual basis. Government Code § 26909(f) allows for audits every two or five years with the unanimous approval of governing board of the district and the unanimous approval of the Board of Supervisors. Elimination of this provision may adversely affect small special districts. This recommendation will not be implemented because the District does not have the legal authority to change state law. Recommendation #1d. The California State Legislature should enact a statute requiring the state controller to independently verify accuracy and completeness of district audits. It is not clear what additional benefit this recommendation will provide the District or its constituents. Auditors currently review district financial records in accordance with generally accepted governmental accounting standards. The audit is then presented at a public meeting. The recommendation will not be implemented because the District does not have the legal authority to change state law. Recommendation #2. Auditors should confirm water districts' compliance with IRS rules, that all income is being reported, that boards actively oversee payments to management, and that all financial records are maintained for at least five years. This recommendation has not yet been implemented, but will be implemented when the District sends out "Requests for Proposals" for auditing services for the 2003-04 Fiscal Year. That portion of this recommendation regarding maintaining financial records will not be implemented because it is not warranted and not reasonable. Verification by an outside auditor that records are being kept for a five-year period would be expensive and the District has adequate controls in place to deal with this situation. Financial recordkeeping is not the responsibility of the auditor, but rather the General Manager in accordance with District Resolution 2002-09, California Government Code § 60200 - 60203 and California Water Code § 21403. Recommendation #3. In an effort to obtain a thorough and professional annual audit, auditors should be changed every three years. This recommendation will not be implemented because it is not warranted. In order to conduct a thorough audit the auditing firm must have familiarity with the operations of the District. This can only be achieved through experience reviewing the district's financial operations and records. A three-year period is too short for an auditor to obtain a high-level of familiarity with the District. The District will, however, change auditors at least every five years. 2 100 Recommendation #4. To increase public awareness of district activities and to provide easy access to this information, public water districts should establish and maintain a Web site with links to their audit report, district travel policies and travel expenses. This recommendation will not be implemented in respect to travel expenses because it is not warranted. This information is available at the monthly meeting of the Board of Directors. In respect to establishing a link to the annual audit and travel policy the recommendation has not yet been implemented, but will be implemented by March 1, 2004. Recommendation #5. Notices of public hearings for rate increases should be clear and concise enabling customers to understand easily the reasons and justifications for such increases. This recommendation has been implemented. The District provides written notices in compliance with Government Code § 54354.5, Proposition 218 and other applicable statutes when setting public hearings for rate increases.

R1d

The California State Legislature should enact a statute requiring the state controller to independently verify accuracy and completeness of district audits. It is not clear what additional benefit this recommendation will provide the District or its constituents. Auditors currently review district financial records in accordance with generally accepted governmental accounting standards. The audit is then presented at a public meeting. The recommendation will not be implemented because the District does not have the legal authority to change state law.

R2

Auditors should confirm water districts' compliance with IRS rules, that all income is being reported, that boards actively oversee payments to management, and that all financial records are maintained for at least five years. This recommendation has not yet been implemented, but will be implemented when the District sends out "Requests for Proposals" for auditing services for the 2003-04 Fiscal Year. That portion of this recommendation regarding maintaining financial records will not be implemented because it is not warranted and not reasonable. Verification by an outside auditor that records are being kept for a five-year period would be expensive and the District has adequate controls in place to deal with this situation. Financial recordkeeping is not the responsibility of the auditor, but rather the General Manager in accordance with District Resolution 2002-09, California Government Code § 60200 - 60203 and California Water Code § 21403.

R2b

Expenses for reimbursement or charges on district credit cards that exceed California state per diem allowances or that do not fall within permitted district expense policies should be disallowed, published on the district's web site and discussed at the next board meeting. The District has implemented this recommendation in respect to disallowing expenses that exceed District policy as contained in "Resolution 2003-05 Director Compensation & Travel Policy". In the event an expense is submitted that exceeds the policy, the claimant must request authorization from the Board of Directors at a public meeting in order to receive reimbursement. This recommendation in respect to posting the expense on the web site will not be implemented because it is not warranted. The current procedures in place are adequate to address this issue.

R3

In an effort to obtain a thorough and professional annual audit, auditors should be changed every three years. This recommendation will not be implemented because it is not warranted. In order to conduct a thorough audit the auditing firm must have familiarity with the operations of the District. This can only be achieved through experience reviewing the district's financial operations and records. A three-year period is too short for an auditor to obtain a high-level of familiarity with the District. The District will, however, change auditors at least every five years. 2 100