Shasta Community Services District Reasons for Inquiry:

The Grand Jury’s review of the independent audit reports for fiscal years 1999/2000, 2000/2001, 2001/2002 and 2002/2003 revealed the following deficiencies in the independent auditor’s report: a. The Schedule of Funded Status (retirement funds for employees) for SCSD states “Information Not Available” in each report since 1998. This information has been available from the California Public Employees Retirement System. b. The Government National Mortgage Association (GNMA) investment as listed on the June 30, 2003 audit showed a cost basis of $30,832 and a market value of $769. The independent auditor stated that SCSD has received principal payments over the years of $30,099, reducing the current cost basis to $733 versus a current market value of $769. c. The Management Letters did not show, how and when the prior years’

The SCSD Board was advised during audit presentations in 2002 and 2003 that under Government Accounting Standards Board Statement 34 (GASB 34) requirements the district’s financial statements would have to follow a new format to reflect physical inventory and valuation by June 30, 2004.

On December 18, 2003, the SCSD Board approved payment of a bill for $142.89 from a business in which one of the members of the SCSD Board is a co-partner. All five members of the Board voted to approve payment of that bill, which was among a slate of several bills submitted to the SCSD Board for its consideration. Section 1090 of the California Government Code prohibits a public official, such as a member of the board of directors of a community services district, from having a financial interest in any contract entered into by the board of which he/she is a member, even if the official does not vote on the contract. It also prohibits the board from entering into such a contract. The payment of the bill from the business in which a member of the SCSD was a co-partner constituted a contract in which the board member has a financial interest. The action taken by the SCSD Board on December 18, 2003 was improper. A contract made in violation of section 1090 is void. Any payments made to the contracting party must be returned to the public entity and the entity is entitled to retain any benefits it had received.

On December 13, 2000, four of the five members of the SCSD Board of Directors voted to appoint a new fire chief, a paid position. The person who was appointed is the spouse of the board member who was not present at this meeting. As noted above, section 1090 of the Government Code prohibits public officers from being financially interested in contracts made by them in their official capacity, or made by boards of which they are members. Hiring of an employee constitutes a contract covered by the provisions of section 1090. Moreover, even if the board member did not vote on the appointment, the SCSD Board should not have appointed the fire chief as long as his/her spouse serves on the Board. In addition to the prohibition against public officials making contracts in which they have a financial interest, a contract made in violation of section 1090 of the Government Code is void. Any payments made to the contracting party pursuant to a contract made in violation of section 1090 must be returned and no claim for future payment under the contract may be made.

SCSD employees get paid once a month, but frequently make a mid-month draw on their wages.

A new draft Policy and Procedures manual is under development to update existing policies and procedures. The Grand Jury found that: • Many current practices do not follow existing policies and procedures • Laws have changed and some existing polices need revision • Existing policies and files are stored in various locations • The district needs to have written policies and procedures where none exists (i.e. appraisal of personnel, personnel grievances, pre-employment physical and drug testing, maintaining list of employees and contractors, reporting on- the-job injuries, taking disciplinary action, and cash handling and deposits).

The bills presented to the SCSD Board for approval have a minimal description, requiring the Board to spend too much time asking for clarification during the bill approval process.

The purchasing of materials is not done in an orderly, cost-effective manner. Rather than planning for bulk purchases, staff makes frequent shopping trips.

The SCSD does not have a credit card policy and has cards for companies no longer in business.

The Investment Performance Report is not submitted to the SCSD Board on a quarterly basis as required by the General Manager’s job description.

The SCSD is not in compliance with three regulations contained in the California Code of Regulations (CCR), at Title 8, General Industry Safety Orders. Specifically: a. Confined Spaces (sections 5156 through 5158): This article prescribes minimum standards for preventing employee exposure to confined space hazards within such spaces as silos and tanks. During the SCSD facility tour, the Grand Jury observed numerous water storage tanks which are covered by the article because each tank: • Is large enough and so configured that an employee can bodily enter and perform assigned work, and • has limited or restricted means for entry or exit and • is not designed for continuous employee occupancy. SCSD employees told the Grand Jury that they do enter these storage tanks. The article requires the employer to inform employees performing work in the area, by posting danger signs or by any other equally effective means, of the existence, location of and the danger posed by the confined spaces. If the employer decides that its employees should not enter a confined space the employer must take effective measures to prevent entrance. If the employer decides that its employees will enter a confined space, the employer must develop and implement a written program that complies with the article. The Grand Jury did not observe any posted warning signs as required by the code. The Grand Jury requested SCSD provide a copy of its written program, but it was not provided and the Grand Jury did not find any evidence that this document exists. b. Excavations (sections 1540 and 1541): These sections apply to trenches, which are defined as an excavation where the depth is greater than the width but less than fifteen feet. The Grand Jury was shown pictures of an excavation done by SCSD where the depth was obviously over 5 feet because a man was standing in it and the sides were higher than he was tall. The regulations require employee protection from cave-ins, unless excavations are made in entirely stable rock, or are less than five feet in depth and examination of the ground by a competent person provides no indication of potential cave-in. The Grand Jury was not provided any evidence in interviews with SCSD employees that these protections were provided nor do the pictures provide such evidence. c. Fall protection (section 3210): Guard rails must be provided on all open sides of unenclosed work locations more than 30 inches above the floor or ground. There is an exception, if employees use the elevated location infrequently and are protected by an authorized fall restraint/fall arrest system. The Grand Jury observed that access ladders were attached to most storage tanks but in only one case was a guardrail installed on the top of the tank. Only one of the other tanks had a locked restriction on the ladder to prevent its use. SCSD did not provide evidence of a fall protection plan, training or equipment.

The Grand Jury observed that the containers in which hazardous materials were being stored were not labeled. Those containers included: • A fire department waste oil tank • Chlorine liquid containers at various locations • Water treatment facility polymer storage containers

Effective January 1, 2004, SCSD was required to file a Business Plan with the Shasta County Environmental Health Department (California Health and Safety Code Section 25503), relating to the handling of hazardous materials. SCSD has not filed the required plan. Guidelines for preparation of a plan are available from the Environmental Health Department’s Hazardous Materials Management division.

During the tour of SCSD facilities the Grand Jury observed that wastewater is discharged from the filter plant into backwash ponds. The SCSD has not filed an Application/Report of Waste Discharge (ROWD) with the Regional Water Quality Control Board (RWQCB). California Water Code Section 13260 states that persons discharging waste that could affect the quality of the waters of the State, other than into a community sewer system, must file a ROWD providing information which may be required by the appropriate RWQCB. The necessary forms are available upon request from the RWQCB.

The access to the pressure-reducing vault located in Records Heights is not secure.

Chlorine gas supplies are not adequately secured at the water treatment facility to prevent theft, vandalism or terrorist acts.

In 2003, the SCSD Board and Water Department employees participated in only one of many available seminars, workshops, conferences and professional organization meetings.

The last Insurance Services Office (ISO) report was issued November 1, 1985. SCSD received a 57.93% credit, earning a Public Protection Class 5 rating. Premiums charged to homeowners and businesses for fire protection insurance are lower if the credit is higher (60-100%).

The SCSD Board approved and adopted on November 20, 2003 a Master Water Plan prepared by Pace Civil Inc. The plan gives the SCSD Board direction on providing water service to the district’s customers for the next 20 years.