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HomeMy WebLinkAboutMINUTES - 12091986 - T.3 ITri To:, ' BOARD OF SUPERVISORS FROM: INTERNAL OPERATIONS COMMITTEE Contra October 27 , 1986 Cma DATE: O C11'�/ - Grand Jury Recommendation regarding Auditing �JIJI �I� SUBJECT: Requirements for Independent Special Districts SPECIFIC REQUEST(S) OR RECCMMENDATION(S) & BACKGROUND AND JUSTIFICATION RECOMMENDATIONS: 1. Determine what action should be taken on the recommendation of the 1985-86 Grand Jury that the Board seek legislation to authorize the Auditor-Controller to perform financial oversight functions that would include validating the propriety of expenditures by Special Districts. 2 . Remove this item as a referral to the 1986 Internal Operations Committee. BACKGROUND- In its report to the Superior Court the 1985-86 Grand Jury made the following recommendation: "That the Board of Supervisors initiate legislation that would empower the County Auditor-Controller' s Office to perform financial oversight functions that would include validating the propriety of expenditures by Special Districts. Such monitoring process should also include verifying the legality of expenditures and reviewing the adequacy of billing documentation in authorization of payment." on September 9, 1986, the Board of Supervisors adopted the following response to this recommendation: "The Auditor has provided a response to this recommendation which highlights the problems and issues associated with State legislation necessary to authorize the Auditor to 'perform fiscal oversight including validating the propriety of expenditures by ( locally governed) special districts' ( that is, districts not governed by the Board of Supervisors) . One of the major concerns is the issue of ' local ' versus 'centralized' control; another is the cost and potential revenue sources necessary to allow the Auditor to employ adequate staff to handle the additional work generated from the districts. CONTINUED ON ATTACHMENT: _ YES SIGNATURE: _ RECOMMENDATION OF COUNTY ADMINISTRATOR X RECOMMENDATION OF BOARD COMMIT AP ROVE OTHER —! (for Suov. Sunne_AeFla -x-'j-"" SIGNATURE s ncy C. Fanhden p Tom Pol✓s� -� ACTION OF BOARD ON December 9. 1986 APPROVED AS RECOMMENDED OTHER XX The Board heard a presentation from the foreman of the 1985-1986 Grand Jury providing additional information as to the reason for the referral; the Board also noted that a member of the Grand Jury did not receive adequate notice of the Internal Operations Committee meeting on this matter. Therefore, IT IS BY THE BOARD ORDERED that the matter is REFERRED back to the Internal".Operations Committee. VOTE OF SUPERVISORS 1 HEREBY CERTIFY THAT THIS IS A TRUE XX UNANIMOUS (ABSENT ) AND CORRECT COPY OF AN ACTION TAKEN AYES: NOES: AND ENTERED ON THE MINUTES OF THE BOARD ABSENT: . ABSTAIN: OF SUPERVISORS � ON THE DATE SHOWN. CC: Internal Operations Committee ATTESTED pIGC�CLm-r County Administrator PHIL BATCHELOR, CLERK OF THE BOARD OF Grand Jury SUPERVISORS AND COUNTY ADMINISTRATOR County. Counsel M382/7-83 By— �J ,DEPUTY Page 2 "Authorize the Internal Operations Committee to convene one or more meetings with representatives of independent special 'districts in the County, including the Superintendent of Schools, to discuss ways in which the concerns of the Grand Jury can be addressed, including the possibility of legislation. The Foreman of the 1985-86 Grand Jury and this County' s legislative delegation should be invited to the meeting. " Our Committee met with representatives of most of the independent special districts in the County on October 27 . Due to a mix-up in the location of the meeting, the representative of the Grand Jury was not at the meeting. However, Mr. Bouchet reviewed his memo of August 13, 1986. Mr, Bouchet notes that he does not believe he currently has statutory authority to perform the type of validation of the propriety of expenditures envisioned by the Grand Jury. Mr. Bouchet notes that special districts can contract with the Auditor-Controller to perform these oversight functions and several special districts already contract for this service. The representatives of the special districts noted that each of them is required to either contract for a financial audit with the County Auditor-Controller, or obtain the services of an outside private accounting firm for such audit services. These audits review expenditures to insure that adequate documentation is present, that expenditures adhere to the policies of the governing body, and that the district' s books fairly reflect the financial condition of the district. It is important, however, to note that what the Grand Jury appears to be advocating goes beyond the normal limits of an audit. The Grand Jury appears to want the Auditor-Controller to be in a position to question the appropriateness of the policy decisions made by the district' s governing board. All of the special district representatives present unanimously objected to the Auditor-Controller being in a position to question whether an independently elected governing board should have undertaken some or all of the activities and programs they have undertaken. This seems to clearly place the Auditor-Controller in the untenable position of refusing to pay a bill because he doesn' t think the district' s governing board should have undertaken a particular program, or chosen to spend its funds in a particular way. This would seem to more properly be the role of the voters who elected the district' s governing board and to whom the members of the governing board are ultimately responsible. On the other hand, a more typical function of auditing the proposed expenditures of a special district to insure that the expenditure is legal, is consistent with the governing board' s policies and is supported by appropriate documentation, is a legitimate function of the Auditor-Controller. However, undertaking this function for the independent special districts would conservatively require 3 to 5 additional full-time positions in the Auditor' s Office plus associated equipment and space. The only available source of funds .for such positions is to charge the special districts for those services. The districts generally feel they do not have the funds available to pay ,for these services, particularly when they feel such services are unnecessary. Again, the special districts already have the ability to contract with the County Auditor-Controller to perform either the annual audit of the ,district' s books, or even to pre-audit their expenditures before bills are paid. Even mandating that special districts obtain such pre-audit services from the Auditor-Controller would not address the issue of questioning the propriety of the policies adopted by the district' s governing board. Page 3 In the face of the unanimous opposition of the special districts to the recommendation of .the Grand Jury, our Committee does not believe the County could be successful in obtaining the passage of the necessary legislation to mandate a pre-audit of districts' expenditures. Further, we do not believe it is appropriate for one elected body to seek to question the policy decisions of another elected body by requiring the Auditor-Controller to second-guess those policy decisions. We have allowed the special districts to submit any additional written comments they wish our Committee to consider as long as such comments are received by November 28 . We have then recommended that the Board conduct a hearing on this report on December 9, 1986 at 10 : 30 A.M. in order to allow the Grand Jury to explain its recommendation in more detail. Since we did not have the benefit of the Grand Jury' s presence at our meeting, we are deferring to the full Board any final decision on the Grand Jury' s recommendation. _ 1