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District Operations <br />After extensive investigation, the Grand Jury learned of oversight shortcomings and management <br />issues that include the following: <br />• Standard business practices, such as performing detailed background checks, were not <br />followed in the hiring of the finance director accused of embezzling. As a result, the <br />District hired an individual who was already under indictment in another embezzlement <br />case. <br />The Manager and the Board's finance committee did not recognize red flags in financial <br />reports that could have revealed the embezzlement far sooner. Examples include the <br />budget overage (ultimately noticed by a Trustee), lack of complete monthly financial <br />packages as provided by the previous finance director, and discrepancies revealed in two <br />years' annual audits. Board complaints to the Manager concerning financial reports were <br />answered with the excuse that a new accounting system had been installed and that there <br />were issues with the County Controllers staff. <br />• The Trustees' written evaluations of the Manager's performance revealed significant <br />differences of opinion. Some Trustees gave the Manager high ratings while others <br />expressed little confidence in the Manager's ability to manage the District. Others <br />indicated they did not trust the Manager and felt the Manager was excessively controlling <br />information provided to the Board. <br />• Internal financial controls in place at the time of the embezzlement were inadequately <br />implemented. For example, controls required that both the Manager and a Board officer to <br />sign checks issued by the finance department for payments. However, the finance <br />department used signature stamps that seemed to by-pass this control. <br />• The Manager hired unlicensed and uninsured contractors to work on District facilities, a <br />violation of District policies. <br />• Surplus vehicles were sold to employees and friends, a practice that the Grand Jury was <br />informed has been discontinued. <br />• The issuance of Visa cards to employees for the purchase of materials led to abuse. The <br />Visa cards had high limits and there was little oversight of their use. The finance director <br />used a Visa card to pay her attorneys for a previous embezzlement case. Neither the <br />Manager nor the Board's finance committee caught improper charges of up to $15,000 <br />placed on the card. <br />There was an amendment to the District Policies and Procedures manual in 2007 that <br />stated, "dismissal of the current District manager would require 90% of the Trustees' <br />approval." The Grand Jury requested and received an updated version of the manual. The <br />entire section 2160 titled "Separation from District Employment" is no longer in the <br />current manual. It has been replaced by a new section 2160 titled "Salary and Benefit <br />Survey." No further information was provided as to the reasons for this change. <br />6 <br />� abed - 3 l L <br />