LOS ANGELES — California Controller John Chiang called for greater scrutiny of the state's 4,800 special districts in conjunction with the release of an audit of two special districts that found they missed the mark on 71 management and fiscal controls designed to prevent fraud and abuse.
"While special districts can possess vast powers to tax, issue debt, and manage public resources, they are frequently the least understood and watched form of government," Chiang said in a statement. "With so little public scrutiny and even poorer constituent participation, these little-known governmental agencies can become breeding grounds for scandal and shockingly poor fiscal management."
The Sierra Foothills Public Utility District, located two miles outside of Fresno, and the Indian Valley Community Services/Indian Valley Ambulance Service Authority in the Sierra Nevadas, are the special districts identified in Chiang's report as lacking fiscal controls needed to prevent fraud, waste and abuse. He also reviewed the San Miguel Consolidated Fire Protection District in San Diego County, but found that only one of 65 of its internal control measures was deficient.
In comparison, Chiang's audit of Bell, a city of which six former city leaders are serving time for embezzlement, found 46 of the 59 applicable internal management and fiscal controls were deficient or missing, according to the controller's office.
In a story somewhat redolent of Bell, Leanna May Moore, the former general manager for the Indian Valley authority, was arrested in November 2013 and charged with fraud, forgery, and embezzlement, initially totaling $381,841. In February, Plumas County District Attorney David Hollister increased the amount embezzled to $676,375.
The controller's office said IVCSD's current General Manager Jesse Lawson "claims that the district has started to make positive changes to processes, which may alleviate some of the noted deficiencies."
Chiang advocated for increased scrutiny around how these agencies are formed and greater accountability for performance.
"With more than 4,800 of these agencies in existence today, there should be a renewed discussion about how these agencies can be formed, what checks-and-balances and reporting requirement should apply, and how they can be held accountable for their performance," he said.
Auditors found that the Sierra Foothills PUD's administrative and internal accounting controls were non-existent or grossly deficient, according to a letter from Jeffrey Brownfield, Division of Audits chief, to the PUD's General Manager Thomas Skinner.
Brownfield also noted, however, that Skinner was not the general manager during the two-year period from July 1, 2010 to June 30, 2012 reviewed for the audits and that Skinner has been working diligently to make positive changes to reconstruct the district's records and to keep the district operating. Skinner is working pro bono until the district's board decides whether the district should remain in existence, as it doesn't currently generate any income, according to the audit.
In a responding letter, Skinner said he and the board agree with the audit's findings and emphasized the lack of accounting controls or financial reports were failures of the prior general manager and prior board. He thanked the controller for recognizing the district's efforts to bring financial reports up to date.
The Sierra Foothills district was created to provide public infrastructure facilities and services to the Rio Mesa Avenue 12 Village master planned community. The original plan called for three villages with 30,000 homes, two championship golf courses, a conference-center hotel, an office park, and a community shopping center, but only one golf course came to fruition, according to the controller's report. Riverbend Golf Course, an independent operator, owned, operated, and eventually leased the district.
Due to the severity of the findings, Chiang said he will conduct follow-up reviews of both special districts in approximately one year.