Sanitation district found to have improved financial controls
October 23, 2011
The County auditor-controller said that the South San Luis Obispo County Sanitation District has implemented changes and now has sufficient controls in place to avoid a conflict of interest, according to an Oct. 21 report by Gere Sibbach, auditor-controller.
In response to a report by the San Luis Obispo County Grand Jury that said John Wallace, the administrator of the district, had been funneling millions of dollars to a private engineering company without proper oversight, the district board enacted additional financial controls.
In June, the Grand Jury asked Sibbach to do to a review of the district’s internal financial controls.
While Sibbach found reasonable controls currently in place he made several suggestions for improvement.
Sibbach found that in one instance of 23 disbursement requests randomly inspected, a request approving payments had not been signed by two directors as required.
In three of 13 instances of warrant requests with funds being paid to Wallace’s engineering firm the Wallace Group, Wallace had signed the warrants approving the payment along with only one director.
Sibbach said in August the district changed its procedures and no longer allows Wallace to approve payments to his private firm.
In addition, Sibbach found that payments to the Wallace Group were not always easily identifiable or separated from others costs. He suggested that Wallace Group costs be separated distinctly from other major budget items, administration and engineering costs.
During the past three years, expenditure exceeded revenue by $1.8 million. Sibbach suggested the board decrease expenditures until fees can be increased. The district paid Wallace Group $829,563 during the 2010/2011 fiscal year.
The South County Sanitation District provides sewer services to about 38,000 customers in Arroyo Grande, Grover Beach and the unincorporated town of Oceano.