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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.


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The Sibbach report on John Wallace and his cronies on the SSLOCSD oversight board is as worthless as the Grant report on the Paavo Ogren-Maria Kelly conflict-of-interest/fraud-laden actions involving the Los Osos sewer.


Is Sibbach corrupt or just not very bright?


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I didn’t bother to read the report as its pointless. Sibbach notes one in 23 disbursements weren’t sighed illegally. Are these disbursements the monthly warrants, the audit went back just shy of two years . As the report shows that would be only going back to the 08/09 FY, then forward which was audited. 2009 is when the new lab tech was hired and began to uncover internal fraud in reporting. RTI, Ferrara’s long time personal friend was hired to investigate internally under Wallace’s directions and provided limited and bias info. Their attorney says their right on track and have always been, but they change procedures because what, they were slow and they needed more legal fees and Admin fees to pay their mortgages? Lets not forget Wallace has been providing engineering and admin for 25 years, not 25 months.

The problem lies in a quarter century of no open competitive bidding taking place, no project cost reviews by an unbiased outside contractor or engineer company, and whats been documented by both Sibbach and the Grand Jury that final payment information VS initial job bid prices are non existent so there’s no way to track how much was really billed out per project. How can this possibly be legal in Government contracting?


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Can’t agree more with what rallyraid had to say. The problem is that Wallace is so entrenched w/ the local politicians that none of them will do or say anything against him. Wallace has had his way with the San Dist for 25+ years. Makes ya kind sad to think that none of the politicians who have sat on the District’s Board never brought the conflict of interest problem to light. In the end all it accomplishes is putting more money in Wallaces bank account and higher rates for all the sewer users.

Wallace Nicolls and Ferraro blatently ignore the many facts that have been provided and are basically thumbing their noses at all of the problems that have been brought to light.

The only way to overcome this problem is to demand that Nicolls and Ferraro be removed from the San Dist board. As long as the good ol boys are there nothing will ever change.


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Are the people who are being served by this sanitation district stupid? so wealthy? uninterested? or are they all so corrupt themselves that they don’t want any further detailed information put out about this?

Wallace has many companies: they go by the name of SCSD, Morro Bay, etc. etc. where he has been pulling money out of the taxpayers’ pockets for so long that he has forgotten that they are actually taxpayers’ monies and not his private bank accounts.

Wake up, you citizens of South County. You are going to get a increase in your fees and it seems it will go right into Wallace’s pocket.


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I’ve said this before, but I’ll say it again: “The County of San Luis Obispo has NO BUSINESS “investigating it’s own”. The County needs to get real here & hire an outside independant firm that SPECIALIZES in investigating corruption in community government.” It’s clear that the Wallace Group as well as the Seitz Brothers are deeply involved in “attempting” to hide their many mis-deeds. The Wallace “situation” should not be swept under the rug, nor should the Maria Kelly/Paavo Ogren “episode” be ignored. It’s clear there is a conflict in BOTH these examples. There is NOT a more corrupt County in the State of Ca. than San Luis Obispo County. Heads need to roll here…


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Time for change. People can bitch and moan about this, but what we should be doing is putting out requests for proposals from other engineers. In order to post the kind of detailed job description for a firm like the Wallace Group, you have to do a little public records research. You have to get a handle on exactly what they do, and how they do it, how much particular projects cost, what materials work best given the demands of your town’s population and infrastructure, etc…


You have to have detailed knowledge about the environment in which your infrastructure must perform. All this preliminary research is readily available. You just need about a thousand hours of time to do the preliminary research.


Sometimes, you get lucky, and go to the right Web site, and discover that there are companies which design and sell entire wastewater treatment facilities marketed by the size of the population which will use it. I don’t think the Wallace Group had to design the town’s wastewater treatment plant from scratch.


And when I say “town,” I am referring to the many communities in which Wallace Group has contracts. When you have that many contacts, it must get easier to just bypass legal procedures and regulations put in place to safeguard public money. What appalls me is just how many public officials are ready and willing to sign off on a bill which must be approved by a specified number of managers or directors. Where the Hell were they in the decades this was probably going on? And what motivated them to be complicit in signing off on a warrant without the formal approval of the Board?


My next stop is the Clerk Recorder’s Office to see what the District’s bylaws and articles of incorporation can tell me. I want to know where I can find any similar information about Wallace’s corporate structure. Then, I’m going to contact the Ca. Secretary of State’s Office to see if there is any information on Wallace Group in Sacramento. Somewhere in the blizzard of paperwork, there will be a specific procedure by which someone okays money paid out to the Wallace Group.


Of course, you could ask the lawyer for the SSLOCSD Seitz, since the procedure in question is a matter of public record. If the moon is in Jupiter, the dog’s tail is pointing North, and the winds are blowing seaspray off the crests of the waves, you just might get an answer.


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Seems a waste of effort as it addresses few if any of the allegations made by the Grand Jury, the public or recently terminated District employees who spoke out after witnessing firsthand accounts what takes place internally. It informs us right off the get go Sibbach did not conduct a conflict of interest investigation, nor did Sibbach determine that a conflict exists, yet somehow the Tribune article suggests preventative conflict of interest controls are in place, would somebody direct me to where would those be, I must have missed something?

Let’s get this straight, there’s no accountability for services provided as initial bids and actual charges at year’s end are unclear or nonexistent on paper. So here’s how it looks, you sell the tax payers something suggesting it has a price tag of $1000, you luckily have access to the public’s “deep pockets”. Your later asked by the public exactly how much was charged for that job and your told there’s no documents and no way to prove only $1000 of public funds were taken, OK, sounds legitimate to me, where do I sign up for my share of the pie?

Wallace signs off his own pay checks with only one of his two buddies, Nichols or Ferrara co signing the checks. Wonder if Wallace ever asked Jim Hill to sign off on the Wallace’s checks? You really believe after years of supporting their business partner and friend either Ferrara or Nichols would be willing to admit to anything wrong taking place? Can you say political suicide? Ever really question why Hill walked away from his position after trying to clean up this mess?

Mike Seitz suggests the years long investigations by multiple governing agencies including a lawsuit that they allegedly lost filed by an employee who spoke out, including a paid off with a gag order, had nothing to do with their recent change of policies and practices. Termination of that same employee in late 2010 due to what Wallace told the public was economic shortcomings, then in early 2011 Wallace approves a 3% raise for staff. Twenty five years of the same old same old, and Seitz and the Board members decide to split the contract and write new policies for administrative and engineering services?? Yeah OK, Id say they chugalugged a bit too much of what the Sanitation District treats.

Internal investigations are ordered by Wallace and Ferrara’s hired guns to investigate employee allegations of fraud in NPDES reporting and altering of lab reports along with other unethical practices under Wallace’s directions and nothing is found. The state then completes their investigations and the District is charged with everything Wallace, the Board members, their investigator and Seitz told the public never took place but were all lies by employees. The tax payers pick up the tab for legal fees and fines to come and management is still as pure as the driven snow.

What’s wrong with this picture people?


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