Oceano’s missing audits cost to the community

May 24, 2012

OPINION By JULIE TACKER

Audits are important for a number of reasons, but most importantly for the Oceano Community Services District; they are required to borrow money.

The most recent missed opportunity involved the refinance of the debt associated with the seismic-retrofit of the Lopez Dam.  Historically low interest rates provided an opportunity to save money on the debt service.

While the cities of Pismo Beach, Arroyo Grande and Grover Beach all benefited from the refinance because their audits and financial houses were in order, the Oceano Community Services District (OCSD) was unable to even make application for the new and better financing due to the absence of audits.  Instead the OCSD was extended credit by the County of San Luis Obispo Flood Control District to cover their portion of the indebtedness at less favorable terms.

In contrast, as an example the city of Arroyo Grande is saving close to $50,000 annually over the 20-year refinance term and will realize approximately $1 million in savings.

Oceano could have and should have saved money too.

Audits are also important relative to any other loans or grants applied for by the OCSD.  The US Department of Agriculture, California Special Districts Association, even the Community Development Block Grants distributed by the County, all need current financials to make application.  Audits are an examination by a trained accountant of the financial records of a governmental entity, including noting improper or careless practices, recommendations for improvements, and a balancing of the books.

In a letter dated June 20, 2011 from James P. Erb, CPA, San Luis Obispo County Assistant Auditor-Controller, reminds the district that “Government Code Section 26909 requires an annual audit be conducted for all special purpose districts within the County, and a report be filed with the County Auditor-Controller within 12 months of the end of the fiscal year under examination.”  The letter goes on to say, “The code also authorizes the County Auditor-Controller to contract with an independent auditor to perform the audit and charge the costs against the district.”

For years, the district has suffered financial turmoil, especially under the leadership of former General Manager, Raffaele Montemurro.  The district hasn’t completed an audit since 2007/08.

General Manager Tom Geaslen was hired in June of last year, promising to “turn this district around” making out-of-date audits his highest priority.  Geaslen proudly published the controversial 08/09 audit only weeks after his hire, but later rescinded it saying it needed “restating” to include FEMA monies received and spent by the district after the San Simeon earthquake of 2003.  To date, he hasn’t brought it back to the board.

This audit is the same audit that was the subject of numerous Board discussions from 2009-2011.  Three-hundred thousand dollars’ worth of mysterious Certificate of Deposits had been found, the 2010 Board voted to have this audit be forensic in nature.  The forensic audit was never done; instead a “test” was done by CPA consultants Glenn, Burdett, Phillips & Bryson, for only the fourth quarter of 08/09 specific to checking and credit card charges.

This analysis found numerous irregularities and red flags for fraud.

At each OCSD Board meeting Geaslen verbally assures the Board that all accounts are paid up and that the district is fiscally healthy.  Without reconciling the past, how can Geaslen assure the Board and community that the future is so rosy?  As recently as the board’s May 9 meeting, Geaslen again promised that the completed audits would be presented and ready for adoption at their “next meeting.”

The May 23, OCSD agenda makes no mention of any audits.  With fiscal year 2011/12 winding down quickly; will the district be four years’ worth of audits behind?

The county auditor-controller has yet to take the matter away from the district. Geaslen’s cozy relationship with Supervisor Teixeira has likely kept the Auditor-Controller at bay.

Geaslen’s wife Deb is the Supervisor’s Legislative Aide and she and Tom were co-campaign managers getting Teixeira elected in 2010.  But how long before the Auditor-Controller’s office has to step in, take the audits away and stick the district with the bill?

Not counting Geaslen, who will be paid $167,790 this year and Accounting Manager, Marie McGrath’s staff time; the two teams of auditors, Moss, Levy & Hartzheim, LLP., and Caliber Audit & Attest, LLP., accounting firm, Pressley & Associates, two independent consultants familiar with the district’s previous accounting system, the district has spent over $55,000 this fiscal year their consulting fees related to the audits.

Whose responsibility is this now?  Monte or Tommy?