California State Auditor’s Report: Central Basin Municipal Water District (December 3, 2015)

Its board of directors has failed to provide the leadership necessary for it to effectively fulfill its responsibilities

This report concludes that the district’s board of directors (board) has failed to provide the leadership necessary for the district to effectively fulfill its responsibilities. For example, we found that the board failed to ensure that the district maintained stability in key executive management positions throughout our review period. Further, we found that the board failed to take basic steps to ensure the district’s long-term financial viability, including engaging in long-term financial planning and performing the necessary study to ensure the district’s water rate structure is appropriate and that it will collect sufficient revenues to meet its costs. Finally, the board’s actions contributed to the district losing its insurance coverage, forcing the district to purchase insurance with higher premiums for considerably less coverage than in previous years.

The board also violated state law in 2010 when it improperly approved the establishment of a legal trust fund without adequate public disclosure. Further, it lacked a means of ensuring expenditures made from the $2.75 million trust fund were appropriate. In addition, the district consistently engaged in questionable contracting practices. For example, we found that the district often inappropriately circumvented its competitive bidding process when it awarded contracts to vendors. The district also spent thousands of dollars of public funds on purposes unrelated to its mission, some of which very likely constitute gifts of public funds, which are prohibited by the California Constitution.

Additionally, the district did not always follow its policies for hiring employees, which led it to hire certain individuals who did not possess the necessary qualifications for their positions and to incur unnecessary expenses. In one instance, the district paid more than $22,000 for an employee to obtain a bachelor’s degree, when possession of such a degree was already a minimum requirement to qualify for his high-level position. Ultimately, this individual did not obtain his degree during his employment with the district. We also found that some of the benefits the district offers its board members may be overly generous, as it provides them with full health benefits and a generous automobile allowance, even though their work is essentially part-time. Finally, we noted multiple instances in which the district paid for unreasonable travel and meal expenses for both its board members and staff.

Elaine M. Howle, CPA, State Auditor

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