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- California Governor’s Office of Emergency Services
- California State Auditor's Comments on the Response From the California Governor’s Office of Emergency Services
- Fallen Leaf Lake Community Service District
- California State Auditor's Comments on the Response From the Fallen Leaf Lake Community Service District
- El Dorado Local Agency Formation Commission
June 25, 2019
Ms. Elaine M. Howle, CPA
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, CA 95814
Dear Ms. Howle:
The California Governor’s Office of Emergency Services (Cal OES) received the California State Auditor’s (CSA) Draft Report regarding an audit of Fallen Leaf Lake Community Services District (Fallen Leaf), on June 18, 2019. Cal OES appreciates the opportunity to provide a response to CSA’s draft report.
During the audit, Cal OES observed two possible limitations to CSA’s methodology that may impact our response.
First, according to CSA, Cal OES was not originally within the scope of this audit. During the course of CSA’s original audit of Fallen Leaf, Cal OES was included after CSA inquired into certain topics related to Fallen Leaf’s participation in the Fire and Rescue Mutual Aid System and the California Fire Assistance Agreement (CFAA). Fallen Leaf is just one of more than one thousand local entities that participate in the CFAA. It is important to note that CSA’s recommendations were made in the context of the review of Fallen Leaf, as opposed to all, or a larger sample, of the entities that comprise the CFAA.
Second, CSA denied Cal OES’s request for additional time to address the content of this report. Cal OES is concerned that this constrained timeline did not afford adequate time to respond.
Nevertheless, Cal OES intends to address CSA’s recommendations and responds to each recommendation as follows:
To better ensure that it reimburses local fire agencies appropriate amounts for responding to incidents, including the provision of strike teams for fighting wildfires,
Cal OES should complete implementation of its plan to audit a sample of salary forms and invoices that local fire agencies submit under the fire agreement. It should complete its negotiations with the State Controller’s Office (SCO) for it to perform these audits by September 15, 2019.
Cal OES Response
Cal OES is currently in the process of contracting with SCO to conduct audits of submitted salary surveys and invoices. Cal OES hopes to have an inter-agency agreement with SCO by September 2019.
To further ensure that local fire agencies receive proper reimbursement for responding to incidents, Cal OES should recommend to the CFAA Committee that it include the following steps in the new fire agreement, anticipated to be effective starting in 2020:
- Require local fire agencies to submit documents showing approval by their governing body of the average actual salary rates included on the salary form.
- Require local fire agencies to submit documentation to support their average actual salary rates.
- Revise the salary form and reimbursement invoice form so that authorized representatives of local fire agencies sign them under penalty of perjury.
Cal OES Response
Cal OES will work with the CFAA Committee members during their next CFAA negotiations meeting to address the following:
- Require local fire agencies to submit supporting documentation showing that their governing body approved their submitted average actual rate forms;
- Require local fire agencies to submit documentation to Cal OES supporting their average actual salary rates; and
- Revise the salary survey and reimbursement invoice forms to show that the authorized representatives of local fire agencies sign them under penalty of perjury.
Cal OES appreciates the assistance and guidance offered by CSA during their audit. If you have additional questions or concerns, please contact Ralph Zavala, Cal OES Internal Audits Office Chief, at (916) 845-8437.
MARK S. GHILARDUCCI
cc: Mark Ghilarducci, Director
Grace Koch, Chief Deputy Director
Timothy Perry, Chief of Staff
Brian Marshall, State Fire and Rescue Chief
Lori Lopez, Senior Emergency Services Coordinator, Fire and Rescue
Ralph Zavala, Chief, Internal Audits Office
CALIFORNIA STATE AUDITOR’S COMMENTS ON THE RESPONSE FROM THE CALIFORNIA GOVERNOR'S OFFICE OF EMERGENCY SERVICES
To provide clarity and perspective, we are commenting on the response to our audit from Cal OES’ director. The numbers below correspond to the numbers we have placed in the margin of the director’s response.
We disagree that including Cal OES in the audit and affording it the same length of time to review the draft report as we do other auditees on other audits is a limitation in our methodology or should have affected Cal OES’s response. Our work related to assessing the district’s financial condition and ongoing financial viability included determining whether the district overbilled reimbursing agencies for personnel hours related to the fire agreement. We included Cal OES in our audit after we identified evidence of the district’s overbilling because of the key role Cal OES plays in the fire agreement’s reimbursement process. At that point, we took the same actions that we would take for any audit: we issued Cal OES an engagement letter; we held an entrance conference with Cal OES to explain the audit; we obtained and reviewed documentary evidence of its policies and the actions it took related to reimbursing fire agencies for their staff on strike teams; we interviewed Cal OES personnel to gain perspective; we held an exit conference to share our proposed findings, conclusions, and recommendations; and we provided Cal OES a copy of our draft report for it to review and provide comments.
The director’s inference that we based our Cal OES recommendations on a review of a single local fire agency among thousands is wrong. We based our findings, conclusions, and recommendations related to Cal OES on sufficient, appropriate evidence obtained from a variety of sources. Our report specifically mentions this evidence, which we believe clearly supports our results. For instance, in the Audit Results, we mention three weakness in the fire agreement’s reimbursement process, including the fact that Cal OES no longer audits salary forms and reimbursement claims, a control we recommended in an audit we issued in 2012; the fire agreement does not require local fire agencies to submit documentation to support the enhanced salary rates they submit to Cal OES; and the fire agreement does not require local fire agency representatives to sign the salary forms or reimbursement invoices under penalty of perjury. Furthermore, as we point out here, Cal OES accepts as factual the enhanced rates that local fire agencies submit on their salary forms, in part, based on those signatures. These weaknesses, in conjunction with evidence related directly to the district, enabled us to arrive at our findings and conclusions. Therefore, we stand by our recommendations to Cal OES.
Cal OES’s complaint about a “constrained timeline” for providing a response is misplaced. We gave Cal OES the same five‑business‑day time period to provide a written response to our audit that we have given to all auditees for the last several decades. Furthermore, when we held the exit conference on June 4, 2019, or three weeks before its response was due, we informed Cal OES of all the findings related to it in our report, shared a preliminary draft of the portion of the report that pertained to it, and advised it to start preparing its response at that time.
June 24, 2019
Ms. Elaine Howle
Office of the State Auditor
621 Capitol Mall, Suite 1200
Sacramento, CA 95814
Re: Draft Auditor Report/District Response
Dear Ms. Howle,
The Fallen Leaf Lake Community Service District governance team, which consists of the Board of Trustees and the Fire Chief, have reviewed your draft report. The District takes this report very seriously, and thanks your office for the opportunity to review the report and respond to it.
As you may be aware, the District provides valuable fire-fighting and emergency resources to the South Lake Tahoe community and to the State. Our District is committed to improving internal practices to ensure the District can serve California long into the future. We thank your staff for their time and effort in performing this review to help strengthen our operations.
If you have any questions or require additional information, please have your staff contact Gary Gerren, Fire Chief, at (530) 544-3300. Attached are our comments and response to the recommendations and findings contained in your draft.
FALLEN LEAF LAKE
COMMUNITY SERVICES DISTRICT
DISTRICT RESPONSE TO DRAFT STATE AUDIT REPORT
A. To begin, the District would like to comment on the Report’s conclusion and recommendation in favor of the expansion of the District’s electorate through legislation. The District strongly agrees with that conclusion and recommendation, believing as it does that the Report’s conclusion and recommendation on this topic is the best approach to solving the voting-rights problem that has brought the District before the Legislature. The Report’s conclusion and recommendation is in line with and validates the efforts by the District to accomplish that goal, and the District intends to continue its pursuit of that goal through AB 1053, which is the successor bill to SB 561. Compared with the other “Local Solutions” detailed within the report, the Legislative option is the only reasonable approach to ensuring an independent, represented electorate.
B. The District also provides the following responsive comments to the audit’s factual findings:
1) In reference to Page 16 that local agencies must submit the number of hours worked on an incident in an emergency record: The District responds that the local agency does not submit the hours worked during the emergency activity, as those hours are maintained by the strike team leader and accounted for on the F42 form. At the end of the emergency activity, the strike-team leader also records (on the F42 form) the estimated arrival time for the emergency unit back at their home base. These total hours are collected at the incident, and OES files the paperwork and presents the local agency with an invoice.
2) a. In reference to Page 17 that the District did not pay its 16 recruits as part of regular duties: The District informed the audit team that recruit duties were performed by the recruits as part of their training program. The District has treated the recruits, consistently with labor law, as interns that were performing and completing training that is provided by the District in exchange for necessary experience in order to complete their training.
b. In addition, with respect to sending the recruits out on strike teams, the Fire Chief did not use an enhanced rate as stated in the audit. The salary schedule was filled out based upon rates the Fire Chief established for strike teams. The Board approved the strike-team operations as part of its normal District budgets, including the anticipated income from the strike team activities. The fire department’s routine operations were not considered as part of this process.
3) With respect to Page 18, which references “rather than using the base rate for personnel.” The District responds that the Fire Chief did not claim enhanced rates for strike teams during calendar years 2016-2018. The Fire Chief used a “strike-team only” salary survey for compensation and direct costs for firefighters, engineers and captains.
The Fire Chief is able to assign firefighting personnel, both paid and interns, to a strike team. The interns are compensated as a firefighter while performing during emergency, strike-team incidents. The interns (recruits) were paid while performing duties as firefighters while assigned to the Fallen Leaf Lake F. D. during operations requested by the State of California. The Fire Chief adhered to the terms of the OES MOU as he reasonably understood them.
4) With respect to the reference on Page 20 that the Fire Chief also stated that he had submitted an enhanced pay rate to offset the low wages: The District responds that the Fire Chief stated that he had submitted a strike-team salary-survey rate which was higher than the lower wage paid during routine operations.
5) With respect to the reference on Page 21 that the Fire Chief “stated that the District's pay scales are lower than other fire districts nearby, and that he believes it is uncommon for firefighters to respond to strike team incidents for low pay rates unless the firefighters are volunteers,” the District responds as follows: The Fire Chief’s understanding is that volunteers receive the default rate. The Fire Chief’s justification for the salary survey was based upon his understanding and previous salary surveys that were submitted and approved by Cal OES. The Fire Chief has not circumvented the board’s role of governing the District, as he explained to the auditors several times. The Fire Chief provided evidence to the auditors (in the form of Board meeting minutes) that the District has approved the use of strike teams as part of the budget process, which is a normal procedure for the Board.
6) With respect to the reference on Page 22 that “based on the authorization, the fire chief should not have submitted salary rates for strike team personnel without approval from the district’s board,” the District responds that the Fire Chief did submit the salary rates for strike team personnel with approval based on the board’s normal operation of budget approval.
7) With respect to the first paragraph on Page 23, the District responds as follows: Based on the Fire Chief’s understanding of the reimbursement process, there were no willful or intentionally improper submissions of reimbursement funding.
8) With respect to references on Pages 23-25 that the District mischaracterized its employment relationship with its recruits: As stated previously several times to the auditors, there was no willful misclassification of an employee as an independent contractor. The classification as 1099 employees was based on expert opinion from the District’s and Chief’s auditor and the District’s bookkeeper. The District understands that the State auditors have reached a different legal conclusion and will respond to their recommendations as stated below.
District’s Responses to the Report’s Recommendations:
The District responds to each recommendation as described below:
• To ensure that the District complies with the reimbursement terms of the fire agreement and does not claim excessive reimbursement amounts, the district’s board, by September 15, 2019, should create and implement a policy governing the reimbursement rate the fire chief claims for paid and recruit firefighters who participate on strike team assignments under the fire agreement. Additionally, the district’s board should review and approve the annual salary form before the fire chief submits it to Cal OES.
District Response: The District agrees to create and implement a policy to comply with the reimbursement terms of the Cal OES fire agreement. The District’s board will also review and approve the annual survey form prior to submission to Cal OES.
• To rectify the excessive reimbursement amounts it received for strike team assignments, the district should take the following actions by December 31, 2019:
1) Develop and implement a plan for returning to the paying agency the excessive reimbursements it received for calendar years 2016 through 2018.
District’s Response: The District will develop and implement a plan to identify and return to the paying agency any excessive reimbursements for calendar years 2016-2018.
2) Work with Cal OES to identify the amounts of excess reimbursements the District received for calendar years 2013 through 2015 and then develop and implement a plan for returning those amounts to the paying agency.
District’s Response: The District will work with OES to determine overpayment, if any, for the calendar years 2013-2015 and, if so, will develop and implement a plan for returning any excess monies received.
• To ensure that it complies with all applicable labor and wage laws, the District should, by September 15, 2019, seek advice from appropriate experts, such as legal counsel and tax advisors, regarding the proper characterization and compensation of its recruit firefighters, and develop and implement a policy in this area that meets all applicable requirements.
District’s Response: The District agrees to seek such advice and to develop and implement an appropriate policy meeting the applicable requirements.
• To improve its financial viability and safeguard its ability to continue providing services to the Fallen Leaf Lake community, the district should take the following actions by December 31, 2019:
• Monitor the status of the financial risks it may face in the future, forecast their impact on the district's finances and budget, and plan and implement appropriate changes to its budget as necessary throughout the fiscal year.
District’s Response: The District and its auditors believe that the District is financially viable. The District will strengthen its financial viability by incorporating the recommendation as appropriate.
• Limit the extent to which it relies on volatile revenue sources to balance its budget.
District’s Response: The District believes it makes financially sound choices. The District will strengthen its finances by taking the necessary steps to review and assess, on an annual basis, any revenue sources that it and its auditors may reasonably conclude are “volatile.”
• Develop and implement a budget plan that realistically estimates changes in revenues and expenditures, as well as identifies approaches to address such changes.
District’s Response: The District believes it has been realistic in estimating changes in revenues and expenditures. The District will strengthen its budget plan by annually reviewing and assessing any potential changes in revenues and expenditures.
• Develop a five-year forecast of estimated revenues and expenditures and a plan to guide its decisions and actions in the event of fluctuations.
District’s Response: The District agrees with the recommendation.
CALIFORNIA STATE AUDITOR’S COMMENTS ON THE RESPONSE FROM THE FALLEN LEAF LAKE COMMUNITY SERVICE DISTRICT
To provide clarity and perspective, we are commenting on the response to our audit from the president of the district’s board of directors (board president). The numbers below correspond to the numbers we have placed in the margin of the board president’s response.
While preparing our draft audit report for publication, page numbers shifted. Therefore, the page numbers that the board president mentions in his response do not correspond to the page numbers in our final report.
Although accurate, the board president’s comments fail to convey the extent of the district’s role in providing information concerning reimbursements for its staff’s efforts on strike teams. As we note in the text box, the local fire agency notes the start and stop dates and times for its staff on the emergency activity record. Cal OES uses this information to determine the number of hours the fire agency’s staff worked on an incident, calculates the reimbursement amount, and creates and submits an invoice—which includes the number of hours and the reimbursement amount—for the local fire agency. For the district, the fire chief signed and returned these invoices to Cal OES, certifying them as correct to the best of his knowledge and belief. We revised the text here to clarify that a local fire agency must submit information regarding the length of time its personnel work on an incident.
We do not agree that it is clear that the district has treated its recruits consistently with labor laws. As we state here, we describe our concerns regarding the district’s compliance with labor laws, including that recruits can earn more than the allowed nominal fee while on strike team assignments.
Contrary to the board president’s comment, the fire chief did, in fact, submit enhanced salary rates to Cal OES. As we describe in the text box and further here of our report, enhanced salary rates are rates that are greater than the default base salary rate.
The board president’s comment is misleading. As we state here, the fire chief could not provide evidence that the district’s board approved the pay rates he submitted to Cal OES. In reaching this conclusion, we examined budget documents and board meeting minutes, neither of which contained sufficient detail to demonstrate that the board knew of or approved the enhanced salary rates the fire chief claimed for strike team personnel. Furthermore, although the district’s budgets for fiscal years 2017–18 and 2018–19 identified the revenue amounts the district expected to obtain from strike team reimbursements, they do not identify the enhanced salary rates the fire chief submitted to Cal OES for reimbursement. Finally, even after we shared our statement with the fire chief at the exit conference, he failed to provide us with evidence that would support the board president’s statement. To clarify how we reached our conclusion on this issue, we revised the text here.
The fire chief’s use of a “strike‑team only” salary survey was improper. As we state here, the fire agreement states that it will not reimburse local fire agencies for enhanced salary rates that exceed the rates that the agencies themselves pay their personnel. We also state here that the fire agreement’s default reimbursement rate is the base rate and that we expected the fire chief to include the base rate on the salary form.
As we indicate here, the fire chief did not follow Cal OES’s instructions for submitting salary information to Cal OES and the district improperly profited as a result. As we state here, we believe the fire agreement and its instructions are clear. If the fire chief found the fire agreement and Cal OES’s instructions for completing the salary form confusing, he should have contacted Cal OES for clarification. We stand by our conclusion.
Volunteers are not the only strike team personnel who can receive the base rate: any personnel normally paid less than the base rate can also receive it. Because the fire agreement’s default reimbursement rate is the base rate and because the district’s personnel who participate on strike teams are either unpaid or normally earn less than the base rate, the base rate would be appropriate for the district’s firefighters and recruits, as we state here.
Submitting inflated salary information in salary surveys in one year without repercussions does not justify the district continuing to do so. As we state here, Cal OES told us that it accepts the enhanced salary rates that local fire agencies include on the salary forms in part because they are signed to the best of the signer’s knowledge and belief.
Nowhere in our report do we assert that the fire chief willfully, or intentionally, submitted incorrect reimbursement forms or willfully misclassified employees. However, the evidence we obtained shows clearly that the fire chief knowingly submitted enhanced salary rates to Cal OES for typically unpaid recruits, knowingly did not pay his recruits the full salary rates he claimed for strike team reimbursements, and knowingly did not pay his recruits overtime for their strike team work.
As we explain here, the district’s ongoing financial viability may be in jeopardy. Thus, our recommendations in this area are not only prudent but necessary.
We look forward to reviewing the updates on the district’s progress in implementing this recommendation at 60 days, six months, and one year following the issue date of this report.
June 19, 2019
Elaine Howle, CPA
California State Auditor
621 Capitol Mall, Suite 120
Sacramento, CA 95814
SUBJECT: Fallen Leaf Lake Community Services District, Report 2018-133 (dated July 18, 2019
Dear Ms. Howle,
Thank you for the opportunity to review and comment on the draft report on Fallen Leaf Lake Community Services District (Fallen Leaf Lake CSD or FLL). I understand this agency’s review was a courtesy and that the draft report must be kept confidential per Government Code Sections 8545(b) and 8545.1. The final draft of the report will be published next month and I may not disclose the draft report’s content before that time. I also understand that the report does not contain any recommendations to this Commission.
While a written response from LAFCO was not expected, the following comments are respectfully submitted after the review of the draft report.
Page 45 of 61: “If the district gives up its park and recreation services so it can consolidate to form a fire protection district, the park and recreation services could continue, but the current level of operations would not necessarily endure” (emphasis added).
Because LAFCO did not have access to the full report, it is possible that the redacted section of this paragraph contains the necessary information to support this statement. As a result, this comment is limited to LAFCO’s experience independent of the research and analysis that was performed in the draft report. Setting aside that no one, to LAFCO’s knowledge, has recommended the divestiture of FLL’s park and recreation services, the premise is imperfect based on three premises. First, FLL outsources parks and recreation services. A private vendor runs and operates the marina and its store. FLL has no dedicated staff or programs that it runs independent of this vendor. Second, the records from prior years indicates that the contract with the current vendor makes the parks and recreation services side of FLL self-sustaining for the district. Third, the fire service operations have no impact on the preceding two factors given that the revenue streams for these services are kept separate and there is no shared staff between these two functions (it is understood that the fire chief also acts as general manager to the district; however, that role is for the district as a whole). As a result, there is no evidence known to LAFCO that supports the contention that “the current level of operations would not necessarily endure” if FLL ceases to exist, if parks and recreation services are provided by another entity or if FLL continues to exist as a district that only provides parks and recreation services.
Page 46 of 61: “Alternatively, the successor district may be able to avoid significant increases in personnel costs either by using volunteers or by not staffing the Fallen Leaf Lake station to the same extent the district does. This approach would likely result in a lower level of fire protection services to the Fallen Leaf Lake community, such as slower response times than the district currently provides. These potentially reduced fire protection service levels could also result in the loss of, or lower levels of, fire insurance coverage or higher fire insurance costs for property at Fallen Leaf Lake.”
In LAFCO’s estimation, this conclusion is only partially accurate. The paragraph implies that only by keeping the status quo – an independent FLL providing fire suppression services – would service levels and costs remain at current levels. It is true that Fallen Leaf Lake CSD controls costs by using volunteer firefighters. It is true that costs would increase if a successor entity taking over fire suppression from FLL chooses to staff the Fallen Leaf Lake Station 9, fully or partially, with paid personnel. It is also true that residents would experience lower levels of services or longer response times if the successor entity chooses not to staff Station 9. However, if the successor entity chooses to staff Station 9 with volunteers at the same number of firefighters that FLL currently has, then the premise for the last two cases no longer stands.
The hope is that the following issues are addressed in the redacted portions of the report. It should be also noted that fire insurance carriers are seriously reconsidering whether to extend coverage in the wildland-urban interface. But there should be a discussion about how “fire insurance coverage or higher fire insurance costs” would be impacted by services continuing to be provided by a financially-distressed district. Equally important is a discussion on the costs of constant turnover. There is very little retention in volunteers year-over-year during fire/tourist high season when Station 9 is staffed. Fallen Leaf Lake CSD has to recruit volunteer firefighters annually in order to maintain operations.
Lastly, not all of the information that the State Auditor had in reaching its recommendation that the best option is to expand FLL’s electorate was available for review in the draft report. As a result, this agency will not question this recommendation. However, there should be an understanding that there will be consequences should the Legislature adhere to this recommendation for two reasons. Notwithstanding the issue of who would be tasked with running District elections, creating a hybrid district (where landowner-voter, registered voter and/or a third class of voter, a permit-holder voter, may be enfranchised) would make future reorganizations problematic under existing State Law. This will be true regardless of who instigates the reorganization, whether it is the FLL Board of Directors, its residents, or another entity. Special legislation may be necessary should a future reorganization involving LAFCO be needed in the future.
Second – with the understanding that it is possible that this was raised in the redacted portions of the report – LAFCO will emphasize again that the governance issue that FLL faces is not just a local oddity. There are multiple counties along the mountains and the coast that have districts with the quandary of serving a substantial number of second and third homeowners (Placer County by itself has 13 districts). The draft report cited at least four other districts with similar traits. This issue needs to have a more comprehensive approach in order to arrive at a solution that ensures equity and the furtherance of goals of the Legislature. Otherwise legislators will continue to grapple with these issues in an ad hoc manner as these districts continue to struggle. This report has the tremendous potential of raising the visibility of this issue so that a dialog can begin with all stakeholders on a workable, permanent solution.
Please contact me at 530-295-2707 or a firstname.lastname@example.org should you have any questions relating to this letter.
José C. Henríquez
CALIFORNIA STATE AUDITOR’S COMMENTS ON THE RESPONSE FROM THE EL DORADO LOCAL AGENCY FORMATION COMMISSION
To provide clarity and perspective, we are commenting on the response to our audit from the executive officer of the El Dorado Local Agency Formation Commission (LAFCO). The numbers below correspond to the numbers we have placed in the margin of the executive officer’s response.
While preparing our draft audit report for publication, page numbers shifted. Therefore, the page numbers that the executive officer mentions in his response do not correspond to the page numbers in our final report.
The executive officer’s comment pertains, in part, to redacted text concerning the district that was in the draft report that we provided to the El Dorado LAFCO: the text was redacted for reasons of confidentiality as required by state law. The Audit Committee directed us to perform this work. As we note in the Scope and Methodology for this audit, the Audit Committee asked us to identify and assess alternative governmental or nongovernmental entities that could provide services similar to those that the district provides and determine whether reorganizing the district would jeopardize public access to Fallen Leaf Lake. We also point out here that one of the two types of services the district provides is park and recreation services.
We draw no connection in the report between our concerns regarding the district’s fire protection services and the operation of its park and recreation services. In fact, we discuss the possible effects if the district gives up park and recreation services in order to consolidate with another district to form a fire protection district. Specifically, we state that although deed covenants for certain land the district owns require the district to maintain public access to the lake, they do not require a future owner to retain other park and recreation services, such as operating the store, marina, or restroom facilities, which the district owns.
While we acknowledge here that a successor entity may be able to avoid significant increases in personnel costs by using volunteers, this prospect seems unlikely. As we indicate here, the fire chief for Lake Valley—the only adjoining such district, and thus a likely candidate for consolidation—informed us that it does not use volunteer firefighters. We stand by our conclusion.
The executive officer’s comment pertains, in part, to redacted text concerning the district that we did not share with the El Dorado LAFCO. We discuss the district’s financial issues here and the potential impact of fire insurance coverage and costs here. Furthermore, because it was not among the audit objectives the Audit Committee approved, we did not assess turnover among the district’s firefighting staff.
We do not share the executive officer’s concern over possible consequences of a future reorganization of the district if the Legislature chose to enfranchise the district’s landowners and permit holders; he does not explain why a future reorganization would be problematic or why special legislation would be necessary as a result of reorganization. Furthermore, according to our legal counsel, stakeholders would not need additional legislation to undertake a reorganization of the district if the Legislature enfranchised landowners and permit holders.
We considered proposing a comprehensive solution for resolving governance issues for existing special districts other than the district to be beyond the scope of this audit. Despite certain similarities these districts may have in common, such as vacation home communities and small electorates, additional attributes may make the solution we propose impractical for these other special districts. We did, however, propose a recommendation to the Legislature to help keep future special districts from encountering governance issues like the ones encountered by the special districts named in our report. Namely, we recommend that the Legislature amend state law to require a LAFCO to assess whether an electorate is of sufficient size when it considers creating or modifying a special district.