JOHANNESBURG, Calif. — An internal audit of the Rand Communities Water District’s finances and documents turned up a disturbing trend, according to a report by the district’s board secreatry.
Carrie Hoerauf provided an update at the board meeting on Wednesday in Johannesburg. Hoerauf had been appointed as auditor by the board in August, as set forth by district bylaws.
Her task was to review the commission of financial records after the board discovered them in disarray, along with discrepancies and billing concerns.
The small water district serves Johannesburg, Randsburg and the San Bernardino County town of Red Mountain.
“There was no cash log, no recording of how cash was received and deposited, [and] there was no specific petty cash file as records were not kept together,” Hoerauf said. Checks showed reimbursement of petty cash, but no receipts were available. Some existed as scanned copies, but the originals are missing.
She said there were very few routine places to keep records in general and there was a lack of a filing system for the 2017-18 fiscal year. Only a small amount of records existed compared to the prior fiscal year.
The district lacked a daily filing practice and financial documents existed in numerous versions.
“It was hard for me to know which one was the real one,” Hoerauf said.
The current fiscal year lacks any financial documents and those that exist for FY 2017-18 can’t be matched against the district’s check registers and invoices.
On the checking and banking side of things, she noted that checks for board member compensation were signed by the recipient.
“That is not an appropriate check-writing practice,” Hoerauf said. Paychecks contain a number of errors in terms of both payees and amounts.
In addition, Hoerauf said she did not find any hardcopy bank statements, though she could access some online.
“I never found a whole year of bank statements,” Hoerauf said. Check registries were created on a monthly basis instead of a running document.
“In terms of safekeeping of documents, there was improperly filed personal information,” Hoerauf said. “I found personal financial information on the counter where the public visits and in other people’s files.”
For receivable billing data, the only records show $11,000 from a company, North Wind.
“The invoice was resent because it was hard to tell if it was sent in the first place,” Hoerauf said.
She called the district’s billing system complicated at best and a lot of customers’ checks were found all over the office.
“There was a large amount of unfiled documents, a lot of unopened mail and unmailed documents,” Hoerauf said.
That included an unsent document to appoint someone for a two-year, short-term position on the board of directors. The position was originally open on the Nov. 6 election, but no one filed, so the board was required to appoint someone by Sept. 27.
“It did not come into my hands in a very timely fashion and I only found it very recently,” Hoerauf said.
She noted that a lot of material and minutes are missing from board meeting documents, something she said she will have to re-create.
Hoerauf also provided an update on an August visit by the Kern County grand jury. The visit was considered routine and conducted every five years.
However, in light of the upheaval at the small water district, the grand jury followed up with a second visit to the Wednesday meeting and had previously interviewed district personnel and board members.
The last few months have seen a drastic change in the district’s leadership, along with confusion on documents and finances.
The board recently fired its previous general manager Michael Powell and replaced him with an operations manager, Carl Dorey. Dorey was later promoted to interim manager.
On Wednesday, the board removed director Cindy Brown as its president following a closed session discussion, though board members gave no official reason outside the decision to oust her.
In addition, director Leon Tudyk officially resigned two months before his term was up. The board voted to appoint Bret Ballinger to fill the vacancy for two months, and appointed Ernest Napolis to fill a two-year term that begins in December and runs through 2020.
Tudyk’s initial reason to resign was due to a stated continual disregard of the rules by board members. While he intended to rescind his resignation Wednesday night following a discussion with Kern County grand jury members, consultation of the district bylaws made him reconsider
He also contended that Powell’s termination was done illegally and and personally motivated by some.
The district also faces financial issues. In August, board member Ghulam Din noted it lost $260,000 over the past few years. On Wednesday, he noted the loss was at least $120,000 in one year.
There was also controversy over whether the termination of office manager David Williams was properly done.
In August, Brown positioned to have Williams terminated but a motion died in one meeting, followed by the discovery of a unsigned letter of resignation. A second, signed copy surfaced after that meeting but most board members questioned whether it was properly vetted.
The board decided in a Aug. 17 emergency meeting that Williams’ resignation was improperly received and reversed it.
The issue resurfaced Wednesday when it was revealed Dorey terminated Williams; board members were concerned because district bylaws state the general manager must consult or seek consent from the board before terminating an employee.
Hoerauf said the grand jury received all board documents they requested, and about 75 percent of all district financial-related documents.
“The other 25 percent could never be located or extracted from the computer,” Hoerauf said.
Acting board president William Liebscher asked how much of the issues corresponded with Dorey’s appointment as general manager, compared with when Powell led the district.
Hoerauf said her assignment was to audit what was in place and what was missing.
“I don’t have a comparison to make between the reign of one general manager or another,” Hoerauf said. “I only looked at documents and how they were dealt with.”
She said she appreciated the trust the board placed in her and thanked the public for recommending her as the auditor, but noted a lot of work needs to be done to correct things.
Din noted how horrible it sounded the way the office was run in the past. However, he noted that he worked five months to put in place a system to get finances reported on a monthly basis. He called it upsetting not to see a finance report given to the board.
“For five months, I have cried, crawled, screamed, tried everything I could do and this guy [Dorey] made a decision and doesn’t have a financial report,” Din said. “It was almost done, and now we are going to have to start all over again.”
In his short time as interim general manager, Dorey showed some attempt to address some of the issues ailing the district.
Wednesday night, he proposed replacing the district’s current billing system with a new one and outsourcing payroll to SASS in Ridgecrest. Dorey said he had received complaints from customers about their water bills, and that an upgrade would correct future issues.
Outsourcing payroll would remove the district’s liability for handling federal taxes, unemployment insurance and other taxes.
However, some board members decided to table the requests and form an ad-hoc committee to discuss the financial impact on the district.