ADMINISTRATION AND FISCAL MANAGEMENT OF THE GALT-ARNO CEMETERY DISTRICT
Subject of Investigation
The administration and fiscal management of the Galt-Arno Cemetery District (District).
Reason for Investigation
The matter came to the attention of the Grand Jury as the result of a complaint filed by a group of concerned citizens.
Method of Investigation
Members of the Grand Jury interviewed the district manager and the Chairperson of the district's Board of Trustees, as well as one of the complaining citizens. In addition certified financial statements for the district prepared by a Certified Public Accountant for the fiscal years ended June 30, 1997 and 1998 were reviewed. The members also reviewed the Annual Reports of Financial Transactions of Special Districts for the district for the fiscal years ended June 30, 1998, 1999 and 2000. The annual reports are compiled from financial data submitted by the district without audit pursuant to Government Code Sections 53891 and 12463.1. The certified financial statements as well as the annual reports were the most current made available to the Grand Jury.
The district was established in 1949 and operates two cemeteries. One is known as the Galt Cemetery, which is located in Galt, and the other is the Arno or Hicksville Cemetery, which is located approximately three miles north of Galt just off Highway 99. The district has a full time manager and various hourly employees who operate the cemetery and maintain the grounds. The district's revenues for the fiscal year ended June 30, 1998, were $183,727 and the expenditures $169,326. (See Galt-Arno Cemetery District, General Purpose Financial Statements For the Years Ended June 30, 1998 and 1997, p. 3) The district's financial activities are subject to grand jury review under Penal Code. Section 933.5.
Health and Safety Code Section 8990 provides in part that "[a]s soon after the first day of July as practicable, the trustees (Board of Trustees of the district) shall file with the board (Board of Supervisors), a report, setting forth all their transactions during the fiscal year, and containing an itemized account of all their receipts and disbursements during the fiscal year, together with proper vouchers for them." Health and Safety Code Section 8991 provides in part that "the board of supervisors may provide...that, in lieu of the trustees report...the trustees shall file with the board (Board of Supervisors)...a verified copy of the audit report of the annual audit of the district made pursuant to Section 26909 of the Government Code..." Government Code Section 26909 provides that when such an audit is conducted by a Certified Public Accountant or Public Accountant it must be under standards established by the State Controller. Those standards are currently set forth in the California Code of Regulations, Title 2, Sections 1113.1 and 1131.1 to 1131.5. Government Code Section 26909 authorizes a biennial audit upon the unanimous request of the district's Board of Trustees as well as the unanimous approval of the Board of Supervisors. Regardless of the period covered the certified financial statement must be filed within 12 months of the end of the fiscal year or years covered by the audit. The most current certified financial statements (audit reports prepared by a certified public accountant) are for the fiscal years ended June 30, 1997 and 1998. Under Government Code Section 26909 the report was due no later than June 30, 1999. The report is dated February 22, 2001, approximately 20 months after the deadline. The District is current in meeting the filing requirements for annual reports.
This is not the first time the Galt-Arno Cemetery District has been subjected to investigation by the Grand Jury because of its financial operations and failure to meet reporting requirements. The 1996/1997 Grand Jury found that the certified financial reports for the fiscal years ended June 30, 1994, 1995 and 1996 did not reveal whether the auditor preparing the reports was a certified public accountant or public accountant. Those certified financial statements, however, did reveal that the auditor conducting the audit and preparing the certified financial statements was a relative of the district manager; thereby clouding the validity or objectivity of those certified financial statements. (See 1996/1997 Sacramento County Grand Jury Final Report, p.16)
The 1997/1998 Grand Jury found that the district, in an effort to avoid any appearance of impropriety, retained a Certified Public Accountant in Southern California to conduct the required audits. However, this was done without competitive bidding and created the possibility of additional expenses for the district because of travel requirements. (See 1997/1998 Sacramento County Grand Jury Final Report, p. 31) The district has since retained a local Certified Public Accountant to perform the audits and prepare the certified financial statements.
1. The lack of the timely preparation and receipt of certified financial statements and annual reports results in the inability of concerned citizens and officials to meaningfully review and keep current with the financial condition of the district.
2. The lack of adequate internal controls (separation of functions between those accounting for and handling funds) could raise questions concerning whether certified financial statements and Annual Reports of Financial Transactions of Special Districts fully and accurately reflect the status of the district's accounts and financial condition.
Findings and Recommendations
Finding #1. The most current certified financial statements for the district are for the fiscal years ended June 30, 1997, and June 30, 1998, and were issued February 22, 2001.
a. The district should develop procedures that will cause the issuance and filing of certified financial statements for the district within one year after the close of the fiscal year(s) audited as required by law.
b. The Sacramento County Board of Supervisors should, if it has not already done so, issue an order which directs both (1) the filing of such certified financial statements, in lieu of trustees reports, and (2) the development of effective procedures to monitor the filing of these certified financial statements. (Government Code Section 26909)
Finding #2. The most current certified financial statement (for the fiscal years ended June 30, 1997 and June 30, 1998) discusses the lack of internal controls over the districts financial activities because of a lack of necessary clerical or accounting personnel to perform the accounting and custodial functions needed for such controls. To that finding by its independent certified public accountant the district responded by contending that the cost of hiring such additional personnel would not justify any benefit that might result.
Recommendation #2. The District should consult with its independent Certified Public Accountant and the County Auditor to develop sufficient internal control procedures to protect the integrity of the district's financial transactions, records and resultant financial statements. The procedures should be designed to result in minimal additional costs to the district because of its limited financial resources.
Penal Code Section 933.05 requires that specific responses to both the findings and recommendations contained in this report be submitted to the Presiding Judge of the Sacramento Superior Court by September 30, 2001, from:
· The Galt-Arno Cemetery District Board of