July 18, 2019
The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
Sacramento, California 95814
Dear Governor and Legislative Leaders:
As requested by the Joint Legislative Audit Committee, the California State Auditor presents this audit report concerning the Fallen Leaf Lake Community Services District (district). This report concludes that the district’s billing and budgeting practices and its small electorate jeopardize its ability to provide services. The California Fire Assistance Agreement (fire agreement) between federal and state agencies provides for reimbursement to local fire agencies, including the district, for providing firefighting assistance to federal, state, and other local agencies during wildfires. However, the district claimed excessive personnel costs by inflating its salary rates and claiming over $700,000 more than it should have for 2016 through 2018. Without the inflated reimbursements and if the district did not reduce expenditures or increase revenues from other sources, it would have experienced financial shortfalls. Also, the district jeopardized its financial viability because it may have to repay the excessive reimbursement amounts. Furthermore, the district’s recent budget practice of counting on these reimbursements—a volatile revenue source—to help cover increases in budgeted personnel costs, adds to the district’s financial risk. Separately, limited oversight by the California Governor’s Office of Emergency Services of the reimbursement rates that local fire agencies claimed and weaknesses in the fire agreement’s reimbursement process also enabled the district to claim the excessive reimbursements.
Additionally, the district’s small electorate jeopardizes its ability to continue providing services. The district’s board of director’s (board) must have at least three members for it to conduct district business, but the district has had difficulty attracting candidates to run for the board. State law requires board members to be domiciled residents in the district and to be registered voters there. We estimate the number of domiciled residents in the district to be between five and 33. Although multiple options exist to address this challenge, redefining the district’s electorate to include landowners and other community members, as well as domiciled residents, is the one with the fewest risks and that provides the best opportunity for the district to maintain services and costs at their current levels.
ELAINE M. HOWLE, CPA
California State Auditor