Wednesday, December 07, 2016

DO BLACK LIVES REALLY MATTER WHEN THEY BREAK THE LAW?


I thank Hillsdale College for allowing me to reprint this timely article.

It is evident, that Black Lives do not matter when they are breaking the law. And as such, Blacks and others should be held accountable.

 

The Danger of the “Black Lives

Matter” Movement

Heather Mac Donald

Author, The War on Cops

HEATHER MAC DONALD is the Thomas W. Smith Fellow at the Manhattan

Institute and a contributing editor of City Journal. She earned a B.A.

from Yale University, an M.A. in English from Cambridge University,

and a J.D. from Stanford Law School. She writes for several newspapers

and journals, including The Wall Street Journal, The New York Times,

The New Criterion, and Public Interest, and is the author of three books,

including Are Cops Racist? and The War on Cops: How The New Attack

on Law and Order Makes Everyone Less Safe (forthcoming June 2016).

 

 

 

For almost two years, a protest movement known as “Black Lives Matter” has

convulsed the nation. Triggered by the police shooting of Michael Brown in Ferguson,

Missouri, in August 2014, the Black Lives Matter movement holds that racist police

officers are the greatest threat facing young black men today. This belief has triggered

riots, “die-ins,” the murder and attempted murder of police officers, a campaign to

eliminate traditional grand jury proceedings when police use lethal force, and a presidential

task force on policing.

Even though the U.S. Justice Department has resoundingly disproven the lie that a

pacific Michael Brown was shot in cold blood while trying to surrender, Brown is still venerated as a martyr and now police officers are backing off of proactive policing in the face of the relentless venom directed at

them on the street and in the media. As a result, violent crime is on the rise. The need is urgent, therefore, to

examine the Black Lives Matter movement’s central thesis—that police pose the greatest threat to young black men. I propose two counter hypotheses: first, that there is no government agency more dedicated to the idea that black lives matter than the police; and second, that we have been talking obsessively about

alleged police racism over the last 20 years in order to avoid talking about a far larger problem—black-on-black crime.

Let’s be clear at the outset: police have an indefeasible obligation to treat everyone with courtesy and respect, and to act within the confines of the law. Too often, officers develop a hardened, obnoxious attitude. It is also true that being stopped when you are innocent of any wrongdoing is infuriating, humiliating, and sometimes terrifying. And needless to say, every unjustified police shooting of an unarmed civilians a stomach-churning

tragedy. Given the history of racism in this country and the complicity of the police in that history, police

shootings of black men are particularly and understandably fraught. That history informs how many people view the police. But however intolerable and inexcusable every act of police brutality is, and while we need to make sure that the police are properly trained in the Constitution and in courtesy, there is a larger reality behind the issue of policing, crime, and race that remains a taboo topic. The problem of black-on-black crime is an uncomfortable truth, but unless we acknowledge it, we won’t get very far in understanding patterns

of policing.

 

Every year, approximately 6,000 blacks are murdered. This is a number greater than white and Hispanic homicide victims combined, even though blacks are only 13 percent of the national population. Blacks are killed at six timesthe rate of whites and Hispanics combined. In Los Angeles, blacks between

the ages of 20 and 24 die at a rate 20 to 30 times the national mean. Who is killing them? Not the police, and not white civilians, but other blacks. The astronomical black death-by-homicide rate is a function of the black crime rate. Black males between the ages of 14 and 17 commit homicide at ten times the rate of white

and Hispanic male teens combined. Blacks of all ages commit homicide at eight times the rate of whites and

Hispanics combined, and at eleven times the rate of whites alone  The police could end all lethal uses of force tomorrow and it would have at most a trivial effect on the black death by-homicide rate. The nation’s police

killed 987 civilians in 2015, according to a database compiled by The Washington Post. Whites were 50

percent—or 493—of those victims, and blacks were 26 percent—or 258. Most of those victims of police

shootings, white and black, were armed or otherwise threatening the officer with potentially lethal force.

The black violent crime rate would actually predict that more than 26 percent of police victims would be black.

Officer use of force will occur where the police interact most often with violent criminals, armed suspects, and those resisting arrest, and that is in black neighborhoods. In America’s 75 largest counties in 2009, for example, blacks constituted 62 percent of all robbery defendants,57 percent of all murder defendants, 45 percent of all assault defendants—but only 15 percent of the population. Moreover, 40 percent of all cop killers

have been black over the last decade. And a larger proportion of white and Hispanic homicide deaths are a result of police killings than black homicide deaths—but don’t expect to hear that from the media or from the political enablers of the Black Lives Matter movement. Twelve percent of all white and Hispanic homicide victims are killed by police officers, compared to four percent of all black homicide victims. If we’re going to have a “Lives Matter”anti-police movement, it would be more appropriately named “White and Hispanic Lives Matter. Standard anti-cop ideology, whether emanating from the ACLU or the academy, holds that law enforcement actions are racist if they don’t mirror population data. New York City illustrates why

that expectation is so misguided. Blacks make up 23 percent of New York City’s population, but they commit 75 percent of all shootings, 70 percent of all robberies, and 66 percent of all violent crime, according to victims and witnesses. Add Hispanic shootings and you account for 98 percent of all illegal gunfire in the city. Whites are 33 percent of the city’s population, but they commit fewer than two percent of all shootings, four percent

of all robberies, and five percent of all violent crime. These disparities mean that virtually every time the police in New York are called out on a gun run—meaning that someone has just been shot—they are being summoned to minority neighborhoods looking for minority suspects. Officers hope against hope that they

will receive descriptions of white shooting suspects, but it almost never happens. This incidence of crime means that innocent black men have a much higher chance than innocent white men of being stopped by the police because they match the description of a suspect. This is not something the police choose.

It is a reality forced on them by the facts of crime.

The geographic disparities are also huge. In Brownsville, Brooklyn, the per capita shooting rate is 81 times

higher than in nearby Bay Ridge, Brooklyn—the first neighborhood predominantly black, the second neighborhood predominantly white and Asian. As a result, police presence and use of proactive tactics are much higher in Brownsville than in Bay Ridge. Every time there is a shooting, the police will flood the area looking to make stops in order to avert a retaliatory shooting. They are in Brownsville not because of

racism, but because they want to provide protection to its many law-abiding residents who deserve safety.

 

Who are some of the victims of elevated urban crime? On March 11, 2015, as protesters were once again

converging on the Ferguson police headquarters demanding the resignation of the entire department, a six-year-old boy named Marcus Johnson was killed a few miles away in a St. Louis park, the victim of a drive-by shooting. No one protested his killing. Al Sharpton did not demand a federal investigation. Few people outside of his immediate community know his name. Ten children under the age of ten were killed in Baltimore last year. In Cleveland, three children five and younger were killed in September A seven-year-old boy was killed in Chicago over the Fourth of July weekend by a bullet intended for his father.

 

In November, a nine-year-old in Chicago was lured into an alley and killed by his father’s gang enemies; the father refused to cooperate with the police. In August, a nine-year-old girl was doing her homework on her mother’s bed in Ferguson when a bullet fired into the house killed her. In Cincinnati in July, a four-year-old girl was shot in the head and a six-year-old girl was left paralyzed and partially blind from two separate

drive-by shootings. This mindless violence seems almost to be regarded as normal, given the lack of attention

it receives from the same people who would be out in droves if any of these had been police shootings. As horrific as such stories are, crime rates were much higher 20 years ago. In New York City in 1990, for example, there were 2,245 homicides. In 2014 there were333—a decrease of 85 percent. The drop

in New York’s crime rate is the steepest in the nation, but crime has fallen at a historic rate nationwide as well—by about 40 percent—since the early 1990s. The greatest beneficiaries of these declining rates have been minorities.

 

Over 10,000 minority males alive today in New York would be dead if the city’s homicide rate had remained at its early 1990s level. this historic crime drop? A policing revolution that began in New York and spread nationally, and that is now being threatened. Starting in 1994, the top brass of the NYPD embraced the then-radical idea that the police can actually prevent crime, not just respond to it. They started gathering and analyzing crime data on a daily and then hourly basis. They looked for patterns, and strategized on tactics

to try to quell crime outbreaks as they were emerging. Equally important, they held commanders accountable for crime in their jurisdictions. Department leaders started meeting weekly with precinct commanders to grill them on crime patterns on their watch. These weekly accountability sessions came to be known as Compstat. They were ruthless, high tension affairs. If a commander was not fully informed about every local crime outbreak and ready with a strategy to combat it, his career was in jeopardy.

Compstat created a sense of urgency about fighting crime that has never left the NYPD. For decades, the rap against the police was that they ignored crime in minority neighborhoods. Compstat keeps New York commanders focused like a laser beam on where people are being victimized most, and that is in minority communities. Compstat spread nationwide. Departments across the country now send officers to emerging

crime hot spots to try to interrupt criminal behavior before it happens.

In terms of economic stimulus alone, no other government program has come close to the success of data-driven policing. In New York City, businesses that had shunned previously drug-infested areas now set up shop there, offering residents a choice in shopping and creating a demand for workers. Senior citizens

felt safe to go to the store or to the post office to pick up their Social Security checks. Children could ride their bikes on city sidewalks without their mothers worrying that they would be shot.

But the crime victories of the last two decades, and the moral support on which law and order depends, are now in jeopardy thanks to the falsehoods of the Black Lives Matter movement. Police operating in inner-city neighborhoods now find themselves routinely surrounded by cursing, jeering crowds when they make a pedestrian stop or try to arrest a suspect. Sometimes bottles and rocks are thrown. Bystanders stick

cell phones in the officers’ faces, daring them to proceed with their duties.

Officers are worried about becoming the next racist cop of the week and possibly losing their livelihood thanks to an incomplete cell phone video that inevitably fails to show the antecedents to their use of force. Officer use of force is never pretty, but the public is clueless about how hard it is to subdue a suspect who is determined to resist arrest. As a result of the anti-cop campaign of the last two years and the resulting push-back in the streets, officers in urban areas are cutting back on precisely the kind of policing that led to the crime

decline of the 1990s and 2000s. Arrests and summons are down, particularly for low-level offenses. Police officers continue to rush to 911 calls when there is already a victim. But when it comes to making discretionary stops—such as getting out of their cars and questioning people hanging out on drug corners

at 1:00 a.m.—many cops worry that doing so could put their careers on the line. Police officers are, after all, human. When they are repeatedly called racist for stopping and questioning suspicious individuals in high-crime areas, they will perform less of those stops. That is not only understandable—in a sense, it is how things should work. Policing is political. If a powerful political block has denied the legitimacy of assertive

policing, we will get less of it. On the other hand, the people demanding that the police back off are

by no means representative of the entire black community. Go to any police neighborhood meeting in Harlem, theSouth Bronx, or South Central Los Angeles, and you will invariably hear variants of the following: “We want the dealers off the corner.” “You arrest them and they’re back the next day.” “There are kids hanging out on my stoop. Why can’t you arrest them for loitering?” “I smell weed in my hallway. Can’t you do something?” I met an elderly cancer amputee in the Mount Hope section of

the Bronx who was terrified to go to her lobby mailbox because of the young men trespassing there and selling drugs. The only time she felt safe was when the police were there. “Please, Jesus,” she said to me, “send more police!” The irony is that the police cannot respond to these heartfelt requests for order without generating

the racially disproportionate statistics that will be used against them in an ACLU or Justice Department lawsuit.

 

Unfortunately, when officers back off in high crime neighborhoods, crime shoots through the roof. Our country is in the midst of the first sustained violent crime spike in two decades. Murders rose nearly 17 percent in the nation’s 50 largest cities in 2015, and it was in cities with large black populations where the

violence increased the most. Baltimore’s per capita homicide rate last year was the highest in its history. Milwaukee had its deadliest year in a decade, with a 72 percent increase in homicides. Homicides in

Cleveland increased 90 percent over the previous year. Murders rose 83 percent in Nashville, 54 percent in Washington, D.C., and 61 percent in Minneapolis. In Chicago, where pedestrian stops are

down by 90 percent, shootings were up 80 percent through March 2016. I first identified the increase in violent

crime in May 2015 and dubbed it “the Ferguson effect.” My diagnosis set off a firestorm of controversy on the

anti-cop Left and in criminology circles. Despite that furor, FBI Director James Comey confirmed the Ferguson effect in a speech at the University of Chicago Law School last October. Comey decried

the “chill wind” that had been blowing through law enforcement over the previous year, and attributed the sharp rise in homicides and shootings to the campaign against cops. Several days later, President Obama had the temerity to rebuke Comey, accusing him (while leaving him unnamed) of “cherry-pick[ing] data” and

using “anecdotal evidence to drive policy [and] feed political agendas.” The idea that President Obama knows more about crime and policing than his FBI director is of course ludicrous. But the President thought it necessary to take Comey down, because to recognize the connection between proactive policing and public

safety undermines the entire premise of the anti-cop Left: that the police oppress minority communities rather than bring them surcease from disorder. As crime rates continue to rise, the overwhelming majority of victims are, as usual, black—as are their assailants. But police officers are coming under attack as well. In August 2015, an officer in Birmingham, Alabama, was beaten unconscious by a convicted felon after a car stop. The suspect had grabbed the officer’s gun, as Michael Brown had tried to do in Ferguson, but the officer hesitated

to use force against him for fear of being charged with racism. Such incidents will likely multiply as the media continues to amplify the Black Lives Matter activists’ poisonous slander against the nation’s police forces.

The number of police officers killed in shootings more than doubled during the first three months of 2016. In fact, officers are at much greater risk from blacks than unarmed blacks are from the police. Over the last decade, an officer’s chance of getting killed by a black has been 18.5 times higher than the chance of an

unarmed black getting killed by a cop. The favorite conceit of the Black Lives Matter movement is, of course,

the racist white officer gunning down a black man. According to available studies, it is a canard. A March 2015 Justice Department report on the Philadelphia Police Department found that black and Hispanic officers were much more likely than white officers to shoot blacks based on “threat misperception,” i.e., the

incorrect belief that a civilian is armed. A study by University of Pennsylvania criminologist Greg Ridgeway, formerly acting director of the National Institute of Justice, has found that black officers in the NYPD were 3.3 times more likely to fire their weapons at shooting scenes than other officers present. The April 2015 death of drug dealer Freddie Gray in Baltimore has been slotted into the Black Lives Matter master narrative, even

though the three most consequential officers in Gray’s arrest and transport are black. There is no evidence that a white drug dealer in Gray’s circumstances, with

a similar history of faking injuries, would

have been treated any differently. We have been here before. In the 1960s and early 1970s, black and white

radicals directed hatred and occasional violence against the police. The difference today is that anti-cop ideology is embraced at the highest reaches of the establishment: by the President, by his Attorney General, by college presidents, by foundation heads, and by the press.

The presidential candidates of one party are competing to see who can out-demagogue

President Obama’s persistent race based calumnies against the criminal justice system, while those of the other

party have not emphasized the issue as they might have I don’t know what will end the current

frenzy against the police. What I do know is that we are playing with fire, and if it keeps spreading, it will

be hard to put out.

Friday, April 17, 2015





JORDANELLE SPECIAL SERVICE DISTRICT
 
 
_______
 
Findings and Recommendations

April 16, 2015
 
_______
 
Report No. 13-JSSD-8L
OFFICE OF THE

UTAH STATE AUDITOR



JORDANELLE SPECIAL SERVICE DISTRICT
 
 
_______
 
Findings and Recommendations

April 16, 2015
 
_______
 
Report No. 13-JSSD-8L
AUDIT LEADERSHIP:


Van H. Christensen, CPA, CFE, Audit Director

Leslie Larsen, CPA, CFE, Audit Supervisor
OFFICE OF THE

UTAH STATE AUDITOR
Utah State Capitol Complex, East Office Building, Suite E310 • Salt Lake City, Utah 84114-2310 • Tel: (801) 538-1025 • auditor.utah.gov
 
REPORT NO. 13-JSSD-8L
 
April 16, 2015

Board of Directors

Jordanelle Special Service District

P.O. Box 519

Heber City, Utah 84032

Dear Board Members:

We have performed the procedures described below to certain aspects of Jordanelle Special

Service District’s (the District’s) internal control and compliance for the period January 2008

through December 2013, unless stated otherwise. The purpose of these procedures was to

investigate allegations of mismanagement and potential misappropriation of public funds. We

performed the following procedures at the District:

1. We evaluated the control environment at the District by considering the history of audit

findings and recommendations issued to the District, management’s response to those

findings, the District’s policies and procedures, and financial transactions executed by the

District.

2. We reviewed the District’s written policies and procedures for adequacy and completeness.

3. We examined contracts between the District and other special service districts within

Wasatch County, as well as contract payments made to the District, for propriety. We also

reviewed the write-off of bad debt associated with the contracts.

4. We examined the District’s water reservation fees and associated interest and penalties for

propriety and compliance with certain laws.

5. We reviewed two land purchases made by the District for adequate documentation and

compliance with certain laws and policies and procedures.

6. We examined credit card transactions and supporting documentation, when available, for

reasonableness and propriety.

7. We evaluated gas card purchases for reasonableness and propriety.

8. We assessed the issuance and use of travel per diem to Board members and employees for

reasonableness and propriety.

9. We evaluated the District’s conflict of interest disclosures and policy related to conflict of

interests, as well as the District’s expenditures for transactions which may indicate possible

conflicts of interest.

10. We assessed the potential for impact or liability on the State or other governmental entities in

the event of default on bonds issued by the District.

11. We reviewed the District’s public notice and other required procedures associated with the

issuance of bond debt, and the resulting assessment to the rate payers within the District, for

compliance with certain laws.

12. We reviewed other miscellaneous procedures as considered necessary.

Our procedures were more limited than would be necessary to express an audit opinion on

compliance or on the effectiveness of the District’s internal control or any part thereof.

Accordingly, we do not express such opinions. Alternatively, we have identified the procedures

we performed and the findings resulting from those procedures. Had we performed additional

procedures or had we made an audit of the effectiveness of the District’s internal control, other

matters might have come to our attention that would have been reported to you.

Our findings resulting from the above procedures are included in the attached findings and

recommendations section of this report. We feel that findings 1 through 11 in this report are key

internal control weaknesses or important compliance issues to the District. In addition, we

included other matters in this report to indicate additional areas we reviewed and the issues we

noted. The responses to the individual findings and recommendations provided by the District

have been integrated into the report after each applicable finding and recommendation. The

cover letter submitted by the District with their responses is included as an attachment to this

report.

The Office of the Utah State Auditor is the auditor of public accounts by authority of the Utah
Constitution Article VII, Section 15 and Utah Code 67-3-1. Audits are conducted to determine


honesty and integrity in fiscal affairs, accuracy and reliability of financial statements,

effectiveness and adequacy of financial controls, and compliance with the law, as the auditor
determines necessary. The Utah Constitution and the Utah Code provide for limited authority in


regards to audits of private entities or citizens and, as such, the Office has focused this audit on

the activities of only the District.

If you have any questions regarding this report, please contact me.

Sincerely,

Van H. Christensen, CPA, CFE

Audit Director

801-538-1394

vchristensen@utah.gov
JORDANELLE SPECIAL SERVICE DISTRICT
 
 
TABLE OF CONTENTS

Page
BACKGROUND 1



FINDINGS AND RECOMMENDATIONS together with

the District’s Response to Individual Findings and Recommendations:
 
1. WEAK CONTROL ENVIRONMENT 1

2. MISSING CLOSED MEETING MINUTES AND RECORDINGS 3

3. LACK OF POLICIES AND PROCEDURES 4

4. CONCERNS OVER CONTRACT WITH AND DEBT WRITE-OFF FOR STRAWBERRY LAKEVIEW

SPECIAL SERVICE DISTRICT 5

5. INADEQUATE WATER RESERVATION FEE LIST AND CONTRACTS 7

6. PURCHASE OF PROPERTY UNDER UNUSUAL CIRCUMSTANCES 9

7. INADEQUATE CONTROL OVER AND POSSIBLE IMPROPER USE OF DISTRICT CREDIT CARDS 12

8. INADEQUATE REVIEW OF AND PROBLEMS WITH GAS STATION PURCHASES 16

9. WEAKNESSES RELATED TO TRAVEL PER DIEM AND REIMBURSEMENT 21

10. FAILURE TO EVALUATE THE REASONABLENESS OF ALLOWING ON-CALL EMPLOYEES TO

USE DISTRICT VEHICLES FOR COMMUTING 23

11. LACK OF POTENTIAL CONFLICT OF INTEREST DISCLOSURE 24



OTHER MATTERS:
 
A. ASSESSMENT AREA BOND LIABILITY 25

B. ASSESSMENT AREA BOND INTEREST RATE 26

C. NOTICE TO PROPERTY OWNERS WITHIN THE ASSESSMENT AREA 26

D. WATER TREATMENT FACILITY LAND ACQUISITION 27

AUDITOR’S CONCLUDING REMARKS 28



ATTACHMENTS RELATED TO THE DISTRICT’S RESPONSE
 
COVER LETTER TO DISTRICTS RESPONSE Attachment A

EMAILS REFERENCED IN THE DISTRICTS RESPONSES TO INDIVIDUAL FINDINGS Attachments B & C




JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
1
 
BACKGROUND
 
 
The Jordanelle Special Service District (the District) was established by Wasatch County in 1993

to provide water treatment and distribution, as well as waste water operations to residents within

the District’s boundaries. The main operating revenues of the District consist of fees for water

and sewer treatment services, water reservation fees, tap fees, and construction inspection fees.

Since 2013, the Wasatch County Council has acted as the District’s Board of Directors (Board).

Prior to 2013, the District was governed by an administrative control board, which was

comprised of members of the Wasatch County Council as well as other citizens appointed to the

Board.
FINDINGS AND RECOMMENDATIONS
 
 
1. WEAK CONTROL ENVIRONMENT


The District has a weak control environment as evidenced by the District’s failure to:
obtain, organize, and retain critical documents,

implement a comprehensive policies and procedures manual,

follow existing policies,

implement audit recommendations, and

hire personnel with the appropriate expertise.


The District’s weak control environment has also been evident as the District has resisted,

delayed, and opposed our requests for information. For example, in response to a request

for documents related to our audit, the District included the following in a letter dated

January 7, 2015, “… [the District] is compelled to voice objections to your request.”

Similar language has been included in response to other requests for information. Some

objections have been in response to requests for clearly public information such as meeting

minutes. All information requested by the Office of the Utah State Auditor has been within

the scope of provisions found in the Utah Constitution and State statute.

We reviewed the District’s annual financial statement audits for the period of 2006 through

2013 and found that of the 35 findings issued, 20 were repeat findings or findings for similar

past issues. The issues noted were similar to those found in this report, such as lack of a

written agreement or contract, lack of policies and procedures, or conducting business

outside the accounting system. The District’s failure to implement recommended corrective

action indicates a dismissive attitude toward sound business practices.

As noted in the following findings, the District often responded that the documents we

requested were missing. Given the volume of missing records and the claims of a litigation

hold, we are concerned with the disregard for reasonable record keeping and whether there

was a concerted effort to impair our audit.

The errors noted in this report may have been caused by a lack of expertise among the

governing body and management regarding internal controls and good financial
JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
2
 
management procedures. However, complaints and opposition of management toward the

audit, unusual delays in providing requested information, unsupported transactions, missing

documents, repetitive errors, and lack of proper policies and procedures should not be

automatically dismissed as sloppy record keeping and poor management practices as these

activities could also indicate an intentional effort to conceal inappropriate activity or the

possibility of fraud.

The control environment established by management and the governing body includes the

attitudes, actions, policies, and management styles that influence the day-to-day activities

and culture or tone within an entity. It also consists of the integrity, ethical values, and

competence of the entity’s people. A weak control environment allows a tolerance, and

sometimes even an encouragement, for misconduct within an entity. It provides the

opportunity for District assets to be lost, stolen, or misused without detection.
Auditor’s Recommendation:

We recommend that the District establish a strong control environment by

implementing strict policies and procedures, ensuring that policies and procedures are

followed by all employees of the District, and providing effective oversight. We also

recommend that the District implement all recommendations from previous audits, as

well as those recommendations in this report in a timely manner.
 
District’s Response to Finding:

This Finding improperly implies that JSSD “resisted, delayed and opposed [y]our requests

for information” From the very first request in January, 2014 to the last request this past

month, JSSD cooperated with and provided the Auditor with information requested, and

acknowledged the fact that documents may not have been located. (See Summary of State

Auditor’s Document Requests and JSSD’s Responses.) The concerns raised by the District

from the beginning stemmed from the fact that it was embroiled in contentious litigation and

that the Auditor’s office was being used in an effort to bolster the private litigants claims.
The Auditor’s own website expressly provides that [c]omplaints about issues that are being



litigated are generally not accepted.
 
JSSD incorporates comment no. 6 in its cover letter accompanying this response. Instead of

performing a qualitative analysis, the Auditor’s report merely conducts a “quantitative

analysis” to leave the misimpression that “the District’s failure to implement recommended

corrective action indicates a dismissive attitude toward sound business practices.” JSSD

had only 15 unique findings in eight years (35 total findings less 20 noted as repeat

findings). The Audit Report fails to note that repeat findings occur in the year immediately

subsequent to the original finding and then were corrected. Hence, the above pattern does

not indicate a “failure to implement recommended corrective action” or “a dismissive or

apathetic attitude toward sound business practices.” The District has acknowledges that it

is short on adequate staff and personnel (both accounting and management personnel) to

meet the daily management needs of the organization. Corrective action is being taken as
 
JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
3
 
evidenced by the fact that JSSD has hired a comptroller to assist in assuring financial

controls are in place.

The District recognizes there may have been a lack of expertise among management

regarding internal controls. The above findings, however, leave the misimpression of

JSSD’s record keeping. The “volume of missing records” belongs primarily to one

transaction class (credit cards) in which the Auditor sought records dating back more than

four (4) years. This does not suggest there “was a concerted effort to impair [their] audit.”

JSSD was open and honest about its records and owned up to the fact that certain

documents could not be located, not because of any intention to hide documents, impair the

audit or conceal inappropriate activity.

It is reasonable, based on the plethora of private litigants asserting unfounded claims

against JSSD, that JSSD would be cautious about demands for information that closely

paralleled the issues in the pending litigation. Regardless, it is unfair to infer that JSSD’s

“activity” was an “intentional effort to conceal inappropriate activity and indicates the

possibility of fraud.” There is simply no evidence the District or Auditor of misuse of public

funds, self-dealing or fraud.

District’s Response to Recommendation:
JSSD concurs with this Recommendation. The District has already taken steps to establish
a strong control environment by implementing strict policies and procedures. (See Capson

email to Leslie Larsen, dated October 7, 2014, a copy of which is attached.) This includes



hiring a comptroller for the purposes of assuring that financial policies are followed.
 
2. MISSING CLOSED MEETING MINUTES AND RECORDINGS


The District has not retained closed meeting minutes and recordings in accordance with the
Utah Public Records Management Act (Utah Code, Title 63A Chapter 12) and the State


Archives General Retention Schedule, which require government entities to retain closed

meeting minutes and recordings permanently. We requested all closed meeting minutes and

recordings for the period January 2008 through December 2013. The District only provided

minutes for 2013 and 6 of 8 closed meetings held during 2012 (a total of 10 meetings). The

District did not provide any other minutes or recordings for the 20 other closed meetings

that took place during the time period requested.

The Board is ultimately responsible for the proper recording and maintenance of Board

meeting minutes. The Board’s failure to retain documentation of important discussions that

occurred during closed meetings not only violated State statute, but impaired our ability to

conduct our audit. Our primary purpose in requesting closed meeting minutes was to

determine why the District purchased the property noted in Finding No. 6. The purpose

given in the open meeting minutes indicated that the purchase was made because “...this is a

very good deal for the district.” Simply being a good deal is not sufficient justification for

purchasing property.
JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
4
 
Auditor’s Recommendation:

We recommend that the Board ensure all Board meetings are properly documented by

recording and taking minutes, as applicable, at each meeting and by permanently

retaining all meeting minutes and recordings in accordance with the Utah Public

Records Management Act and the State Archives General Retention Schedule.
 
District’s Response to Finding:

JSSD acknowledges that it was unable to locate closed minutes from 2008 through 2010.
 
(See Mark R. Gaylord’s letter of May 19, 2014 in which he discusses the alleged missing



minutes, a copy of which is attached.) However, since 2012 all closed meeting minutes exist

and JSSD is “ensur[ing] all Board meetings are properly documented by recording and

taking minutes, as applicable, … in accordance with the Utah Public Records Management

Act and the State Archives General Retention Schedule.” The Audit fails to recognize that

all Board meetings during the relevant time frame were “properly documented.” Finally,

the Auditor concedes that the primary purpose in requesting the closed minutes was to

“determine why the district purchased the property noted in Finding No. 6” relating to the

Willey transaction. The Willey transaction, however, was openly discussed during public

hearings and not in a closed meeting.

District’s Response to Recommendation:

The District concurs with this Recommendation and believes that it is following the

recommendation that the Board ensure all meetings are properly documented. In fact, this

Recommendation actually leaves the misimpression that minutes have not been properly

maintained when the Findings only focus on closed meetings. The District (and its Board)

has been complying with this Recommendation even before the investigation began as there

is no indication that there are missing minutes, public or closed, since 2011.
 
3. LACK OF POLICIES AND PROCEDURES


The District does not have a complete, written policies and procedures manual. We

requested the District’s financial policies and procedures manual multiple times before the

District acknowledged they do not have a complete, written policies and procedures manual.

The District does have small portions of written policies for personnel, purchasing, vehicle

use, and various operational matters. However, the policies are deficient and do not address

important issues such as the handling of cash receipts, cash disbursements, credit card use,

etc. We are also concerned because there appears to have been a lack of follow-up by

management and the Board related to the implementation of policies and procedures.

During our review of Board minutes, we noted that in 2008 the general manager stated he

would draft a cash handling policy; however, based on the lack of further discussion in the

minutes and the lack of policy, there was no follow-up by the general manager nor the

Board.
JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
5
 
Because the District has been in existence since 1993 and has operated for many years

without written policies and procedures, and because of additional concerns we have related

to a poor control environment at the District (see Finding No. 1), we consider the lack of

written policies and procedures to be a serious concern. A complete, written policies and

procedures manual is essential to a good control environment and to helping ensure proper

control over and use of public funds. In the absence of fully developed policies and

procedures, the District should default to the policies and procedures of Wasatch County, its

creator.
Auditor’s Recommendation:

We recommend that the District establish or adopt a complete, written policies and

procedures manual to help establish a good control environment and ensure proper

control over and use of public funds.
 
District’s Response to Finding:

Assuming the Audit Report is limited to the period of 2008 through 2013, the District agrees

that its written policies and procedures manual were incomplete. This concern was raised

during the July, 2014 interview of Board members and management. On October 7, 2014 a

copy of the newly adopted Administrative Policy and Procedures Manual was provided to
 
the Auditor. (See Capson Email attached hereto.) The Auditor fails to acknowledge this in



the Audit Report.

District’s Response to Recommendation:

The District agrees with this Recommendation and has adopted a complete written financial

policy and procedures manual which the Audit Report fails to acknowledge.
 
4. CONCERNS OVER CONTRACT WITH AND DEBT WRITE-OFF FOR



STRAWBERRY LAKEVIEW SPECIAL SERVICE DISTRICT
 
While reviewing contracts between the District and other Wasatch County special service

districts, as well as bad debt write-offs made by the District, we found the following

problems related to a contract between the District and Strawberry Lakeview Special

Service District (SLSSD) for the calendar years 2012 and 2013:

a. SLSSD has not paid the District for the services provided under the contract. This

violates the contract, as the contract specifically states that it is “not the intent of the

parties that one district subsidize the operation of another” and the District “shall not

provide service to SLSSD for less than the actual cost of the service and annual

adjustments shall be made in the costs of services to prevent such subsidization.” The

District should perform an annual review of the costs and make sure SLSSD pays their

share of the costs. We believe this situation places an unfair burden on the District’s
JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
6
 
ratepayers as they are subsidizing the management, operation, and maintenance costs of

SLSSD.

b. The District wrote-off the $30,000 debt from SLSSD for 2012, as evidenced by

discussion of the write-off in the 2012 SLSSD financial statements. However, we could

find no evidence of the District’s approval of the write-off or discussion of the write-off

in the Board minutes. The Board should discuss large write-offs and document Board

approval of the write-offs to help ensure write-offs are appropriate and meet District

policy. The Board should also avoid write-offs for other governmental entities.

c. The contract details services (management, operation, and maintenance) the District will

provide for SLSSD, but lacks a specific monthly payment amount. Instead, the contract

states that SLSSD shall pay the District on an “as-needed basis” for the services

provided. We believe the contract wording is unusual and vague; especially compared

to similar contracts between the District and other Wasatch County special service

districts, which specify a monthly amount.

d. Prior to our audit, the District lacked both verbal and written policy related to the writeoff

of bad debts. Lack of policy can cause unreliable and inconsistent Board decisions

regarding the write-off of bad debts.
Auditor’s Recommendation:

We recommend that the District:
 
Perform an annual review and adjustment of the costs of services and ensure



that other special service districts pay the District for their portion of

management, operation, and maintenance services, as required by the

contracts, so that the costs are not subsidized by ratepayers of the District.
 
Document Board discussion and approval of the write-off of large debt



amounts.
 
Amend any current contracts and ensure future contracts between the District



and other special service districts include provisions for specific monthly

payment amounts by the other special service districts sufficient to reimburse

the District for actual costs of services provided.
 
Implement written policy related to the write-off of bad debts and avoid writeoffs



for other governmental entities.
 
District’s Response to Finding:

The Auditor was informed during the July 17th interview of JSSD’s governing board and

manager that the debt write-off was done with the full knowledge and consent of the

governing board.
 
JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
7
 
Furthermore, although the written minutes do not reflect the scope of the discussion, a

review of the recording of the February, 2012 board meeting reveals a six minute and 40

second discussion about the difficulty in charging a set rate to SLSSD for the services

rendered. The minutes themselves reflect that Resolution 2012-02 was adopted in which the

County asked JSSD to take over maintenance of the lagoon because of State requirements to

have a certified employee oversee the lagoon. Accordingly, it is JSSD’s position that the

Board and management acted appropriately and reasonably in regards to the relationship

with SLSSD.

District’s Response to Recommendation:

The District understands, agrees and will take steps to implement the Recommendation. In

fact, the District already has in place management contracts with other special service

districts which the County has requested JSSD manage to save costs. Copies of these

contracts were provided to the Auditor on March 27, 2014.
 
5. INADEQUATE WATER RESERVATION FEE LIST AND CONTRACTS


In order for a developer to obtain development approval, they must ensure water is available

for each building lot. The developer may already have water rights or may purchase water

shares on the open market. If the developer does not have water or is unable to find more

favorable options on the open market, they may voluntarily enter into an agreement with the

District to reserve water accumulated by the District.

When a developer conveys property or building lots approved for development, the fee is

attached to the property and paid by the subsequent landowner. The information requested

and recommendations made in this finding pertain only to the developer who entered into an

agreement with the District to reserve water and not to landowners who subsequently

purchased property from the developer.

To determine whether the District had a process in place for establishing the fees and

whether they had entered into contracts with original developers which noted specific terms,

such as the amount of the fees and interest rates charged for late payment, we requested a

list of water reservation fees that were charged to developers who entered into agreements

with the District.

We found that the District does not have a readily available list of developers who initially

entered into water reservation fee agreements. Because the District does not have a readily

available list, we are unable to determine how many written contracts may have been

prepared for these agreements. As acknowledged by the District, and based on information

they provided to us, the District does not have contracts for all developers who entered into

agreements with the District.

The contracts that were provided to us did include the amount of the water reservation fee

charged and a provision for a 1.5% interest rate for late payment. However, the contracts
JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
8
 
did not include a provision for an additional late penalty, which most often ranged from 5%

to 10% of the outstanding balance each month. We are concerned that the amount of the

penalty was not a term or condition of the original agreements in which the developers

voluntarily entered into.
Auditor’s Recommendation:

We recommend that the District always enter into a contract with a developer for

water reservation fees. We also, recommend that the District clearly define terms and

conditions at the inception of the water reservation fee. In order to ensure that the

District is properly charging and tracking water reservation fees, we recommend that

the District maintain a listing of developers being charged the fee, and retain the

associated contract.
 
District’s Response to Finding:

The Auditor’s Findings regarding Water Reservation Fees charged to property owners

seeking development approval calls into question an historical business practice of JSSD

with regards to charges for JSSD to reserve water for the benefit of developers. Over the

years JSSD has acquired and/or leased water rights for the benefit of its citizens. As a way

of assuring it had sufficient water to meet the needs of its community, JSSD adopted a Water

Rate Resolution beginning in approximately 1999 and amended over the years to address

changes in costs associated with reserving water. (Copies of the Water Rate Resolutions

were provided to the Auditor.) As the Auditor correctly points out, pursuant to Wasatch

County Ordnance 10.01.01 any property owner seeking development approval from the

County is obligated “to demonstrate to the satisfaction of the County that the developer

owns sufficient culinary and irrigation water rights to service the proposed subdivision or

development activity.” The Water Rate Resolution was a governing document which sets

forth the terms and conditions upon which a property owner could voluntarily request to

reserve water for their specific development. In addition, JSSD provided a “Will Serve”

letter to the County confirming it would deliver water to the developer. (A copy of a Will

Serve letter was provided as part of this Audit.)

The Auditor is critical that JSSD was unable to locate and/or may not have entered into

written agreements with property owners looking to reserve water for their developments.

Although JSSD did enter into some written contracts affirming water reservations, this was

not a practice of JSSD’s as it considered the Water Rate Resolution as the document

governing the relationship between it and the property owner. The terms and conditions

upon which JSSD provides water reservations to property owners is set forth in the Water

Rate Resolutions including the reservation fee charged and the late fees and interest

charged in the event that payment is not received timely. The property owner was then

issued an annual bill for payment of the reservation fee charged to reserve water. The

property owner unilaterally and voluntarily elected to pay the bill and to the extent it

declined to do so the Water Rate Resolution entitled JSSD to either (a) terminate service for

violation or non-payment, which rights were spelled out in the resolution or place a lien on
 
JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
9
 
the customers property for past due fees and charges for commodities, services, or facilities

that the district has provided to the customer's property. Utah Code Ann. § 17B-1-902

District’s Response to Recommendation:

The District agrees with the Recommendation to the extent that it complies with the Utah

Municipal General Records Retention Schedule. JSSD’s governing body adopted Jordanelle

Special Service District Water Reservation Policy Resolution 2015-4 on February 10, 2015,

a copy of which was provided to the Auditor last month. In addition, the District now has

posted on its website an Application for Water Reservation Agreement which anyone

interested in reserving water may fill out, date, and deliver to JSSD.I It will endeavor to

identify and track the reservation fees charged to developers who have not obtained

subdivision plat approvals. Once subdivision approval is obtained and the property is

subdivided by lots the reservation fee will attach to that lot or lots and JSSD will charge the

current owner of the lot in the same manner that it charges an owner who has connected to

a water system.
 
6. PURCHASE OF PROPERTY UNDER UNUSUAL CIRCUMSTANCES


We noted the following problems and concerns related to the District’s purchase of a

52-acre tract of land for $1.8 million in October 2008:

a. Purchase Made on Behalf of a Separate Entity – The Board minutes show that

management represented that the land would initially be purchased by the District, but

would be sold to the North Village Special Service District (NVSSD) “when the bond

comes through.” The land is located in the North Village area. It is unusual for one

political subdivision to purchase land for the use of another political subdivision.

District management represented that the use of the land was intended to benefit both the

District and NVSSD. However, due to poor documentation and a questionable purchase

arrangement with NVSSD (discussed in b. below), it is unclear why the Board purchased

the land. (Also see Finding No. 2.)

b. Purchase Arrangement Not Documented – Although District management represented to

the Board that NVSSD would buy the property, we found no mention of this

arrangement in the NVSSD minutes at the time, nor was there any type of written

agreement with NVSSD at the time. Although the District is contracted to perform the

management function for NVSSD and, at the time, two of the District board members

were also NVSSD board members, the two districts are separate legal entities and should

be treated as such. Therefore, if the purchase was indeed legitimate and desirable to

both entities’ boards, the terms should have been documented and agreed to in writing.

We are particularly concerned that there is no mention of the transaction in the NVSSD

minutes until December 2011, when the District’s general manager, who also acts as the

NVSSD manager, informed the NVSSD Board that they would be paying the third and

final installment of the loan in February 2012. This indicates that the NVSSD board
JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
10
 
may not have been fully informed about or agreed to the arrangement with the District.

We also question whether the District’s Board adequately discussed or considered the

ramifications of this purchase. The District minutes reflect only one conversation about

the purchase prior to purchasing the property. Due to the unusual nature of the purchase,

we expected to see more discussion over a longer time period to fully consider the

ramifications of the arrangement. The Board should have ensured that the arrangement

with NVSSD was documented and the terms clearly defined before committing District

funds to the purchase.

c. Untimely Property Transfer Agreement and No Repayment Arrangement – The District

made the down payment and two of three installments on the loan. NVSSD made the

final installment in February 2012. Due to a finding and recommendation from the

District’s financial auditors, the District finally entered into a written Property Transfer

Agreement with NVSSD in May 2013. This was almost five years after the original

purchase and over one year after NVSSD had paid the third and final installment on the

loan. As noted above, an agreement should have been in place before the property was

purchased. The Property Transfer Agreement specified that the District and NVSSD

would negotiate a payment plan within 150 days of the date of the Agreement, whereby

NVSSD would repay the District for the remainder of the property. To date, the payment

plan does not exist.

d. The Property Purchase Was Never Ratified – The Board discussed the original property

purchase during the October 2008 board meeting and made a motion to purchase the

property. The motion was seconded and was to be ratified at the next board meeting.

However, the District’s Board never actually ratified the action, apparently due to an

oversight. The failure to follow-up on this action and put it on the agenda for the next

meeting is problematic and could result in adverse actions against the District. The

Board should ensure that proper voting procedures are followed and documented in the

minutes.

e. Current Status is Unclear – The Property Transfer Agreement specified that NVSSD’s

payment of the third installment “resulted in the equitable ownership of an undivided

one-third of the property to pass to NVSSD.” The Agreement also provides that when

NVSSD repays the District, ownership will transfer to NVSSD. However, since the two

entities never executed the repayment agreement and no repayments have been made,

the property is still jointly owned. Further, the District has provided no evidence that

there was an appraisal of the land around the time NVSSD made the final payment on

the land nor around the time of the Property Transfer Agreement. We believe that it was

inappropriate for NVSSD to make the final payment and enter into the Property Transfer

Agreement without a current appraisal to establish the land value. Likewise, it would be

inappropriate for NVSSD to continue the process of purchasing/transferring the property

without an appraisal to establish the current land value to ensure that the property is a

good value for their rate payers. Again, the failure to establish the terms in writing with

NVSSD when the property was originally purchased has caused complications and

uncertainty as to whether NVSSD should pay the current market price for the property or

the original purchase price. For these reasons, we believe it is unclear whether the
JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
11
 
District will be able to sell the property to NVSSD or whether it will be used jointly by

both entities. The lack of a properly crafted and documented agreement at the outset of

this transaction has contributed to a potential waste of funds.

Due to a lack of documentation about the original purchase and the lack of resolution of the

property transfer to NVSDD, we cannot say with certainty whether this purchase was in the

rate payers’ best interest for either the District or NVSSD. We believe that a deficiency of

Board control and oversight as evidenced by the lack of timely written agreements and

establishment of repayment terms allowed this situation to occur. The Board should ensure

that management is acting in the best interest of the District and its ratepayers, and should

provide appropriate oversight to ensure transactions are reasonable and proper.
Auditor’s Recommendation:

We recommend that the Board exercise proper oversight of unusual transactions,

require written agreements when appropriate, require appraisals for land

transactions, and ensure that all Board actions are properly executed. We also

recommend that the District Board review the status of the Property Transfer

Agreement with NVSSD and clearly document and execute appropriate agreements

between the entities.
 
District’s Response to Finding:

The District objects to the implication raised by this Finding to the extent that it fails to

acknowledge that the District provided the Auditor with a detailed description of the

transaction, the benefits of the transaction and that the transaction was fully vetted during

Board meetings open to the public, albeit by the JSSD board. It also fails to acknowledge

that the general manager of JSSD was asked to manage NVSSD pursuant to a written

agreement (which was reduced to writing) in order to save costs to the respective districts.

Copies of the Maintenance Agreements between JSSD and other special service districts

within Wasatch County (including NVSSD) were produced as part of this Audit on March

27, 2014. The audit should reflect the Board and management documented these

relationships. Although the Auditor may wish to characterize the transaction as “unusual,”

when it comes to providing services to its citizens, this transaction is a reflection of two

districts working cooperatively to serve those needs. The transaction actually provides a

benefit to the residents within JSSD’s and NVSSD’s jurisdiction.

District’s Response to Recommendation:

The District agrees to the recommendation and will continue to take steps to improve its

oversight and controls in making sure that transactions are properly documented, approved

and/or ratified.
 
JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
12
 
7. INADEQUATE CONTROL OVER AND POSSIBLE IMPROPER USE OF



DISTRICT CREDIT CARDS
 
We reviewed District credit card expenditures for the period January 2008 through

December 2013 and found a lack of internal control over and possible improper use of the

cards. Of particular concern is the District’s resistance to implementation of better control

and review of credit card expenditures. The District was issued a finding related to credit

cards during their 2011 audit. The Board discussed the audit findings during their meeting

held on August 14, 2012. However, based on our evaluation of credit card transactions after

August 14, 2012, we found that 166 of a possible 307 credit card transactions were not

supported by a receipt (54%). Furthermore, of the 141 receipts provided, only 108 were

itemized receipts, and only 33 included a written comment or explanation of business

purpose. The failure to implement proper controls and review over credit card transactions

has allowed potential misuse of District credit cards to occur, as noted below.

The District used various credit cards during the time period and up to three District

employees were in possession of cards at various times. However, our analysis showed that

85% of the total dollar amount of purchases were made using cards assigned to the general

manager. The chart below summarizes by type the purchases made with District-issued

bank credit cards and notes whether there was sufficient documentation to support the

transactions. Due to the lack of supporting documentation as discussed in a. below, we had

to assign categories for most transactions based solely on merchant name. The problems

noted with credit card use are detailed after the table.
Credit Card Transactions – January 2008 to December 2013
 
Category

(as assigned by the Office of

the State Auditor)

Amount

Total # of

transactions

per category

No receipt/

supporting

documentation

% of

transactions

unsupported

Additional

problems

noted
 
 
Gas Station $ 9,012 204 201 98.5% See b.

Assets 27,756 111 86 77.5% See c.

Grocery 18,747 312 296 94.9% See d.

Restaurant 10,838 262 210 80.2% See e. & f.

Finance Charges 1,427 64 n/a n/a See g.

Travel 19,007 108 94 87.0%

Internet 8,443 75 n/a n/a

Security 4,799 204 n/a n/a

Misc. (training, licensing,

employee morale, office

supplies, auto maintenance)

31,502 180 143 79.4%

Total $131,531 1,520 1,030 67.7% See a.
 
a. Inadequate Supporting Documentation

Of the 1,520 credit card transactions, 1,030 ($90,140) were not supported by a detailed

receipt or explanation of business purpose. It was not possible for the Board to have

performed an adequate detailed review of credit card expenditures considering the lack
JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
13
 
of supporting documentation, yet the Board approved the credit card expenditures at

every monthly Board meeting during the 6-year period reviewed. As mentioned above,

after the Board discussed the credit card finding in 2012, there continued to be a

significant number of unsupported credit card purchases. This indicates a weak control

environment, as audit findings and recommendations were not properly implemented.

b. Questionable Gas Station Purchases (also see Finding No. 8)

District credit cards were used for purchases at gas stations even though District policy
(Resolution No. 2005-6) requires that State Fleet Services fuel cards (Fuelman cards) be


used for the purchase of fuel and minor vehicle-related expenses. We question these

credit card purchases for the following reasons:

1) Of the 204 transactions, 201 were not supported by a receipt.

2) Most of the transactions were charged on the credit card issued to the general

manager; however, 20% of the transactions were for $25 or less which is counter to

our expectation since the general manager drives a truck, which would likely cost

more than $25 to fill. This leads us to question whether these are non-fuel

purchases.

3) We would expect most, if not all, fuel purchases to be made using the Fuelman

account.

4) Using District credit cards rather than using Fuelman cards to purchase fuel caused

the District to pay $729 more in excise taxes, assuming these were all charges for

fuel.

Fuelman cards are intended to help ensure that the District pays a low, fair price and

tracks fuel usage. The District’s use of credit cards instead of Fuelman cards and the

lack of supporting documentation can lead to wasteful or improper purchases.

c. Questionable Purchases at Retail Store Where the District Has a Charge Account

Of the total amount categorized in the above table as “assets,” $2,784 was charged at

The Home Depot on the general manager’s District-issued credit card even though the

District has a charge account with The Home Depot. None of these purchases were

supported by receipts. Although it is not inappropriate to use a credit card for retail store

purchases, since the District has a charge account directly with The Home Depot, the

lack of receipts could indicate that the purchases were made using credit cards rather

than the charge accounts so the receipt could be discarded and conceal what was

purchased. Whether an employee uses a credit card or a charge account, they should

always provide a detailed receipt to justify the business purpose of the purchase.

d. Questionable Purchases at Grocery Stores

Of the 312 credit card purchases at grocery stores, 296 were not supported by a receipt

documenting what was purchased. Our review of the 16 receipts provided, which

amounted to $960, indicated that approximately half the amount was spent on treats,

drinks, magazines, etc.
JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
14
 
e. Questionable Local Restaurant Charges

We question many of the credit card charges to local restaurants (in Wasatch and

adjacent counties) for the following reasons:

1) Of the $8,508 charged for meals at local restaurants, $7,454 did not have sufficient

documentation to indicate whether the charge was for a legitimate business purpose.

2) The dollar amount which the District spends on meals at local restaurants has

steadily increased each year, with the 2013 amount being more than triple the 2008

amount. This seems unusual considering the economic downturn. We would expect

that local restaurant charges would be infrequent and would only occur when there is

a legitimate business purpose.

f. Restaurant Charges During Travel

As noted in Finding No. 9 regarding problems with per diem payments, two District

employees used their District credit cards during conferences or other out-of-town travel

to purchase $2,208 in meals for themselves and others, likely employees or Board

members who were also receiving meal per diem. These charges are improper because

travel per diem was already distributed to the employees in advance of the travel dates.

g. Finance Charges on District Credit Cards

The District paid various finance charges on the credit cards including late fees, interest,

expedited payment fees, and over limit fees. As noted in the table, these charges

amounted to $1,427 during the period reviewed. Although the amount of fees has

decreased over the years, with only $89 in 2013, we consider these charges to be

unnecessary and a waste of public funds.

h. Excessive Credit Limit and Number of Cards Issued

Other than a two-month window in 2012, the general manager had two District-issued

credit cards in his name. Also, the credit limit was increased from $5,500 to $10,000 in

2012. We believe the number of cards and the credit limit are excessive and increase the

opportunity for improper purchases, especially combined with the lack of detailed

receipts and independent review of credit card transactions. Employees should be issued

the minimum number of cards and lowest credit limit necessary to achieve the business

purpose in order to minimize risk to the District.

The use of credit cards can be an efficient way to make purchases; however, without

effective controls, there is a high risk of improper use. Controls over credit card purchases

can be time consuming; therefore, some entities choose to limit their use to certain types of

purchases and minimize the available credit balance. The District should establish a policy

that balances the convenience and efficiency of using credit cards with the cost of

implementing appropriate controls over their use. In some instances this policy may require

employees to use their own credit card to make purchases and subsequently seek

reimbursement from the District. As a result of our testwork, we have determined that the

District’s use of credit cards has been of questionable purpose, and in some cases, wasteful

or improper.
JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
15
 
Recommendation:

District management and the Board should improve controls over the use of credit

cards and reduce the risk of potential waste and abuse of District funds as follows:
 
Ensure that the Board performs a more thorough review of credit card



expenditures to determine that there is appropriate documentation for

expenditures and that expenditures have a valid business purpose and are

reasonable.
 
Optimize accountability by requiring utilization of Fuelman and other



merchant accounts when in place and retention of receipts when using District

credit cards.
 
Ensure that meal purchases are appropriate and do not constitute a double



payment when per diem is also paid.
 
Ensure that necessary credit card accounts are properly managed so that



finance charges and other penalties are not incurred.
 
Limit the number of credit cards issued and ensure they have the lowest credit



limit necessary.

We also recommend that the Board review potential misappropriations to consider

appropriate disciplinary actions, including the payment of restitution as considered

necessary.
 
District’s Response to Finding:

The District agrees that even the slightest impropriety in use of credit cards is unacceptable.

It has also acknowledged that its internal controls with regards to credit card receipts may

have been lacking, but have corrected this issue over the past several years. The Findings,

however, are critical of JSSD’s practices which it will seek to improve but require some

explanation or comment.

First, as mentioned in the cover letter, the audit only focuses on one class of transactions.

Considering the scope and size of JSSD’s annual budget (almost $62 million in operating

expenses for the District between 2008 and 2013) the total amount of all credit card

transactions during the same period totaled $131,531 (only 21,921.83/year), which
represent 0.21% of all expenditures (or 1/5th of 1%).
Second, despite the Auditor’s “concern is the District’s resistance to implementation of

better control and review of credit card expenditures,” the District has not resisted in any



respect to implement better controls. The District has established and adopted complete

written financial policies and procedures manuals to help establish a good control

environment. (See Capson Email dated October 7, 2014, which attaches the policies.)

Third,

the Auditor questions local restaurant charges, which are a function of JSSD’s day-to-day
 
JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
16
 
business and interaction with consultants and other professionals. Further, the total

amount of charges over 6 years was $8,508. This is only $118 per month, which seems

reasonable considering operations of the District.
 
[Auditor’s Note: no “Fourth” item was included in the District’s response.]
Fifth, at page 14, h., the Auditor’s issue with the “excessive credit limit” of two District

issued credit cards ignores that credit limits are needed to cover costs of the board going to

the CRWUA conference each year.

District’s Response to Recommendation:

The District agrees with the Recommendation. What it objects to is the implication that

there has been “misappropriations” that may require “appropriate disciplinary actions.”

The District and/or its Board have not uncovered any evidence that its management or

employees have acted improperly or contrary to the best interests of the District with

respect to the use of credit cards but is prepared to move swiftly to enforce and remedy any

mismanagement or misuse of public funds and implemented this Recommendation.
 
8. INADEQUATE REVIEW OF AND PROBLEMS WITH GAS STATION PURCHASES


We noted the following concerns while reviewing gas station purchases for calendar years

2008 – 2013:

a. General Manager’s District-Issued Credit Cards Used for Gas Station Purchases

The general manager’s District-issued credit cards were often used for gas station

purchases rather than Fuelman cards assigned to the District vehicles (see Finding No.

7.b.). The general manager represented that the credit cards were used because there

were very few gas stations in Heber City that accepted the Fuelman card and availability

was limited. However, a station which did accept the Fuelman card was located on the

same street and less than one mile away from the other stations where credit card

purchases were regularly made. In addition, the general manager’s Fuelman card was

used at that station during the same periods of time when credit card purchases were

made at the other stations.

b. Multiple Gas Station Charges within Short Timeframe on General Manager’s District-

Issued Cards

We reviewed the gas station charges made on the general manager’s District-issued

credit cards and the Fuelman gas card assigned to his vehicle. As seen in the table

below, 23% of the total dollar amount charged occurred within two days of another gas

station purchase in Heber City or Park City using the same Fuelman card or credit card

or a combination of cards. We question the propriety of these purchases. The frequency

of these purchases could indicate that the District credit card was used to put fuel into a

personal vehicle or to purchase non-fuel items. The District’s policy prohibits the
JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
17
 
charging of fuel purchases for non-District vehicles and is grounds for termination or

other disciplinary action.
Frequency of

Purchase

Dollar

Amount

Number of

Transactions

Percent of Total

Dollar Amount
 
 
Same Day $1,092 22 5%

Within 1 Day $1,843 34 8%

Within 2 Days $2,194 47 10%
 
In addition, another 5% ($1,049) of the total dollar amount charged occurred within two

days of another purchase, but at least one of the purchases was outside of Heber City or

Park City. This situation indicates that the general manager was traveling; however,

because we were unable to determine the propriety of the travel and its relation to the

amount of fuel purchased due to inadequate records, we were unable to determine the

propriety of these transactions.

c. No Fuel Record Kept by General Manager

The general manager did not keep a record of his fuel purchases. District policy
(Resolution No. 2005-6) requires that a record of fuel purchases be maintained then


“signed by the employee and turned in when full.” If the general manager had used the

Fuelman cards issued to the vehicle, the proper records would have automatically been

maintained by State Fleet Services (see d. below).

d. Inadequate Fuel Records Policy

The District’s policy to maintain a record of fuel purchases is inadequate. The record

retention period of one year is too short, and the necessary information to be included on

the record is not specified. The State Archives record retention schedule applicable to

the District requires that accounts payable records be retained for at least 4 years.

Therefore, the fuel records should be maintained for at least 4 years as they are essential

to the proper documentation of the expenditures. At a minimum, each record should

include the date of purchase, odometer reading, number of gallons purchased, and

purchase price. The recording and maintenance of this information would allow a proper

review and approval of the expenditures and help to prevent and detect the

misappropriation of funds. This review and approval process is eased because reports

maintained by the State’s Fleet Services provide all the necessary information.

e. Inaccurate Records for Fuelman Cards

District employees did not accurately record information required for the fuel records

maintained by the State’s Fleet Services. As a result of inconsistencies noted upon our

initial review, we more thoroughly reviewed the 427 purchases made for two of the

District’s 17 Fuelman cards. Although we tested the transactions of only two cards, we

believe we would have noted similar problems had we reviewed other cards. We noted

the following:
JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
18
 
1) For the 427 purchases, 60 recorded odometer readings resulted in negative miles

driven, which indicates the odometer readings were not correctly recorded.

Inaccurate recording of odometer readings could indicate an unintentional error, an

intentional disregard for policy, or an attempt to hide a misappropriation, such as

fueling a personal vehicle or improper use of a District vehicle.

2) Numerous odometer readings appeared to be estimates rather than actual because

the number of miles driven were rounded to an even hundred. For example, we

would not expect fill ups to occur exactly every 200 or 300 miles. It seemed as

though the odometer readings were being entered based on a set number of miles.

This could have been done to force a reasonable fuel efficiency so as to make the

fuel purchases appear reasonable.

3) Of the 427 purchases, 74 purchases resulted in unusually low fuel efficiency based

on miles per gallon, which was calculated using the odometer readings recorded by

the employees. Of these 74 purchases, 32 were made either the same day or within

one day of another purchase. The frequency of the purchases, in addition to the low

fuel efficiency, could indicate a potential misuse.

f. Fuelman Cards for Specific Vehicles Used to Purchase Different Types of Fuel

Fuelman cards assigned to vehicles requiring unleaded gasoline were used to purchase

$2,530 worth of clear diesel fuel ($904 of the transactions were made with the two cards

noted in e. above), and the Fuelman card assigned to the dump truck requiring diesel fuel

was used to purchase $3,387 of unleaded gasoline. Since Fuelman cards are assigned to

specific vehicles, only the fuel type for that specific vehicle should be purchased with

that card. Therefore, we question the propriety of these purchases. The improper

purchases indicate the cards either were not used for the vehicles assigned, as

represented by the District, or that the cards were intentionally misused to purchase fuel

for other vehicles. The District’s policy prohibits the purchase of fuel for non-District

vehicles and is grounds for termination or other disciplinary action.

g. Failure to Report Taxable Fringe Benefits

The District did not properly determine taxable fringe benefits. District vehicles are

used for daily commuting by the general manager, assistant manager, and on-call

employees. Commute use of a District-provided vehicle is considered a taxable fringe

benefit per IRS Publication 15-B since commuting to and from work and home is

considered a personal use of the vehicle. The District indicated that they believed they

did not have to report the employees’ commute use of the vehicles as a fringe benefit

because public safety vehicles are exempt from the requirement. However, Internal

Revenue Bulletin: 2010-23 indicates that a public safety vehicle does not include pickup

trucks. The bulletin does allow for specialized utility repair trucks that are specifically

used to carry heavy tools, testing equipment, or parts if the modifications make it
unlikely the vehicle will be used more than a de minimis amount for personal purposes.


The vehicles provided to the District employees noted above do not appear to meet the

definition of a public safety vehicle. Therefore, the District should determine and report

the taxable amount of fringe benefits using one of the approved methods described in

IRS Publication 15-B. Because the District has not been appropriately reporting taxable
JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
19
 
fringe benefits, it may not be in compliance with federal and state laws and the

employees’ incomes may have been understated and underreported.

Although the District indicated that fuel reports were reviewed two times per year, those

reviews were inadequate. The questionable transactions noted above were allowed to occur

without detection because the District does not have controls or other procedures to ensure

that expenditures are properly reviewed and approved. A thorough review should be

performed monthly and should include a review of compliance with all applicable policies

as well as a review of frequency and locations of purchases, miles driven, fuel efficiency,

and gas type purchased in order to determine the propriety of the purchases. Any

irregularities should be followed up on, as they could indicate potential abuse and fraudulent

charges and could help management identify expenditures that require more documentation

and/or employees that require more monitoring.

Someone with adequate authority should be responsible for reviewing these reports in order

to adequately approve the propriety of the fuel purchases. Because we are questioning

activities of the general manager, the Board needs to provide adequate oversight to ensure

compliance and propriety at all levels of the District.
Auditor’s Recommendation:

We recommend that the Board implement and enforce an adequate policy for District

fuel purchases and perform adequate oversight, including a monthly review of fuel

records, to ensure compliance and propriety at all levels. The policy and oversight

should include the following:
 
A requirement that only Fuelman cards, rather than District-issued credit



cards, be used for the purchase of fuel and minor vehicle-related expenses,

except for the rare circumstances when a gas station that accepts Fuelman

cards is not available.
 
Ensure that regular reviews of fuel purchases are completed. The reviews



should look for unusual activity and promptly follow up on unexpected

behavior, such as fuel purchases made within a short timeframe for the same

vehicle.
 
Ensure that District personnel comply with the District’s policy requiring a fuel



record to be kept for all fuel purchases.
 
The requirements that: 1) fuel records be maintained in accordance with the



State Archives record retention schedule (at least 4 years), and 2) specific

information be recorded for all fuel purchases, including date of purchase,

odometer reading, number of gallons purchased, and purchase price.
JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
20
 
A requirement that actual odometer readings be recorded rather than



estimates, and follow up on records which indicate unusual frequency of

purchases, low fuel efficiency, or irregular odometer readings.
 
A requirement that Fuelman cards be used to purchase fuel for only the



vehicles to which they are assigned.
 
Accurate determination and reporting of taxable fringe benefits in accordance



with IRS Publication 15-B.

We also recommend that the Board review potential misappropriations to consider

appropriate disciplinary actions, including the payment of restitution as considered

necessary.
 
District’s Response to Finding:

The Finding ignores the fact that the District’s fuel uses extend beyond the fleet of vehicles

and beyond just the Heber Valley. The District has has historically purchased all fuel for

fleet (vehicles assigned a Fuelman card) and non-fleet (backhoes, backup generators, lawn

mowers, etc.) with either Fuelman cards or credit cards. The District recognizes that in

order to make the Fuelman an effective monitoring tool, all non-fleet fuel purchase needs to

be made outside the Fuelman system and effective monitoring the Fuelman statements needs

to be done.

With regards to the Auditor’s criticism about the general manager’s use of credit cards for

gas station purchases (p. 16, a.), JSSD admits the general manager has used the District’s

credit card to fuel the District vehicle assigned to him. The suggestion that the general

manager “represented that the credit cards were used because there were very few stations

in Heber City that accepted the Fuelman card” is taken out of context.

Likewise, it is unclear which two vehicles the auditor’s office reviewed. Based on a quick

review of the Fuelman statements given to the auditor, item e.2) on page 18, the District

believes the audit actually refers to an employee’s vehicle that had a transfer tank. Looking

at trends and irregularities for ALL vehicles it is not uncommon that an unusually low fuel

efficiency fuel-up is followed by an unusually high fuel efficiency fuel-up; or vice versa.

This reflects that an erroneous odometer input is corrected by the subsequent correct one.

The general and assistant manager assigned vehicles also repeatedly show unusually high

mileage efficiency without a corresponding low efficiency. This is consistent with the fact

that both had District credit cards and acknowledged use of their assigned credit cards to

fill their respective vehicles, which reflects that there was no attempt to conceal the

purchases of fuel for the vehicle, whether done with a credit card or Fuelman card.

Finally, with regards to the Auditor’s criticism about failure to report taxable fringe

benefits regarding the District’s vehicles provided to management and on-call employees,

the District respectfully disagrees with this conclusion. As noted below with regards to call

logs, the District believes it is reasonable that its manager, assistant general manager and
 
JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
21
 
on-call employees be assigned and provided a vehicle. They are expected to be available
24/7 and the vehicles do meet the necessary qualifications of the Internal Revenue Code and


related regulations.

District’s Response to Recommendation:

The District agrees better controls need to be in place. The District has taken the necessary

steps to assure this is being done, which includes better control over company issued credit

cards.
 
9. WEAKNESSES RELATED TO TRAVEL PER DIEM AND REIMBURSEMENT


The District made duplicate payments for employee meals during travel. The District paid

employees and Board members a flat meal per diem rate of $50 per day for District-related

travel. However, the District’s policy on travel states that the District will reimburse for

actual meal expenses “up to” an approved amount per day. Further, the policy indicates that

the employee must keep receipts to support the reimbursement requested. These two

provisions in the District’s current policy indicate that meal reimbursements should be for

actual expenses and not on a per diem basis. The District should either follow its existing

policy for reimbursement of actual travel expenses, which would require employees to keep

all receipts for reimbursement, or amend its policy to allow and properly monitor per diem

payments.

We also reviewed the per diem payments for 2010 through 2013 and found that the use of a

flat rate per diem resulted in overpayments and waste as noted in the following situations:

a. As noted in Finding No. 7.f., two employees used the District-issued credit card to

charge $2,208 for meals during travel when per diem was also issued for the trips. We

believe it is likely that at least some of these meal purchases benefitted other employees

and/or Board members; however, these other individuals also received per diem for

travel. We are very concerned that employees and/or Board members would accept per

diem when their meals were purchased with the District credit card since such activity

would be a waste and abuse of public funds.

b. The District did not make adjustments to the per diem rate for less than a full day of

travel or when meals were provided by other parties. Two Board members indicated

that while traveling, some of their meals were paid for by others (engineers, vendors,

etc.). We also noted instances where it appeared some meals were provided by the hotel.

Both the Federal/IRS guidelines and State Administrative Code require reductions in per

diem for these situations. It is reasonable to expect the District to adjust per diem when

the employee does not have to pay for meals. Failure to reduce per diem for less than

full days of travel or for meals provided by others results in a waste of public funds.

c. The District’s travel policy allows for advances of travel per diem; however, the District

does not have adequate procedures in place to review the travel advances after travel has
JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
22
 
been completed and compare them to actual travel expenses (as evidenced by receipts),

and to require reimbursement by the employee, when necessary. Lack of a review and

reconciliation of travel advances to actual travel expenses could allow improper travel

advances to be made without detection.

These situations occurred because the District was not following its current policy on

reimbursement for actual travel expenses, including the requirement to submit receipts, and

also because the District does not have adequate internal controls in place to review travel

reimbursement requests and make appropriate adjustments for partial days traveled, meals

paid for by other entities, and travel advances received.
Auditor’s Recommendation:

We recommend that the District either follow its current policy for reimbursement of

actual travel expenses, which would require the submission of receipts, or amend the

policy regarding per diem payments. The policy should include the following:
 
A provision to reduce reimbursement or per diem for meals provided by other



parties.
 
A procedure to ensure that employees do not use the District-issued credit card



for meals when they are also receiving per diem, a travel advance, or a

reimbursement of expenses.
 
A provision to reduce reimbursement or per diem for less than a full day’s



travel.
 
A procedure to review and/or reconcile travel advances to actual travel



expenses.

Finally, we recommend that the District seek reimbursement for the cost of meals that

were paid for twice by the District (through credit and per diem) or were provided by

other parties.
 
District’s Response to Finding:

The District is committed to complying with its own policies as well as the mandates of the

Internal Revenue Service. The Auditor raises valid concerns in the manner in which the

District documents its travel expenses, which the District will endeavor to improve.

However, the District disagrees that it made duplicate payments for employee meals during

travel. The District (payor) reasonably believed that the employee or board member

incurred meal and incidental expenses during each day of travel. As such, no reimbursement

is required.

IRS Rev Proc 2011-47 (Internal Revenue Bulletin: 2011-42) states:
 
.03 Meals provided in kind. A payor is not required to reduce the federal per

diem rate or the federal M&IE rate for the locality of travel for meals



provided in kind, provided the payor has a reasonable belief that the
 
JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
23
 
employee incurred or will incur meal and incidental expenses during each

day of travel.

Moreover, an employee or board member is not required to reimburse the per diem if a

vendor, prospective vendor or other third-party pays for a meal. Therefore, we believe the

Auditor’s conclusions are contrary to the IRS code and/or there is a difference of opinion in

this regard.

District’s Response to Recommendation:

As reflected above, the District disagrees with the findings of the Auditor with regards to

per diem travel expenses. Regardless, the District has adopted a financial policy that

addresses the issue of seeking reimbursements for expenses incurred during travel, which it
 
shall do its best to comply with going forward. (See Capson email, attached hereto.)

10. FAILURE TO EVALUATE THE REASONABLENESS OF ALLOWING ON-CALL



EMPLOYEES TO USE DISTRICT VEHICLES FOR COMMUTING
 
The District allows the General Manager, Assistant General Manager, and on-call

employees to use District vehicles for daily commuting. The District justifies this practice

in order to allow for timely responses to emergencies outside regular business hours. We

asked the District to provide us with emergency call out logs to determine whether the

number of emergency call outs justifies the cost of commuting privileges. The District

responded that they did not maintain any logs. The District did indicate that they could

reconstruct a log using employee time records; however, it is apparent that the District has

not evaluated the frequency of call outs to ensure that employee use of District vehicles for

commuting is reasonable. This practice is particularly concerning since one employee

granted commuting privileges commutes approximately 100 miles each day. If a timely

response to emergencies is, indeed, the justification for allowing an employee to use a

District vehicle for commuting, we question the reasonableness of having an employee who

lives approximately 50 miles away from Heber City designated as a person available to

respond timely.
Auditor’s Recommendation:

We recommend that the District maintain a log of after-hour emergency call outs and

determine whether the frequency of the call outs and the improved timely response

justify the expense of allowing employees to use District vehicles for commuting.
 
District’s Response to Finding:

The Auditor’s Findings question the reasonableness of JSSD’s business decision to provide

a vehicle to its general manager, assistant manager and others employees without

maintaining call logs of when the vehicle is used for (a) de minimus non-work purposes and

(b) for after hour emergency calls. The District’s decision to provide a vehicle for its
 
JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
24
 
management is a reasonable decision because of the limited number of staff available for

emergency calls. The District believes it is complying with applicable statues and

regulations regarding the fringe benefits offered with regards to vehicles.

District’s Response to Recommendation:

The District will undertake a determination regarding whether its current policy regarding

call-out logs is sufficient. It has considered requiring all vehicles that are called out on

emergencies after hours to have a “log book” that shall document each emergency call. As

part of this process, the District will evaluate the reasonableness of allowing employees to

use District vehicles for commuting.
 
11. LACK OF POTENTIAL CONFLICT OF INTEREST DISCLOSURE


One former Board member did not disclose a potential conflict of interest as required by
Utah Code 67-16-8 Utah Public Officers’ and Employees’ Ethics Act, which requires that a


public officer or employee not participate in his official capacity in respect to any

transaction with a business entity where the public officer or employee is also an officer,

director, or employee unless disclosure has been made. The former Board member is

employed by a company which sells a modest amount of materials to the District and, as

such, should have filed a sworn statement with the Board before participating in the review

and approval of payments made to the company.

We believe the deficient policies and procedures contributed to the lack of conflict of

interest disclosure. The law requires a conflict of interest disclosure to be completed when

first becoming a public officer and to be updated on an as-needed basis. Proper disclosure

by public officers and employees and abstaining from voting, when applicable, strengthens

the faith and confidence of the citizens in the integrity of their government.
Auditor’s Recommendation:

We recommend that the District implement proper policies and procedures requiring

Board members and management to complete a conflict of interest disclosure as
required by Utah Code 67-16-8.
District’s Response to Finding:

The District agrees with the Auditor that public officers have a duty to disclose any potential

conflict of interest. It also agrees that there is benefit in establishing policies and

procedures related to potential conflict of interest. The District, however, takes issue with

the Finding that a “former board member is employed by a company which sells a modest

amount of materials to the District, and, as such, should have filed a sworn statement with

the Board before participating in the review and approval of payments made to the

company.” It also takes issue with the Finding that the “law requires a conflict of interest

disclosure to be completed when first becoming a public officer … .”
 
JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
25
 
Although Board members and management may not have filed a sworn statement as

provided in Utah Code Ann. § 67-16-7, the District disputes such a disclosure was required.

Utah Code Ann. § 6-16-1 et seq. is intended to have public “officers and employees”
disclose conflicts when the officer and/or employee has a “private interest” in the

transaction with whom the public entity is doing business or a “substantial interest” in any


company, which is defined as “at least 10% of the outstanding stock of a corporation or a

10% interest in any business.” Utah Code Ann. § 67-16-3(15). None of Wasatch County

councilmembers or employees (including its general manager) of JSSD own a “substantial

interest” in a company doing business with JSSD. Moreover, the mere fact that JSSD

purchased a modest amount of materials from a company in which a council member was

employed, does not in and of itself require disclosure if the council member was unaware of

the purchase (or transaction) before it was made and the entire council was asked to

approve warrants that included the purchase.

The audit also ignores the numerous times when a positional conflict arose, concerning a

transaction, the affected councilmember excused himself from the meeting and/or voting on

the issue. The District disagrees that each of its members must file conflict of interest

disclosure statements annually. The members of the Board and management cannot

anticipate whether a conflict of interest occurs unless and until it arises. Once it becomes

known that a conflict may exist, it has been a practice of the District to identify, disclose and

recuse themselves from voting on the issue even though doing so is not required by law. The

District believes this is a reasonable policy and has followed it for years.

District’s Response to Recommendation:

The District agrees with the Recommendation and affirmatively assets it currently complies

with Utah Code Ann. § 67-16-8. It will continue to monitor conflicts of interest and disclose

them when necessary and/or required by Utah law.
 
OTHER MATTERS
 
 
During the course of our audit we evaluated a number of matters not included in the findings

and recommendations above. Findings and recommendations represent exceptions that

require corrective action. The following matters were not found to be exceptions and are

included here only to indicate additional areas we reviewed and the issues we noted.
A. ASSESSMENT AREA BOND LIABILITY


We evaluated the potential for assessment area bonds issued by the District to become a
liability of the District, Wasatch County, or the State of Utah. Utah Code 11-42-606 states

that, “(1) Assessment bonds are not a general obligation of the local entity that issues

them. (2) A local entity that issues assessment bonds: (a) may not be held liable for

payment of the bonds…” (emphasis added)




JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
26
 
We found provisions such as the following in the various bond documents:
“Neither the Issuer nor Wasatch County, Utah shall be liable for the payment of the


Series 2009 Bonds…”
“Neither Wasatch County nor the State shall in any event be liable for the payment


of the principal of, premium, if any, or interest on any of the Bonds…”
“The Bonds do not represent or constitute a debt of Jordanelle, Wasatch County, or


of the State…”

Based on State statute and the bond documents it does not appear that the District, Wasatch

County, or the State of Utah is liable for the payment of the bonds simply because

landowners within the assessment area fail to pay the assessment. The District may be

liable for the bonds if they fail to perform certain duties outlined in the bond documents or

state statute; however, we did not identify significant noncompliance with required

provisions.
B. ASSESSMENT AREA BOND INTEREST RATE


We evaluated the reasonableness of the interest rate charged for the assessment area bonds.

We found that during construction, warranty bonds were issued to pay for construction

costs. When construction was complete, the warranty bonds were required to be repaid with

assessment area bonds.

The District issued warranty bonds and construction began prior to the sharp decline in

property values in 2008. By the time construction was complete and the warranty bonds

were to be repaid, property values within the assessment area had declined significantly. As

provided in State statute and the assessment area bond documents, assessment area bonds

are secured only by the value of the property within the assessment area, which made a very

limited market for the assessment area bonds.

With the District in a poor negotiating position, the purchasers of the bonds were able to

dictate terms such as the interest rate and default rate. Therefore, it appears that the timing of

the issuance of the warranty bonds and the issuance of the assessment area bonds created a

market condition that led to the high interest rates.
C. NOTICE TO PROPERTY OWNERS WITHIN THE ASSESSMENT AREA


We evaluated the process by which property owners are notified that their property would be
included in an assessment area. Utah Code 11-42-201 through 209 outlines provisions for


holding a public hearing, publishing notice of the hearing, and mailing notice to each

property owner within the proposed assessment area. It also contains provisions for a

property owner to protest the designation of the assessment area, the inclusion of the

owner’s property in the assessment area, and the proposed improvements.
JORDANELLE SPECIAL SERVICE DISTRICT
 
 
FINDINGS AND RECOMMENDATIONS
27
 
We reviewed meeting minutes, court transcripts containing a property owner’s testimony,

and other similar information. It appears that the District followed the notice and hearing

requirements as found in State statute.
D. WATER TREATMENT FACILITY LAND ACQUISITION


We reviewed a complaint that the District purchased property for a water treatment facility

in a manner that allegedly allowed District personnel to improperly benefit. We obtained

explanations from District officials, sworn affidavits from parties involved, and real estate

transaction documents which offered the following explanation of the transaction. The

District identified a parcel of property that was better suited for a water treatment facility

than property originally obtained by the District. The property was listed for sale; however,

another party had begun negotiations to purchase the property for $300,000 below the list

price. Without first obtaining an appraisal, the District negotiated with this intermediate

party who agreed to sell the property to the District at the list price. As part of the District’s

negotiation, the District assisted the intermediate party with their financing by granting the

intermediate party’s financing bank a security interest in $2.5 million of the District’s bank

deposits.

This transaction allowed the District to obtain property suitable for a treatment facility and

the intermediate party to make a profit of approximately $300,000. Both the District and the

intermediate party have attested that the transaction was arms-length and proper. To the

extent we have authority to investigate, we found no evidence that District personnel

improperly benefited. However, we recommend that the District obtain appraisals before

purchasing property.

We also reviewed Utah Constitution (Article VI, Section 29), which prohibits a political

subdivision from lending its credit, and determined that the District’s granting of a security

interest in the $2.5 million bank deposit is likely not a violation of the Utah Constitution.
OFFICE OF THE

UTAH STATE AUDITOR
Utah State Capitol Complex, East Office Building, Suite E310 • Salt Lake City, Utah 84114-2310 • Tel: (801) 538-1025 • auditor.utah.gov
 
28
 
AUDITOR’S CONCLUDING REMARKS
 
 
The Office of the Utah State Auditor received multiple complaints regarding the District, and

after reviewing the information, we determined that further investigation was warranted. As we

evaluated matters initially brought to our attention, certain risk factors caused us to determine that

expanding the scope of the audit was also appropriate.
Audit Scope
 
The District complains that based upon language found on our website we “generally” do not look

into certain matters. However, the scope of an effective audit cannot be determined by the auditee

(i.e. the District) and must be made according to the auditor’s professional judgment. One of the

significant risk factors causing the expansion of the audit has been the District’s attempt to limit

and direct the scope of the audit.

For example, throughout the audit, the District has required that all information and requests be

“filtered” through their external litigation attorney. Inhibiting access to individuals and records

has caused unnecessary delays and inefficiencies during the audit. In our professional judgment,

the unusual matters we found raised questions and caused us to request information that our office

“generally” may not look at due to pending litigation or the passage of time. However, when

during the course of an audit we identify strange, odd, or unusual activity, we cannot “look the

other way” simply because the issue was not included within a predetermined scope.

Again, the scope of an audit is not the District’s decision to make. Attempts by the District to

define or redirect that scope concerns us because it impedes an effective audit.
Lack of Expertise
 
It was our hope that with changes in Board membership and District management critical

improvements could be implemented. However, the District’s response indicates a resistant and

obstructive “business as usual” tone. Their response also reinforces the most significant matter

noted in the report (see Finding No. 1) which points to the Board’s attitude, actions, and

management style that are resistant and dismissive to sound business practices.

The District’s response complains multiple times that the report fails to give the District credit for

corrective action already taken. However, this is outside the scope of the audit. Additionally,

given our experience with the District’s resistant attitude and manipulation of facts, we chose not

to make a statement regarding corrective action without the corrective action being implemented,

consistently applied, and verified by our office. Implemented corrective action would need to be

operating for at least a year for our office to assess the effectiveness of the process and ensure that

policies have been converted into consistent practices.
AUDITOR’S CONCLUDING REMARKS
 
 
(continued)

29
 
As noted in the report, the deficiencies found may be caused by a lack of financial management

expertise among the governing body and management. The District asserts that certain corrective

actions are in progress; however, these actions will be meaningless unless the governing body and

management understand and enforce policies and procedures designed to safeguard and ensure

the efficient use of public funds. The Board’s response indicates that they still lack the necessary

expertise. The following examples from the District’s response are indications that they do not

understand critical issues:
Meal Reimbursement, Finding No. 11 – The District refers to an IRS Revenue Bulletin


justifying board members double dipping of meal reimbursements. The IRS Bulletin is

irrelevant; the point of the finding is that the Board members failed to follow District

policy. Their argument implies that IRS provisions are designed to provide internal

controls for the District, which they are not, and that a governing body cannot adopt

policies more restrictive than IRS guidelines.
Illusion that “Fraud does not happen here,” Finding No. 1 – The response includes the


statement that there is no evidence “…of misuse of public funds, self-dealing or fraud.”

The Board fails to understand their responsibility to establish internal controls that

minimize the risk of fraud, and that the District’s lack of internal controls would not detect

errors or fraud if it was occurring.
Projecting Conclusions Regarding Credit Card Errors – The District complains that the


report unfairly concludes that potential problems exist in areas other than credit cards and

that credit cards are a small part of District expenditures. It is reasonable to project credit

card disbursements to other transaction classes because:
The Board asserts that they review credit cards, but without credit card receipts an


effective review cannot be completed. The Board also asserts that they review all

disbursements; however, given the Board’s ineffective review of credit card

transactions, it is reasonable to believe that they do not conduct an effective review

of other disbursements.
The District lacked policies establishing controls over credit cards, which led to


weaknesses identified. The District also lacked policies over cash receipts and

other disbursements; therefore, it is reasonable to conclude similar weaknesses

exist in other areas that lack controls.
Delegation of Board Role – In many instances, the Board has deferred questions and


responsibility for the audit and its conclusions to their external litigation attorney. By

doing this, the District has allowed their external litigation attorney to function as a

defacto member of the governing body rather than simply an advisor. The Board should

not delegate their role of governing the District to another individual or group who cannot

be held accountable to the citizenry.
AUDITOR’S CONCLUDING REMARKS
 
 
(continued)

30
 
Misinterpretation of Conflict of Interest Statute, Finding No. 11 – The District’s response

misinterprets the conflict of interest statute found in Utah Code 67-16-8. This statute


states:
“No public officer or public employee shall participate in his official
capacity or receive compensation in respect to any transaction between the


state or any of its agencies and any business entity as to which such public
officer or public employee is also an officer, director or employee or owns a
substantial interest…” (emphasis added) [definition of “agencies” includes


political subdivisions, i.e. JSSD]

The District’s response fails to recognize the two words highlighted in the above law.

The response focuses on “substantial interest” but the report is not saying that the

instance identified includes “ownership” which would trigger the substantial interest
criteria. The instance noted in the report identifies a board member who works for a



company from which the District buys supplies. The board member was involved in

approving disbursements for the company.
 
Distortions, Deflections, Contradictions and Misstatements of Fact
 
Much of the publicly available information regarding District concerns is confusing and contains

conflicting accounts. As the scope of the audit expanded, we attempted to provide clarity to

disputed issues. The District’s response is consistent with the District’s approach throughout the

audit, which has been to defend inappropriate activity and cloud relevant facts by distorting,

deflecting, and manipulating facts and information. Essentially, the District defends certain

actions simply by throwing mud in a clear pool of water so that the picture becomes cloudy.

In evaluating how to clarify items in the District’s response which conflict with conclusions found

in our report, our primary objective is to again provide clarity without providing an excessive

amount of details which may lead to confusion and satisfy the District’s objective. Therefore, the

following examples do not constitute an all-inclusive list of distortions, deflections,

contradictions, and misstatements of fact found in the District’s response, but are examples

illustrating this point.
Missing Closed Meeting Minutes, Finding No. 2 – The District’s response to Finding No.


2 indicates that “the audit fails to recognize that all Board meetings during the relevant

time period were “properly documented.” This statement is simply untrue. Only 10 of

30 closed meetings during the audit period were properly documented with the

documentation retained in accordance with Utah Code and the State Archives General

Retention Schedule. Further, the land transaction was not adequately discussed and

documented – see Finding No. 6.
Concerns Over Contract With and Debt Write-Off For SLSSD, Finding No. 4 – The


District’s response to Finding No. 4 states that the “write-off was done with the full

knowledge and consent of the governing board.” However, lack of documentation causes

us to question the transparency and justification for the write-offs. Further, the District
AUDITOR’S CONCLUDING REMARKS
 
 
(continued)

31
 
refers to a six minute and 40 second discussion about SLSSD. This discussion was

irrelevant to the issues discussed in Finding No. 4.
Purchase of Property Under Unusual Circumstances, Finding No. 6 – The District’s


response to Finding No. 6 refers to a detailed description provided during the audit of the

land transaction conducted by the District and NVSSD. However, an after-the-fact

description of a transaction is not sufficient for audit purposes. Any transaction,

especially a large land transaction, should be adequately documented in the entity’s

records. The District contends that “the transaction was fully vetted during Board

meetings open to the public, albeit by the JSSD Board.” However, we found that the

transaction was not adequately discussed or documented in the District’s minutes and

was not discussed or documented at all in the NVSSD minutes. It appears the Board is

contending that the limited discussion in the District’s minutes is sufficient

documentation of NVSSD’s participation in the transaction. To assert that discussion

during one entity’s board meeting (the District) is sufficient to justify a large land

transaction also entered into by a separate entity (NVSSD) shows a complete disregard

for proper procedure, protocol, and transparency to the public.
Inadequate Review of and Problems with Gas Station Purchases, Finding No. 8 – The


District’s response to Finding No. 8 asserts that our Office did not take certain facts and

conditions into consideration when evaluating Fuelman card use. However, the Office

did consider the use of transfer tanks, corrections in fuel efficiency due to odometer input

errors, or use of the credit card to purchase fuel, etc. Even when taking these facts into

consideration, our testwork showed problems with the use of Fuelman cards which

highlight the need for a detailed review of Fuelman card use by the District.

Again, the above listing is not intended to be a complete list of distortions or contradictions. It is

only a partial listing intended to illustrate general concerns.

We affirm and stand by the conclusions found in the report. We also continue to have concerns

about District financial practices and the Board’s ability to correct these issues.
32
 
ATTACHMENTS RELATED TO THE DISTRICT’S RESPONSES
 
 
NOTE: The responses to the individual findings and

recommendations provided by the District have been integrated

into the report after each applicable finding and recommendation.
 
(NOTE: No changes have been made to the District’s responses other than references to

page numbers which changed with the input of the responses.)
 
The District’s cover letter to their responses is included as

Attachment A to this report. Also included, as Attachments B and C,

is the verbiage of the two emails referenced in the District’s response.
 
Jordanelle Special Service District
 
 
P.O. Box 519

Heber City, UT 84032

OFFICE: (435) 654-9233

FAX: (435) 657-9582

April 8, 2015
 
Via E-mail and Hand Delivery
 
 
 
John Dougall

State of Utah

Office of the State Auditor

Utah State Capitol Complex

East Office Building, Suite E310

P.O. Box 142310

Salt Lake City, Utah 84114-2310
 
Jordanelle Special Service District

Audit Report No. 13-JSSD-8L (the “Audit Report”)
 
 
 
Dear Mr. Dougall:

This letter represents Jordanelle Special Service District’s (“JSSD”) response to the

“DRAFT” Audit Report delivered to JSSD’s Board of Directors on March 13, 2015. The Audit

Report includes the Findings and Recommendations of the Auditor based on the audit of JSSD that

your office commenced over a year ago to “investigate allegations of mismanagement and potential

misappropriation of public funds.” It is our understanding that this letter will be included in the final

Audit Report as JSSD’s official response to the Findings and Recommendations made by the

Auditor.

To begin with, JSSD welcomes the Recommendations made by the Auditor with regards to

its internal controls. Every organization can benefit from an audit and the Audit Report shows JSSD

could have had better internal controls in place for the period covered by the Audit Report. It is

important for any organization to regularly evaluate its procedures and internal controls, and then to

improve them as recommended. JSSD appreciates the opportunity to improve and provide this

response to the Audit Report.

In doing so, we trust the Auditor will take JSSD’s comments in the vein that they are offered,

which is to identify concerns the District has with some of the Findings (not Recommendations)

based on the record provided. This is not intended to excuse the need for improvements in JSSD’s

internal controls. However, JSSD is compelled to distinguish between the conclusions of some of the

Findings based upon the record provided and investigated for the Audit Report and the

Recommendations. A summary of these concerns are as follows:
 
Attachment A
 
1. Although JSSD welcomes the Recommendations, the Auditor did not find any

mismanagement or misappropriation of public funds.
 
 
JSSD understands that the Audit Report was done pursuant to Utah Code Ann. § 67-3-1(4)
 
whereby it performed a “special purpose audit.” In doing so, we understand the Auditor did not



follow generally accepted audit procedures because the nature of the audit was to “investigate

allegations of mismanagement and potential misappropriation of public funds.” Although the Audit

Report found “internal control weaknesses” it did not find any mismanagement or misappropriation

of public funds. JSSD has and will continue to monitor and improve upon its internal controls as

recommended and is prepared to move swiftly to correct and enforce any transactions involving

mismanagement or misappropriation of public funds.
 
2. Although the Recommendations are helpful, the Auditor’s office has ignored its

policy of generally not investigating complaints that are the subject of litigation

and JSSD is concerned that the Auditor’s office could potentially be used by

litigants to gain a tactical advantage.
 
 
Since the Auditor commenced this investigation in late January of 2014, JSSD raised

concerns that the investigation was being undertaken for the benefit of private litigants. In the

District’s letter to the Auditor’s office on January 31, 2014, and in repeated verbal and written

communications thereafter, JSSD informed the Auditor’s office that it was embroiled in contentious

litigation with customers served by JSSD. It explained that the “anonymous” tip to the Auditor’s

office was likely from a disgruntled landowner and litigant within JSSD’s jurisdiction and that the

Auditor should follow its own policy which is not to accept or pursue such investigations when

parties are embroiled in pending lawsuits. (http://auditor.utah.gov/hotline/, Related Issues

(“Complaints that are currently under investigation by another entity will generally not be

accepted.”)) Although JSSD welcomes this investigation, it appears the Auditor’s office has ignored

its own policies in doing so.
 
3. Missing from the Audit Report is an acknowledgement of JSSD’s timely

response to the Auditor’s concerns reviewed in a full day’s meeting last July by

implementing certain controls, policies and procedures as then recommended.
 
 
JSSD welcomes the Audit. What is noticeably absent, however, from the Audit Report is an

acknowledgement that JSSD heard the Auditor’s concerns back in July of 2014 when they had a full

day meeting with the Auditor’s office, and have implemented specific controls, policies and

procedures as recommended that demonstrates the concern and responsiveness of JSSD.
 
4. While JSSD acknowledges the clear importance of internal controls over all

transactions, it is inaccurate for the Auditor to project general control

weaknesses to all transactions, especially with the majority of transaction

classes never being tested by the Auditor.
 
 
It is important to note that the Auditor did not test all transaction classes within JSSD. The

Auditor’s efforts focused solely on certain transaction classes such as credit cards, gas cards, and per

diem payments. In fact, the sum total of all transactions tested by the Auditor amount to less than 1%
 
Attachment A

(continued)
 
of all transactions over the same period of time. While JSSD acknowledges the clear importance of

internal controls over all transaction classes, it is inaccurate to project control weaknesses from one

transaction class to all other transaction classes that were not tested by the Auditor.
 
5. JSSD has been anxiously awaiting the final Audit Report, not delaying it.

However, given the similarity between the Auditor’s investigation and on-going

litigation , JSSD was cautious in its production of records —making some

delays inevitable (although JSSD can appreciate the Auditor’s concern over

some delays).
 
 
In light of the concern over the Auditor’s office being used by private litigants to gain

information and/or findings that could be used in their respective cases, JSSD was cautious in its

production of records. The Auditor criticizes JSSD and concludes that it has a “weak control

environment” because it “resisted, delayed and opposed” requests for information. Although the

Auditor’s office may have perceived delays in some circumstances, JSSD did not seek to resist,

intentionally delay or oppose the Auditor’s request for information. JSSD was careful to inspect and

ensure all records were made available and that the responses were accurate. This vetting process

inevitably resulted in some delays . JSSD cooperated thoroughly and completely with the Auditor’s

request for information over a thirteen month period. JSSD Excel Spreadsheet provided the Auditor

with the level and scope of its cooperation. It also openly admitted when it was unable to locate

some records (a concern to JSSD leading to process changes), it was not because JSSD was resisting
 
or opposing such production.1




6. The Auditor sought materials going back more than six (6) years despite the

Auditor’s policy that complaints are generally not accepted if the alleged

wrongdoing has been more than two years ago, and the investigation extends

beyond a period in which JSSD was statutorily required to retain records

related to the audit.
 
 
JSSD understands that the investigation was primarily for the period of January 2008 through

January 2013, although the Auditor also examined internal controls for other periods which in some

instances date back over fifteen (15) years ago. JSSD is concerned with the time frame of the audit

period in two respects: To begin with, the State Auditor’s own website provides that complaints are

generally not accepted if the time elapsed since the alleged wrongdoing has been more than two

years. Here, the Auditor sought (and in many instances obtained) materials going back more than six

(6) years. (http://auditor.utah.gov/hotline/, Timing.) Next, the investigation extends beyond a period

in which JSSD was required to retain certain records that requested during the investigation. On

January 31, 2014, JSSD informed the Auditor that it follows the Utah Municipal General Records

Retention Schedule. This fact is important because the Audit Report is critical of the absence of
 
1 It bears noting that many of the requests for information by the Auditor paralleled requests and/or



allegations being asserted by private litigants, including the claims of mismanagement and

misappropriate of bond funds.
 
Attachment A

(continued)
 
John Dougall
 
 
April 8, 2015

Page 4

records (particularly the credit card information) that the District was permitted under Utah law to

discard after the passage of more than four (4) or six (6) years ago. (See Utah Municipal General

Records Retention Schedule, http://archives.utah.gov/recordsmanagement/grs/mungrs-list.html.) It is

reasonable that certain records may not have been retained in accordance with the Schedules imposed

and adopted by the State of Utah.

With the foregoing comments in mind, attached hereto are JSSD's Responses to the Findings

and Recommendations set forth in the Audit Report. We thank the Auditor and his stafffor the

opportunity to provide these responses and look forward to working with the Auditor in the future.

Thank you for your consideration. Let us know if you have any questions.




Enclosures
 
 
cc: Mark R. Gaylord, Esq.

Randall Larsen, Esq.




Steve Capson
 
 
Very truly yours,

)ORDANELLE SPE~TRICT

Michael Kohler, Chairman



Attachment A

(continued)
 
Attachment B
 
Attachment C

Attachment C

(continued)