San Luis Obispo County’s auditor-controller plans to study whether a conflict of interest exists at a South County wastewater treatment plant, as the county civil grand jury alleged in a report last month.
The grand jury’s report, released June 2, said a conflict of interest exists between John Wallace, the administrator of the South San Luis Obispo County Sanitation District, and his engineering firm, the Wallace Group.
The district serves 38,000 people in Arroyo Grande, Grover Beach and Oceano.
Grand jurors also alleged the district’s board of directors has failed to recognize or eliminate the conflict of interest, and that Wallace’s contract, which was signed in March 1986, has never been evaluated, re-bid or modified.
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The grand jury recommended the county’s audit division consider an audit of the district. In a letter to San Luis Obispo Superior Court Judge Charles Crandall, Auditor-Controller Gere Sibbach instead proposed his staff perform a limited review of internal financial controls at the district with a specific emphasis on a possible conflict of interest between Wallace and his firm.
“We’ll concentrate on bill paying, how they budget, how they report expenses to the board of directors and who has to sign off on payments and contracts,” Sibbach said Thursday.
Sibbach wrote he could perform an audit for the 2010-11 fiscal year or a future year but that does not appear to be cost effective or necessary since the district contracts with a certified public accountant annually to audit its accounts and records.
Michael Seitz, the district’s attorney, also said the district board is trying to make its administration and engineering budgets more transparent by possibly splitting Wallace’s agreement into two separate contracts: one for his administrative work and the other for the engineering work his firm provides.
The board will consider the two contracts at its next meeting.
Separating the contracts will prevent Wallace from assigning engineering projects unless they have already been budgeted or are necessary in an emergency, Seitz said. Sibbach said he’ll review the contracts once they’ve been approved.