South County wastewater treatment plant will undergo review

San Luis Obispo County’s auditor-controller plans to review some of a South County wastewater treatment plant’s internal financial controls in response to a county civil grand jury report that questioned the agency’s structure.

The grand jury’s report, released June 2, determined 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.

The grand jury recommended that the county auditor-controller consider an audit of the district. In a letter to the 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.

Sibbach wrote that 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 delegating engineering unless it had already been budgeted or is necessary in an emergency situation, Seitz said. Sibbach said he will review the contracts after they've been approved.