Regional
Nevada County Grand Jury Releases Mark Miller Response to Report on Nevada City Government
Author: Nevada County Civil Grand Jury
Published on Sep 14, 2007, 09:45

Honorable Foreman and Grand Jurors,

Thank you for the opportunity to respond to your 2006-2007 report on Nevada City Government. Your report was comprehensive and highlighted most of the items that were reported through the City's internal operations investigation. In response to the Grand Jury's report recommendations, please receive the following from the City Manager.

Records Management

Findings:

1. At the Time of the Jury's investigation, the City's offices contained 26 boxes of unorganized paperwork, substantial unopened mail going back five years, and unfiled/unorganized City records going back to the 1980's.
Answer: Agree, as of April 26, 2006 when the City began its operations investigation. The records have since been reviewed and organized.

2. At the time of the Jury's investigation, City offices contained stacks of records which were unsecured from risk of theft, loss or damage.
Answer: Agree, regarding the Office Operations Supervisor files, as of April 26, 2006 when the City began its operations investigation. City planning files were and are in locked cabinets as recommended by the Grand Jury's 2001-2002 Report.

3. At the Time of the Jury's investigation, there was no apparent record retention/disposal policy in place. Rather, record keeping appeared to be fragmented and duplicative.
Answer: Agree, as of April 26, 2006 when the City began its operations investigation.

4. In its 2001-2002 Report, the Jury found the City did not then " ...have a written procedure for records management, resulting in a lack of guidelines for employees. Additionally, the manner of maintaining public records does not comply with State guidelines."
Answer: Agree

5. In its 2001-2002 Report, the Jury recommended, among other matters, (a) the City develop a much needed records management system; (b) the City implement the Local Government Records Management Guidelines issued by the California Secretary of State; and (c) the City initiate a records security and back-up system.
Answer: Agree

6. The City, in its Response to the Jury's 2001-2002 Report wrote, "The City is currently in the process of hiring a new City Manager. The City Clerk will discuss this item [Records Management] with the new City Manager after the position is filled."
Answer: Agree

7. In further response to the Jury's 2001-2002 Report, City representatives also wrote: "When the Grand Jury provides funding, we will implement new Records Management Guidelines."
Answer: Agree. This response was generated by the office operations supervisor.

Recommendations:

1. The City should, as a matter of highest priority, establish a record keeping and protection policy with appropriate procedures.
Response: Agree. Implementation of this was 'begun prior to the Grand Jury report and is ongoing.

2. The City should assure that all currently unf1led City records and documents are filed and indexed consistent with its record keeping policy and applicable law.
Response: Agree. Implementation of this was begun prior to the Grand Jury report and is ongoing. The City is in the process of implementing this Recommendation. All boxes have been emptied and contents are now in file drawers. Files are in the process of being indexed.

3. All unopened mail and related correspondence should be properly processed, with suitable explanations where appropriate.
Response: Agree. Implementation of this was begun prior to the Grand Jury report. This Recommendation had been fully implemented, and is our current policy.

Finances

Findings:

1. At the time of the jury's investigation, City records made it clear the City had lost significant revenue due to the City's failure to bill, or the sending of incorrect bills, for business license fees, water and sewer fees, and Transient Occupancy Taxes.
Answer: Agree to the finding that City has lost significant revenue due to failure to correctly bill for sewer/water and business licenses. However, the City does not bill for TOT, as lodging owners submit their returns based on occupancy. The City is doing periodic audits of the TOT generators.

2. The examination of the City's financial records by City-retained expert consultants reflected significant uncollected debt (accounts receivable) which had been on the books for years, some now uncollectible because of the passing of statutes of limitation
Answer: Agree. City debt collection procedures had been corrected. prior to the Grand Jury report and is additional improvement is ongoing.

3. The examination of the City's books by its expert consultants disclosed inconsistent (or non-existent) practices with regard to follow-up of past due accounts.
Answer: Agree. Implementation of this was begun prior to the Grand Jury report. City debt collection procedures have been corrected with Council approved debt follow-up procedures.

4. The examination of the City's books by its expert consultants also disclosed only sporadic bank statement reconciliation, no general ledger reconciliation to cash, and substantial variances in financial accounts.
Answer: Agree. Implementation of this was begun prior to the Grand Jury report the City has hired new auditors with extensive government experience and created the new position of Finance Manager.

5. The City's expert consultants also found, historically, the City's basic accounting activities were left to the year-end auditors. And the new Government Accounting Standards Board Policy, GASB 34, which became effective in 2004, had not yet been implemented by the City.
Answer: Partially agree, but all audits have been GASB 34 compliant. The 2002/2003 audit was the first year of requirements on Nevada City, and that audit was fully compliant. The new finance manager provides in-house financial expertise that is assisting in GASB compliance.

6. In the course of the review of the City's affairs by the City and its expert consultants, a number of undeposited checks payable to the City dating back several years were discovered.
Answer: Agree. Correction of this was made prior to the Grand Jury report and is ongoing. The current policy is to deposit all checks, with bank deposits completed several times a week.

7. Effective February 19, 2007, the City hired a Finance Manager to replace a full-time financial consultant that has worked over the past months to address many of the deficiencies noted above.
Answer: Agree

Recommendations:

1. The City should provide extensive transitional guidance for its newly hired Finance manager and direct such individual to establish written policies and practices which will assure the City's financial rights and assets are protected.
Response: The City agrees and is in the process of implementing. Extensive transitional guidance has been provided for the new Finance Manager, including ongoing consultations with an experienced governmental accounting firm, financial managers and other government agencies. The City Council has budgeted funds to ensure guidance is available as needed.

2. The City Council should exercise diligent oversight of the City's financial resources and take steps to assure its members understand the relevant processes and are given timely periodic reports.
Response: The City agrees and is in the process of implementing. Diligent oversight of the financial resources is being provided by the Council directly through two finance-experienced Council members serving full-time on the Finance Committee and Finance Manager and City Treasurer reports to the City Council, and additionally through the Finance Committee's citizen expertise and detailed oversight and reporting back to City Council. A new audit firm specializing in government audits has been engaged, is currently performing the City audit and is providing recommendations for the Council.

City Clerk's Office

Findings:

1. The incumbent City Clerk was first appointed in 1987 and has been reelected to the office every four years since.
Answer: Those findings predate the current City Manager

2. Shortly thereafter, the incumbent City Clerk was designated as the Office Operations Supervisor and held that position until its elimination by the City Council on April 25, 2006.
Answer: Partially agree. The City Council voted 4-1 on June 26, 2006, to eliminate the Office Operations Supervisor position in a public meeting after extensive public input and receiving the unanimous recommendation of the City's consultants.

3. Over the years, the functions of the elected office of City Clerk and the appointed office of Office Operations Supervisor were allowed to become blended and the duties indistinguishable.
Answer: Partially agree. The positions were blended but not indistinguishable. City Clerk duties are detailed by State law.

4. The City Council eliminated the position of Office Operations Supervisor, following reports from a citizens' committee, and an investigative team composed of a forensic certified public accountant, a personnel specialist, a former law enforcement officer and a financial consultant.
Answer: Agree

5. The incumbent City Clerk, subsequent to April 25, 2006, has failed to enter the Nevada City Offices for purposes of performing the duties of City Clerk.
Answer: Partially disagree. The City Clerk has entered City Hall on approximately two times, to perform an official duty.

6. At the time of the Jury's investigation, the Jury found that deeds conveying real property to the City had not been recorded.
Answer: Agree, as was report to the Grand Jury. Deeds are now recorded.

7. At the time of the jury's investigation, City Ordinances and Council Resolutions were not being maintained in an organized manner, were not readily accessible by the public, and had not been codified, indexed or published since 1990. Additionally, City Council Minutes had not been filed since 1995.
Answer: Agree. Minutes are now filed and a draft new Municipal Code is being proofed.

8. The City has had to hire additional personnel to perform functions of the City Clerk and to cover the responsibilities of the former Office Operations Supervisor.
Answer: Partially agree. The Finance Manager has been hired to perform finance duties.

9. The incumbent City Clerk, in her individual capacity, has sued Nevada City alleging wrongful termination of her employment as Office Operations Supervisor.
Answer: Agree

10. Over seventy percent of California cities utilize an appointed City Clerk in order to provide more effective oversight of the work of that position.
Answer: I believe this premise to be true but have not investigated the Clerk issues.

Recommendation:
The City should, as permitted by California Government Code Section 36508, hold an election to make the office of City Clerk an appointive position, and the City Council should thereafter, by Ordinance, determine whether the City Council or the City Manager appoint the City Clerk.
Response: This recommendation is to the City Council.

City Management Practice and Accountability Findings:

1. The principal duties of the City Manager of Nevada City include the efficient administration of all the affairs of the City which are under his control.
Answer: Agree

2. The City has had two City Mangers during the past 41 years, the present City Manager having been in the position for almost five years.
Answer: Agree

3. The City Manager 1S responsible for overseeing all City personnel, which included the Office Operations Supervisor.
Answer: Partially agree. The City Manager is responsible for overseeing all City personnel except for the City Attorney, which serves at the pleasure of the Council. The Office Operations Supervisor on several instances made comments that the position was not responsible to the City Manager.

4. Prior to April 26, 2006, the City did not employ any experienced accounting personnel, and the City's financial software had not been upgraded for almost two decades.
Answer: Partially agree. The City's financial software has not been upgraded for 16 years.

5. At the time of the jury's investigation, there was insufficient oversight of the City's administration of various grant programs and loans.
Answer: Disagree. The record keeping was not up to acceptable standards, but the City has applied for and received numerous grants that were administered well and oversight was excellent. The City has even been shown as an example for successful Federal projects by the USDA.

6. At the time of the Jury's investigation, available records pointed to inconsistent application of City Ordinances.
Answer: Agree as to sewer and water Ordinances.

7. At the time of the Jury's investigation, there was evidence of improper employee classifications (regular versus temporary) as well as the finding of derogatory material being entered into employee personnel flies by a department head without advisement or the employee's right to respond as required by law.
Answer: Potentially correct but classifications were not formally made until after April 26, 2006 and now are correct.

8. The Jury was unable to locate any City office policy or procedures manuals.
Answer: Agree

9. During the transition, the City Manager directed the expert financial consultant not to discuss prior history of the City's financial affairs with the new Finance Manager.
Answer: Disagree. The Finance Manager has many discussions on prior history with the city's financial consultants and continues to do so. Specific work on investigative matters was not part of the Finance Manager position.

Recommendation: The City Manager should develop and implement fundamental policies and procedures including, but not limited to, personnel, records management, and financial management consistent with sound, generally accepted management principles.
Response: The City agrees. Implementation is in process and began before the Grand Jury's investigation. The City Manager has been instructed by the City Council to work with staff and consultants as necessary to develop modern, effective policies and procedures. Several policies and procedures have been developed, primarily in the financial management area, more are underway in all areas, and funding has been budgeted. The codification portion of the records management procedures is well underway and will be brought to City Council for formal adoption in the near future.

City Council Oversight

Findings:

1. At the time of the Jury's investigation, it did not appear the City Council had ever conducted a comprehensive performance evaluation of its City Manager.
Answer: Disagree in part. There have been three formal performance evaluations of the current City Manager and informally reviewed two additional times. The previous City Manager was not evaluated in 37 years.

2. Subsequent to April 2006, the City Council designated one of its members to seek an accommodation with the incumbent City Clerk such that the duties of City Clerk would be performed.
Answer: Agree.

3. There is considerable disagreement as to the efficacy of the interim solution, which has resulted in the City Clerk performing certain duties in her automobile parked in front of City Hall.
Answer: Agree

4. According to Government code Section 36804, "If the city clerk is absent, the deputy city clerk shall act. If there is none, the mayor shall appoint one of the councilmen as city clerk pro tempore."
Answer: Agree

5. For the past fourteen years, the City has contracted with the same outside auditing firm to perform the annual audit of the city's financial records.
Answer: Agree

6. The City's outside auditors have not performed a comprehensive audit, but rather have examined only materials provided y the Office Operations Supervisor and other City staff.
Answer: Agree, regarding audits prior to April 2006. New audits are more comprehensive.

7. To date, only one Auditor Management Review Letter has been located for the past seven years. (An Auditor's Management Review Letter identifies any significant issues discovered in the audit process.)
Answer: Agree

8. Between May 17, 2006 and June 28, 2006, the City received seven consultant interim reports covering the review of materials under the care, custody and control of the City Clerk/Office Operations Supervisor.
Answer: Agree

9. The interim reports referred to in No.8 above contained in excess of 70 detailed and task specific recommendations.
Answer: Agree

10. The City Manager terminated these investigations prior to the issuance of a final report.
Answer: Disagree. The City manager continued investigations through the final investigative phase and the improvements phase is continuing, with reports by consultants and staff.

11. The City, as of March 2007, could not provide the cost of the reports referred to in No.8 above; However, materials reviewed by the Jury suggest the cost will exceed $200,000.
Answer: Disagree

Recommendations:

1. The City Council should evaluate the job performance of the current City Manager with a view to assuring itself that the City is being effectively managed.
Response: The City Council has agreed to do an additional job performance review of the City Manager within six months.

2. The City Council should review the duties and responsibilities of the City Manager position to be certain they are comprehensive and suitable.
Response: Agree and will be implemented within six months as part of the performance review process. The Municipal Code spells out the duties and responsibilities.

3. The City Council should establish a comprehensive working plan, with completion dates, for implementation of the recommendations contained in the reports of the City's retained expert consultants.
Response: The City Council will implement this recommendation in that it will review the recommendations contained in the reports and determine completion dates as appropriate.

4. Members of the City Council should, with the assistance of the City Attorney, review their statutory and fiduciary duties and assure that senior management is doing its job.
Response: The City Council and City Attorney have agreed and the implementation of the recommendation is on-going.

Please do not hesitate to contact me if you have any questions.

Sincerely,
Mark Miller
City Manager

All the responses are available for download from the Grand Jury web site.

Related articles:

Grand Jury Report on Nevada City Government.

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