Fallen Leaf Lake
Community Services
District
Its Billing Practices and Small Electorate
Jeopardize Its Ability to Provide Services
July 2019
REPORT 2018-133
For questions regarding the contents of this report, please contact MargaritaFernández, Chief of Public Affairs, at ..
This report is also available online at www.auditor.ca.gov | Alternative format reports available upon request | Permission is granted to reproduce reports
 Capitol Mall, Suite  | Sacramento | CA | 
CALIFORNIA STATE AUDITOR
.. | TTY ..
...
For complaints of state employee misconduct,
contact us through the Whistleblower Hotline:
Don’t want to miss any of our reports? Subscribe to our email list at
auditor.ca.gov
Elaine M. Howle State Auditor
621 Capitol Mall, Suite 1200 | Sacramento, CA 95814 | 916.445.0255 | 916.327.0019 fax | www.auditor.ca.gov
July 18, 2019
2018‑133
e Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
State Capitol
Sacramento, California 95814
Dear Governor and Legislative Leaders:
As requested by the Joint Legislative Audit Committee, the California State Auditor presents this
audit report concerning the Fallen Leaf Lake Community Services District (district). is report
concludes that the district’s billing and budgeting practices and its small electorate jeopardize its
ability to provide services. e California Fire Assistance Agreement (fire agreement) between
federal and state agencies provides for reimbursement to local fire agencies, including the
district, for providing firefighting assistance to federal, state, and other local agencies during
wildfires. However, the district claimed excessive personnel costs by inflating its salary rates and
claiming over $700,000 more than it should have for 2016 through 2018. Without the inflated
reimbursements and if the district did not reduce expenditures or increase revenues from other
sources, it would have experienced financial shortfalls. Also, the district jeopardized its financial
viability because it may have to repay the excessive reimbursement amounts. Furthermore,
the district’s recent budget practice of counting on these reimbursements—a volatile revenue
source—to help cover increases in budgeted personnel costs, adds to the district’s financial risk.
Separately, limited oversight by the California Governor’s Office of Emergency Services of the
reimbursement rates that local fire agencies claimed and weaknesses in the fire agreement’s
reimbursement process also enabled the district to claim the excessive reimbursements.
Additionally, the district’s small electorate jeopardizes its ability to continue providing services.
e district’s board of director’s (board) must have at least three members for it to conduct district
business, but the district has had difficulty attracting candidates to run for the board. State law
requires board members to be domiciled residents in the district and to be registered voters there.
We estimate the number of domiciled residents in the district to be between five and33. Although
multiple options exist to address this challenge, redefining the district’s electorate to include
landowners and other community members, as well as domiciled residents, is the onewith the
fewest risks and that provides the best opportunity for the district to maintain services and costs
at their current levels.
Respectfully submitted,
ELAINE M. HOWLE, CPA
California State Auditor
iv California State Auditor Report 2018-133
July 2019
Selected Abbreviations Used in This Report
Agreement Committee California Fire Assistance Agreement Committee
Board Board of Directors, Fallen Leaf Lake Community Services District
Cal OES California Governor’s Office of Emergency Services
District Fallen Leaf Lake Community Services District
Fire agreement California Fire Assistance Agreement
Forest Service U.S. Forest Service
LAFCO local agency formation commission
vCalifornia State Auditor Report 2018-133
July 2019
Contents
Summary 1
Introduction 7
Audit Results
The District Inappropriately Profited From Providing Firefighting
AssistanceUnder the Fire Agreement 15
The District Mischaracterized Its Employment Relationship With
Its Recruits 20
The District’s Ongoing Financial Viability May Be in Jeopardy 22
Weaknesses in the Fire Agreement’s Reimbursement Policy
and CalOES’sOversight of Enhanced Salary Rates Enabled the
District’sOverbilling 24
The District’s Small Electorate May Threaten Its Ability to
Function Effectively 28
When Creating and Modifying Special Districts, LAFCOs Are
NotRequiredtoEvaluate Their Electorate Size 35
Recommendations 37
Appendix A
Scope and Methodology 41
Appendix B
Although Other Options Could Also Address the District’s
GovernanceChallenge,TheyInclude Additional Risks and Hurdles 45
Responses to the Audit
California Governor’s Office of Emergency Services 49
California State Auditor’s Comments on theResponse From
the California Governor’s Office of Emergency Services 53
Fallen Leaf Lake Community Services District 55
California State Auditor’s Comments on theResponse From
the Fallen Leaf Lake Community Services District 61
El Dorado Local Agency Formation Commission 65
California State Auditor’s Comments on theResponse From
the El Dorado Local Agency Formation Commission 69
vi California State Auditor Report 2018-133
July 2019
Blank page inserted for reproduction purposes only.
1California State Auditor Report 2018-133
July 2019
Audit Highlights . . .
Our review of the Fallen Leaf Lake
Community Services District revealed
the following:
» The district improperly profited from
reimbursements it received for providing
personnel to fight wildfires.
• It overbilled reimbursing agencies
by more than $700,000 from 2016
through 2018.
» Without the inflated reimbursements
and if the district did not reduce
expenditures or increase revenues from
other sources, it would have experienced
financial shortfalls.
» The district jeopardized its financial
viability because it may have to repay the
excessive reimbursement amounts.
» Cal OES’s limited oversight of the
reimbursement rates claimed by
local fire agencies and weaknesses
in the reimbursement process
enabled the district to claim
excessive reimbursements.
» The district’s small electorate challenges
its ability to provide services to its
community members.
• It has difficulty attracting candidates
to run for its five‑member board
because only permanent residents who
are registered voters are eligible—
only 17 of the 62 registered voters had
mailing addresses in South Lake Tahoe.
• Expanding the district’s electorate
to include nonresident landowners
and permit holders would allow
more people the opportunity to vote
on district matters and to serve on
the board.
Summary
Results in Brief
Established in , the Fallen Leaf Lake Community Services
District (district) is a special district located south of Lake Tahoe
in El Dorado County. e district includes  parcels of land
that are either privately owned or used by individuals who have
recreational permits from the U.S. Forest Service (Forest Service).
e district provides the community with fire protection and park
and recreation services. However, it has consistently overbilled
other government agencies for reimbursements related to providing
firefighting assistance, creating the risk that it will need to pay
the funds back. Additionally, when balancing its annual budget,
it has relied on the reimbursements it receives for providing such
firefighting assistance, even though it has no assurance that this
funding will be ongoing or consistent. Further, because the district
has such a small electorate, it could face difficulties in the near
future in electing enough members to its board of directors (board)
to achieve a quorum—a majority of the board members. Without a
quorum, the board may be unable to function and the district may
be unable to provide the community with services at their current
cost and service levels.
e California Fire Assistance Agreement (fire agreement) between
federal and state agencies provides for reimbursement to local
fire agencies—such as the district’s—for providing firefighting
assistance, such as personnel and equipment (strike teams) during
wildfires. Under the fire agreement, local fire agencies can receive
reimbursement for personnel at a base rate or a higher, enhanced
rate. To receive an enhanced rate, local fire agencies must calculate
and submit to the California Governor’s Office of Emergency
Services (CalOES) their average actual salary rates. CalOES uses
these salary rates to calculate the reimbursement amounts due
to the local fire agencies from the federal, state, and other local
agencies to which they provided assistance.
However, when filing its salary forms for  through  with
CalOES, the district’s fire chief reported higher salary rates than
the district actually paid its firefighters, which resulted in the
district claiming over $, more than it should have. As a
result of these improper reimbursements, the district’s audited
financial statements for fiscal years – through –
show that its revenue exceeded its expenditures. However, had it
submitted salary forms with the appropriate salary rates and had
it not reduced its expenditures or increased revenues from other
sources, the district would have experienced a financial shortfall
during that period. e district may need to repay the excessive
California State Auditor Report 2018-133
July 2019
2
reimbursements in the future. Doing so would significantly impact
its reserve balance, which was $. million at the end of fiscal
year–.
In addition, the district recently implemented a budget practice that
has further jeopardized its ongoing financial viability. Specifically,
since fiscal year –, the district’s budgets have relied on strike
team reimbursements to help cover increases in its personnel
costs. Given that such reimbursements are subject to a number
of variables—for instance, the number of wildfires that occur and
the length of time firefighters spend on strike teams—we consider
them to be a volatile revenue source, meaning that they are neither
ongoing nor consistent. Consequently, the district has taken an
unnecessary financial risk by relying on this revenue to support its
personnel costs.
CalOES’s limited oversight of the enhanced salary rates claimed by
local fire agencies and weaknesses in the reimbursement process
under the fire agreement enabled the district to claim excessive
reimbursements. For instance, although we recommended in 
that the California Emergency Management Agency—which the
State later renamed CalOES—analyze the accuracy of the rates
that local fire agencies reported on their salary forms and audit
a sample of invoices each year, it has completed only eight such
audits over the past seven years. CalOES is working to reinstate
these audits and, as of June , was negotiating an agreement
with the State Controller’s Office to perform them. Additionally,
the current fire agreement does not require local fire agencies
to submit documentation to support the enhanced salary rates
they claim. Revising the fire agreement to require each local fire
agency to submit documents demonstrating that its governing
body approved its salary rates and supporting how the fire agency
calculated the rates would allow CalOES to determine whether the
rates were reasonable. e California Fire Assistance Agreement
Committee (Agreement Committee) is currently renegotiating a
new fire agreement that CalOES expects to become effective in
January.
In addition to its financial problems, the district faces a governance
challenge because of its small electorate. Specifically, it has had
difficulty attracting candidates to run for its five-member board
because of the eligibility requirements that define which community
members can vote on district matters or serve on the board. Only
people who are domiciled—have their primary, fixed residence—in
the district are eligible to register to vote and to sit on the board.
Many community members live in the district for only part of
the year because it is a seasonal community. Consequently, as of
January, the district had  registered voters, and only of
them provided mailing addresses in South Lake Tahoe. e other
3California State Auditor Report 2018-133
July 2019
voters, including all five of the district’s current board members,
registered with mailing addresses outside the area—an indication
that these community members may actually be domiciled outside
of the district and therefore be ineligible to register to vote in the
district or serve on the board. e district has not had a contested
election for a board seat since August , and since January,
it has had seven different vacancies on its board.
Expanding the district’s electorate would likely help to address its
governance challenge. Although other options exist, they have more
risks and are more likely to affect the services the district provides,
as well as the costs of those services. We believe that expanding
the district’s electorate to include nonresident landowners and
individuals who have permits to use Forest Service land would
allow more people the opportunity to vote on district matters and
to serve on the board. Doing so would not only address vacancy
concerns for the board, it would also allow these individuals to vote
on district matters that affect them.
Although the district’s board faces a challenge as a result of its small
electorate, existing state law does not require that when a local
agency formation commission (LAFCO) is creating or modifying
a special district, it must consider—along with other factors such
as the potential district’s ability to provide services—the size of the
proposed special district’s electorate.
Selected Recommendations
Legislature
To ensure that the district has an electorate of sufficient size from
which it can elect a board, the Legislature should enact legislation
to allow landowners and holders of Forest Service permits within
the district, along with otherwise domiciled registered voters in the
district, to vote on district matters and serve on the board.
To help voters in special districts elect full-size boards of directors
and to help special district boards avoid quorum issues and service
disruptions, the Legislature should amend state law to require a
LAFCO to assess whether an electorate is of sufficient size when it
considers creating or modifying a special district.
California State Auditor Report 2018-133
July 2019
4
Cal OES
To better ensure that it reimburses local fire agencies appropriate
amounts for responding to incidents, including the provision
of strike teams for fighting wildfires, CalOES should complete
implementation of its plan to routinely audit a sample of salary
forms and invoices that local fire agencies submit under the
fire agreement. It should, by September , , complete
its negotiations to have the State Controller’s Office perform
theseaudits.
To further ensure that local fire agencies receive proper
reimbursement for responding to incidents, CalOES should
recommend to the Agreement Committee that it include the
following steps in the new fire agreement:
• Require local fire agencies to submit documents showing
approval by their governing bodies of the average actual salary
rates included on the salary form that the local fire agencies
submit to CalOES.
• Require local fire agencies to submit documentation to support
their average actual salary rates.
District
To rectify the excessive reimbursement amounts it received for
strike team assignments, the district should, by December,,
develop and implement a plan for returning to the paying agencies
the excessive reimbursements it received from  through .
To improve its financial viability and safeguard its ability to
continue providing services to the Fallen Leaf Lake community, the
district should take the following actions by December , :
• Monitor the financial risks it may face in the future, forecast
their impact on its finances and budget, and plan and implement
appropriate changes to its budget as necessary throughout the
fiscal year.
• Limit the extent to which it relies on volatile revenue sources to
balance its budget.
• Develop and implement a budget plan that realistically estimates
changes in revenues and expenditures, and identifies approaches
to address such changes.
5California State Auditor Report 2018-133
July 2019
• Develop a five-year forecast of estimated revenues and
expenditures and a plan to guide its decisions and actions in the
event of fluctuations.
Agency Comments
Although it generally intends to implement our recommendations,
the district disagreed with certain of our report’s conclusions,
including that its financial viability may be in jeopardy. CalOES
stated that it intends to address our recommendations and
described the corrective actions it will take. Finally, although we
did not include recommendations for the El Dorado LAFCO in
our report, it provided a written response, which we include on
page. Because this LAFCO questioned certain statements
and conclusions in our report, we provide our perspective on its
response beginning on page.
6 California State Auditor Report 2018-133
July 2019
Blank page inserted for reproduction purposes only.
7California State Auditor Report 2018-133
July 2019
Introduction
Background
State law allows the creation of special districts, which are local
governments that deliver specific services within their geographic
boundaries. Community services districts, a type of special district,
can provide up to  different services. Other types of special
districts include fire protection districts and water districts. e
Fallen Leaf Lake Community Services District (district) covers
a small geographic area—square miles—in El Dorado County
south of Lake Tahoe. Figure shows the district’s location and
its boundaries. A five-member board of directors (board), whose
members serve four-year, staggered terms, governs the district.
Since board members have met four to six times per year to
conduct the district’s business.
Land parcels in the district can be publicly or privately owned.
Many parcels have homes or cabins that community members
occupy only seasonally; the district experiences road closures in
the winter because of snow. e district’s community members
include  private landowners who own  parcels of land and
the improvements on that land, such as houses or cabins.
ey
also include  holders of permits that the U.S. Forest Service
(Forest Service) has issued for cabins or other improvements on
federal land parcels.
A residence on Forest Service land requires
a permit from the federal government, and the permit holder
may use the parcel only for recreation purposes, not as a primary
residence. eForest Service issues these special-use permits for
-yearperiods.
1
A landowner can be either an individual or an entity, such as a trust. Some district landowners
own more than one parcel.
2
A Forest Service permit holder can be either an individual or an entity, such as a trust. One person
currently holds permits for two parcels in the district.
8 California State Auditor Report 2018-133
July 2019
Figure 
The District’s Boundaries
F
A
L
L
E
N
L
E
A
F
R
O
A
D
Fallen
Leaf
Lake
Cascade
Lake
Lake Tahoe
STANFORD SIERRA CONFERENCE CENTER
FIRE S TATION
DISTRICT OFFICE
FALLEN LEAF LAKE CAMPGROUND
AND VISITOR PARKING
District
Primary access road into
the district
Gate into the district is closed
during the winter season.
Homeowners have a code to
unlock it.
N
89
Source: Analysis of data from the El Dorado County Assessor and El Dorado County Elections Department, parcel map from the county assessor,
auditor observation, Google Maps, the El Dorado LAFCO, the district, the Forest Service, and state law.
9California State Auditor Report 2018-133
July 2019
The District’s Services and Funding
e district was established in  to provide fire protection
services to the area. Besides basic fire protection, these services
currently include emergency medical services, inspections to help
community members comply with a state law that requires the
maintenance of feet of cleared space around structures to help
protect those structures from wildfires, and responses to hazardous
material incidents. To operate the fire department and conduct
the district’s day-to-day business, the district contracts with an
individual who serves as both its fire chief and general manager.
According to this individual, the district has six paid firefighters
other than himself and an assistant fire chief, four volunteer
firefighters who have been with the fire department for many years,
and  unpaid resident recruit firefighters (recruits).
To fund fire protection, the district’s board annually sets a fire
special tax that is levied in units. e maximum tax that the board
can levy is $; in  a unit was $. Owners and permit
holders of parcels with improvements, such as cabins, pay a full
unit, while owners of unimproved parcels pay one-half unit, or
$ in . Stanford Sierra, a conference center in the district,
pays  units, or $, in .
e district also provides park and recreation services. In the
district accepted title to land at the south end of Fallen Leaf Lake.
etitle contained a covenant guaranteeing public access to the
lake. e district’s current park and recreation services include
theoperation of a marina, a general store, a community building, a
boat launch and rental service, a swim beach, and parking areas, as
well as inspection of watercraft to prevent invasive aquatic species
from contaminating the lake. e district contracts with a vendor
toprovide these services. e vendor charges customers fees to
cover the expenses for park and recreation services, and it pays the
district an annual fee.
The Governance of Special Districts
Generally, each special district elects a board of directors that
oversees its activities, although county boards of supervisors can
govern certain types of special districts within their county
boundaries. e type of special district determines who is eligible to
vote in its elections, known as a district’s electorate. For instance,
3
A September  report to the board stated that the fire chief recruits graduates of the local
Tahoe Basin Fire Academy to staff the district’s station along with the district’s paid personnel.
The district provides the recruits with training and opportunities to gain hours of experience
toward receiving their Fire Fighter  certification.
10 California State Auditor Report 2018-133
July 2019
for individuals to be eligible to vote in a community services
district, fire protection district, or park and recreation district, state
law generally requires that they be domiciled—have their primary,
fixed residence—in the district and be registered to vote in the
district. However, state law defines the electorate for certain types
of water districts as consisting of the individuals who own land
within those districts. ese distinctions become important in
districts such as Fallen Leaf Lake, where many community
members live for only part of the year and are likely
domiciledelsewhere.
State law requires a five-member board to govern
community services districts, such as Fallen Leaf
Lake. To conduct business, a community services
district’s board must have a quorum—a majority
or at least three of the board members—present
at a given meeting. To be a candidate for a
community services district’s board, a person must
be a registered voter of the district, as we describe
in the textbox.
Entities With Key Responsibilities Related to
SpecialDistricts
In each county, two entities can play key roles
related to special districts: the local agency
formation commission (LAFCO) and the county
board of supervisors. State laws govern the
creation of and certain modifications to special
districts, both of which LAFCOs must approve.
For example, LAFCOs review applications to form
new special districts. An application can come in
the form of a petition, which individuals must sign
in accordance with any legal requirements under
which the district will be formed. Alternatively,
an application can consist of a resolution either
by a local agency that contains or would contain
territory for the proposed district or by the
LAFCO itself. An application must include a
statement regarding the nature of the proposed
special district, a map and description of its boundaries, and a plan
for providing services. e plan must include a description of the
services currently provided to the affected territory, an indication of
when the special district can feasibly provide the proposed services,
and information regarding how the special district will finance
those services.
Eligibility Requirements for Community Services
District Board Members
Stated simply, to qualify to be a board member of a
community services district, a person must be a registered
voter who resides in the district.
• State law requires that an individual who wishes to
be a community services district board member be
a voter of the district.
• State law further establishes the following
requirements for an individual who wishes to be
avoter:
– Be registered to vote in accordance with the
State’s Elections Code.
– Be a U.S. citizen 18 years of age or older.
– Be a resident of an election precinct in California.
State law defines residence for voting purposes as
a person’s domicile. It defines a person’s domicile
as “that place in which the person’s habitation
is fixed, wherein the person has the intention
of remaining, and to which, whenever the
person is absent, the person has the intention
ofreturning”.*
Source: Elections Code and Government Code.
* State law also says that at a given time, a person may have
more than one residence but only one domicile.
11California State Auditor Report 2018-133
July 2019
e LAFCO’s executive officer reviews the application and, if
applicable, schedules and holds public hearings. At the hearings,
LAFCO can receive written protests of the proposed special
district. If percent of the voters in the affected territory
sign written protests, it will stop the application; similarly, if
percent or more of the voters or landowners sign written
protests, the affected territory must hold an election regarding
thespecialdistrict. If the LAFCO approves the application
andthepublic does not impede the application through such
written protests, the special district can be formed.
LAFCOs also have other responsibilities regarding special
districts. For instance, they must approve changes to existing
special districts, such as the consolidation of two or more special
districts or the dissolution of a special district. ese changes can
be initiated from various sources, including LAFCOs, voters, or
landowners. State law also requires LAFCOs to conduct periodic
municipal service reviews of special districts. ese reviews
must evaluate the services provided in the special district’s
area and determine the districts’ financial ability to provide the
services, andtheir accountability for the services, including their
governmental structure and operational efficiencies. LAFCOs can
use these reviews when proposing modifications to special districts.
State law requires that LAFCOs conduct these reviews generally
every five years. e El Dorado LAFCO’s most recent review of the
district is dated October . According to its executive officer, the
ElDorado LAFCO originally scheduled the district’s next review for
, but it then moved other special districts ahead of the district
because of the other districts’ upcoming projects, including three
possible reorganizations.
In certain cases, a county can also fulfill key responsibilities for
special districts within its jurisdiction. For instance, under state
law, a county’s board of supervisors governs certain types of special
districts. Furthermore, a county’s board of supervisors can help fill
vacant special district board seats. Specifically, if the membership of a
special district’s board falls below the number required for a quorum,
the county’s board of supervisors—at the request of the special
district’s secretary or a remaining board member—can either appoint
a person to fill the vacancy or call an election to fill the vacancy.
State law allows the county’s board of supervisors to fill only enough
vacancies to provide the special district with a quorum. Additionally,
if a special district dissolves and if it was located entirely within the
unincorporated territory of a single county, that county serves as a
successor to wind up the dissolved special district’s affairs.
12 California State Auditor Report 2018-133
July 2019
The California Fire Assistance Agreement
Under an agreement between federal and state agencies, local fire
agencies—such as the district’s—can provide personnel and
equipment to federal, state, and other local agencies during severe
wildfire conditions or other emergencies. is agreement, called the
California Fire Assistance Agreement (fire agreement), describes
theprocess by which the State or other participating
entities (paying agencies) can reimburse local fire
agencies for the cost of providing such assistance.
When local fire agencies provide firefighting
assistance—for example, in the form of strike
teams—to fight wildfires under the fire agreement,
the agreement authorizes reimbursement for
personnel on an hourly basis, for vehicles and
equipment on an hourly or daily basis depending on
the type, and for an administrative fee. e current
fire agreement expires in December .
e California Fire Assistance Agreement
Committee (Agreement Committee) is responsible
for negotiating the terms of the fire agreement
and for the agreement’s maintenance. e fireand
rescue chief of the California Governor’s Office
of Emergency Services (CalOES) or the chief’s
designee chairs the Agreement Committee,
which consists of representatives from CalOES,
the California Department of Forestry and Fire
Protection (CAL FIRE), the federal fire agencies who
sign the fire agreement (Forest Service, the Bureau
of Land Management, the National Park Service,
the U.S. Fish and Wildlife Service, and the Bureau of
Indian Affairs), and three advisory representatives
from local government fire agencies in California.
e Agreement Committee meets as necessary
to make changes to the fire agreement, and it also
meets annually to establish reimbursement rates,
establish new methods of reporting or invoicing
under the fire agreement, and to negotiate
procedural changes to the fire agreement.
Regardless of whether a federal, state, or local
agency requested firefighting assistance, CalOES
is responsible for processing reimbursements for
that assistance. To receive reimbursement under
the fire agreement, local agencies must submit to
CalOES a number of documents, which we describe
in the textbox. First, on the annual salary form,
local agencies must submit salary rates: the agencies
Forms and Authorizations Required for
Reimbursement Under the Fire Agreement
Annual Salary Form: A local fire agency seeking
reimbursement for its personnel must complete and sign
an annual salary form and file it with Cal OES. The local fire
agency may claim either of the following rates:
• Base rate—default reimbursement rate per hour
($20.69 in 2018*).
• Average actual salary rate (enhanced rate)—the
local fire agency uses its actual salaries to calculate
theaverage actual hourly rate per classification (for
example,firefighter, apparatus operator, captain, etc.).
Emergency Activity Record: After responding to an
incident, a local fire agency fills out this form to record and
substantiate the personnel and equipment it used for the
response. The local fire agency notes the start and stop
dates and times for its staff on the form from which Cal OES
can calculate the number of hours assigned.
Reimbursement Invoice: Cal OES uses the local fire
agency’s information to calculate the reimbursement
amount for each individual incident.
• The number of hours based on information from the
emergency activity record.
• The annual salary form contains the rates per hour.
When calculating the reimbursement amount,
CalOES multiplies the rate on the annual salary form
by 1.5 to ensure full reimbursement for direct costs
for personnel.*
Cal OES forwards the reimbursement invoice to the localfire
agency for verification and signature. Once the local
fireagency returns it, Cal OES submits it to the appropriate
federal, state, or local agency forpayment.
Source: Analysis of the fire agreement, Cal OES’s instructions,
and Cal OES’s reimbursement forms.
* This applies to certain personnel, such as firefighters,
apparatus operators, and captains.
13California State Auditor Report 2018-133
July 2019
can claim reimbursement for personnel rates either at a base rate
($. per hour in ) or at an enhanced rate if their average
actual salary rates are greater than the base rate. CalOES publishes
instructions for calculating enhanced rates on its website and
references those instructions on the annual salary form. It expects
local fire agencies to compensate their personnel at the rates
theagencies include on their annual salary forms. Second, on the
emergency activity record, local agencies must submit information
regarding the length of time their personnel worked on an incident.
CalOES uses these two forms to calculate the reimbursement
amounts for the local agencies for each incident.
14 California State Auditor Report 2018-133
July 2019
Blank page inserted for reproduction purposes only.
15California State Auditor Report 2018-133
July 2019
Audit Results
The District Inappropriately Profited From Providing Firefighting
Assistance Under the Fire Agreement
Because it overbilled CalOES and paid its own personnel less
than the rate it told CalOES it would, the district improperly
profited from reimbursements it received from paying agencies for
providing personnel to fight wildfires. Under the fire agreement,
local fire agencies—such as the district’s—can provide strike teams
to respond to incidents such as wildfires. We discuss the forms
and authorizations local agencies must submit to CalOES to seek
reimbursement for providing these strike teams in the Introduction.
According to the senior emergency services coordinator for
CalOES, CalOES does not intend for local fire agencies to make
money or profit from the fire agreement’s reimbursement process.
During our audit period, the district’s strike teams generally
consisted of a captain, who was a paid employee, and two or
threeapparatus (equipment) operators and firefighters, most of
whom were recruits. According to the fire chief the district does not
send its volunteers to work on strike teams. During  the district
paid its sixnonmanagement firefighting personnel $perhour,
regardless of rank, when performing regular, or non-strike team,
duties in the district. e district did not pay its  recruits for
performing regular duties in the district, such as responding to
medical incidents or searching for lost persons. Given that the hourly
salary rates forthe district’s personnel when performing regular
duties were below the fire agreement’s base rate of $.perhour
and that the fire agreement’s default reimbursement rate is the base
rate, we expected the fire chief to include the base rate—rather
than an enhanced rate—on the annual salary form when claiming
reimbursement amounts for the district’s personnel who served on
strike teams.
However, rather than using the base rate for personnel, the fire
chief instead improperly claimed enhanced rates for the firefighter
through captain ranks for strike teams during each calendar year
from  through . For instance, for  the fire chief
submitted hourly salary rates that ranged from $ for the district’s
firefighters—including recruits—to $ for company officers, or
captains.
e district assigns both its nonmanagement personnel
and its recruits to strike teams, and the fire chief told us that
recruits receive pay only when assigned to a strike team. Further,
the district did not pay its firefighters the full rate that it claimed
for their strike team duty. For example, although the fire chief
submitted an hourly salary rate of $ for a firefighter on strike
team assignments for , he told us that he instead paid each
firefighter only $perhour, a difference of $ for each hour.
California State Auditor Report 2018-133
July 2019
16
By claiming enhanced salary rates for the district’s personnel rather
than the base rate, the fire chief failed to adhere to the terms of the
fire agreement when submitting the annual salary form. Specifically,
according to the fire chief, he included in his calculations of the
enhanced rate his employees’ overtime rates plus an additional
amount to pay for personnel who covered the strike team’s duties
at the district when they were on strike team duty. is practice
violates the instructions for completing the salary form, which he
signed. e fire chief told us that he readthe fire agreement and
watched a video that CalOES created to describe the instructions
for filling out the salary form but that he found them confusing.
For example, he was unsure if the base rate included overtime.
However, we believe the fire agreement and its instructions,
which we discuss in the Introduction, are clear. In addition, the
instructions for calculating the average actual rate state specifically
that the rate should not include overtime. If the fire chief was
unclear about the rates to include on the salary form, he should
have contacted CalOES for clarification.
In addition to claiming reimbursements based on the enhanced
rates instead of the base rate, the district also retained
reimbursement amounts that could cover overtime compensation
for strike team personnel. e agreement includes provisions for
compensating local fire agencies for its strike teams’ direct costs.
Direct costs can include overtime pay and payments for other
employees to fill in for those who are on a strike team. Specifically,
when calculating reimbursement amounts for firefighters and
certain other strike team personnel, CalOES multiplies the rate the
local fire agencies submit by .. By doing so, the fire agreement and
CalOES intend the payment to be a full reimbursement for direct
costs for strike team personnel.
Documents pertaining to strike teams are clear regarding amounts
local fire agencies should pay their personnel. First, the fire
agreement states that it will not reimburse local fire agencies for
enhanced rates that exceed the rates that the agencies themselves
pay their personnel. Furthermore, CalOES expects local fire
agencies to compensate their personnel the rates they submit on
their annual salary form. e fire chief told us that the district pays
its personnel overtime compensation when they perform regular
duties at the district for more than  hours in a two-week pay
period. Given this information, we expected the district to pay its
firefighting personnel the rates the fire chief claimed on the annual
salary form, and to pay overtime of . times the claimed rate when
strike team assignments exceed  regular hours in a pay period.
However, the district did not meet this expectation. Specifically, in
  strike teams worked more than  hours in a pay period,
but the district did not pay them overtime.
By claiming enhanced salary rates
for the district’s personnel rather
than the base rate, the fire chief
failed to adhere to the terms of the
fire agreement.
17California State Auditor Report 2018-133
July 2019
e fire chief’s practice of paying firefighting personnel less
than the rate he claimed on the annual salary form and of
not paying overtime to personnel for strike team assignments
contradicted CalOES’s intent in providing the reimbursements.
According to the fire chief, the district paid each firefighter—
paid or recruit—$perhour while on a strike team assignment,
regardless of the number of hours worked. Given that for 
CalOES reimbursed the district $ for each hour a firefighter
worked on a strike team, or .times the $ per hour rate that
the fire chief submitted, we calculate that the district generally
received about $ more than it paid its firefighters for every hour
they worked on a strike team assignment. Furthermore, as we show
in Table , the district claimed even higher rates for apparatus
operators and company officers on strike teams.
Table 1
When Claiming Reimbursements Under the Fire Agreement, the District Inflated Its Hourly Rates for Three
TypesofPositions
YEAR
STRIKE TEAM
PERSONNEL TYPE
HOURLY RATE DISTRICT
PAID ITS STRIKE TEAM
PERSONNEL
HOURLY RATE
DISTRICTCLAIMED
HOURLY RATE
REIMBURSED BY CALOES*
DIFFERENCE BETWEEN
CALOES REIMBURSED RATE
AND DISTRICT PAID RATE
2018 Firefighter $28.00 $32.00 $48.00 $20.00
Apparatus Operator 30.00 35.00 52.50 22.50
Company Officer 32.00 37.00 55.50 23.50
2017 Firefighter $26.00 $30.00 $45.00 $19.00
Apparatus Operator 28.00 32.00 48.00 20.00
Company Officer 30.00 35.00 52.50 22.50
2016 Firefighter $26.00 $28.50 $42.75 $16.75
Apparatus Operator 28.00 28.50 42.75 14.75
Company Officer 30.00 30.00 45.00 15.00
Source: Analysis of the fire agreement, salary forms signed by the district’s fire chief, reimbursement claim forms, district timesheet records, and
interviews with the district’s fire chief.
* CalOES reimburses the district at the overtime rate (1.5 times the rate on the salary form) for these positions.
Because the fire chief submitted inflated salary rates rather than
base rates to CalOES and did not pay its strike teams overtime,
the district improperly profited by receiving higher reimbursement
amounts than it should have. In fact, we calculated that the district
improperly claimed a total of nearly $, in excess personnel
reimbursements from CalOES for  through . In Figure ,
we depict the annual excess reimbursement amount for each year,
along with the appropriate reimbursement amounts based on the
18 California State Auditor Report 2018-133
July 2019
base rate. Because it also provided personnel for strike teams during
 through , we believe it is possible that the fire chief also
overbilled CalOES for personnel in these years.
Figure 2
The District Overbilled Paying Agencies by More Than $700,000 in Personnel Costs
From 2016 Through 2018
0
200,000
400,000
600,000
800,000
1,000,000
$
140,413
$
317,957
$
136,225
$
229,340
$
369,327
$
151,120
$
333,144
$
625,433
$
199,085
Personnel Costs at Base Rate
Total amount
overbilled
$
702,897
Source: Analysis of the fire agreement, salary forms signed by the district’s fire chief, reimbursement claim forms, district timesheet records, and
interviews with the district’s fire chief.
e district’s fire chief stated that he submitted the enhanced pay
rate in part to offset the low wages that the district’s personnel
make performing their regular duties. He asserted that he could not
morally send district personnel on strike team assignments at the
salary rate that the district pays for regular duties at the station. He
further stated that the district’s pay scales are lower than other fire
districts nearby and that he believes it is uncommon for firefighters
to serve on strike teams for low pay rates unless the firefighters
are volunteers. He stated that he based the strike team salary
rateshe included on the survey form on his employees’ overtime
rates. Because the district pays its nonmanagement personnel
$perhour for their regular work at the district, they would
receive $per hour for overtime. us, a firefighter paid $an
hour would receive a slightly higher amount while on a strike team
than they would for overtime work at the district.
19California State Auditor Report 2018-133
July 2019
e fire chief’s explanations do not excuse his improper use ofthe
fire agreement’s reimbursement process. Had he claimedthebase
rate as he should have for , CalOES would have reimbursedthe
district at . times this rate, as the fire agreement describes.
ereimbursement amounts the district would have received
would have covered the personnel costs for its strike teams: the
base rate of pay for the firefighters on strike teams and overtime
payfor these firefighters when necessary.
e fire chief also appears to have circumvented the board’s role in
governing the district. State law gives special districts’ boards the
authority to adopt policies for their districts’ operation, including
fiscal and personnel policies. e district provided no such fiscal
or personnel policies related to its strike teams. In the absence
of a policy delegating the authority to the district’s fire chief to
determine salary rates for fire fighters on strike teams, we expected
the district’s board to have approved the proposed salary rates.
However, the fire chief could not provide evidence that the district’s
board approved the pay rates he submitted to CalOES. Budget
documents the fire chief presented to the board did not contain
sufficient detail to demonstrate that the board knew of or approved
the enhanced salary rates the fire chief claimed for strike team
personnel. Furthermore, board meeting minutes that we examined
similarly lacked this level of detail. Consequently, the fire chief
should not have submittedthe salary rates for strike team personnel
without approval from thedistrict’sboard.
Because the district inappropriately claimed excessive personnel
reimbursements under the fire agreement, it sharply increased
financial reserves for the fire department fund. e district’s financial
statements show that these reserves increased from about $,
in fiscal year – to about $, in fiscal year–, or an
increase of percent. Furthermore, this amount does not include
most of the fire agreement reimbursements that the district received
for  because many of these fires happened after the end of the
fiscal year. In a September  report to the board, the fire chief
stated that strike team income had provided the fire department
the ability to establish reserve funds for anticipated projects,
such as purchasing a new firetruck, planning for an expansion for
thefirestation, and planning for upgrades to the marina pier for the
fireboat. However, if the district intends topursue these projects, we
believe it should find more appropriate funding sources. Namely, if
the district’s community members are the primary beneficiaries of
these projects, then they should provide the funding rather than the
fire chief inappropriately claiming reimbursements from the paying
agencies under the fire agreement. One possible funding source could
be the fire special tax paid by the district’s property owners; if it is not
currently high enough to cover the projects’ costs, then the district
could consider raising the tax.
The fire chief could not provide
evidence that the district’s
board approved the pay rates he
submitted to CalOES.
California State Auditor Report 2018-133
July 2019
20
Based on the fire chief’s improper use of the fire agreement’s
reimbursement process and the resulting excessive strike team
reimbursement amounts the district claimed, we forwarded our
report to the Forest Service, CalOES, CAL FIRE, and the El Dorado
County District Attorney’s Office for their consideration and, if
appropriate, further investigation.
The District Mischaracterized Its Employment Relationship With
ItsRecruits
Not only did the district inappropriately profit from providing
personnel for strike teams, it may also have violated federal law
by not treating its fire agency recruits as employees. Laws related
to whether employers should treat their personnel—including
firefighters—as volunteers, interns, independent contractors,
or employees are complex, and several factors can influence the
determination. For instance, the Fair Labor Standards Act (Fair
Labor Act) is a series of federal statutes that provide numerous
protections, including minimum wages and allowable maximum
work hours, for employees. e Fair Labor Act excludes persons
such as volunteers or interns working as volunteers from
being considered employees, but also it limits the amount of
compensation volunteers can receive and continue to retain their
volunteer status.
e federal regulations under the Fair Labor Act state that
volunteers may be paid expenses, reasonable benefits, a nominal
fee, or any combination thereof, for their service without losing
their status as volunteers. Although the regulations do not specify
what a “nominal fee” would be, the U.S. Department of Labor
suggested that a fee would be considered nominal if it were
percent of what an entity would otherwise pay to hire someone
for the same service. We would have expected that the district
would have determined what a “nominal fee” amount would be as
it relates to the district’s recruit firefighters working on strike teams
and that it would have then ensured that its recruits did not earn
more than that amount from their strike team assignments.
Recruits can easily earn  percent of a district firefighter’s annual
salary while on strike team assignments because a single assignment
can last for several weeks. For example, in  three different
strike teams had assignments that lasted about three weeks. On
each of these assignments recruits earned more than  percent
of what a paid firefighter for the district would normally earn in a
year. erefore, the risk exists that the district may have violated the
FairLabor Act by not treating these recruits—and other recruits
who worked significant hours on strike teams—as employees.
The district may have violatedthe
Fair Labor Act by not treating
recruits who worked significant
hours on strike teams as employees.
21California State Auditor Report 2018-133
July 2019
When we questioned the fire chief about this issue, he stated that he
does not consider the district’s recruits to be volunteers. As we note
earlier, the district does not pay recruits for their normal duties at the
district’s fire station. According to the fire chief, he views the recruits
as unpaid interns who are working toward completing thejob
performance requirements for their Firefighter  certifications. He
noted that the district provides them with equipment and training, at
no cost to the recruits other than theirtime.
e fire chief stated that the district pays recruits when they
respond to strike team incidents because their strike team duties
exceed their normal duties within the district. However, because
the district has paid the recruits the same rates it paid employees
while on strike team assignments and because those assignments
are part of the training regimen for the recruits, the district may be
in violation of the Fair Labor Act. To ensure that it complies with
the applicable labor and wage laws, the district should have sought
advice from appropriate experts regarding the payment of salaries
to its recruits for strike team assignments. e consequences of
violating the Fair Labor Act can be costly. For example, violation
ofthe minimum wage law, which would include treating personnel
as volunteers, can result in payment of back wages for up to
twoyears and an equal amount as liquidated damages.
Furthermore, the district’s treatment of recruits as independent
contractors for payroll purposes appears incorrect. Different tax
requirements exist for independent contractors and for employees.
For instance, on wages it pays to its employees, the district is required
to withhold income taxes, withhold and pay Social Security and
Medicare taxes, and pay unemployment taxes. On the other hand,
the district is not required to take these actions for independent
contractors. According to the fire chief, before  the district
provided its recruits Internal Revenue Service Form  ( tax
forms). Doing so indicates that the district treated its recruits as
independent contractors. However, the job requirements of a strike
team firefighter suggest that the district should have treated the
recruits as employees and provided them W- formsinstead.
Because the fire chief treated the recruits as independent
contractors rather than employees, he may have put the district
at risk of unintended financial consequences. Specifically, the
district may have violated federal law by misclassifying the recruits.
Misclassifying workers as independent contractors rather than
employees could subject the district to various unanticipated
expenses, including penalties and payment of unpaid Social
Security, Medicare, and unemployment taxes. Furthermore, under
state law, willful misclassification of an employee as an independent
contractor could subject the district to penalties of $, to
$, for each violation, among other penalties.
Misclassifying workers as
independent contractors
rather than employees could
subject the district to various
unanticipatedexpenses.
California State Auditor Report 2018-133
July 2019
22
e district could not provide a valid reason for treating its recruits
as independent contractors for strike teams. According to the fire
chief, the district gave the recruits  tax forms based on advice
that the district’s auditor and bookkeeper gave it several years ago,
when the district first started the recruit program. Specifically,
he stated that the auditor and bookkeeper did not raise concerns
about giving the recruits  tax forms, so he assumed doing
so wasappropriate. We did not find, nor did the district provide,
evidence that the board approved the recruits’ classification as
independent contractors. After we brought this issue to the fire
chief’s attention, he stated that for the  fire season, thedistrict
would classify its recruits as employees. Nonetheless, the
districtshould seek advice on this topic from appropriate experts.
Because the district’s treatment of recruits as independent
contractors may have violated federal and state laws, we forwarded
our report to the U.S. Department of Labor, the Internal Revenue
Service, and Employment Development Department for their
consideration and, if appropriate, further investigation.
The District’s Ongoing Financial Viability May Be in Jeopardy
Given the financial risks the district could face in the future, we
believe its ongoing financial viability may be in jeopardy. Even
the district’s $. million reserve balance shown in its fiscal
year– financial audit report—of which $, is in
the fire department fund—may not be sufficient to maintain its
viability. Possible financial risks that could impact the district’s
reserve balance include a repayment to the paying agencies of up
to $, in excess reimbursements the district claimed for
 through  under the fire agreement; any repayments of
excess reimbursements the district claimed for  through ;
andany penalties, back pay, or liquidated damages that federaland
state agencies assess if the district violated labor laws. Should
these potential risks become actual financial liabilities and if their
combined total exceeds the district’s reserve balance, the district
may have to decrease its expenses; increase revenues from other
sources, such as imposing a higher fire special tax; or both.
e district may also have to consider expenditure cuts or revenue
increases if its strike team revenue drops when it starts submitting
appropriately completed salary forms in the future. e district’s
audited financial statements for the three fiscal years from –
through – show that the district’s revenues exceeded its
expenditures during each of these years and that the district’s total
revenues for this period exceeded its total expenditures by roughly
$,. However, this apparent financial stability was because
the district received $, in excessive reimbursement amounts
The district may also have to
consider expenditure cuts or revenue
increases if its strike team revenue
drops when it starts submitting
appropriately completed salary
forms in the future.
23California State Auditor Report 2018-133
July 2019
for providing strike teams for wildfires. Without these excessive
reimbursements, it would have experienced financial shortfalls
had it not reduced its expenditures or increased revenues from
othersources.
e district’s ongoing financial viability is further jeopardized by
a budget practice that it implemented for its budgets for fiscal
years– and –. Generally speaking, government
entities can plan to achieve financial sustainability by enacting
structurally balanced annual budgets that they intend to implement
in an upcoming fiscal year. A government entity can demonstrate
a budget is structurally balanced when its recurring revenues meet
its recurring expenditures. erefore, counting on nonrecurring,
or volatile, revenue sources to cover recurring expenditures can
jeopardize the government’s ability to operate programs.
Although the district did not include strike team revenues in its
budgets for fiscal years – and –, the district did include
them in its budgets for fiscal years – and –. For fiscal
year –, the district budgeted strike team revenue of $,,
or  percent of the fire department’s total budgeted revenue of
$,. Strike team revenue was the second largest budgeted
revenue source for the district’s fire department that year. It appears
that the district included this revenue to help cover a $,
( percent) increase in its budgeted personnel costs for the fire
department, from $, in the prior fiscal yearto $,.
For fiscal year –, the district budgeted strike team revenue
of $,, or  percent of the fire department’s total budgeted
revenue of $,. Strike team revenue was the largest revenue
source for the district’s fire department in this fiscal year. Because
the revenue amounts that strike team reimbursements actually
generate can fluctuate basedon a number of variables (including,
for instance, the number of strike teamsthe district is capable of
providing,the numberofstriketeam assignments the State makes,
and the length of the strike teamassignments), we consider strike
team reimbursements to be a volatile revenue source.
Likewise, the El Dorado LAFCO’s  review of the district
stated that the district could be in a “deeper hole” if its strike team
revenues were lower than budgeted. e LAFCO’s executive officer
also stated that strike team revenue cannot be considered regular,
stable, and ongoing because it depends on a district’s ability to field
a strike team and the number of wildfires that occur around the
State in any given year. erefore, although the district’s financial
statements note that it received almost $, in strike team
revenues during fiscal year –, we believe the district took an
unnecessary financial risk when it included such a volatile source
as a relatively large proportion of the revenue in its budget and
For fiscal year 2017–18, it appears
the district included strike team
revenue in its budget to help
cover a $124,000 increase in its
budgeted personnel costs for the
fire department.
California State Auditor Report 2018-133
July 2019
24
counted on this revenue to pay for personnel. Had this revenue not
materialized, the district’s other budgeted revenues would not have
been enough to cover its budgeted expenditures for the fiscal year.
Weaknesses in the Fire Agreement’s Reimbursement Policy
and CalOES’s Oversight of Enhanced Salary Rates Enabled the
District’sOverbilling
We identified three weaknesses in the fire agreement’s reimbursement
process that enabled the district’s overbilling. First, CalOES stopped
auditing salary forms and reimbursement claims submitted by
local fire agencies. In our January report, California’s Mutual
Aid System: e California Emergency Management Agency
Should Administer the Reimbursement Process More Effectively,
Report -, we recommended that the California Emergency
Management Agency (Cal EMA) analyze the accuracy of the rates
local fire agencies reported in their salary surveys and audit a sample
of invoices each year.
In that report, we identified instances of
local fire agencies misbilling the State for personnel costs under the
fireagreement. We noted that CalEMA did not ensure that local fire
agencies’ calculations for the salary forms were correct and that until
Cal EMA took steps to ensure the accuracy of the rates that local
fire agencies claimed in their salary forms, local fire agencies would
continue to be able to submit erroneous bills to the government
agencies paying for theseresources.
Although CalOES told us that it fully implemented our
recommendation to analyze the accuracy of rates local fire agencies
submitted on salary forms and to audit a sample of invoices each
year, it completed only eight such audits—four in  and four in
. According to CalOES, it completed only these audits because
of extraordinary fire season activities and the statewide flooding
disasters from  through . It stated that these fire seasons
collectively resulted in approximately , fires, . million acres
burned, and hundreds of thousands of structures destroyed. It also
stated that its response and recovery priorities affected not only
itself, but also the fire agencies it needed to audit because of their
increased response and recovery commitments. Notwithstanding
its reasoning, had CalOES continued to perform these audits and
had it performed more of them, it might have identified the fire
chief’s overbilling or overbilling by other fire agencies. Furthermore,
even if CalOES had not selected the district’s salary forms for
review, the fire chief’s knowledge that CalOES was performing
such audits might have deterred him from improperly using the
4
Effective July , a Governor’s Reorganization Plan transferred Cal EMA to the Governor’s Office,
renaming it CalOES.
Had CalOES continued to perform
audits and had it performed more
of them, it might have identified the
fire chief’s overbilling or overbilling
by other fire agencies.
25California State Auditor Report 2018-133
July 2019
fire agreement’s reimbursement process. CalOES is working
to reinstate these audits: as of June , it was negotiating an
interagency agreement with the State Controller’s Office to perform
the salary survey audits and was in the process of developing the
audit selection and performance methodologies.
A second weakness in the fire agreement’s reimbursement process
is that the current fire agreement does not require local fire agencies
to submit documentation to support the enhanced salary rates they
claim. As we discussed previously, a local fire agency must submit
only an annual salary form to claim an enhanced salary rate that
is higher than the base rate. CalOES then uses the enhanced rate,
along with the number of hours that the local fire agency claims
for an incident, to calculate reimbursement amounts. Because the
fire agreement does not require any supporting documentation for
enhanced salary rates, CalOES has insufficient evidence to confirm
the accuracy of the enhanced rates that local fire agencies submit.
If the fire agreement were to require local fire agencies to submit
twotypes of supporting documents, it would help CalOES better
ensure the accuracy of the enhanced salary rates they claim. First,
the fire agreement can require each local fire agency to submit to
CalOES documents demonstrating that its governing body has
reviewed and approved the enhanced salary rate. Because a local fire
agency ought to have already completed its calculations of its average
actual rates to support the enhanced salary rate, a reasonable next
step would be to have the local fire agency’s governing body review
and approve those rates. Such documentation could be in various
formats, including an approved resolution or copies of approved
governing body minutes showing a motion and approval of the rates.
e fire agreement could also require each local fire agency to
submit documentation to support the agency’s calculations of an
enhanced rate if it claims one and demonstrate how the agency
calculated it. Given that local fire agencies should already be
performing the calculations to support enhanced salary rates they
claim, documentation to support those calculations should not
present an additional burden. eir inclusion would give CalOES
the opportunity to review for reasonableness the documents
supporting the enhanced salary rates and to ensure that the local
fire agencies’ calculations are reasonable and based on actual
rates. Examples of documentation that could provide this level
of assurance are average rate calculations supported by salary
tables, labor agreements, or other similar documentation. We
would expect CalOES and the other fire agreement signatories to
negotiate and agree on the specific types of documentation that
would suit this purpose. Alternatively, local fire agencies could
forego submitting the calculations and documentation by accepting
the base salary rate.
If the fire agreement were to
require local fire agencies to submit
twotypes of supporting documents,
it would help CalOES better ensure
the accuracy of the enhanced salary
rates they claim.
California State Auditor Report 2018-133
July 2019
26
e third weakness we noted was that neither the annual salary
form nor the reimbursement invoice requires a signature from the
fire agency’s representative under penalty of perjury. Although
theforms require signatures, they state only that the signers certify
to the best of their knowledge and belief that the information is
correct. e CalOES senior emergency services coordinator told
us that CalOES accepts the enhanced salary rates that the local
fire agencies include on their annual salary forms as factual in part
because they are signed to the best of the signers’ knowledge and
belief. However, the current statement was clearly not sufficient
to deter the district’s fire chief from completing, signing, and
submitting forms with inflated salary rates to CalOES. Including
a penalty of perjury statement can serve as a deterrent to signers
providing false information.
We observed that other state agencies use forms that require
a signature under penalty of perjury when local government
entitiesclaim reimbursement from the State. For instance, when
counties claim reimbursement from the State for administrative
expenses associated with certain Medi-Cal services, county
representatives must sign under penalty of perjury that the amounts
claimed are in accordance with state law. If the fire agreement
were to require that signatories sign the annual salary form and the
reimbursement invoice under penalty of perjury, CalOES could
obtain additional assurance that enhanced salary rates and the
related reimbursement claims were accurate.
Because CalOES’s State Fire and Rescue Chief (fire and rescue
chief) is the chair of the Agreement Committee, CalOES is
uniquely positioned to take a role in addressing the reimbursement
issues we identify in this report. According to CalOES’s senior
emergency services coordinator, about , local fire agencies
participate in the California Fire Service and Rescue Emergency
Mutual Aid System; each of them can be reimbursed for providing
strike teams under the fire agreement. is large number, CalOES’s
limited oversight of enhanced salary rates local fire agencies submit,
and our prior audit work demonstrate that a significant risk exists
that local fire agencies other than the district may have and may
continue to submit unsubstantiated enhanced salary rates that may
lead to excessive reimbursements.
e current fire agreement is set to expire in December .e
fire agreement is the appropriate document for the signatory
agencies, including CalOES, to communicate expectations to
local fire agencies seeking reimbursement. When we discussed
our recommendations with CalOES, the senior reimbursement
coordinator stated that the Agreement Committee must approve
any changes to the agreement, such as requiring additional
documentation from local agencies, and that CalOES cannot make
Including a penalty of perjury
statement on the annual salary
form and reimbursement invoice
can serve as a deterrent to signers
providing false information.
27California State Auditor Report 2018-133
July 2019
such changes unilaterally. Additionally, according to the fire and
rescue chief, any changes require agreement among all Agreement
Committee members through a formalized negotiationprocess.
According to its state fire and rescue chief, CalOES is currently
renegotiating a new fire agreement with the other members of the
Agreement Committee. CalOES expects the new fire agreement
to become effective in January  and run through the end of
. CalOES’s participation in these negotiations provides the
opportunity for it to advocate for the inclusion of written provisions
related to strengthening its oversight of the enhanced salary rates
that local fire agencies submit under the fire agreement, including,
but not limited to, the following provisions:
• CalOES will audit a sample of annual salary forms and
reimbursement invoices that the local fire agencies submit
andwill work with local fire agencies to rectify any errors.
• Each local fire agency must provide sufficient documentsto
support its calculations of average actual salary rates and
todemonstrate its governing body’s approval of those rates.
• Each local fire agency must sign annual salary forms and
reimbursement invoices under penalty of perjury.
CalOES also has an opportunity to use this
audit report and its implementation of our
recommendations to help it address ongoing issues
with the Forest Service related to the current
fire agreement. In a July  letter, the Forest
Service informed CalOES that a federal audit had
determined that the Forest Service was overpaying
local governments and that controls needed to
be in place to ensure that such overpayments
did not occur again. Similarly, in an April
letter, the Forest Service informed CalOES that
a January federal audit had also questioned
reimbursements made to multiple California
fire agencies. Based on these findings, the Forest
Service stated that it would impose additional
requirements on reimbursements until the current
fire agreement expires in December. We show
two of these requirements in the textbox.
CalOES and other California fire organizations
have expressed concerns that the Forest Service’s new requirements
will present cumbersome administrative and fiscal burdens on
local fire departments. In an April  letter to the ForestService,
CalOES stated that the Forest Service’s new requirements
New Forest Service Reimbursement Requirements
In April 2019, the Forest Service stated that it would
immediately implement several requirements regarding
reimbursements under the current fire agreement, including
the following:
• All outstanding and future invoices submitted
for reimbursement must include supporting
documentation that demonstrates a fire agency’s
actual paid costs. Local governments and Cal OES
may still use existing reimbursement forms as long
as they attach documentation of actual costs.
• Along with preparing a proper form for indirect
costs, fire agencies must complete actual expense
salary surveys that demonstrate actual salary costs.
Source: Forest Service letter to Cal OES dated April 17, 2019.
California State Auditor Report 2018-133
July 2019
28
would have a significant impact on volunteer fire agencies with
small operating budgets, in part because they would require
those fire agencies to pay their responding firefighters to create
documentation before receiving any reimbursement from
the Forest Service. CalOES stated that because of budgetary
constraints, small agencies do not have the cash flow to pay
their responding firefighters before receiving reimbursement,
much less the funding to hire additional staff to manage the new
administrativerequirements.
Although the Forest Service’s new requirement that local fire
agencies include documentation for actual paid costs on each
invoice could be onerous for both the local agencies submitting
the reimbursement forms and the agencies processing these forms,
we believe that the fire agreement’s existing terms that allow
CalOES to rely on average actual salary rates when calculating
reimbursement amounts continues to be a reasonable alternative
in principle when properly followed. CalOES’s successful
implementation of our current recommendations would provide
additional assurance that local agencies will follow the terms of the
fire agreement related to average actual salaries and, therefore, that
CalOES will calculate proper reimbursement amounts. Also, if the
Agreement Committee takes steps to better ensure the accuracy of
the rates that local fire agencies submit in their salary forms, local
fire agencies will be less likely to submit potentially erroneous bills
to the government agencies paying for these resources.
The District’s Small Electorate May Threaten Its Ability to
FunctionEffectively
e district’s ongoing ability to have a complete board and therefore
to provide fire protection and park and recreation services within
the Fallen Leaf Lake area is uncertain. Only permanent residents,
for whom Fallen Leaf Lake is their domicile, can legally register to
vote and run for the board, meaning that very few people in the
seasonal community are eligible. A district board member told
us that none of the relatively few district residents are interested
in serving on the board. If the district’s board has too many
vacancies, it will be unable to perform duties such as authorizing
taxes, entering into contracts for services, and paying staff. Several
options exist that could resolve this concern: the State could
expand the district’s electorate, the district could consolidate with
another special district, or the district could dissolve. Although
implementing any of these options would necessitate overcoming
certain hurdles, expanding the district’s electorate is the best option
to ensure that the area will continue to receive services at their
existing levels and costs.
Only permanent residents, for
whom Fallen Leaf Lake is their
domicile, can legally register to vote
and run for the board, meaning
that very few people in the seasonal
community are eligible.
29California State Auditor Report 2018-133
July 2019
The District’s Ability to Provide Services to Community Members
Depends on It Having Enough Board Members
According to state law, the district’s board is responsible for
establishing policies for its operation, and its general manager is
responsible for implementing those policies. Further, the board
has the specific authority to impose taxes, such as seeking voter
approval for a fire special tax assessed on each affected parcel of
land and, in the cases of Forest Service land, each cabin; enter
into contracts, such as the contract with the concessionaire who
manages the park and recreation services; and pay staff, such as the
district’s fire chief. For the board to conduct district business and
exercise its authority, state law requires that a majority of board
members be present; thus, to have a quorum, the board needs
three members to be present. If fewer than three board members
are present, the board cannot propose a fire special tax for voter
approval, approve contracts, or set salaries. e board also cannot
appoint members to fill vacant seats without a quorum.
e district’s recent history in fielding candidates for election to
its board raises concerns regarding its ability to have a full-size
board. e district has not had a contested election for a board
seat since August . In the five opportunities for elections
since then, no more than one person has run for each open seat.
Specifically, forof the  open seats in the last five elections,
one person filed to be a candidate for each one, and the El Dorado
County Board of Supervisors (board of supervisors) appointed
thelone candidates in lieu of holding the elections. For three of the
open seats, no one ran. In those instances, the county’s board of
supervisors appointed nominees whom the district’s existing board
membersrecommended.
In addition, the district’s board has experienced numerous
vacancies since ; too many vacancies at the same time can
jeopardize the board’s ability to achieve a quorum and conduct
business. From January  through November , the board
had a total of seven vacancies spanning  months. e shortest
vacancy was about two months, while the longest was about
months. Moreover, for two months during , the board
experienced three vacancies at the same time. Because it had only
twomembers at that time, the board did not have the ability to
achieve a quorum and could not have conducted the district’s
business had it been necessary. e county’s board of supervisors
appointed board members in lieu of an election to fill two of the
vacant positions in March, which reestablished a quorum.
The district has not had a contested
election for a board seat since
August 2010. For 12of the 15open
board seats in the last five elections,
one person filed to be a candidate
for each one; for the three other
open seats, no one ran.
California State Auditor Report 2018-133
July 2019
30
The Seasonal Nature of the District Limits the Number of
PermanentResidents
A major factor contributing to the uncertainty over the district’s
ability to field a full board is the small size of the district’s electorate.
State law requires candidates for the board to be voters of the
district. As of January , records from the El Dorado County
Elections Department show that the district had only registered
voters. According to one of the district’s board members, the
area is a community of summer cabins with only seasonal access.
erefore, it seems likely that many community members would
register to vote in the locations of their primary homes. According
to the board member, none of the residents who live only at
FallenLeaf Lake are interested in serving on the board.
e number of the district’s registered voters declined sharply after
the Secretary of State’s Office identified improprieties associated
with a  district election. In August , the district held a
special election to recall and replace two board members and
to select a third member to fill a vacancy. El Dorado County
records for that election show that votes were cast out of
registered voters. According to a September  letter from
the El Dorado County district attorney (district attorney), the
Secretary of State’s Office investigated complaints of voter fraud
and candidate ineligibility or fraud related to this election. e letter
indicated that the investigation revealed widespread improprieties
surrounding voter registration. Specifically, the letter described
that many, if not most, of the persons registered to vote at thetime
of the August election were ineligible to vote in the district.
e district attorney placed all registered voters on notice that
similar future violations would be prosecuted and that voting
is permissible only in the location of a person’s domicile, rather
than in connection with any other residence a person may own.
By June, the number of registered voters in the district had
declined to , suggesting that many of the district’s registered
voters from  did not keep their voter registration in the district.
It is difficult to determine a precise number of domiciled residents
who live in the Fallen Leaf Lake area and, of those, how many
are eligible to vote in district elections. However, by taking into
accountthe number of landowners who claimed a homeowner’s
exemption, the number of registered voters within the district who
reported mailing addresses in the South Lake Tahoe area, and the
number of individuals with vehicle registrations or driver licenses
with addresses within the district, we estimated the number of
State law requires candidates for
the board to be voters of the district.
As of January 2019, the district had
only 62registered voters.
31California State Auditor Report 2018-133
July 2019
domiciled residents to be between five and .
e board member
said that his analysis showed that the district has only people
who could legitimately claim domicile and lawfully vote.
In particular, the number of registered voters in the district who
have mailing addresses outside the South Lake Tahoe area raises
questions regarding whether these individuals registered to vote
in the correct location. Specifically, of the individuals currently
registered to vote in the district, only  ( percent) identified
mailing addresses in South Lake Tahoe. e other voters
(percent) registered with mailing addresses outside the area, and
eight of those  have out-of-state mailing addresses. Out-of-area
mailing addresses are an indication that these community members
could be domiciled elsewhere; if true, this would mean they are
not eligible to register to vote in the district. It is worth noting that
the voter registrations of all five current board members include
mailing addresses outside the district.
During our review of the district’s voter registration information,
we observed other irregularities in addition to out-of-area mailing
addresses. ese irregularities included  individuals with voter
registrations in more than one county or state, two individuals who
received ballots from more than one county for the same election,
and four individuals who have switched their voter registrations
at least twice since  between El Dorado County and other
counties. Because these irregularities indicate possible violations of
California law, we forwarded our report to the California Secretary
of State and the district attorney for their consideration and, if
appropriate, further investigation.
Expanding the District’s Electorate Would Likely Resolve the Governance
Challenge It Faces
Although several options exist that could enable the district to have
a full board and continue to provide services, each option faces
hurdles and would have different effects on the levels and costs of
services at Fallen Leaf Lake. e key options are for the State to
expand the size of the electorate that can vote on district matters
and serve on the district’s board, for the district to consolidate
with another special district, or for the district to dissolve and
for another entity or entities to provide its services. Table
summarizes these options, along with the risks and hurdles each
presents. Because of the district’s small geographic size and because
5
A portion—,—of the full value of an owner’s principal residence is exempt from property
taxation. A property owner can receive this exemption for only one property. To receive the
homeowner’s exemption, homeowners in El Dorado County must file an application with
thecounty assessor’s office.
The voter registrations of all
fivecurrent board members
include mailing addresses outside
thedistrict.
32 California State Auditor Report 2018-133
July 2019
it consists mostly of vacation homes, we believe that expanding the
district’s electorate provides the best opportunity for the Fallen Leaf
Lake community to continue receiving services that are similar in
terms of their level and cost to the services it currently receives.
Wediscuss the other two options in more detail in Appendix B.
Table 2
Each Option for Resolving the District’s Governance Issues Involves a Number of Risks and Hurdles
OPTION GOAL ACTIONS REQUIRED RISKS OR HURDLES
IF SUCCESSFUL, IMPACT ON
SERVICE LEVELS ANDCOSTS
Legislative Solutions
Expand the
district’s
electorate
More community
members are eligible
to vote and to serve
on board.
Legislature enacts new
statutes.
• The State may not enact legislation.
• The new law may be challenged
incourt.
None anticipated.
Local Solutions
Consolidate
the district
with another
special district
New successor special
district provides fire
protection services; a
different entity would
provide park and
recreation services.
New successor special
district provides both
fire protection and
park and recreation
services.
• District board,*
voters,
†
LAFCO, or
county board of
supervisors proposes
the change.
• LAFCO holds public
hearing.
‡
– Change is stopped if
50percent of voters
protest it in writing.
– District election
is required if
the district does
not object to
dissolution and
25percent of voters
or landowners
protest.
• District fails to give up its park and
recreation power and therefore
cannot consolidate with a fire
protection district.
§
• District gives up its park and
recreation power, but no
other entity begins providing
thoseservices.
• Fallen Leaf Lake or the other special
district’s community members
successfully protest or vote against
consolidation.
• Potential cost increases to
Fallen Leaf Lake landowners:
– Fire special tax
– Fire insurance
• Potential decrease in
emergency response time, if
successor does not staff the
station at Fallen Leaf Lake.
• Potential loss of park and
recreation services.
Dissolve the
district
One or more other
entities provide
services; the district
ceases to exist.
• Fallen Leaf Lake community
members successfully protest or
vote against dissolution.
• District dissolves but one or more
other entities do not take on
responsibility for structure fire
protection or park and recreation
services at Fallen Leaf Lake.
• Potential cost increases to
Fallen Leaf Lake landowners:
– Fire insurance
• Potential decrease in level
of service for fire protection
and in response time for
emergency medical services.
• Potential loss of park and
recreation services.
Source: Analysis of state law and guidelines, the district’s current circumstances, materials regarding other special districts, and information from
ElDoradoCounty.
Note: Two additional options exist for the district. However, because neither of them are likely to resolve the district’s small electorate, we did not
include them in the table. First, the State could enact legislation to reduce the size of the district’s board from five to three members. Although doing
so could make it easier to find candidates, the board might still experience vacancies and quorum issues. Alternatively, the district could give up its
fire protection authority and then allow its territory to be annexed into a nearby fire protection district. Under this option, the district would continue
to retain its park and recreation authority. We believe it unlikely that implementing either of these two options would resolve the district’s underlying
issue of a small electorate, and therefore the risk of the board not being able to conduct business would remain high.
* Consolidation can be proposed by district boards or voters in either district, and voters of either district can protest the change and vote on it if it
goes to an election.
†
For voters to propose consolidation, 5 percent or more of the registered voters in each district must sign a petition. Alternatively, a petition for
dissolution must be signed by either at least 10 percent of the registered voters in the district or at least 10 percent of the landowners in the district.
‡
If the district board—rather than community members or the LAFCO—proposes dissolution that is consistent with a prior LAFCO study or
determination, the protest provision would not apply. The LAFCO could then approve and order the dissolution.
§
For the district to consolidate with a fire protection district, it must first give up its authority to provide park and recreation services.
33California State Auditor Report 2018-133
July 2019
e first option in Table , enacting legislation to expand
the electorate, would increase the likelihood of the district’s
maintaining a full board, achieving a quorum, and having the
ability to continue providing services at their current levels and
costs. By expanding the district’s electorate to include nonresident
landowners and permit holders in addition to resident voters, the
State could give a larger number of people the ability to vote on
district matters and to serve on the board. As we discuss previously,
although the district had voters registered as of January,
only  provided local mailing addresses. In contrast, information
from the El Dorado County Assessor’s Office shows that the district
has  landowners and  permit holders.
A board member summarized the district’s electorate issues for us
in this way:
In , the El Dorado County District Attorney sent letters to
the Fallen Leaf Lake community, advising them that they could
no longer vote on Fallen Leaf Lake issues unless they were
domiciled at the lake. . . . at letter was followed by another to
all permittees from the Forest Service . . . [stating that] anyone
who declared their cabin at Fallen Leaf to be their “domicile”
would be in violation of the terms of their “recreational” permit.
. . . erefore . . . anyone who holds a Forest Service permit risks
losing that permit if they vote at Fallen Leaf, even if they are
domiciled there. Other community members vote at the peril
of prosecution. Furthermore, since state law requires that board
members be registered voters of the district, it has become
nearly impossible to recruit candidates to serve on the . . . board.
LAFCO recognizes that there is not [a] sufficient number of
domiciled voters . . . to support the district.
Expanding the district’s existing electorate of residents to include
landowners and permit holders would allow these two groups of
people to vote on district matters without fear of prosecution or
loss of permit. Landowners and permit holders could receive ballots
to vote only on district matters and could maintain their voter
registrations at their domiciles. ese individuals have an interest in
the district’s governance because they must pay the fire special tax
that the district levies.
In addition, enacting legislation to enfranchise landowners and
permit holders would resolve the issue of the district having a
small electorate from which to select board members. Although
we did not identify other community services districts that
allow both nondomiciled landowners and domiciled residents
to vote on district matters, we did identify a water district—
which is another type of special district—that does so. In 
the Legislature enacted a statute that enfranchised domiciled
By expanding the district’s
electorate to include nonresident
landowners and permit holders
in addition to resident voters, the
State could give a larger number of
people the ability to vote on district
matters and to serve on the board.
California State Auditor Report 2018-133
July 2019
34
residents of the Sierra Lakes County Water District (Sierra Lakes)
in Placer County for district elections—a right previously reserved
by law for landowners only. erefore, it is possible for the State
to enfranchise the district’s landowners and permit holders for
district elections. e Sierra Lakes service area, similar to the Fallen
Leaf Lake area, has many nonresident landowners and relatively
few permanent residents. e two districts both cover small
areas geographically— square miles or less—and are composed
primarily of vacation or second homes. Further, the boards for
both districts address issues of interest to both property owners
and residents alike, such as charges on property owners that fund
district operations. Sierra Lakes has had three contested elections
in the last seven elections, with an average of  people voting in
each contested election.
Legislation to include landowners in the district’s electorate could
face legal challenges because it would increase the number of
potential voters, thereby diluting the influence of the resident
voters. However, a California court already upheld similar
legislation when the Legislature expanded the electorate for Sierra
Lakes. In  a California appellate court held that legislation
that allowed both landowners and resident voters to vote on issues
related to Sierra Lakes did not violate the U.S. or state constitutions.
e court made its decision partly because Sierra Lakes’ operations
affected landowners financially and affected both landowners
and residents through services. e court noted that one factor
contributing to its conclusion was that the legislation limited Sierra
Lakes’ powers. To follow this precedent, legislation to expand
the district’s electorate to include Fallen Leaf Lake landowners
and permit holders could similarly limit the district’s powers to
providing only its existing services.
e executive officer of El Dorado LAFCO believes that if the
Legislature expands the district’s electorate to include both
residents and landowners, the district will continue to have
difficulty funding its fire protection services, largely because
resident and landowner voters would be reluctant to raise the fire
special tax to the level that the district needs to have a sustainable
fire department. Further, with a larger electorate, obtaining the
necessary number of votes could be even more difficult. We believe
that despite this potential risk, an expanded electorate would
provide the district the best chance to maintain its services at their
current levels and costs.
Legislation to expand the district’s
electorate to include Fallen Leaf
Lake landowners and permit
holders could limit the district’s
powers to providing only its
existingservices.
35California State Auditor Report 2018-133
July 2019
When Creating and Modifying Special Districts, LAFCOs Are Not
Required to Evaluate Their Electorate Size
LAFCOs must evaluate several factors when considering the
creation of and modifications to special districts. ese factors
include the need for organized community services and the
sufficiency of the revenue to pay for the services that will be
provided. However, state law does not require LAFCOs to consider
whether a special district’s electorate will be large enough to
provide an adequate pool of eligible board members. Without a
large enough electorate, special districts run the risk of not having
enough eligible people to serve on their boards.
Like the Fallen Leaf Lake district, other special districts have
had issues with small electorates. e Legislature has attempted
various solutions to resolve the issues, such as reducing the size
of these special districts’ boards of directors, with limited success.
esespecial districts include the Sawyers Bar County Water
District (Sawyers Bar) in Siskiyou County, the Santa Rita Hills
Community Services District (Santa Rita Hills) in Santa Barbara
County, and the Sierra Cedars Community Services District
(Sierra Cedars) in Fresno County. Over the past  years, each of
these special districts has at times had fewer than  registered
voters and, like the Fallen Leaf Lake district, has faced vacancies,
uncontested elections, or both.
To address their electorate problems, legislation sought to convert
Sawyers Bar, Santa Rita Hills, and Sierra Cedars from five-member
boards to three-member boards. However, these districts have
continued to struggle to maintain full boards and to hold contested
elections. For example, documents show that in  Sawyers Bar
had only  registered voters. In that same year, legislation required
Sawyers Bar to reduce its number of board members from five to
three if it received a petition requesting the change signed by a
majority of its voters. Sawyers Bar serves a remote rural community
in Siskiyou County, making it difficult to find five people who were
willing to serve as board members. Although Sawyers Bar reduced
its board size, it still has difficulty because of its small electorate.
Specifically, it had uncontested elections in  and  and at
least one vacancy during that time period.
Similarly, in  Santa Rita Hills had  to  registered voters.
Located in northern Santa Barbara County, Santa Rita Hills is
authorized to provide road-related services. Legislation enacted
in that year authorized Santa Rita Hills to reduce its board
size from five members to three. However, no board members
ran for reelection for the November  election, and as of
December, the board had no members. erefore, the board
lost its quorum before it could enact the change to its board size.
Like the Fallen Leaf Lake district,
other special districts have had
issues with small electorates.
California State Auditor Report 2018-133
July 2019
36
Asof August , Santa Rita Hills still did not have a quorum and
was unable to provide services. Because Santa Rita Hills was not
conducting business, the Santa Barbara County LAFCO attempted
to dissolve it in early . However, more than percent of
the landowners protested, which stopped the dissolution. Efforts
by theSanta Barbara County Board of Supervisors to appoint
members toSanta Rita Hills’ board have not been successful.
Santa Rita Hills’ continued struggle to function calls into question
whether the Fallen Leaf Lake district’s board would benefit from
legislation to reduce its size from five members to three.
Finally, the Legislature considered legislation introduced in 
to allow Sierra Cedars to have a smaller board. However, the
Legislature did not enact this legislation, which would have allowed
the Sierra Cedars board to reduce its members from five to three.
While the Legislature was considering this bill, Sierra Cedars had
board vacancies and lacked a quorum. Fresno County records show
that in January  the county’s board of supervisors appointed
two members to Sierra Cedars board because of vacancies that
put the board below a quorum. ey also show that Sierra Cedars
had an uncontested board election in  and the boardhad
a vacant seat in early . As of April , Sierra Cedars
had registered voters and was considering reorganizing as a
landowner-voterdistrict.
LAFCOs could reduce the risks presented by small electorates by
considering electorate size when reviewing proposals to create or
make changes to special districts. Current law related to special
districts encourages orderly growth and the efficient provision
of services. It requires LAFCOs to consider the likelihood of
significant growth in the area, the need for organized services, and
the ability of a special district to provide the proposed services.
Although current law requires LAFCOs to consider population size
and density when reviewing proposed changes to special districts, it
does not require them to consider the number of individuals eligible
to vote in the district and whether the electorate provides a large
enough pool of eligible board members. e executive officer of the
El Dorado LAFCO believes that when LAFCOs consider forming or
making changes to a special district, they should consider whether
that special district has a large enough base of voters and whether
enough individuals are eligible to serve on the district board to
enable contested elections. By enacting legislation that requires
LAFCOs to consider an electorate’s size when reviewing proposals
to create or change a special district, the State would better
ensure that special districts do not encounter governance issues
like those faced by the district, Sawyers Bar, Santa Rita Hills, and
SierraCedars.
LAFCOs could reduce the risks
presented by small electorates by
considering electorate size when
reviewing proposals to create or
make changes to special districts.
37California State Auditor Report 2018-133
July 2019
Recommendations
Legislature
To ensure that the district has an electorate of sufficient size from
which it can elect members to its board, the Legislature should
enact legislation to allow landowners and holders of Forest Service
permits within the district, along with otherwise domiciled
registered voters in the district, to vote on district matters and
serve on the board.
To help voters in special districts elect full-size boards of directors
and to help special district boards avoid quorum issues and service
disruptions, the Legislature should amend state law to require a
LAFCO to assess whether an electorate is of sufficient size when it
considers creating or modifying a special district.
CalOES
To better ensure that it reimburses local fire agencies appropriate
amounts for responding to incidents, including the provision
of strike teams for fighting wildfires, CalOES should complete
implementation of its plan to audit a sample of salary forms and
invoices that local fire agencies submit under the fire agreement.
It should, by September , , complete its negotiations to have
the State Controller’s Office perform these audits.
To further ensure that local fire agencies receive proper
reimbursement for responding to incidents, CalOES should
recommend to the Agreement Committee that it include the
following steps in the new fire agreement, anticipated to be effective
starting in :
• Require local fire agencies to submit documents showing
approval by their governing bodies of the average actual salary
rates included on the salary form that the local fire agencies
submit to CalOES.
• Require local fire agencies to submit documentation to support
their average actual salary rates.
• Revise the salary form and reimbursement invoice form so that
authorized representatives of local fire agencies sign them under
penalty of perjury.
California State Auditor Report 2018-133
July 2019
38
To ensure that local fire agencies receive proper reimbursement
for responding to incidents for the remainder of the current
fire agreement, CalOES should recommend that as part of the
negotiations process, the Agreement Committee implement
the preceding recommendation for the remainder of the
currentagreement.
District
To ensure that the district complies with the reimbursement terms
of the fire agreement and does not claim excessive reimbursement
amounts, the district’s board, by September , , should create
and implement a policy governing the reimbursement rate the fire
chief claims for paid and recruit firefighters who participate on
strike team assignments under the fire agreement. Additionally, the
district’s board should review and approve the annual salary form
before the fire chief submits it to CalOES.
To rectify the excessive reimbursement amounts it received for
strike team assignments, the district should take the following
actions by December , :
• Develop and implement a plan for returning to the paying
agencies the excessive reimbursements it received for 
through .
• Work with CalOES to identify the amounts of excess
reimbursements the district received for  through  and
then develop and implement a plan for returning those amounts
to the paying agency.
To ensure that it complies with all applicable labor and wage
laws, the district should, by September , , seek advice
from appropriate experts, such as legal counsel and tax advisors,
regarding the proper characterization and compensation of its
recruit firefighters. It should develop and implement a policy in this
area that meets all applicable requirements.
To improve its financial viability and safeguard its ability to
continue providing services to the Fallen Leaf Lake community, the
district should take the following actions by December , :
• Monitor the financial risks it may face in the future, forecast
their impact on its finances and budget, and plan and implement
appropriate changes to its budget as necessary throughout the
fiscal year.
39California State Auditor Report 2018-133
July 2019
• Limit the extent to which it relies on volatile revenue sources to
balance its budget.
• Develop and implement a budget plan that realistically estimates
changes in revenues and expenditures, and identifies approaches
to address such changes.
• Develop a five-year forecast of estimated revenues and
expenditures and a plan to guide its decisions and actions in the
event of fluctuations.
We conducted this audit under the authority vested in the California State Auditor by Government
Code etseq. and according to generally accepted government auditing standards. ose
standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to
provide a reasonable basis for our findings and conclusions based on our audit objectives specified in
the Scope and Methodology section of the report. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our auditobjectives.
Respectfully submitted,
ELAINE M. HOWLE, CPA
California State Auditor
Date: July , 
40 California State Auditor Report 2018-133
July 2019
Blank page inserted for reproduction purposes only.
41California State Auditor Report 2018-133
July 2019
Appendix A
Scope and Methodology
e Joint Legislative Audit Committee (Audit Committee)
directed the California State Auditor to examine the district. As
part of this examination, it asked us to evaluate whether other
entities are capable of providing the district’s services, determine
whether having other entities take over the district’s services would
jeopardize public safety and public access, and assess the district’s
financial condition. Table A. lists the objectives that the Audit
Committee approved and the methods we used to address them.
Table A.
Audit Objectives and the Methods Used to Address Them
AUDIT OBJECTIVE METHOD
1
Review and evaluate the laws,
rules, and regulations significant
to the audit objectives.
• Reviewed relevant laws and other documents applicable to the formation, reorganization, dissolution,
and governance of special districts.
• Reviewed relevant laws and other criteria applicable to voting and voter eligibility.
• Reviewed relevant laws and other criteria applicable to employer and employee relationships.
• Reviewed the fire agreement and other documents applicable to reimbursements paying agencies
made to local fire agencies for strike team assignments.
2
To the extent possible,
determine the number of
residents, landowners, and
Forest Service permit holders
inthe district.
• Reviewed data obtained from the El Dorado County Assessor’s Office to determine the number of
parcels, landowners, and Forest Service permit holders within the district.
• Reviewed voter registration information for the district obtained from the El Dorado County Elections
Department to determine the number of registered voters within the district.
• Analyzed maps of the Fallen Leaf Lake area, registered voter information obtained from the El Dorado
County Elections Department, property ownership data obtained from the El Dorado County Assessor’s
Office, and driver’s license and vehicle registration data obtained from the Department of Motor Vehicles
to estimate the number of residents within the district.
3
For fiscal years 2015–16 through
2017–18, review the district’s
financial reports and assess
itsfinancial condition and
ongoing financial viability.
• Analyzed the district’s audited financial information and assessed trends in the district’s expenditures,
revenues, and fund balances for fiscal years 2015–16, 2016–17, and 2017–18 to determine the district’s
financial stability.
• Reviewed and analyzed district documents to determine if the district overbilled for personnel hours
related to the fire agreement.
• Reviewed the district’s revenue and expenditure information from its audited financial reports and
budget documents to determine whether the district could sustain itself if it received appropriate strike
team reimbursement amounts.
continued on next page . . .
42 California State Auditor Report 2018-133
July 2019
AUDIT OBJECTIVE METHOD
4
Determine whether the
dissolution or reorganization of
the district into a different entity
would jeopardize public access
to Fallen Leaf Lake or public
safety at Fallen Leaf Lake and the
surrounding area.
• Reviewed relevant documents and interviewed staff to identify services the district currently provides.
• Reviewed deed documents pertaining to the property to determine requirements for public access to
Fallen Leaf Lake, including whether and how those requirements would continue to apply in the event
that the district dissolved or the land changedownership.
• Reviewed relevant documents and interviewed individuals to determine the ability of other entities to
take over fire protection duties within the district.
• Reviewed relevant documents and interviewed individuals to assess the public safety risks of the
governance options we identified, if applicable, including the potential for increased response times for
fire and medical incidents.
• Reviewed relevant documents and interviewed individuals to identify public or private entities that
could provide the fire protection and recreation services that the district currently provides.
5
Identify and assess
alternative governmental or
nongovernmental entities, if any,
that are capable of providing
services similar to those that the
district currently provides.
6
Review and assess any other
issues that are significant to
theaudit.
• Reviewed the district board’s meeting minutes, the board of supervisors’ meeting minutes, and other
relevant documents to determine the number of contested and uncontested district elections and the
extent of district board vacancies since 2010.
• Identified four existing special districts that have a small number of residents or that have experienced
recurring vacancies on their boards of directors. For each district, we determined how they either
addressed or plan to address their small electorate size or board member vacancies.
• Interviewed the district’s fire chief and reviewed district documents concerning the resident recruit
firefighters to evaluate their employment status.
Source: Analysis of Audit Committee’s audit request number -, and information and documentation identified in the column titled Method.
Assessment of Data Reliability
In performing this audit, we relied on electronic data files that we
obtained from El Dorado County, the Secretary of State’s Office,
and the Department of Motor Vehicles. e U.S. Government
Accountability Office, whose standards we are statutorily obligated
to follow, requires us to assess the sufficiency and appropriateness
of computer-processed information we use to support our findings,
conclusions, or recommendations. Table A. describes the analyses
we conducted using data from the information systems we used,
our methods for testing them, and the results of our assessments.
43California State Auditor Report 2018-133
July 2019
Table A.
Methods Used to Assess Data Reliability
DATA SOURCE PURPOSE METHOD AND RESULT CONCLUSION
El Dorado
County Elections
Department
Election Interface
Management
System (EIMS)
January 2019
To determine the number
of registered voters in the
district and the number
of registered voters in the
district who included mailing
addresses outside of the
South Lake Tahoe area as part
of their voter registration
asof January 2019.
• We performed dataset verification procedures and
conducted electronic testing of key data elements.
We did not identify any significant issues.
• Because EIMS is a partially paperless system,
we did not perform completeness or accuracy
testing. Furthermore, we did not perform a review
of the system controls over these data because
of the significant resources required to conduct
such an analysis. To gain some assurance of the
data’s reliability, we compared key data elements
from EIMS to other databases and identified
noexceptions.
Undetermined reliability for the
purposes of this audit.
Although this determination
may affect the precision of the
numbers we present, there is
sufficient evidence in total to
support our findings, conclusions,
andrecommendations.
El Dorado County
Assessor’s Office
Megabyte Property
Tax System (MPTS)
January 2019
To determine for the district
the number of parcels,
landowners, and holders of
Forest Service permits.
• We performed dataset verification procedures and
conducted electronic testing of key data elements.
We did not identify any significant issues.
• Because MPTS is a partially paperless system,
we did not perform completeness and accuracy
testing. Furthermore, we did not perform a review
of the system controls over these data because of
the significant resources required to conduct such
an analysis. To gain some assurance of the data’s
reliability, we compared certain MPTS data with
another database and identified no exceptions.
Undetermined reliability for the
purposes of this audit.
Although this determination
may affect the precision of the
numbers we present, there is
sufficient evidence in total to
support our findings, conclusions,
andrecommendations.
Secretary of
State’sOffice
California Voter
Registration System
(VoteCal)
April 2019
To confirm the number of
active voters in the district
and examine the registration
histories of those voters.
We did not perform any assessment of these data
because the supporting documentation is maintained
among California’s 58 counties, making accuracy and
completeness testing impractical.
Undetermined reliability for the
purposes of this audit.
Although this determination
may affect the precision of the
numbers we present, there is
sufficient evidence in total to
support our findings, conclusions,
andrecommendations.
Department of
Motor Vehicles
(DMV)
Driver’s License
Database and
Vehicle/Vessel
Registration
Database
March 2019
To determine the number of
individuals holding driver’s
licenses, identification cards,
and vehicle registrations
listing an address within
thedistrict.
• We performed dataset verification and electronic
testing of key data elements from DMV’s dataset;
we identified no exceptions.
• Because the dataset is partially paperless, we did
not perform completeness or accuracy testing.
Furthermore, we did not conduct a review of
the system controls because of the significant
resources required to conduct such an analysis. To
gain some assurance of the data’s reliability, we
compared key elements from DMV’s dataset to
other databases and identified no exceptions.
Undetermined reliability for the
purposes of this audit.
Although this determination
may affect the precision of the
numbers we present, there is
sufficient evidence in total to
support our findings, conclusions,
andrecommendations.
Source: Analysis of data and documents from, and interviews with, El Dorado County, the Secretary of State’s Office, and the DMV.
44 California State Auditor Report 2018-133
July 2019
Blank page inserted for reproduction purposes only.
45California State Auditor Report 2018-133
July 2019
Appendix B
Although Other Options Could Also Address the District’s Governance
Challenge, They Include Additional Risks and Hurdles
As we discuss in the Audit Results, one option to address the
governance challenge the district faces in ensuring it has an
adequate number of board members would be for the Legislature
to expand the size of its electorate. In the absence of state actionto
expand the electorate, local actions could implement one of
twoother options—consolidating the district with another special
district or dissolving the district and having different entities
provide the services. Both of these options could potentially resolve
the district’s governance challenge; however, given the risks and
hurdles inherent in each, implementing them might not improve
the district’s situation. Having other entities provide the services
would mitigate the risk of the service disruptions that would occur
if the district’s board lost its quorum and could no longer conduct
the district’s business. However, the continued provision of services
following a district consolidation or dissolution would depend on
multiple stakeholder groups agreeing on the outcome. Table on
page outlines the actions these stakeholder groups would need
totake.
Consolidating the district with another special district could either
create a single new successor special district or result in one of the
districts being designated as the successor special district. Given
that the Lake Valley Fire Protection District (Lake Valley) surrounds
much of the district and there are no other adjoining fire protection
districts or nearby community services districts, Lake Valley is a
likely candidate for consolidation with the district. However, to
consolidate with Lake Valley and create a successor fire protection
district, the district’s board would have to give up its authority to
provide park and recreation services. State law requires that at
the time of consolidation, the new successor special district must
be authorized to deliver all the services previously provided by
both consolidating special districts. Because state law authorizes
fire protection districts to provide only services related to the
protection of lives and property, the district must also be authorized
to provide only those services before it can consolidate with
another special district, such as Lake Valley, to form a successor fire
protection district. e district could identify a different entity to
provide park and recreation services if it chose to consolidate with
Lake Valley. Alternatively, it could keep all of its current powers
and consolidate with another special district to form a successor
community services district that would provide both fire protection
and park and recreation services.
California State Auditor Report 2018-133
July 2019
46
Further, for any type of consolidation to occur, stakeholders would
need to take a number of steps. First, a proposal would need to be
submitted to the El Dorado LAFCO either by both district boards
or the county board of supervisors, by a petition signed by not less
than percent of the voters in each district, or by the LAFCO itself
if the proposal is consistent with a prior LAFCO recommendation
or conclusion. e LAFCO can either disapprove or approve the
proposal; if it approves the proposal, it then must hold a hearing to
conduct protest proceedings. A key hurdle to a consolidation is that
voters of either special district can stop the change if percent
or more of them protest it in writing. Additionally, if percent or
more of the voters or landowners in either special district protest,
an election must be held, during which the voters of each district
can either approve or reject the change. If fewer than percent of
voters or landowners protest, LAFCO can order the consolidation.
If the district gives up providing park and recreation services so
that it can consolidate with another special district to form a fire
protection district, the park and recreation services could continue
under a different owner; however, the district’s current level of
operations would not necessarily endure. Although the property’s
deed covenants require that the owners of the land maintain public
access to the lake, they do not require that future owners maintain
or operate the store, the marina, or restroom facilities, which the
district owns. However, the district’s financial reports for fiscal
years – through – show that its park and recreation
services have been financially self-sufficient, so a successor entity
may be interested in maintaining a similar level of services.
In addition to the hurdles to initiate and implement consolidation,
this option increases the risk of higher costs to Fallen Leaf Lake
landowners and permit holders and lower levels of services to
the Fallen Leaf Lake community. For example, the district’s fire
department currently uses many unpaid recruit firefighters, in
addition to some volunteer firefighters and paid seasonal staff. As
a result, the district has lower personnel costs than if it employed
the same number of paid, full-time staff. However, Lake Valley
does not use volunteer firefighters, according to its fire chief. If
the successor district after consolidation were to use only paid
personnel and keep service levels the same, the costs for firefighting
services would likely increase, which in turn could mean increases
to the fire special taxes assessed to property owners in the district’s
and LakeValley’s jurisdictions. Alternatively, the successor district
might be able to avoid significant increases in personnel costs
either by using volunteers or by not staffing the Fallen Leaf Lake
firestation to the same extent that the district does. is latter
approach would likely result in a lower level of fire protection
services to thedistrict’s community, leading to slower response
times thanthe districtcurrently provides. If the community’s fire
47California State Auditor Report 2018-133
July 2019
protection service levels decrease, it could result in the loss of
fire insurance coverage, lower levels of fire insurance coverage, or
higher fire insurance costs for property at Fallen Leaf Lake.
Alternatively, dissolving the district would terminate its existence.
El Dorado County would then control the district’s funds and take
on its powers and duties for the sole purpose of winding up its
affairs, unless the LAFCO required another district to instead take
that role. e requirements for dissolution are similar to those
for consolidation, with key differences being that a petition to
propose dissolution must be signed by not less than percent of
the district’s voters or landowners and that a dissolution involves
stakeholders only within the district rather than within multiple
special districts. Additionally, if the district board—rather than
community members or the LAFCO—proposes dissolution that is
consistent with a prior LAFCO study or determination, the protest
provision would not apply, as Table  shows.
As the successor, El Dorado County would not be required to
continue the services the district provides, and if neither the
county nor another entity were to implement replacement services,
the Fallen Leaf Lake community would likely receive diminished
emergency services. e land within the district comprises
areas in which the State—through CAL FIRE—is responsible for
wildland fire protection and areas in which federal fire agencies are
responsible for wildland fire protection. However, these entities
have only limited responsibility for structure fire suppression. In
that situation, the costs for fire insurance for property at Fallen Leaf
Lake could increase or the ability to obtain fire insurance could
decline. Fortunately, Fallen Leaf Lake is within an area that receives
ambulance and emergency medical services through a joint powers
authority. However, if the district were to dissolve, the remaining
emergency medical services providers would be located outside of
Fallen Leaf Lake, likely resulting in a slower response time than the
district can currently provide.
e LAFCO has authority to require El Dorado County to
continuethe district’s services if it dissolves, although the LAFCO’s
executive officer explained that LAFCO cannot reasonably impose
such an obligation unless extensive discussions occur and the
county agrees to provide the services. e county could continue
the services either directly or by establishing a zone within a county
service area. A county service area is a special district governed
by the county board of supervisors that can provide any service
that the county is authorized to provide. When the county board
of supervisors determines that it is in the public interest to raise
additional revenues within specific areas of a county service area or
to provide such areas with different authorized services, different
levels of service, or different authorized facilities, it may form
California State Auditor Report 2018-133
July 2019
48
oneor more zones. However, implementing a zone to provide
the services that the district currently provides would require
several actions. ese steps include the county’s requesting and the
LAFCO’s authorizing fire services within the county service area
that already encompasses the district’s boundaries. In addition, the
county’s board of supervisors or Fallen Leaf Lake’s registered voters
would need to propose the creation of a zone and identify a funding
method within the county service area. Moreover, a majority
of voters could stop the zone’s formation by protesting it. e
voters may be averse to approving this arrangement if they prefer
more localized control, as exists in the current structure under
which thelocal district board controls the local assessment. e
establishment of a zone would give the county board of supervisors
some control over the local assessment.
Further, for full services to continue after the district’s dissolution,
several entities would need to agree to become involved, potentially
including El Dorado County, CAL FIRE, and others. If the county
does assume responsibility for services after the dissolution, it
would need to contract with another entity, such as a nearby fire
protection district or CAL FIRE, to provide fire protection and with
a vendor to provide park and recreation services. ese entities
may not provide the level of service that the district currently
provides. Additionally, CAL FIRE uses an extensive process to
evaluate whether it will enter into agreements for services, and
it may decline to approve such an agreement. A failure to create
a contract with a fire service provider could result in diminished
protection at Fallen Leaf Lake, since the state and federal
fireprotection responsibilities do not include structure fires, as
wepreviouslydescribe.
A final option is that the district could give up its fire protection
authority and then allow its territory to be annexed into a
nearby fire protection district, such as Lake Valley; the district
would continue and retain its park and recreation authority. e
executive officer of the El Dorado LAFCO noted that with fewer
responsibilities, the district could continue to fulfill its duties related
to park and recreation services even with a board with vacant seats.
However, this option would not resolve the governance problem
because the district would likely continue to have a small electorate,
so the risk of the board being unable to conduct business would
remain high.
49California State Auditor Report 2018-133
July 2019
* California State Auditor’s comments begin on page 53.
*
1
1
2
3
1
50 California State Auditor Report 2018-133
July 2019
51California State Auditor Report 2018-133
July 2019
52 California State Auditor Report 2018-133
July 2019
Blank page inserted for reproduction purposes only.
53California State Auditor Report 2018-133
July 2019
Comments
CALIFORNIA STATE AUDITOR’S COMMENTS ON THE
RESPONSE FROM THE CALIFORNIA GOVERNOR’S OFFICE
OF EMERGENCY SERVICES
To provide clarity and perspective, we are commenting on the
response to our audit from Cal OES’ director. e numbers below
correspond to the numbers we have placed in the margin of the
director’s response.
We disagree that including Cal OES in the audit and affording it
the same length of time to review the draft report as we do other
auditees on other audits is a limitation in our methodology or
should have affected Cal OES’s response. Our work related to
assessing the district’s financial condition and ongoing financial
viability included determining whether the district overbilled
reimbursing agencies for personnel hours related to the fire
agreement. We included Cal OES in our audit after we identified
evidence of the district’s overbilling because of the key role CalOES
plays in the fire agreement’s reimbursement process. At that
point, we took the same actions that we would take for any audit:
we issued Cal OES an engagement letter; we held an entrance
conference with Cal OES to explain the audit; we obtained and
reviewed documentary evidence of its policies and the actions it
took related to reimbursing fire agencies for their staff on strike
teams; we interviewed Cal OES personnel to gain perspective; we
held an exit conference to share our proposed findings, conclusions,
and recommendations; and we provided CalOES a copy of our
draft report for it to review and provide comments.
e director’s inference that we based our CalOES
recommendations on a review of a single local fire agency among
thousands is wrong. We based our findings, conclusions, and
recommendations related to Cal OES on sufficient, appropriate
evidence obtained from a variety of sources. Our report specifically
mentions this evidence, which we believe clearly supports our
results. For instance, on pages  through , we mention
three weakness in the fire agreement’s reimbursement process,
including the fact that Cal OES no longer audits salary forms and
reimbursement claims, a control we recommended in an audit
we issued in ; the fire agreement does not require local fire
agencies to submit documentation to support the enhanced salary
rates they submit to Cal OES; and the fire agreement does not
require local fire agency representatives to sign the salary forms or
reimbursement invoices under penalty of perjury. Furthermore, as
we point out on page, Cal OES accepts as factual the enhanced
rates that local fire agencies submit on their salary forms, in part,
based on those signatures. ese weaknesses, in conjunction
1
2
California State Auditor Report 2018-133
July 2019
54
with evidence related directly to the district, enabled us to arrive
at our findings and conclusions. erefore, we stand by our
recommendations to CalOES.
Cal OES’s complaint about a “constrained timeline” for providing a
response is misplaced. We gave Cal OES the same five-business-day
time period to provide a written response to our audit that we have
given to all auditees for the last several decades. Furthermore, when
we held the exit conference on June , , or three weeks before
its response was due, we informed Cal OES of all the findings
related to it in our report, shared a preliminary draft of the portion
of the report that pertained to it, and advised it to start preparing
its response at thattime.
3
55California State Auditor Report 2018-133
July 2019
* California State Auditor’s comments begin on page 61.
I
Fallen
Leaf
Lake
COMMUNITY













 



 
 



 






*
56 California State Auditor Report 2018-133
July 2019
Ms. Elaine Howle
State Auditor
Office of the State Audito
r
June 24, 2019
Page 2
AS7 Law San Diego/004680/000001/CO/S0437276.DOCX
DISTRICT RESPONSE TO DRAFT STATE AUDIT REPORT
A. To begin, the District would like to comment on the Report’s conclusion and
recommendation in favor of the expansion of the District’s electorate through legislation. The
District strongly agrees with that conclusion and recommendation, believing as it does that the
Report’s conclusion and recommendation on this topic is the best approach to solving the
voting-rights problem that has brought the District before the Legislature. The Report’s
conclusion and recommendation is in line with and validates the efforts by the District to
accomplish that goal, and the District intends to continue its pursuit of that goal through AB
1053, which is the successor bill to SB 561. Compared with the other “Local Solutions” detailed
within the report, the Legislative option is the only reasonable approach to ensuring an
independent, represented electorate.
B. The District also provides the following responsive comments to the audit’s factual
findings:
1) In reference to Page 16 that local agencies must submit the number of hours
worked on an incident in an emergency record: The District responds that the local
agency does not submit the hours worked during the emergency activity, as those hours
are maintained by the strike team leader and accounted for on the F42 form. At the end
of the emergency activity, the strike-team leader also records (on the F42 form) the
estimated arrival time for the emergency unit back at their home base. These total hours
are collected at the incident, and OES files the paperwork and presents the local agency
with an invoice.
2) a. In reference to Page 17 that the District did not pay its 16 recruits as part of
regular duties: The District informed the audit team that recruit duties were performed
by the recruits as part of their training program. The District has treated the recruits,
consistently with labor law, as interns that were performing and completing training that
is provided by the District in exchange for necessary experience in order to complete
their training.
b. In addition, with respect to sending the recruits out on strike teams, the
Fire Chief did not use an enhanced rate as stated in the audit. The salary schedule was
filled out based upon rates the Fire Chief established for strike teams. The Board
approved the strike-team operations as part of its normal District budgets, including the
anticipated income from the strike team activities. The fire department’s routine
operations were not considered as part of this process.
3) With respect to Page 18, which references “rather than using the base rate for
personnel.” The District responds that the Fire Chief did not claim enhanced rates for
strike teams during calendar years 2016-2018. The Fire Chief used a “strike-team only”
salary survey for compensation and direct costs for firefighters, engineers and captains.
1
2
3
4
4
5
6
57California State Auditor Report 2018-133
July 2019
Ms. Elaine Howle
State Auditor
Office of the State Audito
r
June 24, 2019
Page 3
AS7 Law San Diego/004680/000001/CO/S0437276.DOCX
The Fire Chief is able to assign firefighting personnel, both paid and interns, to a strike
team. The interns are compensated as a firefighter while performing during emergency,
strike-team incidents. The interns (recruits) were paid while performing duties as
firefighters while assigned to the Fallen Leaf Lake F. D. during operations requested by
the State of California. The Fire Chief adhered to the terms of the OES MOU as he
reasonably understood them.
4) With respect to the reference on Page 20 that the Fire Chief also stated that he
had submitted an enhanced pay rate to offset the low wages: The District responds that
the Fire Chief stated that he had submitted a strike-team salary-survey rate which was
higher than the lower wage paid during routine operations.
5) With respect to the reference on Page 21 that the Fire Chief “stated that the
District's pay scales are lower than other fire districts nearby, and that he believes it is
uncommon for firefighters to respond to strike team incidents for low pay rates unless
the firefighters are volunteers,” the District responds as follows: The Fire Chief’s
understanding is that volunteers receive the default rate. The Fire Chief’s justification
for the salary survey was based upon his understanding and previous salary surveys that
were submitted and approved by Cal OES. The Fire Chief has not circumvented the
board’s role of governing the District, as he explained to the auditors several times. The
Fire Chief provided evidence to the auditors (in the form of Board meeting minutes) that
the District has approved the use of strike teams as part of the budget process, which is a
normal procedure for the Board.
6) With respect to the reference on Page 22 that “based on the authorization, the
fire chief should not have submitted salary rates for strike team personnel without
approval from the district’s board,” the District responds that the Fire Chief did submit
the salary rates for strike team personnel with approval based on the board’s normal
operation of budget approval.
7) With respect to the first paragraph on Page 23, the District responds as
follows: Based on the Fire Chief’s understanding of the reimbursement process, there
were no willful or intentionally improper submissions of reimbursement funding.
8) With respect to references on Pages 23-25 that the District mischaracterized
its employment relationship with its recruits: As stated previously several times to the
auditors, there was no willful misclassification of an employee as an independent
contractor. The classification as 1099 employees was based on expert opinion from the
District’s and Chief’s auditor and the District’s bookkeeper. The District understands
that the State auditors have reached a different legal conclusion and will respond to their
recommendations as stated below.
7
4
8
9
5
5
10
10
58 California State Auditor Report 2018-133
July 2019
Ms. Elaine Howle
State Auditor
Office of the State Audito
r
June 24, 2019
Page 4
AS7 Law San Diego/004680/000001/CO/S0437276.DOCX
District’s Responses to the Report’s Recommendations:
The District responds to each recommendation as described below:
• To ensure that the District complies with the reimbursement terms of the fire agreement
and does not claim excessive reimbursement amounts, the district’s board, by September
15, 2019, should create and implement a policy governing the reimbursement rate the fire
chief claims for paid and recruit firefighters who participate on strike team assignments
under the fire agreement. Additionally, the district’s board should review and approve the
annual salary form before the fire chief submits it to Cal OES.
District Response: The District agrees to create and implement a policy to comply with
the reimbursement terms of the Cal OES fire agreement. The District’s board will also
review and approve the annual survey form prior to submission to Cal OES.
• To rectify the excessive reimbursement amounts it received for strike team assignments,
the district should take the following actions by December 31, 2019:
1) Develop and implement a plan for returning to the paying agency the excessive
reimbursements it received for calendar years 2016 through 2018.
District’s Response: The District will develop and implement a plan to identify and
return to the paying agency any excessive reimbursements for calendar years 2016-2018.
2) Work with Cal OES to identify the amounts of excess reimbursements the
District received for calendar years 2013 through 2015 and then develop and implement a
plan for returning those amounts to the paying agency.
District’s Response: The District will work with OES to determine overpayment, if any,
for the calendar years 2013-2015 and, if so, will develop and implement a plan for
returning any excess monies received.
• To ensure that it complies with all applicable labor and wage laws, the District should, by
September 15, 2019, seek advice from appropriate experts, such as legal counsel and tax
advisors, regarding the proper characterization and compensation of its recruit
firefighters, and develop and implement a policy in this area that meets all applicable
requirements.
District’s Response: The District agrees to seek such advice and to develop and
implement an appropriate policy meeting the applicable requirements.
• To improve its financial viability and safeguard its ability to continue providing services
to the Fallen Leaf Lake community, the district should take the following actions by
59California State Auditor Report 2018-133
July 2019
Ms. Elaine Howle
State Auditor
Office of the State Audito
r
June 24, 2019
Page 5
AS7 Law San Diego/004680/000001/CO/S0437276.DOCX
December 31, 2019:
• Monitor the status of the financial risks it may face in the future, forecast their
impact on the district's finances and budget, and plan and implement appropriate changes
to its budget as necessary throughout the fiscal year.
District’s Response: The District and its auditors believe that the District is financially
viable. The District will strengthen its financial viability by incorporating the
recommendation as appropriate.
• Limit the extent to which it relies on volatile revenue sources to balance its
budget.
District’s Response: The District believes it makes financially sound choices. The
District will strengthen its finances by taking the necessary steps to review and assess,
on an annual basis, any revenue sources that it and its auditors may reasonably conclude
are “volatile.”
• Develop and implement a budget plan that realistically estimates changes in
revenues and expenditures, as well as identifies approaches to address such changes.
District’s Response: The District believes it has been realistic in estimating changes in
revenues and expenditures. The District will strengthen its budget plan by annually
reviewing and assessing any potential changes in revenues and expenditures.
• Develop a five-year forecast of estimated revenues and expenditures and a plan to
guide its decisions and actions in the event of fluctuations.
District’s Response: The District agrees with the recommendation.
11
12
11
12
11
60 California State Auditor Report 2018-133
July 2019
Blank page inserted for reproduction purposes only.
61California State Auditor Report 2018-133
July 2019
COMMENTS
CALIFORNIA STATE AUDITOR’S COMMENTS ON THE
RESPONSE FROM THE FALLEN LEAF LAKE COMMUNITY
SERVICES DISTRICT
To provide clarity and perspective, we are commenting on the
response to our audit from the president of the district’s board
of directors (board president). e numbers below correspond
to the numbers we have placed in the margin of the board
president’sresponse.
While preparing our draft audit report for publication, page
numbers shifted. erefore, the page numbers that the board
president mentions in his response do not correspond to the page
numbers in our final report.
Although accurate, the board president’s comments fail to convey
the extent of the district’s role in providing information concerning
reimbursements for its staff’s efforts on strike teams. As we note in
the text box on page , the local fire agency notes the start and stop
dates and times for its staff on the emergency activity record. Cal
OES uses this information to determine the number of hours the fire
agency’s staff worked on an incident, calculates the reimbursement
amount, and creates and submits an invoice—which includes the
number of hours and the reimbursement amount—for the local
fire agency. For the district, the fire chief signed and returned these
invoices to CalOES, certifying them as correct to the best of his
knowledge and belief. We revised the text on page  to clarify that
a local fire agency must submit information regarding the length of
time its personnel work on an incident.
We do not agree that it is clear that the district has treated its
recruits consistently with labor laws. On pages  through , we
describe our concerns regarding the district’s compliance with
labor laws, including that recruits can earn more than the allowed
nominal fee while on strike team assignments.
Contrary to the board president’s comment, the fire chief did, in
fact, submit enhanced salary rates to Cal OES. As we describe
in the text box on page  andfurther on page  of our report,
enhanced salary rates are rates that are greater than the default base
salary rate.
e board president’s comment is misleading. As we state on
page, the fire chief could not provide evidence that the district’s
board approved the pay rates he submitted to CalOES. In reaching
this conclusion, we examined budget documents and board meeting
minutes, neither of which contained sufficient detail to demonstrate
1
2
3
4
5
California State Auditor Report 2018-133
July 2019
62
that the board knew of or approved the enhanced salary rates the
fire chief claimed for strike team personnel. Furthermore,although
the district’s budgets for fiscal years – and –
identifiedthe revenue amounts the district expected to obtain from
strike team reimbursements, they do not identify the enhanced
salary rates the fire chief submitted to Cal OES for reimbursement.
Finally, even after we shared our statement with the fire chief at the
exit conference, he failed to provide us with evidence that would
support the board president’s statement. To clarify how we reached
our conclusion on this issue, we revised the text on page .
e fire chief’s use of a “strike-team only” salary survey was
improper. As we state on page of our report, the fire agreement
states that it will not reimburse local fire agencies for enhanced
salary rates that exceed the rates that the agencies themselves pay
their personnel. We also state on page that the fire agreement’s
default reimbursement rate is the base rate and that we expected
the fire chief to include the base rate on the salary form.
As we indicate in our report on page , the fire chief did not
follow Cal OES’s instructions for submitting salary information
to CalOES and the district improperly profited as a result. As we
state on page  of our report, we believe the fire agreement and its
instructions are clear. If the fire chief found the fire agreement and
Cal OES’s instructions for completing the salary form confusing,
he should have contacted Cal OES for clarification. We stand by
ourconclusion.
Volunteers are not the only strike team personnel who can
receive the base rate: any personnel normally paid less than the
base rate can also receive it. Because the fire agreement’s default
reimbursement rate is the base rate and because the district’s
personnel who participate on strike teams are either unpaid or
normally earn less than the base rate, the base rate would be
appropriate for the district’s firefighters and recruits, as we state on
page.
Submitting inflated salary information in salary surveys in one year
without repercussions does not justify the district continuing to
do so. As we state on page of our report, Cal OES told us that it
accepts the enhanced salary rates that local fire agencies include on
the salary forms in part because they are signed to the best of the
signer’s knowledge and belief.
Nowhere in our report do we assert that the fire chief willfully, or
intentionally, submitted incorrect reimbursement forms or willfully
misclassified employees. However, the evidence we obtained shows
clearly that the fire chief knowingly submitted enhanced salary
rates to CalOES for typically unpaid recruits, knowingly did not
6
7
8
9
10
63California State Auditor Report 2018-133
July 2019
pay his recruits the full salary rates he claimed for strike team
reimbursements, and knowingly did not pay his recruits overtime
for their strike team work.
As we explain on pages  through  of our report, the
district’s ongoing financial viability may be in jeopardy. us, our
recommendations in this area are not only prudent but necessary.
We look forward to reviewing the updates on the district’s progress
in implementing this recommendation at days, six months, and
one year following the issue date of this report.
11
12
64 California State Auditor Report 2018-133
July 2019
Blank page inserted for reproduction purposes only.
65California State Auditor Report 2018-133
July 2019
* California State Auditor’s comments begin on page 69.
LOCAL AGENCY FORMATION COMMISSION
550 Main Street, Suite E. Placerville, CA 95667
(530) 295- 2707 lafco@edlafco.us www.edlafco.us
S:\Special Projects\Fallen Leaf Lake CSD\Response to CA State Auditor FLL Report 2018-133 v2.docx
COMMISSIONERS
Public Member: Michael Powell Alternate Public Member: Dyana Anderly
City Members: Mark Acuna, Cody Bass Alternate City Member: Kara Taylor
County Members: Shiva Frentzen, Brian Veerkamp Alternate County Member: John Hidahl
Special District Members: Tim Palmer, Vacant Alternate Special District Member: Holly Morrison
STAFF
José C. Henríquez, Executive Officer Erica Sanchez, Assistant Executive Officer
Riley Nork, Assistant Policy Analyst Denise Tebaldi, Administrative Assistant Kara K. Ueda, Commission Counsel
June 19, 2019
Elaine Howle, CPA
California State Auditor
621 Capitol Mall, Suite 120
Sacramento, CA 95814
SUBJECT: Fallen Leaf Lake Community Services District, Report 2018-133 (dated
July 18, 2019
Dear Ms. Howle,
Thank you for the opportunity to review and comment on the draft report on Fallen Leaf
Lake Community Services District (Fallen Leaf Lake CSD or FLL). I understand
this
agency’s
review was a courtesy and that the draft report must be kept confidential per
Government Code Sections 8545(b) and 8545.1. The final draft of the report will be
published next month and I may not disclose the draft report’s content before that time. I
also understand that the report does not contain any recommendations to this
Commission.
While a written response from LAFCO was not expected, the following comments
are
respectfully submitted after the review of the draft report.
Page 45 of 61:
“If the district gives up its park and recreation services so it can
consolidate to form a fire protection district, the park and recreation services could
continue, but the current level of operations would not necessarily endure”
(emphasis
added).
Because LAFCO did not have access to the fu
ll report, it is possible that the redacted
section of this paragraph contains the necessary information to support this statement.
As a result, this comment is limited to LAFCO’s experience independent of the research
and analysis that was performed in the draft report. Setting aside that no one, to LAFCO’s
knowledge, has recommended the
divestiture of FLL’s park and recreation services, the
premise is imperfect based on three premises. First, FLL outsources parks and recreation
services. A private vendor runs and operates the marina and its store. FLL has no
dedicated staff or programs that it runs independent of this vendor. Second, the records
from prior years indicates that the contract with the current vendor makes the
parks and
recreation services side of FLL self-sustaining for the district. Third, th
e fire service
operations have no impact on the preceding two factors
given that the revenue streams
for these services are kept separate and there is no shared staff between these two
*
1
2
3
66 California State Auditor Report 2018-133
July 2019
State Auditor Report on Fallen
Leaf Lake CSD 2018-133
June 19, 2019
Page 2 of 3
functions (it is understood that the fire chief also acts as general manager to the district;
however, that role is for the district as a whole). As a result, there is no evidence known
to LAFCO that supports the contention that “the current level of operations would not
necessarily endure” if FLL ceases to exist, if parks and recreation services are provided
by another entity or if FLL continues to exist as a district that only provides parks and
recreation services.
Page 46 of 61: “Alternatively, the successor district may be able to avoid significant
increases in personnel costs either by using volunteers or by not staffing the Fallen Leaf
Lake station to the same extent the district does. This approach would likely result in a
lower level of fire protection services to the Fallen Leaf Lake community, such as slower
response times than the district currently provides. These potentially reduced fire
protection service levels could also result in the loss of, or lower levels of, fire insurance
coverage or higher fire insurance costs for property at Fallen Leaf Lake.”
In LAFCO’s estimation, this conclusion is only partially accurate. The paragraph implies
that only by keeping the status quo – an independent FLL providing fire suppression
services – would service levels and costs remain at current levels. It is true that Fallen
Leaf Lake CSD controls costs by using volunteer firefighters. It is true that costs would
increase if a successor entity taking over fire suppression from FLL chooses to staff the
Fallen Leaf Lake Station 9, fully or partially, with paid personnel. It is also true that
residents would experience lower levels of services or longer response times if the
successor entity chooses not to staff Station 9. However, if the successor entity chooses
to staff Station 9 with volunteers at the same number of firefighters that FLL currently has,
then the premise for the last two cases no longer stands.
The hope is that the following issues are addressed in the redacted portions of the report.
It should be also noted that fire insurance carriers are seriously reconsidering whether to
extend coverage in the wildland-urban interface. But there should be a discussion about
how “fire insurance coverage or higher fire insurance costs” would be impacted by
services continuing to be provided by a financially-distressed district. Equally important
is a discussion on the costs of constant turnover. There is very little retention in volunteers
year-over-year during fire/tourist high season when Station 9 is staffed. Fallen Leaf Lake
CSD has to recruit volunteer firefighters annually in order to maintain operations.
Lastly, not all of the information that the State Auditor had in reaching its recommendation
that the best option is to expand FLL’s electorate was available for review in the draft
report. As a result, this agency will not question this recommendation. However, there
should be an understanding that there will be consequences should the Legislature
adhere to this recommendation for two reasons. Notwithstanding the issue of who would
be tasked with running District elections, creating a hybrid district (where landowner-voter,
registered voter and/or a third class of voter, a permit-holder voter, may be enfranchised)
would make future reorganizations problematic under existing State Law. This will be
true regardless of who instigates the reorganization, whether it is the FLL Board of
Directors, its residents, or another entity. Special legislation may be necessary should a
future reorganization involving LAFCO be needed in the future.
4
4
5
6
67California State Auditor Report 2018-133
July 2019
State Auditor Report on Fallen
Leaf Lake CSD 2018-133
June 19, 2019
Page 3 of 3
Second – with the understanding that it is possible that this was raised in the redacted
portions of the report – LAFCO will emphasize again that the governance issue that FLL
faces is not just a local oddity. There are multiple counties along the mountains and the
coast that have districts with the quandary of serving a substantial number of second and
third homeowners (Placer County by itself has 13 districts). The draft report cited at least
four other districts with similar traits. This issue needs to have a more comprehensive
approach in order to arrive at a solution that ensures equity and the furtherance of goals
of the Legislature. Otherwise legislators will continue to grapple with these issues in an
ad hoc manner as these districts continue to struggle. This report has the tremendous
potential of raising the visibility of this issue so that a dialog can begin with all stakeholders
on a workable, permanent solution.
Please contact me at 530-295-2707 or a jhenriquez@edlafco.us should you have any
questions relating to this letter.
Regards,
José C. Henríquez
Executive Officer
7
68 California State Auditor Report 2018-133
July 2019
Blank page inserted for reproduction purposes only.
69California State Auditor Report 2018-133
July 2019
Comments
CALIFORNIA STATE AUDITOR’S COMMENTS ON THE
RESPONSE FROM THE EL DORADO LOCAL AGENCY
FORMATION COMMISSION
To provide clarity and perspective, we are commenting on the
response to our audit from the executive officer of the El Dorado
Local Agency Formation Commission (LAFCO). e numbers
below correspond to the numbers we have placed in the margin of
the executive officer’s response.
While preparing our draft audit report for publication, page
numbers shifted. erefore, the page numbers that the executive
officer mentions in his response do not correspond to the page
numbers in our final report.
e executive officer’s comment pertains, in part, to redacted
text concerning the district that was in the draft report that we
provided to the El Dorado LAFCO: the text was redacted for
reasons of confidentiality as required by state law. e Audit
Committee directed us to perform this work. As we note on
page in the Scope and Methodology for this audit, the Audit
Committee asked us to identify and assess alternative governmental
or nongovernmental entities that could provide services similar to
those that the district provides and determine whether reorganizing
the district would jeopardize public access to Fallen Leaf Lake. We
also point out on page that one of the twotypes of services the
district provides is park and recreation services.
We draw no connection in the report between our concerns
regarding the district’s fire protection services and the operation
of its park and recreation services. In fact, on pages and
we discuss the possible effects if the district gives up park and
recreation services in order to consolidate with another district to
form a fire protection district. Specifically, we state that although
deed covenants for certain land the district owns require the
district to maintain public access to the lake, they do not require
a future owner to retain other park and recreation services, such
as operating the store, marina, or restroom facilities, which the
districtowns.
While we acknowledge on page that a successor entity may
be able to avoid significant increases in personnel costs by using
volunteers, this prospect seems unlikely. As we indicate on page,
the fire chief for Lake Valley—the only adjoining such district, and
thus a likely candidate for consolidation—informed us that it does
not use volunteer firefighters. We stand by our conclusion.
1
2
3
4
California State Auditor Report 2018-133
July 2019
70
e executive officer’s comment pertains, in part, to redacted
text concerning the district that we did not share with the
ElDorado LAFCO. We discuss the district’s financial issues on
pagesthrough and the potential impact of fire insurance
coverage and costs on page. Furthermore, because it was not
among the audit objectives the Audit Committee approved, we did
not assess turnover among the district’s firefighting staff.
We do not share the executive officer’s concern over possible
consequences of a future reorganization of the district if the
Legislature chose to enfranchise the district’s landowners and
permit holders; he does not explain why a future reorganization
would be problematic or why special legislation would be necessary
as a result of reorganization. Furthermore, according to our
legal counsel, stakeholders would not need additional legislation
to undertake a reorganization of the district if the Legislature
enfranchised landowners and permit holders.
We considered proposing a comprehensive solution for resolving
governance issues for existing special districts other than the
district to be beyond the scope of this audit. Despite certain
similarities these districts may have in common, such as vacation
home communities and small electorates, additional attributes may
make the solution we propose impractical for these other special
districts. We did, however, propose a recommendation to the
Legislature to help keep future special districts from encountering
governance issues like the ones encountered by the special districts
named in our report. Namely, on page we recommend that the
Legislature amend state law to require a LAFCO to assess whether
an electorate is of sufficient size when it considers creating or
modifying a special district.
5
6
7