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County audit of Wallace conflict likely

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The San Luis Obispo County auditor-controller will conduct a review of the South San Luis Obispo County Sanitation District’s financial records—specifically related to a conflict of interest alleged by the county grand jury.

On June 2, the grand jury issued a report titled “The South San Luis Obispo County Sanitation District” that alleged John Wallace, founder and president of the Wallace Group, has a conflict of interest because of his dual role in the district as both administrator and engineer.

On July 12, SLO County supervisors are scheduled to accept a report from County Auditor-Controller Gere Sibbach responding to the grand jury’s determination that the county has some oversight of the district. The South San Luis Obispo County Sanitation District provides sewer services to the Five Cities and is not a county agency.

The grand jury, however, determined that the county has some mild powers to audit the district’s finances. Though Sibbach concluded in a preliminary response to the grand jury that his office has limited auditing authority, he also responded that the office could conduct its own financial review of the district because there wasn’t yet an audit on file for the 2010-11 fiscal year.

“I will assign staff from our audit division to perform a limited review of internal financial controls at the district, with a specific emphasis on possible conflicts of interest between the district administrator and district engineer,” Sibbach’s response states.

Work on the audit is scheduled to begin within the next six months.

Sibbach said a full audit would not be “cost effective or necessary” because the district plans to rotate its principal auditor in compliance with grand jury recommendations, and the district is revising the administrator and engineer contracts to remove potential conflicts.

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