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Los Osos CSD general manager under investigation

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The Los Osos Community Services District Board of Directors is hiring an outside investigator to examine allegations that General Manager Kathy Kivley misappropriated district funds, the board announced on Oct. 12 following a closed session performance review of Kivley.

“We authorized the retention of an outside investigator to investigate the allegation of the general manager’s misappropriation of public funds regarding the alleged misuse of her administrative time off,” Board President Michael Wright wrote in an email to New Times on Oct. 14.

The board will consider hiring from investigators recommended by the Los Osos CSD’s legal counsel, Wright said. Kivley declined to comment on the investigation.

The decision comes in the wake of a scathing financial audit published Aug. 26 that exposed a number of accounting and management errors in the LOCSD during the 2013-2014 fiscal year. The audit, done by Moss, Levy, & Hartzheim LLP, states that “it was difficult to follow and trace the accounting … due to the large amount of journal entries made, many of which were canceling a previous entry.” Many of these entries and cancellations were made directly and improperly by Kivley, according to the audit, which “could result in a misstatement in the financial statements and conceal any misappropriation of assets.” 

The audit also found that two employees received overtime pay for work done during normal work hours, petty cash was used for purchases that cost more than $50, and that it was unable to confirm the accuracy of the compensated absences balance because there was “no formal method of tracking accrued compensated hours earned or used.”

In an Oct. 7 letter to the LOCSD Board of Directors, SLO County Auditor-Comptroller Jim Erb wrote that the audit results “should be of great concern to the Board of Directors.” Erb told New Times Kivley reassured him in conversations that corrective “changes had taken place,” which would be reflected in the 2014-2015 audit scheduled for release in February 2016.

Kivley was hired as the general manager in October 2013, after being fired as city manager of Atwater in 2012.

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