Karen D.

Achms, CPA
Tre a s u rc r-T ax
C

oll ecto r- C Ie tu

COUNTY CLERK Reg istra r of voters TREASURER - TAX COLLECTOR

2222 "M" Street Mercd, CA 95340 (209) 3857307 (209) 7253905 (Fax)

Karen D, Adams, CPA

www.mercdtaxcollector.org
www mercedelections.org

March 16, 2010

TO: FOR:

California Senate Local Government Committee

Oversight Hearing on Prudence and Economy: Rethinking State Limits on County Offices
112, Wednesday, March 17,2010

HELD: State Capitol, Room

Please find my attached responses to the questions set forth in the Briefing Paper for the Oversight Hearing. I thank you for the opportunity to speak on your panel and hope I have provided insightful arguments against any further consolidation of incompatible offices.

Prudence and Economy: Rethinking State Limits on Gounty Offices

Responses Submitted by Karen D. Adams, CPA, Merced County Treasurer-Tax CollectorClerk-Registrar of Voters (TTC-CC ROV)
at senate committee

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capitor, Room 112

Prudence and Economv: Rethinkinq State Limits on Countv Offices

Would counties benefit from a simplified and standardized statute governing the consolidation of county offrces?

In some cases a consolidation may be practical and benefit the

citizens if no "incompatibility of authority' exists. Clearly the Auditor and Treasurer and not compatible and clash of duties does so exist. Incompatibility addresses the need for independence. The independence of an Elected as intended by the original CA Constitution must be protected. lf these Elected positions were converted to an Appointed status, the appointee could be subjected to undue political pressure or influences. Prudence defines the practical duty in which provident care is essential over the management of resources in order to meet the organization's objectives, while Economy is charged with the efficient, sparing, or concise use of resources. Therefore, Prudence must outweigh any Economic benefits in order to provide assurance of a fair equitable system with justice while preserving the assets held under the trust of the citizens.

o If changes to these statutes are necessary, what issues should state law
address and what issues should be and voters?

left to the discretion of county ofhcials

It is imperative for state law to uphold the intent of our founding fathers in all standards to ensure protection of our rights. The CA
Merced County fiC-CCROV Response Page 1

legislators now have an opportunity to eliminate the inconeistencies in the present law and to explicitly prohibit the abrogation of the incompatibility doctrine. There must be restrictions placed on the Board of Supervisors to prevent the right to redefine an Elected status representing the entire through the use of an ordinance or an abili$ to persuade speclal privileges sought through legislature.

Merced County TTC-CCROV Response Page - 2

CounW Offices

- Backqround and Gurrent Law

Do special exceptions, ambiguities, and contradictions in the state law

governing county office consolidations prevent counties from saving money and improving service delivery by consolidating offices?

defined authority through the CA Codes. However, the Code many times fails to permit the actual recovery of related costs associated with enhancing services. At times,

Each Elected has

improvements must be lncorporated under the gray interpretation of the code; otherwise improving service delivery can not be accomplished without impacting a county's fixed budget demands. Therefore, non-mandated services may be bound by lack of available appropriations. An archaic interpretation of cost recovery standards at a fixed dollar amount prescribed in law binds many Electeds from embracing efficiencies that should be afforded to their community. Many explicit service costs do not recognize the actual recovery associated with improved services. The code has inconsistencies between mandated fixed cost recovery and permissible recovery of actual costs related to the process. The inconsistencies and lack of vision in cost recovery language is a true detriment in promoting efficiencies beneftting all parties.

What is the voters' role in approving changes to the structure of county offices? Is the power of referendum and initiative sufficient, or
should state law require voter approval for all consolidations?

Voter Approval should be required on consolidation of compatible offices and the doctrine of incompatible offices should be upheld as intended by law and never abrogated. The Board of Supervisors should not have the ability to take control or subject an Elected to a consolidation based on promoting their self interest or as a guick fixed to the complicated issue of preserving services as Baby Boomers exit the workplace taking years of valuable institutional
knowledge.

Merced County TTC-CCROV Response Page - 3

Gountv Office Consolidations and Countv Population

Should state law apply the incompatible offices doctrine uniformly to all counties, or does it make sense to abrogate the doctrine in some counties but not others?

YES! Lack of uniformity erodes the intent of the law over time.
No exception should be made regardless of county size, region, or any other characteristic. Some protection must be afforded to the Voters when presented with ballot measures that if passed would erode the protection the Code intended.

Should the Legislature reconsider the decision to abrogate the incompatible offices doctrine to allow the consolidation of auditorconfoller and treasurer-tax collector offices?

YES!

Time will yield consequences with the erosion the

independence requirement for an Elected to be void of any clash of duties. Multiple independent review of financial decisions is in the best interest of it's' citizens. Any corporate CEO will cite the need for an independent internal audit division which remains disconnected from other divisions in order to provide an unbiased view of the internal controls and to assess that segregation of duties does provide assurance that fraud, collusion, or embezzlement is mitigated at the highest standard.

Government Code clearly defines the Treasurer's fiduciary duty entrusted with the safekeeping of all cash & investments. While a desk has no portability, cash is a highly liquid seize-able asset

subject to loss in many ways. The intent of the initial laws prohibiting incompatible offices remedied this potential loss. Additional code mandates an oversight authority to audit the Treasury for potential loss by requiring a monthly audit performed
by the County Auditor.

Merced County TTC-CCROV Response Page - 4

Internal auditing provides a cornerstone for strong governance. An auditor is an individual expected to provide an "unbiased" evaluation of the accuracy of financial transactions and accounts. tt is a fallacy to consider that some one can be "unbiased" of your
self.

By consolidating Treasurer-Tax Collector with Auditor-Controller you erode assurance that safekeeping will be provided at its highest level and deficiencies may not be detected or exposed
within an organization seeking to promote itself as a well managed division of the county.

consolidated with the State Controller's Office in order to meet today's constraining budgetary issues. Clearly the citizens of this great state would be provided no protection from the long list of harmful outcomes.

Fathom

the notion of the State Treasurer's Office being

Can state law give counties greater flexibility to consolidate county

offrces without undermining the checks and balances that the incompatible offices docffine is intended to protect?

NO! There should be not exception to permit

county to

abrogate the doctrine of incompatible offices as per my statement above.

Merced County TTC-CCROV Response Page - 5

Gountv Office Consolidations and Charter Counties

Does the relative similarity

office combinations?

adopted in all counties suggest that the state doesn't need to be so selective in speciffing

of office combinations

NOI

Because general law counties consolidate ofltces to a similar extent as charter counties, does state law present significant obstacles to general law counties?

NO COMMENT

Should state law continue to distinguish between the types of consolidations authorized for charter counties and those authorized for general law counties?

NO COMMENT

Merced County TTC-CGROV Response Page - 6

Can state law give counties greater flexibility to consolidate county offices while ensuring that officeholders posses the specialized qualihcations necessary to perform the functions of some county offices?

Rarely would a consolidation provide an opportunity to nullify the qualifications standards required to provide leadership. The elected Auditor & Treasurer can both qualify based under the qualification standard as a Certified Public Accountant. While I myself, a CPA, started my career specializing in auditing and tax law, at the county level I have evolved from a Staff Auditor, an Assistant TreasurerTax Collector, and now an Elected Treasurer-Tax Collector. This evolution to elected process did not come without difficulty, yet my auditor experience clearly assisted me in the position as Assistant Treasurer-Tax Collector to develop a transaction system to provide logic and transparency for monthly cash & investment examination performed by the elected Auditor.

Both the audit and treasury investment function are specialized fields of study requiring a commitment. As the years have passed
by during this evolution, I no longer hold myself out as an auditor or tax accountant because much of that specialty is now stale or outdated. I now hold myself out as a Chief Investment Officer (Treasurer) committed to preservation of capital through the key fiduciary prudent man principal of SLY for Safety, Liquidity, and Yield. As an Elected, I do not compromise to the political pressure to take undue risk to seek yield. However, as an Appointed, I would be bound by the Board of Supervisors in fear of dismissal for not abiding by their request to do so.

Good governance can only be accomplished with a separation of the Treasurer and Auditor authority along with all other incompatible
offices.

Merced County TTC-CCROV Response Page - 7