Audit reviewed District Documents from 2010 through July 2020

CARMICHAEL, CA (MPG) - At the April 20 meeting of the Carmichael Water District Board of Directors, the Board received the Special Procedures Audit Report completed by Richardson & Company. The Audit was authorized last July to review employee benefits provided by the District that were never authorized by the Board.

The Audit reviewed District documents from 2010 through July 2020, finding that various Employee Benefits Packages were implemented over the years, providing unapproved benefits to a number of employees. Additional benefits not outlined in the unofficial benefits packages were also granted to some senior management staff.

The majority of unapproved benefits were received by former General Manager Steve Nugent, who retired at the end of December 2019; former Assistant General Manager Lynette Moreno, who retired at the end of December 2020; and Human Resources Director Lori Kalisiak. The Richardson & Company report states that during the 10 years under review, these three individuals created and implemented unapproved employee benefits packages, through which they each received “tens of thousands of dollars in compensatory time-off, unauthorized insurance premiums, leave pay-outs, and excess reimbursements without the knowledge, authorization, or approval of the Board.”

The report specifies that “while the three members of management staff received the majority of the unauthorized benefits and public monies, seven other employees also benefitted.” It is unknown whether the other employees were aware that the benefits were unauthorized.

In total, the report showed that employees received $640,043.43 in unapproved benefits from 2010 to 2020.

General Manager Cathy Lee asked the Board to accept the report, stating that as a result of the findings, the District will make changes within the organization. The recommended changes include reorganization to establish separation of duties; hiring managers with specialized skills, training, and licensures; implementing an additional special procedures audit as part of the yearly audit; the inclusion of additional pay and benefits details in the annual budget; and the review and revision of existing policies to ensure transparency.

During public comment, David Hanscom said it appeared that “no one’s paying attention to what’s going on in the chicken coop. … You’re responsible for what goes on there. So, you need to be looking at it periodically, and waiting 10 years until we’ve got a problem this big, I don’t know, I’m just discouraged with it.” Hanscom said the Board needs to be looking inward and reviewing the District’s policies and day-to-day operations more thoroughly.

Director Ron Greenwood said, “We’ve discovered things that were wrong, and we’re doing everything we can to correct them, make them right. And that goes from policy to bylaws to our structure. And I think we’re looking inward, because we’re thinking, ‘What can we do to make our District better, keep our water supply reliable and protect it, and ensure quality?’ And I think that’s what we’re elected to do as elected officials.”

But Greenwood said, “I’m concerned that you’re concerned. … because we’re not doing our job right if we’re not keeping our people content with the job that we’re doing for them.”

Human Resources Coordinator Lori Kalisiak also spoke during public comment, stating that she, along with former Assistant Manager Moreno and former General Manager Nugent, “strongly object to the Board approving or accepting the Special Procedures Audit Report.” Kalisiak requested that, if the report related to the Closed Session regarding possible litigation, the Board discuss the item at a later date “so that this report can be reviewed by our legal counsel, and so our legal counsel can provide a formal written response.”

Kalisiak said, “The report wrongly impugns the reputation of three long-term employees, who have spent many years making the District a better place, without sufficient notice or the opportunity for us or the other impacted employees to dispute the faulty conclusions and/or statements made therein. For example, I played no part in the development of these policies and was not even the human resources coordinator until the policies were already in effect. To the extent this Board approves and accepts the report, it does so with the knowledge that there is substantial documentation that refutes the facts, statements, and conclusions therein.”

Nugent and Moreno held the positions of general manager and assistant general manager, respectively, starting in July 2003. Nugent worked for the District for 30 years, and Moreno for 21. Kalisiak started as administrative and human resources support specialist in March 2010, and then took on the role of human resources coordinator in October 2011.

After reviewing the Audit Report during the regular meeting, the Board adjoined to Closed Session. Board President Mark Emmerson later reported that they had “voted unanimously to authorize a special counsel … to file a lawsuit in Sacramento County Superior Court against former General Manager Steve Nugent, former Assistant General Manager Lynette Moreno, and Human Resources Coordinator Lori Kalisiak for the purpose of recovering the value of employee benefits that they obtained for themselves and other employees without Board authorization or knowledge.”

As of April 21, the day after the meeting, Kalisiak was terminated as a District employee.