After nearly three months of turmoil, the Los Osos Community Services District (LOCSD) and General Manager Kathy Kivley might be breaking it off.
On Dec. 4, the LOCSD Board of Directors voted to place Kivley on paid administrative leave.
The LOCSD then announced that it had reached a “unanimous confidential, conditional agreement with Kivley” on Dec. 10.
LOCSD legal counsel Michael Seitz said on Dec. 11 that Kivley’s administrative leave status is “likely to change within the next 10 days.” Utilities Manager Margaret Falkner has stepped in as temporary general manager.
A perplexing Aug. 26 audit of the district’s 2013-2014 finances ignited a period of intense criticism of the district. According to the audit, missing reports and unorthodox manual entries into the district accounts obscured the auditors’ ability to form conclusions.
Suspicions of misconduct surfaced on Sept. 30, when former LOCSD board member Julie Tacker submitted a letter to the current board of directors. Tacker alleged Kivley had taken 124 hours more leave off in a span of two years than her contracts allowed, totaling nearly $6,000.
Tacker obtained Kivley’s paystubs and contracts through a public records request with the LOCSD. She brought the documents to a local accountant, who, after analysis, concluded that Kivley accrued extra administrative leave days in her time with the district.
Tacker told New Times a missing compensated absences report noted in the August audit set off her suspicions.
“I just didn’t buy that the [compensated absences] data couldn’t be compiled,” Tacker said. “I thought, ‘Only Kathy [Kivley] approves that payroll.’”
Tacker’s findings prompted the board on Oct. 12 to hire SLO investigator James Gardiner Associates to examine the allegations.
Gardiner’s findings have not yet been released, and officials would not go on record about the findings of the investigation.
Kivley did not return a request for an interview.
Seitz informed New Times that Kivley’s lawyer did not want his or her name revealed to the press.
Board President Michael Wright maintained that Kivley was on the right track—workwise.
“There’s no doubt about it, the 2013-2014 audit was not a good-looking audit,” Wright said. “But there were legitimate circumstances around it. … I don’t question the work that [Kivley] was doing.”
In 2014, the LOCSD Board of Directors instructed Kivley and other managers to implement the district’s accounting software, MIP Sage Abra, which hadn’t been utilized prior.
Craig Baltimore, the LOCSD board president in 2014, confirmed in an email that, “it was a goal of the board to have the accounting practices of the district brought up to Generally Accepted Accounting Principles, including software, and to have past accounting reconciled.”
In previous years, accounts were kept using Excel spreadsheets, despite the fact that the district was paying for the professional software. LOCSD’s old-fashioned accounting practices led to the end of the district’s partnership with auditing firm Brown Armstrong in 2012.
“[Brown Armstrong] was frustrated because they didn’t think it was proper to not be able to sample the computer system,” Wright said.
Moss, Levy & Hartzheim, the district’s current auditor, agreed to audit the LOCSD’s manual spreadsheets in 2012-2013, but only if the district promised to modernize its practices the following year.
“That’s one of the reasons why the general manger was directed to get these things implemented,” Wright said.
Implementing the software yielded unexpected complications, according to Wright. Management found discrepancies and errors in the books dating back to the LOCSD’s 2006 bankruptcy.
The further management delved into historical records of the district, the more issues they unearthed.
“It kept going back years and years,” Wright said. “The only thing that kept her [Kivley] from going back further was a lack of records.”
Assuming Kivley’s tenure officially ends, a new general manager would be the LOCSD’s fourth in four years, and would inherent the same books.
Wright believes it will take steadfastness and levelheadedness from the political community in Los Osos, which is notoriously hot-tempered, to make successful progress going forward.
“If you start making personal attacks, about personality or how someone dresses, that’s not proper,” Wright said, referring to discourse around Kivley. “It puts a chill on the conversation. It is concerning in the sense that if a good candidate [for GM] doesn’t want to subject themselves to the culture.”
Tacker, who was on the LOCSD board in 2006, argues that public scrutiny is necessary to hold officials accountable.
“If it wasn’t for us vocal few, there’d be nobody watching them,” she said. “We need to be watching them.”
Editorial Intern Peter Johnson can be reached at pjohnson@newtimesslo.com.
This article appears in Dec 17-24, 2015.