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Response synthesis and audit

Sebastopol City Council response

The City partly agrees with the findings, describes revised allocation and rate studies, and says historical overallocation needs further analysis. It cites loan forgiveness, new studies and efforts to recruit accounting expertise for the oversight committee.

Official response PDFOfficial report PDF

Response by Sebastopol City Council · 2026-07-22

4

Addressed

3

Partially addressed

0

Not addressed

0

Unclear

County's stated disposition

These categories reflect the County's response to each recommendation, separate from this audit's assessment.

1

Implemented

1

Will be implemented

1

Requires further analysis

0

Will not be implemented

0

Unclear

How to read this audit

Editorial review of the submitted response only; not a legal ruling or independent verification of agency claims. Citations use physical PDF pages, including blank scanned backs. Blank signature/date fields and court receipt stamps do not establish an adoption or response date.

Commitments

Actions stated in the response

These are commitments extracted from the County's response. They describe what the response says will happen; they do not verify that implementation occurred.

2

Extracted commitments

1

Definite or bounded timing

1

Conditional timing

0

No timeframe

R1 · Bounded timeframe

Prepare and implement new cost allocation and rate studies, as directed by the Council.

No later than FY 2027–28; reported funding is included in the FY 2026–27 budget.

R3 · Conditional timing

Make a concerted effort to solicit certified public accountant applicants, including outreach to professional organizations; appointment is not guaranteed.

During the next recruitment cycle; no fixed date supplied.

Item-by-item review

Findings and recommendations

Assessments describe whether the response engages each cited item. Finding scores separately describe statutory-elements completeness under California Penal Code § 933.05(a) and public usefulness. They do not independently verify the response or constitute a legal conclusion.

Showing 7 of 7 items

finding · F1

The Grand Jury estimated that the City’s failure to update its Cost Allocation Plan for more than 20 years resulted in the City overallocating approximately $5.5 Million of indirect costs to the Enterprise Funds. This was non-compliant with Proposition 218 and left the Enterprise Funds without sufficient money for maintenance and capital improvements.

Audit: Partially addressed

Response says

Acknowledges an outdated allocation plan and possible overallocation, describing a new consultant plan, direct legal billing and expanded time tracking.

Audit analysis

Expresses partial agreement, but does not clearly resolve the disputed $5.5 million estimate, Proposition 218 conclusion and funding effect. Identifies ClearSource and planned FY 2027/28 work as concrete bases; R2 on page 5 says no specific historical amount has been determined.

Finding-response score

Document completeness and usefulness—not factual verification or a legal conclusion.

8/10

3/4

Statutory elements

Stated position
2/2
Applicable disagreement elements
1/2

5/6

Public usefulness

Coverage
1/2
Reason specificity
2/2
Support traceability
2/2

Expresses partial agreement, but does not clearly resolve the disputed $5.5 million estimate, Proposition 218 conclusion and funding effect. Identifies ClearSource and planned FY 2027/28 work as concrete bases; R2 on page 5 says no specific historical amount has been determined.

Scoring confidence: high

Report page 19Response page 1
Discuss finding and response

finding · F2

When the City updated its Cost Allocation Plan in 2024, reduced allocation of indirect costs left approximately $714,000 in the Enterprise Funds to be used for systems maintenance and capital improvements.

Audit: Addressed

Response says

Confirms approximately $510,000 lower water charges and $204,000 lower wastewater charges, but says savings are not earmarked for a particular use.

Audit analysis

Specifies the disagreement over use of savings and explains possible operating, capital, reserve or rate effects, citing the 2024 allocation plan and its cost bases.

Finding-response score

Document completeness and usefulness—not factual verification or a legal conclusion.

10/10

4/4

Statutory elements

Stated position
2/2
Applicable disagreement elements
2/2

6/6

Public usefulness

Coverage
2/2
Reason specificity
2/2
Support traceability
2/2

Specifies the disagreement over use of savings and explains possible operating, capital, reserve or rate effects, citing the 2024 allocation plan and its cost bases.

Scoring confidence: high

Report page 19Response page 3
Discuss finding and response

finding · F3

Because the rate study conducted by the City in 2019 underestimated a reduction in consumption due to conservation measures, the rate adjustment for 2019-2023 was insufficient to keep pace with escalating costs. This resulted in the need for a 37% increase on July 1, 2024, which has been difficult for many ratepayers to accept.

Audit: Partially addressed

Response says

Acknowledges underestimated conservation effects, describes the 2021–2022 drought and 2024 rate study, and recognizes household affordability pressures.

Audit analysis

Engages each material topic and identifies dated drought and rate-study bases, but its partial-agreement label does not clearly identify which proposition is disputed.

Finding-response score

Document completeness and usefulness—not factual verification or a legal conclusion.

9/10

3/4

Statutory elements

Stated position
2/2
Applicable disagreement elements
1/2

6/6

Public usefulness

Coverage
2/2
Reason specificity
2/2
Support traceability
2/2

Engages each material topic and identifies dated drought and rate-study bases, but its partial-agreement label does not clearly identify which proposition is disputed.

Scoring confidence: high

Report page 19Response page 3
Discuss finding and response

finding · F4

In November 2025, the City Council reinstituted an Enterprise Fund Oversight Committee. This promises to provide the City Council with insights and expertise regarding decisions concerning oversight of these critical systems.

Audit: Addressed

Response says

Says the oversight committee was created for the first time in November 2025, not reinstituted, and lists its advisory duties.

Audit analysis

Precisely disputes the committee-history characterization and identifies the creation event and duties; the list continues on page 5. No independent committee-history verification is made.

Finding-response score

Document completeness and usefulness—not factual verification or a legal conclusion.

10/10

4/4

Statutory elements

Stated position
2/2
Applicable disagreement elements
2/2

6/6

Public usefulness

Coverage
2/2
Reason specificity
2/2
Support traceability
2/2

Precisely disputes the committee-history characterization and identifies the creation event and duties; the list continues on page 5. No independent committee-history verification is made.

Scoring confidence: high

Report page 19Response page 3
Discuss finding and response

recommendation · R1

By October 1, 2026, commit to fully comply with Proposition 218 by conducting cost allocation and rate studies at least within 3-5 years intervals and adjusting its cost allocation and ratepayer fees accordingly.

County: ImplementedAudit: Addressed

Response says

Reports adopted 2024 studies, direction to retain consultants for new studies no later than FY 2027/28, and FY 2026/27 budget funding.

Audit analysis

Claims implementation of the commitment, not completion of the next studies; identifies the next study cycle and budget basis.

Extracted commitments

Prepare and implement new cost allocation and rate studies, as directed by the Council.

Responsible party
City of Sebastopol staff and consultants
Timing
No later than FY 2027–28; reported funding is included in the FY 2026–27 budget. · Bounded timeframe
Report page 19Response page 5

recommendation · R2

By October 1, 2026, reach an agreement on the dollar value of mis-allocated indirect costs and commit to a repayment schedule to restore funds transferred from the Enterprise Funds to the general fund by overallocation of indirect costs. This money can be used to implement critical improvements identified in the Master Plan.

County: Requires further analysisAudit: Partially addressed

Response says

Has not determined a historical overallocation amount; reports July 21 approval of forgiveness of a $1.1 million General Fund loan to the Wastewater Fund.

Audit analysis

Does not provide an analysis completion/discussion timeframe or a repayment schedule for agreed historical costs. Loan forgiveness is a distinct reported action, not proof of repayment of the jury’s estimate.

Report page 20Response page 5

recommendation · R3

By October 1, 2026, consider adding a Certified Public Accountant to the Enterprise Fund Oversight Committee to assist the City Council and City Manager with fiscal compliance, analysis, and transparency.

County: Will be implementedAudit: Addressed

Response says

Agrees to seek CPA applicants in the next recruitment, including professional-organization outreach, after no qualified applicants in the prior extended recruitment.

Audit analysis

Describes a future recruitment step but does not guarantee appointment or give a fixed recruitment date.

Extracted commitments

Make a concerted effort to solicit certified public accountant applicants, including outreach to professional organizations; appointment is not guaranteed.

Responsible party
City of Sebastopol
Timing
During the next recruitment cycle; no fixed date supplied. · Conditional timing
Report page 20Response page 5