Public Hearings 9.
LAFCO
- Meeting Date:
- 06/26/2025
Information
SUBJECT
Consider approval of Resolution 2025-06 of intent to initiate dissolution of the Capay, Cottonwood, Knights Landing, and Mary’s Cemetery Districts per Government Code Section 56375.1, if timely audits or minimum financial requirements are not met within 12 months
RECOMMENDED ACTION
1. Open the Public Hearing to receive staff presentation and public comment on the resolution.
2. Close the Public Hearing and consider the information presented in the staff report and during the Public Hearing.
3. Approve Resolution 2025-06, stating intent to initiate the dissolution of the Capay, Cottonwood, Knights Landing, and Mary’s Cemetery Districts if timely audits or minimum financial requirements are not met within 12 months.
2. Close the Public Hearing and consider the information presented in the staff report and during the Public Hearing.
3. Approve Resolution 2025-06, stating intent to initiate the dissolution of the Capay, Cottonwood, Knights Landing, and Mary’s Cemetery Districts if timely audits or minimum financial requirements are not met within 12 months.
REASONS FOR RECOMMENDED ACTION
Government Code Section 56375.1 allows the dissolution of a special district if it fails to remedy specific deficiencies, including failure to provide timely audits, among other items. As discussed at the May 22, 2025, meeting, the four rural cemetery districts have all failed to meet their audit requirements and the Commission provided staff direction to return with this remediation process. The process in the code is relatively new and provides LAFCo additional tools to help compel compliance with basic district deficiencies.
LAFCo staff will continue to work with the districts to help them achieve compliance, but this action will put the districts on notice that more serious consequences may ensue if failures continue after 12 months. There will be a subsequent public hearing after June 30, 2026, where the commission will consider actions taken by the districts to remedy audit and financial requirement deficiencies and determine next steps accordingly. Next steps might include no action, district dissolution or reorganization, or contracting with another district for management.
LAFCo staff will continue to work with the districts to help them achieve compliance, but this action will put the districts on notice that more serious consequences may ensue if failures continue after 12 months. There will be a subsequent public hearing after June 30, 2026, where the commission will consider actions taken by the districts to remedy audit and financial requirement deficiencies and determine next steps accordingly. Next steps might include no action, district dissolution or reorganization, or contracting with another district for management.
BACKGROUND
There are six public cemetery districts in Yolo County that are independent special districts and cover most of Yolo County. These districts are Capay, Cottonwood, Davis, Knights Landing, Mary's, and Winters. Although the Davis and Winters cemetery districts are operating well, there are numerous concerns about the four rural districts (Capay, Cottonwood, Knights Landing, and Mary’s) as discussed in the 2017 and 2025 Cemetery Services Municipal Service Reviews (MSRs). Of chief concern is the failure of the four rural districts to meet auditing requirements. The table below shows completed audits in dark green, audits in progress in light green, compilations in yellow, and agreed-upon procedures (AUP) engagements in pink. Compilations and AUPs may be approved as an alternative to an audit, but those below did not receive approval or meet special requirements.
Auditing Deficiencies
California Government Code Section 26909 deals with the auditing requirements for special districts. The standard requirement is that a district conduct an audit every year, though the law allows the Yolo County Board of Supervisors (BOS) to replace that requirement with audits covering a two-year or other specific interval of no more than five years. Districts which have a revenue of less than $150,000, which currently includes all the rural districts, may either: 1) receive approval to replace the annual audit with an annual AUP or Financial Review or 2) receive approval to conduct no more than five annual financial compilations, after which an annual audit is required (although amendments going into effect Jan 1, 2027, will only allow an annual Financial Review, and no AUP or compilations).
Staff was able to confirm that Knights Landing Cemetery District was conducting two-year audits up until 2019, but no evidence was found that an audit had been completed in the past five years.
Cottonwood Cemetery District completed an AUP for a five-year period from 2014 to 2018. There is no record of the Yolo County BOS approving an alternative CPA review, however, and a five-year cycle for AUPs is not an alternative that is permitted by state code.
Mary’s CD completed three annual compilations in 2017, 2018, and 2019. Again, there is no record of BOS approval for the compilations as a review instrument. The County Department of Financial Services only shows a record of approval for a five-year audit cycle.
There is a record of Capay Cemetery District being approved for a five-year audit cycle but no evidence that Capay has ever conducted an audit in the last ten years.
Per Government Code Section 56375.1(a)(1)(E), failure to perform timely audits for three years or failure to meet financial requirements over a five-year period is an acceptable condition for a commission to initiate the process of district dissolution.
Dissolution Process
If a cemetery district fails to remediate its audit deficiency within the year granted, Government Code Section 57093 increases the protest threshold for the dissolution to 25% of landowners or voters rather than the typical 10% protest threshold required in Section 57094 for proposals initiated by the Commission.
If a dissolution occurs, per Section 57451, the county would be the successor of the dissolved district unless terms and conditions direct the assets to another district as a successor (LAFCo staff would seek another district as a successor). Per Health and Safety Code Sec 9007, cemetery district territory does not have to be contiguous. That means that smaller struggling districts could potentially be dissolved into either of the larger urban districts if that was desired by the Commission.
Agency/Public Outreach
Staff spoke with each of the four rural districts after the May 22nd Commission meeting to let the districts know about the potential initiation of dissolution and to offer support. Davis Cemetery District also provided auditing advice and a list of potential auditors to contact.
A public hearing notice was published in the Davis Enterprise on June 4, 2025. No public comment has been received. Staff has worked with LAFCo Counsel and the cemetery districts to clarify remedies to the auditing deficiency.
Auditing Deficiencies
California Government Code Section 26909 deals with the auditing requirements for special districts. The standard requirement is that a district conduct an audit every year, though the law allows the Yolo County Board of Supervisors (BOS) to replace that requirement with audits covering a two-year or other specific interval of no more than five years. Districts which have a revenue of less than $150,000, which currently includes all the rural districts, may either: 1) receive approval to replace the annual audit with an annual AUP or Financial Review or 2) receive approval to conduct no more than five annual financial compilations, after which an annual audit is required (although amendments going into effect Jan 1, 2027, will only allow an annual Financial Review, and no AUP or compilations).
Staff was able to confirm that Knights Landing Cemetery District was conducting two-year audits up until 2019, but no evidence was found that an audit had been completed in the past five years.
Cottonwood Cemetery District completed an AUP for a five-year period from 2014 to 2018. There is no record of the Yolo County BOS approving an alternative CPA review, however, and a five-year cycle for AUPs is not an alternative that is permitted by state code.
Mary’s CD completed three annual compilations in 2017, 2018, and 2019. Again, there is no record of BOS approval for the compilations as a review instrument. The County Department of Financial Services only shows a record of approval for a five-year audit cycle.
There is a record of Capay Cemetery District being approved for a five-year audit cycle but no evidence that Capay has ever conducted an audit in the last ten years.
Per Government Code Section 56375.1(a)(1)(E), failure to perform timely audits for three years or failure to meet financial requirements over a five-year period is an acceptable condition for a commission to initiate the process of district dissolution.
Dissolution Process
If a cemetery district fails to remediate its audit deficiency within the year granted, Government Code Section 57093 increases the protest threshold for the dissolution to 25% of landowners or voters rather than the typical 10% protest threshold required in Section 57094 for proposals initiated by the Commission.
If a dissolution occurs, per Section 57451, the county would be the successor of the dissolved district unless terms and conditions direct the assets to another district as a successor (LAFCo staff would seek another district as a successor). Per Health and Safety Code Sec 9007, cemetery district territory does not have to be contiguous. That means that smaller struggling districts could potentially be dissolved into either of the larger urban districts if that was desired by the Commission.
Agency/Public Outreach
Staff spoke with each of the four rural districts after the May 22nd Commission meeting to let the districts know about the potential initiation of dissolution and to offer support. Davis Cemetery District also provided auditing advice and a list of potential auditors to contact.
A public hearing notice was published in the Davis Enterprise on June 4, 2025. No public comment has been received. Staff has worked with LAFCo Counsel and the cemetery districts to clarify remedies to the auditing deficiency.
Attachments
Form Review
| Inbox | Reviewed By | Date |
|---|---|---|
| Christine Crawford | Christine Crawford | 06/16/2025 12:04 PM |
- Form Started By:
- JD Trebec
- Started On:
- 06/02/2025 09:41 AM
- Final Approval Date:
- 06/17/2025