As you can calculate from the timestamp on that screenshot above, it has been more than 20 months since Karen Paz Dominguez, then the county’s assistant auditor-controller, stood before the Board of Supervisors and sounded the alarm over a “desperate situation” in her department.
She went over the head of her then-boss, retired Auditor-Controller Joe Mellett, to say the office was “severely understaffed,” a situation that left the county vulnerable to “fraudulent financial activity.”
Today, the Humboldt County Civil Grand Jury released its fifth and final report for the year, which concerns the Auditor-Controller’s Office. Among the findings: The office is “severely understaffed,” and there is “a high risk of fraud in a number of County departments due to their poor cash handling policies and procedures, improper accounting, and lack of accountability.”
[Note: The county sent a response to the Grand Jury report, which can be found at the end of this post.]
This isn’t the first time that Paz Dominguez’s assessment has been validated. In response to her public warnings — and a subsequent Outpost story — the county hired a series of three independent consultants to further diagnose the problems with the county’s money management practices. They largely confirmed Paz Dominguez’s claims while also noting that the county is often out of compliance with standard accounting practices, and the inexperienced staff hasn’t had enough training.
Paz Dominguez was elected auditor-controller last year, and the Civil Grand Jury found that she has made a number of improvements. However, serious problems persist. Among them: bureaucratic obstinacy, inadequate training, and poor inter-department communication. Oh, and the Auditor-Controller’s Office remains understaffed.
“During our investigation we found there continues to be a lack of cooperation among the various departments,” the report says. “This is due to serious understaffing in the Auditor-Controller office, as well as a lack of institutional knowledge in the Auditor-Controller office, the County Administrative Office, and in other departments.”
At certain points in the report the author(s) sound downright flabbergasted that things have been mismanaged for so long. The tone of gobsmacked exasperation rings loudest after the report notes that the county’s “chart of accounts” needs to be more in line with standards from the State Controller’s Office.
“Not only was this a recommendation from the three consultants in 2018, it has been a finding with the same recommendation, from various consultants, for the last 10 years,” the report fumes. “Humboldt County had been putting itself at risk of a State audit over this particular issue.”
Elsewhere, discussing the county’s excessive number of “governmental trust funds,” the finger-wagging continues:
The “way it’s always been done” is a hard habit to break, even if that habit has not been correct or legal in accordance with State laws and guidelines. … The fact remains that the longer it takes departments to reconcile and reclassify these trust funds, the longer the County’s budget is inaccurate. This increases the risk of a possible State audit and being classified as a high-risk county. A high-risk designation would place Humboldt County at a disadvantage when applying for State grants and loans.
In preparing the report, jurors interviewed county officials and staff. “Several interviewees expressed concern that the risk for fraud and theft is significant for the County,” the report notes.
With a hint of inter-office gossip the report notes that Mellett and John Bartholomew, the county’s treasurer-tax collector, had a “difficult relationship.” Which may be why the two departments’ books aren’t being reconciled at the end of each month, as required by government code.
“This also leaves room for fraud to occur,” the report says.
As did the Board of Supervisors’ decision last year to transfer payroll duties from the Auditor-Controller’s Office to Human Resources.
Ultimately the report makes a total of 16 findings and 16 recommendations. Among the latter:
- The Board of Supervisors should ensure that the Auditor-Controller’s Office is fully funded by January 15, 2020.
- The Board should have the Auditor-Controller’s Office audit the Human Resources Payroll Office. (Last year Paz Dominguez told the Times-Standard that she’d been prevented from doing exactly that.)
- The Board should review its decision to move payroll from the Auditor-Controller to HR.
- The county should hire an accountant in the County Administrative Office to ensure compliance with the state’s basic accounting principles.
- The county should hire some consultants who specialize in organizational communication and team building and deploy them on the Auditor-Controller’s Office, County Administrative Office, Human Resources Office, Information Technology Office, and Department of Health and Human Services.
Paz Dominguez was pleased with the report’s findings.
“I think the report demonstrates due diligence on the part of the grand jury and I am very grateful for their time investment,” she said. Some areas need updating or clarification, she added, “but overall I think it’s a fantastic report.”
The report requests official responses from five county departments, plus the Board of Supervisors. Paz Dominguez said she was working on her responses in the office today.
Here’s the press release that accompanied circulation of the report this morning:
In 2017 public allegations arose that the Auditor-Controller’s staff was not functioning in a manner that could provide for the responsible management of funds and accounting needs of Humboldt County. As a result of these allegations, the Board of Supervisors hired independent consultants to conduct an audit and review of the management of the Auditor-Controller’s office.
The Humboldt County Civil Grand Jury reviewed the consultants’ reports and the findings and recommendations they contained. We then investigated the steps Humboldt County government has taken to address the recommendations in the independent consultants’ reports.
We determined there are many areas where recommendations in the audits have not been fully implemented, for various reasons. For example, the Civil Grand Jury found the Auditor-Controller’s Office has encountered a lack of cooperation from county staff in its efforts to carry out its legal responsibilities.
We learned proper training is lacking in many county departments regarding the government accounting requirements related to the responsibilities of their offices. An even greater concern is the opportunity for fraud in a number of county departments due to their poor cash handling policies and procedures, improper accounting, and lack of accountability.
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UPDATE, 5:30 p.m.:
Humboldt County Deputy County Administrative Officer Sean Quincey sent the following statement via email:
We thank the Grand Jury for its work. The county takes very seriously its responsibility to safeguard public funds. Despite numerous serious allegations that have been lobbed at the county regarding its finances over the last year and a half, and numerous independent investigations by several different firms into those claims, we are glad to be able to say that there have been no reported cases of fraud or misuse of public funds.
For several months now the entire county has been working closely with several professional consultants who specialize in leadership and accounting on many of the process-related practices detailed in today’s Grand Jury report. We believe many of these recommended steps are positive and will provide increased transparency. However, it is important that all departments work well with each other if we are to achieve real results.
In an organization that is made up of more than 2,200 employees who provide services to 130,000-plus residents, we need to be careful that the organization-wide changes we make do not have any unintended consequences. These things need to be done with care, collaboration, and consistency in order to provide for continued operations for both the organization and the clients whom we serve. The county is committed to problem-solving and working together to achieve these goals.
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- What’s Wrong at the Auditor-Controller’s Office? Understaffing? A Vendetta? Or Is It the Man in Charge?
- Firebrand Assistant Auditor-Controller Karen Paz Dominguez Files Candidate Papers for Head Position
- Embattled Auditor-Controller Joe Mellett Resigns Nine Months Before His Term Ends
- A Grenade Just Got Lobbed Into the Humboldt County Auditor-Controller Election (Metaphorically)
- Lack of Experience and Insufficient Training Are What’s Wrong at Auditor-Controller’s Office, Outside Analyst Finds