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For months now county officials have been warning that delayed financial transactions, including chronically late payments to vendors, could have “massive implications” for county government, including devastating losses in funding and key services.

A rather dry-sounding agenda item from Tuesday’s Board of Supervisors meeting suggests that this dire prophecy may now be coming true, even as the reasons for the county’s ongoing fiscal snafus remain a matter of bitter internal debate.

Speaking via Zoom, Scott Adair, the county’s economic development director, described the agenda item as “an opportunity” to enhance and improve the county’s workforce development efforts. These efforts, which are overseen by the board-appointed Workforce Development Board, involve a variety of partner agencies offering job training and education, employer hiring incentives, recruiting, interviewing and more.

Arguably, no partner agency is more vital to the county’s current workforce development efforts than the Smart Business Resource Center, a 42-year-old nonprofit based in Redding. Smart currently serves the counties of Del Norte, Humboldt, Shasta, Siskiyou and Trinity.

Eventually, Adair got around to mentioning the reason for Humboldt County’s sudden “opportunity” to reevaluate its business development strategy: Smart is about ready to quit us.

On March 15, Smart CEO Wendy Zanotelli sent a letter to county officials saying, “After careful consideration, the Smart Business Resource Center regrets to inform you of our intent to terminate all contracts with County of Humboldt.”

Why? The letter cited ongoing issues, including chronically late contracts and payments. 

“Despite multiple communications and meetings between Smart and Humboldt County administration over the past two years … the issues have not been rectified and, in some cases, continue to escalate,” the letter states. Smart plans to provide services to Humboldt County through June 30.

Reached by phone on Wednesday, Zanotelli said her agency really doesn’t want to stop serving Humboldt, but the ongoing financial hardship on her agency has proved too much to bear.

“For over a year we’ve been trying to get timely payment,” she said. Yet those payments have been chronically late.

Most of Smart’s funding comes via the Workforce Innovation and Opportunity Act (WIOA), a federal law that funnels grants to state and local jurisdictions for economic development programs. Since Humboldt County partners with Smart to provide those services, the WIOA dollars must go through the county before reaching the nonprofit, and Zanotelli said that despite sending timely and thorough invoices, the county has been late paying its bill time after time.

“We were managing well until the payments [from Humboldt County] got to be 90 days late and we were carrying $400,000 in arrears,” she said. “It finally got down to the point where we needed weekly payments.”

In a December amendment to the county’s contract with Smart, signed by County Administrative Officer Amy Nilsen, the county agreed to start making weekly advance payments of more than $7,500, with a plan to settle any billing discrepancies at the end of the year.

But a tense Board of Supervisors meeting the following month brought out the bitter infighting that’s been a recurring feature of county fiscal management over the last two or three years. Auditor-Controller Karen Paz Dominguez, who has frequently been the focal point of these disputes, objected to making these weekly payments, saying the invoices she’d been provided lacked sufficient detail.

“I’m being asked to issue a payment for services that are not corroborated with evidence,” she said to the board. Later in the discussion she added, “I can’t support the idea of weekly advances without weekly documentation, especially because I answer to [external] auditors.”

She also questioned whether Nilsen was even authorized to sign a contract amendment that had yet to be approved by the board.

First District Supervisor Rex Bohn, whose frustration with Paz Dominguez has frequently boiled over, asked why other counties served by Smart aren’t having problems sending payments in on time.

Fifth District Supervisor Steve Madrone stood up for Paz Dominguez, saying Smart simply needs to provide more information in their invoices. 

“The detail needs to be there,” he said. “Details matter. This goes to the core of the conflict between parts of the county and Auditor-Controller’s Office.”

But Zanotelli told the Outpost that’s not the problem — at least not from her end.

“At no time in any of this have we ever been asked for additional documentation,” she said.

So where are things going wrong? It depends on whom you ask. 

“I don’t want to throw anyone under the bus because we could do with less of that around here,” Paz Dominguez told the Outpost on Wednesday. But she said her office is merely “the middleman” between vendors and the various county departments. In this case, she said, “Invoices that the vendor says they’ve been sending weren’t finding their way to us.”

She noted that there has been a lot of staff turnover in the Economic Development Division, causing frequent miscommunication and, in some cases, a lack of proper follow-through and documentation.

Paz Dominguez said she didn’t hear anything about delayed payments to Smart until last fall, “and our records show that when an invoice gets submitted to us in a complete format, we issue payment.” 

She suggested that the county government’s sheer size and diffuse structure can cause communication problems. “This is a decentralized organization,” she said. “We get a lot of emails [from vendors] saying, ‘Hey, we’re waiting for payment,’ and we have to say, ‘Sorry, I don’t have a request to pay you.’ A lot of miscommunication is the cause of a lot of this grief all over the place.”

Adair, reached briefly between meetings Wednesday morning, acknowledged that there are a lot of steps in the county’s billing and payment processes, with vendor invoices going first to a program coordinator, then to the administration for approval, then the purchasing department, then the Auditor-Controller’s Office … . There are probably 10 people involved before a check goes out in the mail, he said.

Fourth District Supervisor Virginia Bass, who has arranged meetings between county staffers and Smart employees in hopes of resolving the issues, remained diplomatically neutral in her assessment.

“I think we have to look at it as a systems failure and work to figure out where it went wrong without pointing any fingers,” she told the Outpost via phone from the parking lot of Open Door’s North Country Clinic, where she’d just received her second dose of the COVID vaccine.

Paz Dominguez, for her part, said she’s now confident that Smart will be getting its weekly payments on time, largely because her team has spent time training Economic Development personnel the proper steps to take when forwarding invoices. 

An email sent to Adair Thursday morning seeking comment on Paz Dominguez’s take was not returned by the time of publication. But regardless of whether matters get smoothed over with Smart, the county will proceed with reevaluating its workforce development strategies.

During his presentation Tuesday, Adair told the board that while the county has historically been focused on programs funded through the Workforce Innovation and Opportunity Act, there are other sources of grant money for those purposes, including the U.S. Department of Agriculture and the Community Development Block Grant.

He also noted that of the 15 designated labor regions in the state, Humboldt County is one of just three operating as a single-county standalone region. (The other two, Orange County and Ventura County, have much larger populations.) Adair suggested that the county should explore the option of joining with another region, such as the Northern Rural Training and Employment Consortium (NoRTEC) or the Workforce Alliance of the North Bay (WANB).

Adair told the Outpost there would be advantages and disadvantages to abandoning our autonomy in favor of joining a regional workforce consortium.

”There certainly is a compelling business case as to why the majority of counties thought it’s better to merge with other regions, because you’re able to have greater command over the leverage of resources,” he said.” It’s similar to if a group of merchants decide to work together to buy a product they need. You can get better pricing — or sometimes better service — as an alliance.”

Not everyone agrees. At Tuesday’s meeting, Kerry Venegas, the executive director of Changing Tides Family Services and a member of the county’s Workforce Development Board, called in with a dissenting opinion. 

“I find it critically important that we retain local control,” Venegas said. “Keep those dollars flowing to us.”

County staff plans to explore a variety of options for the structure of its workforce development apparatus, and the county will be issuing a request for proposals from other agencies that could potentially take the place of Smart by offering services funded through the Workforce Innovation and Opportunity Act.

Adair — or potentially someone else from the county’s Economic Development Division — is slated to come back before the board on May 24 to report on staff’s findings.