Humboldt County’s ongoing fiscal management nightmare has gotten so bad that the state is sending in a team to conduct an audit.
The word arrived Monday in the form of a letter from California State Controller Betty Yee. Addressed to Auditor-Controller Karen Paz Dominguez and County Administrative Officer Elishia Hayes, Yee’s letter says she has directed her Division of Audits to “conduct an investigation of the financial practices and reporting of the County of Humboldt … .”
The basis for the investigation is the county’s “failure” to file its Financial Transaction Report for fiscal year 2019-20, a document that was due more than 10 months ago.
Yee says the team she’s sending will review the county’s annual financial reporting process to “determine whether the county’s inability to submit timely annual financial reports is due to lack of internal controls and, if so, whether the county has adequate internal controls to detect and prevent financial errors and fraud.”
We reported last month that the State Controller’s Office planned to fine the county $5,000 and send staffers here to complete the county’s overdue financial transactions report, on the county’s dime. “That’s not anything anybody wants,” Fourth District Supervisor Virginia Bass said at the time.
Turns out that’s not true; someone does want that. The Auditor-Controller told the Outpost she’s excited about the state coming in to investigate.
“We’re thrilled about it,” Paz Dominguez told the Outpost on Thursday. “I’ve invited the State Controller’s Office to the county before when I’ve faced challenges with getting compliance, most recently with the Cost Plan. The State Controller has always been responsive.”
Later in the day Paz Dominguez submitted this statement via email: “The Auditor-Controller’s Office looks forward to an objective analysis of the County’s fiscal situation free from the politics which have unfortunately governed the discussion so far. We are confident that the Controller’s report will bear out what the Auditor-Controller’s Office has reported to the Board of Supervisors.”
Others in the county say this investigation is a bad sign, an indication that essential fiscal reporting duties aren’t being performed.
“This action is not typical,” county spokesperson Manny Machado said in an emailed statement. “The county in the past has regularly completed its financial reporting within the prescribed timelines. Our financial reporting is a critical component to our operations, [affecting] our ability to perform the single audit and ultimately our ability to draw down funds from the state and federal governments to provide local services.”
On Wednesday, Humboldt County Public Works Director Tom Mattson received his own letter from the State Controller’s Office informing him that they has not received the county’s 2020-21 Annual Road Report, which was due on Dec. 1. This delinquent report could prompt the state to withhold hundreds of thousands of dollars in funding.
The letter cites California Streets and Highways Code section 2155, which says, “No state money shall be allocated to or made available for expenditure by any county or city at any time when such county or city is delinquent in filing the [road] report … .”
Reached by phone Thursday, Mattson was frustrated. “Frankly, this is the thing I was most worried about,” he said. The county receives about $450,000 each month from the state’s Highway Users Tax Account (HUTA), and the letter suggests that next month’s check might be in jeopardy.
Mattson said the report hasn’t been submitted because of delayed postings from the Auditor-Controller’s Office.
Such finger-pointing has grown increasingly common as the county’s fiscal problems, which date back years, grow increasingly more severe. Last month the Humboldt County Board of Supervisors passed a vote of “no confidence” in Paz Dominguez by a vote of 3-2.
But Paz Dominguez has argued that her office has simply been working to comply with generally accepted accounting practices. She says other departments have often failed to submit accurate paperwork in the proper manner or to supply the required backup documentation. She has also complained that her office is woefully understaffed.
“The county side of the books … still require a lot of cleanup work,” she told the Outpost Thursday. “We try to catch errors up front as we process accounts payable but we can’t keep up with what departments are submitting in journal entries. Being a central service department within a decentralized organization with limited collaborative operations and no cohesive administration has led us to where we are today.”
Asked to address the delinquent Annual Road Report, Paz Dominguez said that’s not her fault either. She said the outstanding transactions — called “cost plan charges” — get submitted to her office by different departments, but the submissions she’s received needed correcting to be compliant with the law.
She said the outside accounting firm of Macias, Gini & O’Connell (MGO) has been working with these departments to “correct” the journals in question “so that they will be compliant with federal regulations that govern the charges.”
Mattson said whatever the cause, the state has never threatened to withhold HUTA funds before — not in his 23 years working for the county, anyway.
Perhaps the state’s investigation will shed some light on who’s really to blame for the county’s fiscal catastrophe. The first meeting with the State Controller’s Office will take place next week. If there’s one thing that everyone agrees on it’s this: Help is desperately needed.
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