Screenshots from the last Audit Committee meeting (clockwise from top left): Supervisor Virginia Bass, Auditor-Controller Karen Paz Dominguez, Supervisor Mike Wilson, Administrative Analyst Mychal Evenson, Treasurer-Tax Collector John Bartholomew and (now-former) County Administrative Officer Amy Nilsen.



Everyone is on edge. 

In recent conversations about county finances with officials, staff members and outside agencies, everyone chooses their words carefully, speaking with diplomacy to avoid inflaming an already volatile situation. 

The tense atmosphere was apparent during the most recent meeting of the Humboldt County Audit Committee, an oversight group that was formed specifically to address rampant dysfunction in the county’s fiscal management, which has devolved into a slow-motion catastrophe of overdue reports, disgruntled county contractors, internal investigations and cross-departmental power struggles.

As you’ll read below, one department head recently told county supervisors she’s never been more worried about the state of the county’s finances. Staffers tell the Outpost that dysfunction has so thoroughly bogged down the system that whole departments fear financial collapse.

From the outside, the drama often seems to center around Karen Paz Dominguez, the county’s firebrand auditor-controller who was elected in 2018 after publicly declaring that the office was so understaffed that it was incapable of ferreting out misstatements or potential fraud.

Since her election, Paz Dominguez has positioned herself as a reformer out to systematically modernize the county’s sloppy fiscal reporting by streamlining operations and closing loopholes to achieve compliance with state-mandated accounting standards. In conflicts with the County Administrative Office, county supervisors and other departments she has argued that her efforts have been frustrated by continued short-staffing, interference and a lack of cooperation.

Critics, meanwhile, accuse Paz Dominguez of mismanaging her resources, spending dollars to chase pennies and losing sight of the big picture. 

In one characteristic conflict about a year and a half ago, Treasurer-Tax Collector John Bartholomew wrote to Paz Dominguez saying the county was accumulating interest charges of nearly $270 per day while waiting for her department to establish a new fund.

‘We can’t be expected to resolve years of neglect at the drop of a hat when everything around us requires immediate or urgent attention.’

Paz Dominguez replied that rules can’t be broken, and some things take time. “We can’t be expected to resolve years of neglect at the drop of a hat when everything around us requires immediate or urgent attention.”

The conflict escalated with each accusing the other of being unprofessional.

“Frankly,” Paz Dominguez wrote at one point, “the years of mismanagement happened right in front of you and I’m the one tasked with cleaning it up so perhaps exhibiting some patience and grace would be more productive.”

Bartholomew countered, “[Y]ou throw wrenches into county operational processes so they no longer function, then don’t bother to provide another tool to allow that process to continue.” He urged her to use a scalpel rather than “taking a machete to anything you suddenly believe should be changed.”

The interpersonal conflicts have only escalated since then, with much of the focus on the apparent power struggle between Paz Dominguez and County Administrative Officer Amy Nilsen. (Several county employees who asked not to be quoted on the matter said Nilsen’s recent resignation after more than 20 years with the county can largely be attributed to this conflict.) But other department heads have clashed with Paz Dominguez as well. 

Late last year, after the county had launched an internal investigation into delayed payments, transfers and reconciliations of accounts, Paz Dominguez sought to retain an outside attorney who has a history of suing the county. Her refusal to be interviewed under any other circumstances effectively stymied the investigation, which was eventually abandoned.

Last month the Board of Supervisors voted 4-1 in closed session, with Fifth District Supervisor Steve Madrone dissenting, to authorize a new fact-finding investigation into five instances of “workplace misconduct and delayed payments by the Auditor-Controller.” Paz Dominguez told the Times-Standard she had no information about the matters.

So what’s really going on? Is the auditor-controller getting sabotaged by entrenched powers resistant to change? Is she in over her head and putting the county at risk? Or are the problems more diffuse and systemic?

In this story we examine some of the most recent fiascoes, including a pair of federal liens levied against the county and the struggles of a local homelessness services provider that owed more than half a million dollars. We also investigate internal county emails and documents that reveal growing discord and increasing alarm over the county’s finances.

Bills unpaid

On Monday morning, county supervisors received a desperate letter from the board of Arcata House Partnership, a nonprofit that works to address the needs of the local homeless population. 

The letter says the county owes the agency $507,394, nearly a third of its annual operating budget, and that delayed payments — some more than six months past due — are seriously jeopardizing its ability to serve the county.

‘It should come as no surprise that the County has defaulted on their contracts with many vendors and contractors … .’

“[B]oth of our lines of credit are maxed out, we cannot pay our utility bills AND our payroll this week [and] our accounts payable is in arrears,” the letter states. In the accompanying email, Arcata House Partnership Executive Director Darlene Spoor told the supervisors, “It should be no surprise that the County has defaulted on their contracts with many vendors and contractors having outstanding unpaid invoices months overdue.” 

Arcata House Partnership is a key member of Humboldt County’s Continuum of Care, the collaborative planning body that coordinates local homeless services and brings in millions of dollars in state and federal funding. Those services are typically contracted through the county Department of Health and Human Services (DHHS), which in turn submits invoices to the Auditor-Controller’s Office. At this point, Arcata House Partnership says it simply can’t afford to accept any more contracts through the county.

“This means the Continuum of Care is in danger of needing to return most of the $5.4 million that was allocated to Humboldt County for homeless services,” the letter explains. “If we do not receive our contracted reimbursement soon, this Board must consider the probability that we will default on our contracts, suspend services for which we are currently contracted, and lay off staff in an effort to maintain some part of the viability of what remains of Arcata House Partnership.”

When the Outpost spoke with Spoor last week she said DHHS Director Connie Beck and her staff have done their best to help resolve these issues, to no avail. She’s not entirely sure where the problem lies but said the invoices her organization submits keep getting rejected for minor discrepancies.

“We’ve submitted our invoices and they got rejected for literally two-cent adjustments because somebody rounded up or down,” Spoor said. Such minor variations are routine and not a reasonable justification for refusing payment, she said, and yet it has happened again and again. “A two-, five- [or] 20-cent adjustment and $90,000 invoices don’t get paid because of it,” she said. “We submitted nine invoices yesterday for the sixth or seventh time.”

Asked about this via email, Paz Dominguez said the holdup isn’t in her department. Her office’s records show that an Arcata House Partnership invoice from February was rejected due to an overtime-billing issue that has since been resolved and there have been no problems since.

“I haven’t heard from Darlene Spoor myself but I can assure you that my office does not have any pending invoices for [Arcata House Partnership] in our queue. We have issued payment for every invoice we have received,” she wrote.

The underlying issue may lie a level or two higher in the fiscal management process. County staffers say Paz Dominguez has also rejected numerous contracts between the county and outside organizations, repeatedly demanding that they be amended or rewritten over minute details that impact extraordinarily small amounts of money. Without a contract in place, invoices can’t be paid, so these revisions can cause bills to go unpaid for weeks and months at a time.

Paz Dominguez denied this, saying she has never asked for a contract to be rewritten. Rather, she offers contractors and county employees the option of either abiding by the terms of existing contracts or, if necessary, amending them.

Whatever the cause, Arcata House Partnership now has more than half a million dollars tied up in the county’s bureaucracy. Spoor said the organization may be unable to fulfill its contract obligations, forcing them to return funds used for such key homeless services as street outreach, referral services and their food pantry, which serves hundreds of local residents each week.

“I can’t tell you how sad I am,” Spoor said in a phone conversation last week. “I was angry for a long time. Now I’m really sad. I’m having to decide, ‘Do I pay my electric bill or do I pay staff this week?’”

Spoor said she knows Paz Dominguez came into office with a lot of issues that needed to be cleared up. “But clearing them up doesn’t mean stopping progress,” she said. “If I stop doing my work — work that we’re contracted to do — what is that? We have an obligation to provide the service, and we are. Now the county’s got an obligation to reimburse us.”

The Outpost reached out to DHHS to see if Director Beck could comment on conflicts with the Auditor-Controller’s Office. A spokesperson replied via email, “Due to ongoing investigations, Director Beck declines to comment at this time.”

However, in emails and other documents obtained by the Outpost, Beck’s concern is clear, as is her frustration with Paz Dominguez, specifically. 

In May, DHHS staff got into an email back-and-forth with the Auditor-Controller’s Office over a county expense claim that Paz Dominguez rejected on the grounds that the itemized amounts didn’t exactly match the total listed on the claim form. Mary Gentle-Martin, a fiscal services analyst with DHHS, said in an email to Paz Dominguez that the discrepancy — five dollars on a claim of more than $16 million — was the result of rounding individual figures. “It is typical to see a variance of up to $10,” Gentle-Martin wrote.

On the morning of May 19, Beck emailed Paz Dominguez requesting a Zoom meeting to resolve the issue. Paz Dominguez replied she was busy doing payroll but would be available after 4:30 p.m. However, at 4:14 p.m. she wrote back to Beck, saying, “Unfortunately, we’ve encountered an issue with today’s payroll and I need to resolve it before I do anything else. As you know, payroll is the top of all priorities.” She asked for a revised claim form with corrected dollar amounts.

“[T]here isn’t a corrected claim certification to send,” Gentle-Martin replied. “The $5 variance between the top and bottom numbers is explained.”

Paz Dominguez wasn’t appeased. “Is it customary for DHHS to submit claim forms that don’t balance?” she wrote back.

The dispute escalated until, on May 20, Beck sent a high-priority email again asking for a Zoom meeting. “I will move anything off my calendar this afternoon to do so,” Beck wrote.

Paz Dominguez replied that she’d spent some more time reviewing the claim and found other discrepancies: “[N]othing seems to tie to the summary sheet of the claim.” Nevertheless, she signed off on the claim, albeit begrudgingly. “At this point,” she wrote, “I’m signing under pressure, not because I can certify accuracy. … I’m not comfortable signing under these conditions again.”

In an emailed statement to the Outpost, Paz Dominguez said, “The $5 discrepancy referenced was just a minor tangential afterthought that I thought would be easy to correct.” The real issue, she said, concerned a broader discrepancy between submitted reference figures and the summary of financial activity.

Regardless, this exchange left Beck frustrated, and early last month, in preparation for the second meeting of the Humboldt County Audit Committee, she forwarded the email chain to Supervisors Virginia Bass, who chairs the committee, and Mike Wilson, who is also a member. Beck told the supervisors that such disputes over a few dollars here and there were wasting a lot of staff time and taxpayer money, and meanwhile the Auditor-Controller’s Office had yet to close the books on Fiscal Year 2019-20, creating a host of problems.

“The main reason why I asked that we not move forward with a new or improved payroll system is just that,” Beck wrote in her email to Bass and Wilson. “She [Paz Dominguez] will focus on that instead of closing the books. She does not have any ability to prioritize.”

DHHS staff recently compiled a spreadsheet describing more than 40 separate problems they’ve encountered with the Auditor-Controller’s Office since the beginning of April — problems including rejected invoices, policy changes, late payments, delayed financial reports and a chronic failure to respond to emails.

Asked about these issues, Paz Dominguez disputed the accounts laid out in the DHHS spreadsheet, saying they misrepresented the situations in question. 

As one example, she also forwarded emails from April regarding a situation similar to Arcata House Partnership’s, in which a vendor who works with DHHS complained of unpaid invoices and blamed the Auditor-Controller’s Office. Paz Dominguez was able to provide evidence to Beck that the invoices in question hadn’t been submitted to her office for payment until weeks, sometimes more than a month after DHHS staff received them, “leaving us only a working day or two to issue payment before the due date, and in some cases, we’re getting invoices after they’re already past due.”

Beck was apologetic. “I have seen in the past where we have stated that the payment is at the Auditors Office which has caused folks to blame your office,” she responded to Paz Dominguez. “That is unfortunate and uncalled for. We all need to take responsibility when it is due. I really appreciate you bringing this example to our attention.”

‘I have never in my career been so worried about the state of the county financial system.’

Nevertheless, Beck’s May 19 email to Bass and Wilson emphasized the seriousness of her concerns. “I have NEVER in my career been so worried about the state of the COUNTY financial system,” she wrote. She mentioned Arcata House Partnership’s situation specifically, noting that the City of Arcata had to start a loan account to cover the cost of services the agency is now providing. “We are going to start losing service providers and losing other funds that we could use for homeless and other services,” Beck warned.

For her part, Paz Dominguez was unapologetic about the level of precision she demands.

“An auditor’s job is to confirm accuracy of financial data, and that can be time-consuming and challenging when data may be labeled or filed incorrectly,” she wrote in an email to the Outpost.

Paz Dominguez declined to comment on the record about Beck’s pointed comments about her, personally. 

Tax liens

On September 25 of last year, Yolanda Kidd, a revenue officer with the Santa Rosa office of the Internal Revenue Service, sent a notice to the Auditor-Controller’s Office regarding delinquent tax returns. According to the notice, the county had failed to file its employer’s federal tax returns from the fall of 2019. Kidd’s message warned of interest charges and penalties for continued delays and urged the Auditor-Controller to contact her.

Six weeks later, on Nov. 5, Kidd sent a follow-up notice saying the returns still hadn’t been filed. Five months passed, and on April 6, Kidd sent the Auditor-Controller’s Office a Final Notice via certified mail. 

“Your federal tax is still unpaid,” it read. “We asked you to pay the tax, but we still haven’t received your payment. … Please send us a full payment today to prevent additional collection action.”

The county owed the IRS more than $142,000, according to the notice, and in a paragraph under the bold-face header “What we’re going to do” it warned, “We may file a Notice of Federal Tax Lien at any time to protect the government’s interest.”

The IRS did file a lien against the county on April 7 — a penalty assessment of  $141,674.75 for failure to pay taxes in a timely manner. Early last month the IRS filed a second federal tax lien against the county, this one for an unpaid balance of $29,839.37 for a total of more than $171,000. 

When the Outpost asked Paz Dominguez about the liens via email last week she said the matter has been fully resolved. The quarterly tax returns had been filed on time, she wrote, but some of the deposits “were recognized in the wrong quarters” and the IRS hadn’t updated its records. 

Paz Dominguez said that she first learned about the liens in late April or early May, though the IRS says they spoke with her staff about the matter months earlier. According to a May 11 email from Human Resources Director Linda Le to other county officials, IRS officer Yolanda Kidd recalls speaking with an Auditor-Controller employee in November, “and staff stated they had received the memos [regarding overdue tax returns] and forwarded them to Ms. Paz Dominguez who was working remotely,” Le’s email said. The Outpost was unable to reach Kidd for comment.

Asked why it took so long to resolve the matter, Paz Dominguez said that during the pandemic some physical mail failed to reach her and her employees, who were all working remotely. She added, “Compiling the documentation for two years’ worth of weekly tax deposits and submitting it in the requested format given our limited staffing, urgent tasks, and daily operations, was very laborious. There were also periods of miscommunication as other departments were also coordinating with the IRS on the matter.”


The county’s internal and external communication problems have been a recurring theme in its mounting fiscal fiascos. For example, Humboldt-Del Norte Film Commissioner Cassandra Hesseltine recently had trouble getting an answer as to why her invoices weren’t being paid. A bill she’d submitted in January had yet to be paid by April, so she reached out to the County Administrative Office. Assistant CAO Elishia Hayes replied via email that the Auditor-Controller’s Office had rejected it “again.” 

“The rejection gave no justification for the reject so we will need to reach out to the AC for additional information,” Hayes wrote.

Hesseltine had no idea what to do. “I am at a loss … ,” she wrote back. “I thought for sure I did everything that was in the contract and beyond. I am open to critique but I can’t keep guessing at this point.”

In follow-up emails, Economic Development Director Scott Adair explained to Hesseltine that the Auditor-Controller’s Office has gotten a lot more strict in its requirements for proof of expenses, but Hesseltine thought she’d accounted for all expenses as required.

Adair was sympathetic. “I know that the AC’s office has reported that they are feeling understaffed and overwhelmed,” he replied. “We’ll reach out to see what it is they require. They sent another rejection to your invoice today, but we are not sure why.”

In a similar instance, the Smart Business Resource Center recently got so fed up with jumping through hoops in its efforts to get paid that it bailed altogether, announcing in March its intention to terminate all contracts with the County of Humboldt. In emails obtained by the Outpost, Smart CEO Wendy Zanotelli bemoaned what seemed to her like moving goalposts.

“Since we have asked for more regular payments starting mid-last year, the A/C has requested increasing amounts of backup documentation. Each time we comply, she asks for more,” Zanotelli said in an email to Bass. “At this point, we are providing documentation above and beyond what we provide to our other workforce boards [across Northern California] and it still isn’t enough to secure payment timely.”

In other instances, organizations have had trouble getting any response at all. In May, for example, staff at the Redwood Region Economic Development Commission (RREDC) was trying to resolve a rent issue at the Prosperity Center building on E Street in Eureka. Suzanne Dockal, a CPA with RREDC, said in an email that she couldn’t tell Adair when rent had last been paid.

“I can’t answer that, as we cannot get anything from beyond November 2020 from the auditor controller offices,” she said, as quoted from an email to Adair on May 17. “I have been following up for weeks … and haven’t received any response… .”

Paz Dominguez has asked people to send emails to, an address that goes to her and others in her office, rather than to, which goes only to her.

On March 17, Humboldt County Treasurer-Tax Collector John Bartholomew sent an email to the latter address asking about an overdue check that should have been issued to the Humboldt Lodging Alliance. Two months later, the check still hadn’t been delivered, and HLA officials wrote to Paz Dominguez to complain.

“We have never had an issue with the County of Humboldt not transferring these funds to HLA and are confused as to why this situation exists,” the email said. “Your immediate attention into this with a payment would be greatly appreciated.”

“I see what happened,” Paz said in an explanatory email to Bartholomew. His original email had gotten buried in her non-preferred work email inbox, so it never got picked up by the accounts payable staff, she said.

However, according to emails obtained via a Public Records Act request, the check request had, in fact, been sent to her preferred email address — by Assistant Treasurer-Tax Collector Michale Hale on March 16, a day before Bartholomew’s email.

This afternoon, the Humboldt Lodging Alliance wrote to Paz Dominguez yet again, cc’ing all five county supervisors along with staff from the CAO’s office, to say the funds still haven’t been deposited.

Even California government offices have had communication troubles with the county. On February 26, the State Controller’s Office wrote to the Auditor-Controller to say they hadn’t received the county’s financial transactions report, which had been due the previous month. Fast-forward three months and the State Controller’s Office wrote again saying, “The attached delinquent letter was mailed February 26, 2021 and we still have not received the report or any correspondence.”

‘The function of our office’

In email correspondence with the Outpost, Paz Dominguez agreed to address each of these complaints in turn, and she defended her office’s strict attention to detail and demands for full accountability. 

“I continue to admire the diligence of A-C staff in ensuring contract compliance to protect public funds,” she said via email. “This is the function of our office. We take great pride in the level of care we utilize when reviewing transactions and authorizing payment of invoices so that State auditors can clearly see our work when they are reviewing.”

Regarding the Film Commission’s issues, she said, “It appears that delays in submitting invoices to our office as well as subsequent miscommunication about dollar amounts resulted in the impression that invoices were rejected without explanation. They were not.” 

The matter has since been resolved, and henceforth the Film Commission will deliver invoices to both the CAO’s Office and the Auditor-Controller’s Office, Paz Dominguez said.

As for relations with the Smart Business Resource Center, she said her office simply requested the documentation specifically required per the agency’s signed agreement with the county.

Regarding unanswered emails, Paz Dominguez said her office has been chronically short-staffed but has worked hard to prioritize requests and provide timely responses. 

“As soon as our remaining staff vacancies are filled and we are able to train them, there will be an increase in responses per hour and we’ll be able to clear out the backlog of inquiries,” she said. “We understand that any delay involving funds is stressful for all involved and sincerely appreciate how gracious and patient our customers have been.”

The Humboldt Lodging Alliance situation, she said, “was being discussed across three different inboxes in multiple email threads which quickly resulted in confusion and miscommunication.” In hopes of avoiding such confusion in the future, her office has asked all departments to use her office’s centralized email addresses, and the asked the county’s IT department to set up a “task-based ticket system” to keep all requests in a central location.

The Bottom Line

The last Audit Committee meeting had the charged atmosphere of a congressional hearing. The agenda was comprised of a list of questions for Paz Dominguez: When will the books be closed for 2019-20? What’s the status of the Corrective Action Plan for the 2018-19 audit findings? What about the Cost Allocation Plans for 2020-21 and 2021-22?

Wilson asked her to consider prioritizing. 

“As you know, there is some nervousness among departments and external entities about the timing of getting stuff done,” he said.

Bartholomew said his top concern was getting the books closed for the previous fiscal year. 

Bass wanted to know the status of the IRS liens.

Paz Dominguez was composed and methodical in her replies, if occasionally defensive. When Mychal Evenson, an administrative analyst with the county and a member of the Audit Committee, asked how a certain task had been done historically, Paz Dominguez bristled.

‘Historical is irrelevant to the now. We don’t do “That’s how we’ve always done it.”’

“Historical is irrelevant to the now,” she said. “We don’t do ‘That’s how we’ve always done it.’”

When Bass asked about spending dollars to chase pennies, Paz Dominguez replied, “It’s not a matter of chasing pennies. It’s a matter of: Are we doing things correctly?”

But for all the fraught exchanges, Paz Dominguez finished with a smile on her face.

“I want to say, this has been a delight,” she sad as the Zoom meeting was wrapping up. “I am very grateful to this committee for meeting today and allowing me the opportunity to share this information. I love talking about this stuff, and I’m so hopeful, and I see us only getting better from here as a county.”

Few others in the county seem to share her optimism. Reached by phone last week, Bartholomew said that while he believes the county’s finances are being handled competently, the chronic delays have serious ramifications. He also suggested that some of the recent attention to detail may be excessive.

“The county is audited every single year, and there have never been any fraudulent activities [uncovered] that I’m aware of since I’ve been with the county,” which was in 2008, he said. The county has always been able to comply with state regulations, so he has trouble understanding why fiscal reporting can’t be done on time now.

A 2018 report on the management and operations of the Auditor-Controller’s Office, conducted by the firm CPS HR Consulting, came to a similar conclusion. “The primary finding of this review is that the current imposition of a 100% complete and correct standard on the submission of invoice records for payment, without consideration of the value or impact of the record, is inappropriate, and results in unnecessary negative consequences for the County,” the report said.

But Bartholomew said departments just need to coordinate better.

“Communication is the thing I tend to harp on,” he said. “We have to have open communication between all departments … and some [exchanges] have been frustratingly slow. Frustration builds up when people outside [the Auditor-Controller’s] Office have to get work done and they can’t get answers. I think there’s a snowball effect … . The bottom line is we need to make operations function in a much more smooth fashion than they have been lately.”

Paz Dominguez agreed with that last part. “What matters most to me and my office at this moment is improving communication and cooperation between different departments in the county so we can work together to deliver the best services to county residents,” she said via email. “The question is how do we get there. We start by fully staffing departments, developing step-by-step procedures manuals and training staff to use them, working to improve communications and by digging in to resolve any problems that may arise.”

Problems have arisen in bunches lately. Time will tell whether the county is able to dig in and resolve them.