Auditor-Controller Karen Paz Dominguez. | File image.

It has been more than six months since the State Controller’s Office notified Auditor-Controller Karen Paz Dominguez and County Administrative Officer Elishia Hayes that the agency would conduct an investigation into the county’s financial practices and reporting due to its failure to file financial reports on time.

This morning, Paz Dominguez issued a press release saying representatives from the State Controller’s Office met with county officials, including herself, on Wednesday to discuss the results of the investigation and communicate their findings with a draft report.

“It is very disappointing that the SCO chose to wait until after the election to release the report because even in its multiply-revised form the report and the information it provides would have been very useful to voters in their decision,” Paz Dominguez says in the release (published in full below).

The Outpost has been checking in with the State Controller’s Office periodically since the investigation team was in town. On April 28, Press Secretary Jennifer Hanson said via email that the audit was still in progress, and she offered an explanation as to why the process can take so long:

It is common for audit teams to request additional information, documentation, or clarifications while continuing to evaluate and analyze the audit results after the on-site fieldwork is conducted.

The audit team independently finalizes the audit results, findings, and recommendations, which are shared with the auditee in an exit conference. Next, a confidential draft audit report is issued to the audited entity for their review and response, and provides the opportunity to submit additional documentation for consideration.

The audit team reviews the response and any additional documentation provided by the auditee before finalizing the audit report. The final report includes a copy of the auditee’s response and the audit team’s comments to the response, as appropriate.

Four days after that explanation, the state filed a lawsuit against Paz Dominguez and the county, saying Paz Dominguez failed to file the county’s adopted budgets on time for two consecutive fiscal years — 2020/2021 and 2021/2022 — and failed to file the county’s Financial Transaction Reports for fiscal years 2019/2020 and 2020/2021 “in the time, form, and manner prescribed by the State Controller.”

Last Friday we checked in with Hanson again, asking for an update on the status of the State Controller’s Office’s report. She said the agency was nearing completion and anticipates that the final report will be issued in July.

Here’s the press release from the Auditor-Controller’s Office:

On Wednesday, June 15, 2022, the Office of the Auditor-Controller attended an exit conference with the State Controller’s Office and the Humboldt County Administrative Office. In attendance were Auditor-Controller Karen Paz Domínguez, the Acting Assistant Auditor-Controller Jim Hussey, the County Administrative Officer Elishia Hayes, the Assistant County Administrative Officer Tabatha Miller, Deputy County Administrative Officer Sean Quincey, and five representatives from the State Controller’s Office (bureau chief, audit manager, audit lead, audit staff). 

Discussed at the meeting were the results of the SCO’s month-long investigation into the County’s internal controls and causes of untimely filing of the 19/20 Financial Transactions Report (FTR). The month-long investigation began in December 2021, covered the 19/20 and 20/21 fiscal years, and ended in early January 2022. Today, six months after the SCO’s completion of field work, the SCO officially communicated their findings with the County in draft report form. The County now has 10 days to respond. Once the responses are delivered to the SCO, they will need additional time to publish their final report which will be made available to the public. 

The Office of the Auditor-Controller became aware of the potential findings of the report in March 2022 and the findings reported today did not differ from the potential findings communicated in March 2022. 

During the exit conference, SCO representatives were asked why their draft report was held up for the past several months. While no clear and definitive response was provided to the County, the SCO referenced “things at the County”, the SCO’s “audit backlog”, and “the review up the chain” as causes for their delay in issuing their investigation report. 

The County has been reminded that the SCO’s draft report is confidential and is not to be distributed. This update is provided because many Humboldt County residents and media reporters have expressed great interest in the SCO’s findings. 

For reasons which have not been explained, the State Controller, Betty Yee, directed the Attorney General to file a lawsuit against the County of Humboldt and Auditor-Controller Karen Paz Domínguez for the untimely filing of the 19/20 and 20/21 FTR on May 2, 2022, a month and a half before communicating the SCO’s findings about why the County was unable to timely file the 19/20 and 20/21 FTR. 

It is very disappointing that the SCO chose to wait until after the election to release the report because even in its multiply-revised form the report and the information it provides would have been very useful to voters in their decision. The A-C office will honor the SCO request for confidentiality until the final report is issued, and will issue a further public comment at that time.