SECOND UPDATE, Friday, 10:45 a.m.:

There has been some speculation that the Civil Grand Jury report published yesterday was leaked early by county employees aligned against Karen Paz Dominguez and that this was done in violation of the Grand Jury’s planned release schedule.

It’s true that, historically, Civil Grand Jury reports get emailed to media outlets whereas yesterday’s report was uploaded to a Grand Jury page on the county website before any official notification went out. But the email below, forwarded in response to an Outpost inquiry, shows that the current Civil Grand Jury foreperson, Jim Glover, asked the county’s IT department to upload the report early Thursday morning.

We were also provided with an email showing that Glover was not expecting the report to be uploaded as soon as it was. He told Paz Dominguez in an email Wednesday that the report would be made available to the media at noon on Friday, June 3. In a follow-up email to Paz Dominguez he said the county’s webmaster “usually takes several days to post a report.” He added, “I regret it was done speedily this time and conflicted with your instructions” not to speak publicly about the report until it was made public.

Commenters here on the Outpost have also pointed out that a previous Civil Grand Jury announced a policy concerning the release of Grand Jury reports in election season. To quote from the 2018 press release:

Beginning this year, the Court implemented a new policy regarding the release of Grand Jury reports during June election years.  The policy allows the release of reports until the second Monday in February; reports completed subsequent to that date must be released after the June election.

We reached out to Glover this morning for an explanation. He responded via email, saying he intends to issue a press release later today that will “better explain the hows and whys of our process.”


UPDATE, 7:30 p.m.:

Civil Grand Jury foreperson Jim Glover released the following statement addressing the timing and content of the report released earlier today:

In one of the most exhaustive investigative reports seen by a Grand Jury in recent years, the Humboldt County Civil Grand Jury has just released its report related to the ongoing struggle of the County of Humboldt and its embattled Auditor-Controller.

This report follows dozens of hours of interviews and inquiries into the matter. The report is a lengthy, detailed, but serious attempt to balance findings and recommendations among the many individuals involved.

Due to the complexity of this report, the time required to complete the investigation was longer than customary. It is the practice of any Grand Jury for reports to be released as soon as they are completed and authorized by the court, thus today’s release.


Humboldt County Auditor-Controller Karen Paz Dominguez. | Screenshot from a March Board of Supervisors meeting.


The latest report from the Humboldt County Civil Grand Jury, which was posted to a Grand Jury page of the county website just a few short days before Election Day, takes a deep dive into the county’s well-documented financial mismanagement woes and emerges with a handful of culprits, though none take as much heat as embattled Auditor-Controller Karen Paz Dominguez.

“Significant deficiencies in the performance of the Auditor-Controller are identified, including the failure to meet the legally required deadlines for filing financial reports,” the report says in its opening paragraph. It goes on to note that these late reports have caused Humboldt County to permanently lose more than $2.3 million in funds and placed another $9.7 million-plus at “significant risk.”

Hundreds of thousands of dollars have been siphoned off by late fees, penalties and lost interest, and the Board of Supervisors has agreed to shell out as much as $971,000 to consultants for help in cleaning up the mess, an amount the report calls “extraordinary.”

The scathing report is titled “Distrust, Disagreements, Dysfunction” and carries some rather unfortunate word algebra for a sub-headline: “Non-Communication Minus Cooperation Divided by Variable Policies and Multiplied by Missing Reports Equals Financial Chaos.”

That’s awfully wordy, but it does encapsulate the gist of the report, which identifies structural impediments, outdated procedures, poor inter-departmental communication, insufficient oversight from the Board of Supervisors and the aforementioned deficiencies of Paz Dominguez as major problems threatening not only the county’s own solvency but also that of outside special districts, including local schools and nonprofits.

There’s also a bit of dark innuendo contained within the report’s preface. It notes that the Civil Grand Jury can conduct formal investigations resulting in reports like this one, but it can also make less formal inquiries into “misconduct by a public officer.” 

This Grand Jury did exactly that, conducting “an informal inquiry into allegations of willful misconduct by the Auditor-Controller.” But the investigative body didn’t receive “sufficient information” to justify a full investigation until near the end of its current term. “The Grand Jury will continue to inquire about allegations of willful misconduct by the Auditor-Controller and can consider legal options, up to and including an accusation,” the preface concludes.

‘A History of Inefficiency’

The Grand Jury launched its investigation after receiving complaint of financial inefficiencies, ineffective communication and a lack of cooperation on the part of Paz Dominguez and her office, though the report doesn’t single her out for scrutiny. Nor does it suggest that all the problems began with her.

The A-C’s office has “a history of inefficiency,” some of which was addressed in a report from the 2018-19 Civil Grand Jury. Many of the problems identified in that report remain unresolved.

But the current report notes that the difficulties have been exacerbated by the “contentious relationships” between Paz Dominguez and virtually everyone she interacts with outside of her own office: “the Board of Supervisors as well as … the County Administrative Office, County department directors, County employees, other elected and appointed officials, school districts and special districts.”

The report does credit Paz Dominguez for making some improvements to the county’s accounting practices, including updating some outdated policies, addressing existing policies that weren’t being followed and requiring approved service contracts and itemized invoices from departments and vendors. “However,” the report notes, “progress was hampered due to the Auditor-Controller making changes without giving notice to or consulting with other County departments.”

Meanwhile, the Board of Supervisors “has been slow to respond and exercise its authority” to supervise this mess. Immediately after making this observation the report drops another “However,” pointing the finger back at Paz Dominguez: “However, on Nov. 22, 2021, the Board gave specific direction by adopting a resolution directed to the Auditor-Controller regarding the calculation and payment of interest to the General Fund. The Auditor-Controller did not comply.”

‘The Doors Remain Closed’

Since before being elected in 2018, Paz Dominguez has complained of understaffing in her office, though the Grand Jury report notes that staffing shortages exist throughout the county workforce. Also, Paz Dominguez has not taken advantage of “the established procedure” for requesting extra staffing, which is done through the budget process. She did not submit a budget request for any of the past three fiscal years, according to the report. 

When the COVID pandemic hit in March 2020, county staffers switched to working from home, but most departments have since reconvened and opened their doors. Staff in the Auditor-Controller’s Office have returned, the report says. “[H]owever, the doors remain closed to other County employees and the general public.”

The report also notes that, this past December, employees with financial experience in other departments were offered to the Auditor-Controller to help with the backlog of unfinished work, including journal entries, bank reconciliations, payroll and overdue financial reports. 

“Although the assistance was accepted, some employees were underutilized by being assigned data entry,” the report says. “Within a few days of being assigned, the assisting employees were returned to their own departments without the backlog being significantly improved.”

Late Reports

The middle section of the report identifies the multiple legally mandated financial reports that have been submitted late or remain outstanding. These include delinquent budget reports and Financial Transaction Reports from the 2019-20 and 2020-21 fiscal years, the absence of which prompted an investigation from the State Controller’s Office followed by a lawsuit from the Attorney General for failure to comply with financial reporting requirements. 

Other late or delinquent reports include the 2019-20 Single Audit (more than eight months overdue); the Cost Allocation Plan for 2019-20 (filed a year and three months late); the Cost Allocation Plan for 2020-21 (filed a year and four months late); the Cost Allocation Plan for 2021-22 (due Dec. 31, 2020, yet to be submitted); and the Cost Allocation Plan for 2022-23 (due Dec. 31, 2021, yet to be submitted). 

The continued delinquency of those last two documents is “putting the County at substantial risk of losing future grants and reimbursements from the State and Federal governments,” the report says.

Other mandatory fiscal reports, including county expense claims and an accounting of redevelopment property tax trust fund distribution, remain outstanding, with the latter impacting the cities of Eureka, Arcata and Fortuna.

Communication Problems

The expense claims require the involvement of both the A-C’s office and the Department of Health and Human Services (DHHS). The report says that, at one point, Paz Dominguez agreed to accept less detailed summary sheets from DHHS, only to turn around and reject those sheets when they were submitted. 

“When the Auditor-Controller rejected the summary sheets, she did not identify the changes that were needed,” the report says. “The Auditor-Controller did not respond to emails requesting a meeting and eventually stopped signing the claims.”

The breakdown in trust and communication extends to other departments, including the Treasurer-Tax Collector and the County Administrative Office (CAO), though the report’s authors note that “Communication and cooperation must be two-way.” That has not been the case.

In light of ongoing conflicts with the CAO, “The Auditor-Controller stopped taking phone calls and directed all communication be done by email to allow her staff to focus on their work without interruptions,” the report says. “Emails inquiring about the status of requests made months earlier often received no response.”

Relationships with other county departments deteriorated further after Paz Dominguez made “unannounced changes to financial procedures” and then “severely curtailed communications.” 

Communication problems exist throughout local government, the Grand Jury notes, but Paz Dominguez is unique. “During this Auditor-Controller’s first year in office, she effectively stopped accepting and returning telephone calls from other County departments, thereby cutting off direct relations with finance managers,” the report says. 

Instead, department heads and finance managers were instructed to send communications via a centralized email address, one that went to more than one person in the A-C’s office. Often, there was no response for long stretches of time, and many county employees consider this email a “black hole,” the report says.

As noted above, some of the problems are clearly structural, and some are related to what the report calls “antiquated” systems, such as paper timecards and a tracking system that requires departments to input revenues and expenses into spreadsheets, resulting in duplication of effort by the Auditor-Controller’s staff. 

Paz Dominguez has updated some of these processes, but her “inconsistent application of procedures” has caused confusion and delays. In the previous two fiscal years, she stopped processing journals for months at a time, the report says. 


The 25-page report goes on to identify mistakes and misunderstandings from Paz Dominguez in managing the finances of schools and special districts. For example, in two previous fiscal years, she incorrectly reported redevelopment agency funds as property tax revenue, causing four local education agencies to be underpaid by $475,304, according to the report.

She also incorrectly filed inflation pass-through funding, causing the Fortuna Union High School District (FUHSD) to suffer a $197,963 cash shortage. And when the funds were eventually received by the county, Paz Dominguez did not notify FUHSD, the report says. (That district’s board later passed a vote of “no confidence” in Paz Dominguez.)

Furthermore, there have been regular delays in Paz Dominguez’s transferring of funds from treasury accounts to school and special district accounts, putting payrolls at risk, the report says. And she has “inappropriately” asked those districts for substantiation, checking to see if claims are legitimate, before agreeing to district fund draws. The report notes that this responsibility properly rests with each school district’s board of trustees or special district’s board of directors, “not the Auditor-Controller.”

As for the estimated loss of $2.3 million in lost revenue, the report says that stems from mandated welfare expense claims, Cost Allocation Plan reimbursements, grant funding, public health claims, Public Works project funds and Planning and Building grants.

The $9.7 million at risk, meanwhile, stems from the late single audits, Financial Transaction Reports and Cost Allocation Plans, jeopardizing state and federal funds, according to the report.

Findings and Recommendations

The report concludes with a list of 17 findings and 19 recommendations. One of the findings blames county supervisors for not responding to the dysfunction in an effective manner. Others blame Paz Dominguez for such things as late reports and audits, unnecessary credit card interest coupled with lost bank interest and making changes to procedures without sufficient notification. 

Most of the recommendations are aimed at Paz Dominguez’s office. The Grand Jury suggests, for example, that she maintain an accessible and comprehensive operations policy and procedures manual that’s made available to all staff. They also recommend she submits budget proposals each year and file all required financial reports and audits by their due dates. 

The report recommends that the Board of Supervisors “act promptly” when notified of conflicts and establish an advisory committee consisting of the A-C, the CAO and at least three other elected officers or department heads. The board should also direct the Auditor-Controller to standardize accounting methods used throughout county government, the report says.

The timing of this report’s release does seem a bit suspect. When the Outpost was first informed of it, we were told it was set to be released tomorrow (Friday), only to discover later in the day that it was already posted online. This morning we sent an email to the Civil Grand Jury asking why they chose to release the report so close to Election Day. As of the time of this post we had not heard back.

In a possibly related development, Paz Dominguez sent out an email this morning notifying local media outlets that she’ll be holding a press conference on the Courthouse steps tomorrow at 2 p.m. The Outpost will be there.


DOCUMENT: Grand Jury Report: Distrust, Disagreements, Dysfunction