Last week’s “final notice” letter from the California Attorney General’s Office, which threatens legal action against embattled Humboldt County Auditor-Controller Karen Paz Dominguez for her failure to submit a long-overdue financial transactions report, was not sent in error, as she suggested publicly this week.
The A.G.’s Office confirmed as much Thursday in an email to Paz Dominguez, saying a pending report from the State Controller’s Office “does not relieve the County of any reporting responsibilities including filing a timely Financial Transactions Report (FTR) and completing the annual single audit by the required due dates.”
The State Controller’s Office offered a similar clarification on Wednesday, confirming to the Outpost that the A.G.’s “final notice” letter was not issued because of some automated system but was indeed sent at the request of the state controller.
This is all rather convoluted, so let’s back up a bit.
In early December, State Controller Betty Yee notified the county that she’d be sending in a team from her office’s Division of Audits to investigate the county’s financial practices and reporting. (You can read her letter here.)
“The basis for the investigation is the county’s failure to file its Financial Transactions Report (FTR) for fiscal year (FY) 2019-20,” Yee’s letter said. That report, which is a state-mandated responsibility of the Auditor-Controller’s Office, is now more than a year past due.
So Yee’s investigation team came in and investigated, conducting interviews, assessing the county’s internal controls and examining its overall financial reporting processes. However, the team has yet to issue its report.
Cut to this past Friday. That’s when Paz Dominguez received the “final notice” from Deputy Attorney General Julianne Mossler. It reminds Paz Dominguez that the state has made several attempts over the past year to compel her to submit the report, saying she could even use unaudited information if necessary, just as long as she finally turns it in.
Mossler’s letter tells Paz Dominguez that she has until March 16 to submit the Financial Transactions Report or else the state will pursue legal action against her (and/or against the county), including a $5,000 fine.
At Tuesday’s Board of Supervisors meeting, Paz Dominguez suggested that Mossler’s letter was sent by mistake — or perhaps as the result of some automated notification system.
Addressing the board, Paz Dominguez said she appreciated the opportunity to “clear up some misconceptions” given that she had recently spoken with representatives from the State Controller’s Office about the letter.
“It came as a surprise to the State Controller’s Office team that is working with our county that the Attorney General sent that letter,” Paz Dominguez said. “They were going to communicate with people at the Attorney General’s Office, and what they could communicate with me yesterday was that they think that maybe it’s probably because we were on a list and the Attorney General has a schedule that they check, and a calendar, and that because we were still on that list by that date, they chose to write that letter.”
The county has engaged outside auditing firm CliftonLarsonAllen to complete the long-overdue 2019-20 Financial Transactions Report. Representatives from that firm have given a target completion date of March 31 — two weeks beyond the new deadline imposed by the state.
But Paz Dominguez says she’s been under the impression that she should wait for the State Controller’s Office to issue its investigation report before completing the overdue document. The State Controller’s Office may want to send in its own accountant to complete the necessary work.
She reiterated this perspective on Tuesday, telling the board, “when the State Controller’s Office [representative] wrote her letter to the county … she said it would be upon her findings that she would determine whether she would appoint an accountant to come and complete the Financial Transactions Report.”
Back in December, Paz Dominguez said she was “thrilled” by that possibility — she would welcome any and all help from the State Controller’s Office.
However, in reading Yee’s letter, it’s not clear whether she’s offering help or simply stating that she may have to resort to sending in a competent professional to fix the county’s financial mess.
“The results of this investigation will assist my office in determining if I need to appoint a qualified accountant to obtain financial information required to be reported to my office in accordance with [Government Code] section 53891,” the letter states.
On Tuesday, Paz Dominguez told the Board of Supervisors that the State Controller’s Office is still drafting its report, “so it does seem a little bit out of the timeline for the Attorney General to be demanding this [Financial Transactions Report]. Either way,” she continued, “I am still waiting for a response from the deputy attorney general who emailed that letter, and I have not yet received one.”
First District Supervisor Rex Bohn asked for clarification: Was she saying that the Attorney General’s letter was sent in error?
“Given what I have heard from the State Controller’s Office directly? Yes,” she said. “That is what I think has happened.”
Here’s video of Tuesday’s meeting, queued up to that exchange:
Mossler’s follow-up email, sent today, makes it clear that the notice was not sent in error. She confirms that the State Controller’s Office’s review of the county’s financial reporting practices is still in progress, saying the final results will be shared in an exit conference “when appropriate.”
But that has no bearing on the state’s imposed deadline.
“The internal control system review does not relieve the County of any reporting responsibilities,” Mossler says, “including filing a timely Financial Transactions Report (FTR) and completing the annual single audit by the required due dates.”
Not only is the county’s 2019-20 Financial Transactions Report overdue, but the report covering the next fiscal year, 2020-21, was due by Jan. 31. Mossler tells Paz Dominguez that instructions for submitting those reports “remain the same as has been included in previous letters from [the State Controller’s Office],” but, perhaps in an attempt to be helpful, she attached a 43-page user guide for local government reporting along with a list of answers to frequently asked questions.
We reached out to Paz Dominguez to ask whether, in light of Mossler’s latest correspondence, she believes the 2019/20 Financial Transactions Report will get submitted to the state by the March 16 deadline.
Initially she said her schedule for today was jam-packed, so she wouldn’t be able to dig deep into the letter until this evening. But shortly thereafter she sent a follow-up email, saying:
I had a quick break between meetings so I provided a response to Ms. Mossler [saying] that I would review her request with county counsel as it didn’t align with what we discussed with the SCO [State Controller’s Office]. I’ll likely meet with my county counsel liaison early tomorrow and will know more then. Oh, how I wish I could clone myself and be in two places at once…
Still no word on whether she’ll be able to submit the overdue report before the March 16 deadline.