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Missing $200K among Mendocino County’s financial failures: California comptroller
A shady accounting system that led Mendocino County officials to think there was $200,000 more in county coffers than there actually was.
Payroll policies with so few regulations that criminal prosecution of two county officials followed.
And persistent staffing and turnover problems that have left two county departments at nearly half capacity for nearly a year.
Those were just some of the findings of a report issued by the California State Comptroller’s office on Friday, which determined that those deficiencies — coupled with the merger of the county’s auditor-comptroller and treasurer-tax collector offices — led to the county failing to file its annual financial transaction reports on time in several years.
Reports for each fiscal year, which runs from July 1 to June 30, are due to the comptroller six months after the end of the fiscal year. Mendocino County has not filed a report on time since 2018-2019, according to the comptroller’s office.
Failure to file such reports can result in fines and, more importantly, a downgrade of the county’s bond ratings, which are vital if the county needs to borrow money for multimillion-dollar road or infrastructure projects. The lower the rating, the more taxpayers may end up paying in borrowing costs.
County supervisors requested the state comptroller perform the audit after they failed to obtain timely financial reports from their own audit and control department for two years, according to Mendocino County Deputy Chairman John Haschak.
The failure came on the heels of the board of supervisors’ decision to merge the offices of auditor-comptroller and treasurer-tax collector in December 2021.
“The auditor-controller was retiring at the time, so the board felt it would be a good time to make this change,” Haschak said.
But officials in both the auditor-comptroller’s office and the treasurer-tax collector’s office opposed the merger. As a result, both the treasurer-tax collector resigned and the incumbent treasurer-tax collector resigned before the merger began in 2023.
Additionally, throughout 2022, office morale in both offices was low, resulting in a peak employee turnover rate of 40%, according to the controller’s report. At the same time, the individual chosen to lead the new cabinet was removed after being accused of misappropriation of public fundsleaving the office even more disorganized.
Alleged misuse of public funds
In October 2023, then-Mendocino County Auditor Chamise Cubbison and Payroll Manager Paulina Kennedy were charged with embezzlement of $68,106 in public funds. If convicted, each could be sentenced to up to four years in prison. Both have pleaded “not guilty.”
The comptroller cited the criminal investigation, but was keen not to pass judgment.
“During our review, we became aware that a former payroll supervisor may have received disallowed payments. This situation has led to a criminal investigation by county officials,” the report said. “Because this matter is the subject of litigation, we do not draw any conclusions about the disposition or allowability of these payments.”
After the criminal case, Haschak said that instead of leaving payroll under the control of the auditor-comptroller-treasurer-tax collector’s office, the county placed payroll management under the control of the chief executive’s office.
“There are multiple people working on this,” Haschak said. “Now there are redundancies.”
‘Accounts in Excel spreadsheets’
Without a plan to move forward and key or experienced personnel in place, financial reporting and accounting functions became too much for the new office to handle, the state said.
The comptroller found that the reporting delays were also a result of the county’s decentralized accounting system. While the county relied on software to track revenue and expenses, the state also found that the county maintained 14 separate bank accounts and, in some departments, tracked its transactions using Excel spreadsheets.
The state report noted that more than $1 million in public funds were tracked through Excel spreadsheets.
“It’s nothing nefarious,” Haschak said. “But it was a surprise to find out we had all these accounts we didn’t know about.”
When Sara Pierce, the county’s new auditor-controller-treasurer-tax collector, began reconciling the funds, county officials discovered there was about $200,000 less in the county coffers than originally thought.
Haschak said Pierce is working to bring all the accounts into a single system, known as MUNIS, where she will continue to centralize the county’s finances.
The county has six months to respond to the state with a plan to correct the problems, which must include policies and procedures for payroll, cash handling and transaction management.
Haschak said the county is on track to correct the mistakes of the past two years and is cautiously optimistic that the county will complete its 2023-2024 financial report on time.
“We have very capable people working on this,” Haschak said. “They should be able to do it.”
Amie Windsor is the Community Journalism Team Lead for The Press Democrat. She can be reached at amie.windsor@pressdemocrat.com or 707-521-5218.