Misbehaving Elected County Auditor-Controllers
California Counties Struggle to Release Financial Reports
In 54 of California’s 58 counties, the auditor-controller is elected by the voters. They are responsible for the checkbook of their counties and the accounting of the transactions that occurred during the year. They are accountants. We lovingly call them bean counters. You know, the green eyeshade types of individuals who you usually never have to worry about.
Yet five of California’s 58 counties were more than a year behind in releasing their Annual Comprehensive Financial Reports (ACFRs). And I’m talking about the year that ended June 30, 2021!
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Humboldt County was the last ACFR to arrive, with the retained auditors dating their report on August 31, 2023, and the county releasing it a month later. Eureka!
Forgive me for the play on the name of its county seat, but Humboldt County’s last auditor-controller garnered so much negative press she was unseated in last year’s election. The dismal performance of the now former auditor-controller, Karen Paz Dominguez, found Humboldt County’s CEO issuing the following press release last June:
“The county has been struggling for years to get the Auditor to complete some of our most basic financial reports, and the Board this year sued the Auditor to mandate that she complete those tasks in response to a state suit on the same issues.
“Timely and accurate financial recordkeeping is critical to the county’s ability to secure state and federal funding and ultimately to provide services to the most vulnerable members of our community. Accordingly, we have come to a tentative mutual agreement with the Auditor regarding the lawsuits filed by the Board and the State Controller wherein she will end her term early. Auditor-Controller-elect Cheryl Dillingham will assume the role of interim Auditor-Controller until her term officially begins in January. We appreciate Ms. Paz Dominguez’s cooperation with this transition.
“The Board has always been focused on ensuring the county can continue serving our community – providing public safety services, housing, road repairs, trails, workforce and economic development and other critical services. The Board has full confidence that Cheryl Dillingham will be successful as Auditor-Controller and serve the people of Humboldt County well.”
Imperial County released the second-latest ACFR. Its independent outside auditor’s report was dated May 25, 2023. The drama in this county was even more intriguing, as the former auditor-controller, Josue Guadalupe Mercado, was found guilty of misappropriating public funds at his trial in February of 2022. You can’t make this stuff up!
Tuolumne’s ACFR was dated April 26, Inyo’s Jan. 13, and Lassen’s was Sept. 29 of 2022. The tardiness has been frustrating as we’re in the autumn of 2023, when all the June 30, 2022, ACFRs should be online and available.
Now that we finally have all of the audited financial statements for all of California’s 58 counties for the year ending June 30, 2021, what can we learn from the chart below?
The next thing one observes is that the coronavirus year of July 1, 2020, to June 30, 2021, did not seem to negatively impact the counties.
Humboldt and Tuolumne did not move much in the rankings over the missing years. But it shows you why it’s critical to receive current data. Financial statements are a management tool, and a lack of fiscal reports reflects a lack of proper administrative management. It pains me to share this embarrassing activity for a state that includes Silicon Valley within its borders.
Let’s discuss the other four counties that also had significant movements. Sonoma County moved up 14 places to 10th place. An increase in total revenues of $259 million, more than 90 percent of it from governmental sources related to the pandemic, provided for the decrease in its unrestricted net deficit.
San Joaquin County had a similar story, but also converted $291 million from restricted to unrestricted, helping to cut its unrestricted net deficit by nearly one-half, jumping up 15 places.
San Diego County increased their restricted net assets by $246 billion, with 83 percent going to a new category titled “Health and Human Services Agency programs.” But having a pension liability increase by $685 million doesn’t help. The word “pension” is used 229 times in their entire ACFR report. These two components make up most of the increase in the county’s unrestricted net deficit, moving it down six places and out of the top ten.
Stanislaus County saw a $135 million increase in liabilities for other post-employment benefits and pension liabilities, now owing $732 million, or $1,306 per resident. This county dropped seven places.
Orange County stayed in the mid-20s after being in 46th place back in 2010, thanks to its massive investment pool losses of some $1.7 billion in 1994. Financial policies for pensions and other post-employment benefits helped Orange County’s rise in the rankings. And its ACFR was issued on time.
Orange County also has minimum qualifications for its auditor-controller. Let’s hope the California State Association of Auditor-Controllers can consider implementing the same requirements statewide, step up their game, and issue their June 30, 2022, and future ACFRs on a timely basis. Amateur hour is over, folks.
What factors contribute to the difficulties faced by counties in releasing their financial reports on time?
Oller in ensuring timely and accurate financial reporting.”
The situation in Humboldt County is not unique. Other counties in California have also faced challenges in releasing their financial reports on time. In fact, the California State Controller’s Office has identified several counties as being significantly delinquent in submitting their reports, including Kings County, Lassen County, Mariposa County, and Modoc County.
So why is it so difficult for these counties to release their financial reports on time? One reason could be the lack of qualified personnel in the auditor-controller’s office. As mentioned earlier, these officials are elected by the voters and may not necessarily have the accounting background or expertise required for the job. This can lead to delays and errors in the financial reporting process.
Another reason could be the complexity of the financial transactions that need to be accounted for. Counties have numerous financial activities, such as tax collections, budgeting, and expenditure management. Ensuring that all these transactions are accurately recorded and reported can be a daunting task, especially for counties with limited resources and personnel.
Furthermore, the COVID-19 pandemic has also played a role in exacerbating the challenges faced by these counties. The pandemic has disrupted normal operations and strained resources, making it even more difficult to allocate time and effort to financial reporting.
The consequences of delayed financial reporting can be significant. It hampers transparency and accountability in the use of public funds, making it difficult for taxpayers and other stakeholders to assess the financial health and performance of these counties. It can also affect the counties’ ability to obtain financing or receive grants from state and federal agencies.
Addressing these challenges requires a multi-faceted approach. Counties need to invest in training and capacity-building for their auditor-controller’s office, ensuring that the elected officials have the necessary skills and knowledge to fulfill their responsibilities. They also need to allocate adequate resources to improve the efficiency and effectiveness of the financial reporting process.
Collaboration between counties and state agencies is also crucial. The State Controller’s Office can provide technical assistance and guidance to counties in meeting their financial reporting obligations. Counties can also learn from each other and share best practices in financial management and reporting.
Ultimately, the timely and accurate release of financial reports is essential for ensuring transparency, accountability, and good governance in California’s counties. It is a responsibility that cannot be taken lightly, and it requires the collective efforts of elected officials, county administrators, and state agencies to overcome the challenges and deliver on the public’s trust.
In the case of Humboldt County, the arrival of the long-awaited ACFR is a step in the right direction. However, it serves as a reminder of the work that still needs to be done to improve financial reporting across the state. The bean counters may not always be in the spotlight, but their work is crucial to the effective functioning of local government. It’s time to give them the support and resources they need to fulfill their vital role.
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