State Controller report includes same points Karen Paz Dominguez made for months

The California State Controller issued a review of Humboldt County’s internal financial controls. In the  conclusion the State Controller lists the same points that former Auditor Controller Karen Paz Dominguez made for months. 

"Our review found internal control deficiencies that contributed to the county’s inability to complete its annual financial reports promptly. These deficiencies, several of which have been identified in various reports, include: 

 The county amassed a backlog of journal entries;  The county failed to complete its cash reconciliations;  

 The ACO is insufficiently staffed; 

 County staff members need additional training; and  The county lacks updated policies and procedures. "

State Controller Press Release:

State Controller Betty T. Yee today published her team’s detailed review of Humboldt County’s internal financial controls, which found a backlog of journal entries and lack of bank reconciliations contributed to the county’s inability to complete timely financial reports — compounded by insufficient staffing, inadequate training, and a lack of updated policies and procedures.

Established in 1853, Humboldt County covers more than 4,000 square miles of California’s North Coast and had a population of more than 136,000 at the last census. Among the State Controller’s most significant findings:

• The county does not reconcile its bank balances and the county treasurer’s accounting records, nor does it reconcile cash and investment accounts pursuant to GC 26905. Timely reconciliations allow an entity to ensure cash transactions have been recorded properly, assist in monitoring cash flows, and detect errors and fraud.
• The county amassed a backlog of journal entries required to finalize financial statements. In addition to delaying reports, the backlog rendered county accounting data unreliable. For example, in September and October 2021, Auditor-Controller’s Office (ACO) staff posted journal entries totaling $106 million to the FY 2019-20 general ledger. As a result, county management may have made financial decisions based on outdated data throughout FY 2019-20.
• Insufficient staffing has kept ACO from fulfilling its duties and responsibilities. With only 13 full-time positions, the fiscal team has had an average of three vacancies throughout the review period, even as a realignment of payroll functions to ACO increased its workload.

The report emphasized that an organization’s commitment to competence is a key principle of an effective internal control system. While staff interviewed during the review expressed eagerness to successfully complete their assigned duties, they felt sufficient training had not been provided. Additionally, the ACO Department Policy & Procedure Manual has not been updated since 2012 and does not reflect current processes.

The report includes county responses to SCO findings and SCO recommendations for improvement. Controller Yee has requested a progress update in six months.