The county’s outside auditor presented his company’s findings to the Board of Supervisors this week and recommended rigorous additional training and protocols to ensure that accounting practices are in compliance with government auditing standards. The findings of the audit for fiscal year 21/22 include a variety of over and understatements, accounts not properly tracked, and a lack of internal controls that expose public funds to the possibility of fraud.
Most of the 14 bank accounts that were not included in county cash or reconciled regularly contained under $10,000. But a combination of errors in one of the accounts led to an understatement of $1.4 million. And a duplicate journal entry in the disaster recovery fund led to a $4.2 million error. That last was among the mistakes that were corrected, but the report, by outside auditor Clifton Larson Allen LLP cautioned that, “Accounts that are either unknown or are not reconciled and included in County activity can expose the County to risk of misstatement and fraud.” The audit does not say whether or not fraud occurred, but it does warn that, “Management override of controls presents a fraud risk that is considered to be a broad risk in every entity.”
Jeff Peake, of Clifton Larson Allen, noted that the report was tardy due to delays by the county in providing the necessary information. The audit includes governmental activities, each major fund, and aggregate remaining fund information. This is separate from the ongoing audit by the state controller’s office, which was requested both by the Board of Supervisors and the regional leadership of SEIU 1021, the county government’s largest labor union. Routine audits of federal grants and other revenue sources are also still ongoing.
Supervisor Dan Gjerde said this was the first time the Board has received a public presentation by the outside auditor, and went to work getting a translation of some terms, specifically from a section of the report that read, “Private purpose trust fund cash was understated by $1,394,282, contributions to private purpose trust was understated by $3,900,430 and distributions from private purpose trust was understated by $2,506,148.”
“Can you just kind of put in simpler English, what is meant by private purpose trust funds?” he asked. “What would be examples of the private purpose trust, and what would these distributions be made for?”
Pierce replied that, “These are county funds that are public administrator/public guardian that are administered by Social Services. In addition, it is also the funds from the Behavioral Health conservatorship program that Dr. (Jenine) Miller administers…These are public administrator dollars. They are not general fund. So if someone goes into a conservatorship program, it’s the funds that we receive from those programs.”
Supervisor John Haschak tried to flesh out the question of unreconciled bank accounts. Pierce first reported their existence shortly after the Board suspended Treasurer Tax Collector Auditor Controller Chamise Cubbison and appointed Pierce to her job in an acting role.
“So there’s 14 of these accounts,” Haschak summarized. “One account is for the conservatorship, and that’s the $1.394 million?”
Pierce provided more detail, saying, “Yes. One of the 14 bank accounts is the Behavioral Health conservatorship account that was opened up during FY 21/22. Previously that funding was part of the public administrator/public guardian accounts…only a portion of the $1.3(94) million is related to one of the unreported bank accounts.” The amounts in the remaining 13 accounts added up to $104,028.
The accounts mostly exist so that county workers in offices outside Ukiah can deposit payments for service fees, rather than being responsible for transporting public money.
Pierce agreed with all the outside auditor’s recommendations to address all the findings. These include providing additional training on things like how to properly identify revenues and expenditures, and keeping track of all the county’s accounts and making sure there is a standard policy about opening new ones.
“So now we’re going to have a list of all those accounts, and people trained and everyone knows what’s going on with those accounts,” Haschak concluded.
Pierce confirmed this, and added that, “We are actually making changes to the signatory authority on some of these accounts. We’ve removed department heads from the bank account signatory authority. Only the auditor’s office is the one that can sign the checks. We’re rolling out a new process to work with the departments on how to transfer those funds into our treasury.”
Gjerde asked Pierce to clarify the duplicative $4.2 million entry, which was corrected. “But what does that mean to that fund?” he asked. “Does that fund have $4.2 million less than county staff believed there was, because it was entered twice?” Pierce confirmed that the money was recorded twice in FY 20/21, and the error was fixed the following fiscal year.
Peake, with Clifton Larson Allen, could not provide a net amount of the misstatements, or whether the county had come out with more or less money than it would have had if the recommended reviews and internal controls had been in place. Last year’s audit is still outstanding.
That doesn’t sound good.
William’s numerous complaints about not being able to get meaningful financial reports seems to have some real validity. How is it that the “inside auditor” missed all this? And how far back does it all go? What a mess.
So pretty much a nothing burger. I’m sure you could find a couple mistakes like this in any county in the USA
Not actually, most counties have low or no audit findings. And certainly not to this magnitude. These findings should make every resident of the county appreciate the enormity of the scope the work Ms Pierce is doing.
wrong, this is an average amount of errors to appear in an audit
$4.2 million duplicate recording is not average…this county is running multi million dollar deficits let alone partially blind to their budget…not normal
Read what department these funds are located, Social Services. This does not imply that Williams was right. As a matter of fact it shows BOS is complicit. They okay budgets apparently with no knowledge or reports. If Williams isn’t getting information he needs, he should never pass a budget. What does BOS do now with Dr. Miller who oversees the $4.2 million error? They removed an elected official who wasn’t even arraigned when they took action.
This is all part of William’s plan, he threw a grenade hoping to hit something and now he’ll say, “See I told you.” This is a lot words that mean nothing. These are honest mistakes that can be easily fixed, unless the BOS has a vendetta against you. Then they’ll have the DA charge you with crime.
To set the record straight – Dr. Miller oversees Behavioral Health and recently was given the oversight of Public Health. Dr. Miller has never had oversight of Social Services or the disaster recovery budget.
These are errors. Not acceptable, but not fraud. What the board meeting tip-toed around is that these errors were done by the departments, not specifically the Auditor’s Office/Department. If departments don’t disclose bank accounts or make errors its very hard for any auditor to find out. Protection from fraud and errors are every employee’s responsibility, not just one department. The big errors were done by one of the County’s largest departments, which until recently was fully consolidated social services, and behavioral health. Who was responsible for those departments? Anyways, I’m glad that the County will be investing in more training. They should also be staffing all of the departments with qualified fiscal people and probably most departments need more of them, especially for continuity. I have always felt the county systemically does not place a priority on anything budgetary or fiscal, as these people are not front line service delivery and generally looked down upon because there are A LOT of rules about what you cannot spend money on. Also, people with basic math and software skills are hard to come by in Mendocino County.
Cubbison is inept
It’s one thing to have the information and quite another to reduce that to actions that will improve the County’s financial situation. The latter takes leadership and that is in short supply. Members of this Board and much of the executive staff foolishly let Ms. Angelo have exclusive control.
Another 3rd rate county. Okie doke?
Mendocino County funds have been mismanaged for years as well as some departments