The state Controller’s Office says Mendocino County Board of Supervisors shoulders significant blame for the chaos gripping county finances.
State auditors specifically cite the board’s failure to conduct a “risk assessment” of its controversial consolidation of two key county finance offices despite opposition from senior county staff. Other factors cited in the state report include leadership changes in the offices overseen by elected officials, high employee “churn rate,” and a decentralized county accounting system.
“Our review identified internal control deficiencies and other challenges that contributed to the county’s inability to prepare and submit its annual financial reports promptly,” said Kimberly Tarvin, a certified public accountant and chief of the Controller Office’s Division of Audits.
The state’s review did not draw any conclusions, however, about a local criminal investigation into the county’s now suspended Auditor and the former payroll manager, who face single individual charges of felony use of public funds filed by District Attorney Dave Eyster against them last October.
“During our review, we became aware that a former payroll supervisor may have received unallowable payments. This situation led to a criminal investigation conducted by county officials. Because this matter is the subject of litigation, we make no conclusions regarding the disposition or allowability of these payments,” according to the state report.
The state review clarifies some but not all the elements of what is being described in local legal circles as a “hot mess” heading for public court hearings later this month.
Elected Auditor Chamise Cubbison and former county Payroll Manager Paula June Kennedy deny any criminal wrongdoing in a case laced with local politics. It is set for a preliminary hearing on July 25 in Mendocino County Superior Court.
The 17-page state report was issued by state Controller Malia Cohen’s office and limited to the county’s internal controls over financial reporting.
Last week the state Legislature authorized a broader audit of all county functions including finances, contracts and procurements, and elections. That expanded state audit will cost taxpayers an estimated $800,000 over an 18-month-period.
The Controller’s Office report is largely supportive of contentions made by Cubbison, former county Treasurer-Tax Collector Shari Schapmire, and other former senior county financial staff who challenged the Board of Supervisors’ forced consolidation in December 2021 of the two key county financial offices. The veteran county employees warned then the consolidation, combined with chronic understaffing, would disrupt county finances.
Board Chair Mo Mulheren said Saturday night supervisors and acting Auditor Sara Pierce “take seriously” the state report and will continue to “follow through with making improvements for timely reporting of the county financials.”
Supervisors Ted Williams and Glenn McCourty, two board members who have promoted the notion of a new county Department of Finance more closely aligned with county administrators, did not respond Saturday to written requests for comment on the state report.
Delays in financial reporting triggered the political brouhaha, led by Williams who publicly charged the county had three “different sets of books.” It mushroomed when District Attorney Eyster filed a criminal case in 2023 accusing Cubbison of using an “obscure payroll code” to allow Kennedy, the former Payroll Manager, to collect $68,000 in extra pay during the Covid pandemic.
Eyster, who has wrangled with county auditors since 2011 over his own spending practices, specifically targeted Cubbison after they clashed about her questioning his office expenses, including DA-hosted dinners for staff and their guests at a local steak house under the guise of “staff training sessions.” An angry Eyster took the unprecedented step of publicly appearing before the Board of Supervisors in 2021 to block Cubbison’s appointment as interim auditor when former county Auditor Lloyd Weer retired early and selected her to fill out his term.
Eyster later launched a year-long criminal investigation based on tips from the County Executive Office and board members that Kennedy had allegedly drawn unauthorized extra pay with the permission of Cubbison.
Cubbison, however, contends former Auditor Weer and Kennedy reached the special pay agreement before she officially took over the office in January 2023.
While choosing not to weigh in on the pending criminal and civil cases stemming from the prosecution and suspension of Cubbison and Kennedy, the state report noted that the county “lacked sufficient internal controls over its payroll system” which might have resulted in “unallowable payments to a former payroll supervisor.”
State investigators found that the county’s payroll system allows employees in charge of the payroll process to “adjust their own payroll records.” It lacked, at the time, “proper segregation of duties” ensuring that no one employee can initiate, record, authorize, and reconcile a transaction without the intervention of another person.”
The Board of Supervisors since 2021 has blamed senior financial staff in the formerly separate two county offices for uncertainty surrounding the true state of county finances. The county ignored warnings from Cubbison and other senior county finance officials that the forced consolidation would seriously disrupt operations.
The state report concludes that in fact the controversial consolidation, and the early retirement of former Auditor Lloyd Weer, threw the county’s financial offices into disarray. Some supervisors advocate creating a new county Department of Finance to replace both county offices.
Despite the warnings, the county board failed to conduct a “risk assessment” of the merger, nor did they collaborate with department heads “to address concerns and to mitigate the effects that a merger would have on the offices.”
“Collaboration could have helped the merging offices to anticipate and plan for structural, personnel, and technology impacts, and to mitigate risks preventing the county from fulfilling its key responsibilities, including timely financial statements or required FTR’s (financial transaction reports) to state and federal agencies.”
The state review also concluded that insufficient staffing levels kept the offices before and after their merger from “accomplishing their duties and responsibilities in a timely manner.”
Board members were aware of the staffing woes presented to them by Cubbison.
“The departure of key personnel (in the Treasurer-Tax Collector Office) and the lack of sufficient experienced personnel made it difficult for the (Auditor-Controller Office) to complete financial and accounting functions,” according to the report.
With the board enforced consolidation, “these difficulties were compounded,” state auditors concluded.
“It is important to maintain an adequate level of competent staffing to ensure effective internal controls in critical offices” like the Auditor-Controller and Treasurer-Tax Collector.
Read the entirety of the Controller’s Office report on Mendocino County’s internal controls over financial reporting below:
07-2024_lga-lgo_MendocinoCounty
Omg .
Chuckleheads
The state auditor confirms what we, those paying attention anyway, already knew. Finding the political will to fix the matter was always and continues to be the issue. Being a County Supervisor carries a lot of responsibility, that is taken too lightly and is often shirked in order to maintain “comity”.
I second that statement, John.
Count me in as well. I too follow the opinion(s) of these individuals.
Nice to have our suspicions confirmed by the State.
Will things change now? Stay tuned.
In the upcoming audit, I sure hope all the contracts with the Schraders will be properly audited.
I hope the audit will measure the Scope of each contracts deliverables to what we actually got for our money. Should be some big eye opening moments in that aspect alone. And perhaps if found wanting, the contractors will have to pay the county back…………wishful thinking I’m sure, but one can hope.
Thank goodness. My wife and I saw this coming down the pipe 5 years ago. Over a decade of bad Mgmt from the BOS, CEO, and elected heads. This is a red flag warning for Mendocino if the state says you are out of line.
Ok we needed to spend money on a risk assesment study to tell us if taking one dysfunctional agency and adding it to another dysfunctional agency could potentially create one larger dysfunctional agency. It’s the math that confused them. They though one plus one equaled 2 and they would end up with two great agencies. The numbers just don’t lie. I think the board may need to recalibrate their abacus. I think it’s the same one they used for the cannabis program. I’m consulting across the country and cannabis is booming for those that know how to grow, which Mendocino had at one time.
It would have also been appropriate for the BOS to do a study on whether it was a good idea to put the Public Health Department under Behavioral Health. (Which is the reality of the situation, regardless of how they want to spin it). Now almost all experienced PH staff have left and you have people who I’m sure are well-intended, but who lack any Public Health training or experience. Learning on the job while getting paid as subject experts.
Accounting is actually hard thou. Public health is just like “ok everybody please please PLEASE get a vaccine”‘ I’m sure she will do fine
Are you mad that nobody had a “Going Away” party for you? You weren’t even a decent PH Employee. You sat in your office and spewed union garbage. Get a life!
Maybe you weren’t invited.
This crap has been going on through a number of years and regimes in City Admin., and the Hospital.
We need a better presence to keep the Fat Butts in tow.
They, in reality are nobody special.
They have a seat…doesn’t make them Gawds
When will the BOS agendize funding and implementing the action plan laid out by the state? Almost every single bullet point requires the County to provide dollars to accomplish and most importantly maintain the new procedures and hiring/retention recommendations. How will this mesh with the new Tax Sharing Agreement everyone agrees will cost the County $3+mil per year, or the decades old practice of prioritizing public safety functions over just about everything else in the budget? Is this just another study that exposes facts that the BOS will ignore? Will they even respond to or acknowledge the report in a meaningful way? How will they centralize the new Tax Sharing Agreement requirements into Munis to comply with the recommendations, so that Ted can save face so they don’t add a FOURTH “off the books” excel spreadsheet to implement it? Ted? Hello Ted?
County CEO, SUPES, and DA devised that untimely consolidation because they did not want to challenged much less held accountable by the likes of any independently elected auditor who was bound by laws and accounting principles. The bogus charges to discredit the elected auditor and payroll clerk for $68K are de minimus compared to the $800K+ state auditor investigation.
As a former employee of Mendocino County… all of this was predictable and in fact inevitable. The absolute wreckage and domination by Carmel could not have produced anything different. Every time a DH did anything not to her liking, she absorbed that person/function into the Executive Office to fulfill her egomaniacal need for control and disinterest in influencing positive outcomes built on genuine collaboration. The HR Director position went unfilled, then “managed” only from a budgetary perspective, by the Executive Office for years. This is just one tiny example. The backroom dealings, illegal actions, political/bureaucratic pissing matches, lack of professional management and practices, and “chop off their head” culture that she created, is what yields years of chaos and mismanagement. Coupled with a Board populated with Supervisors who confidently overreach into operations without any professional public administration experience… and this is it. This is what an organization looks like totally bereft of accountability and ethical standards.
There are, of course, others who played along with Carmel in hopes of promotions, and some of them are still scattered throughout the County trying to reinvent their professional identities as long as they haven’t burned too many people.
I wonder… if DA Eyster had known that Carmel and her former assistant Kyle Knopp (current City Manager of Rio Dell) had absolutely unfettered and continuous access to every email account in the county email system for over a year, whether criminal and civil investigations would have began much earlier. …But that’s another story.
It is truly sad how things have played out, the people of this County deserve so much more.
Truly disgusting. The squandering. Excessive building purchases that are now torn down, in need of major repair or sit vacant. Toxic upper management that can do NO WRONG yet, do all the WRONGING. Leading the biard of stupidvisors with smoke and mirrors and barking merkins. Morale is busted. Speak against your demonized. Want better “WE DONT CARE. we have our paychecks and nice cool air in the buildingg
having little parties and circular meetings talking about things that dont matter for hours on end. Then to the next office. for more fabulous circular conversation about the same thing you just talked about for 3 hours while they change their merkins for the next show. You need a different one for each meeting!!!! Complaints should be heard instead of poo pooed away. That is why we are here now all county higher ups and management do not hear, do not listen, act entitled and shift blame its no surprise to those who live in reality that this is our situation.