County staff, auditor at odds over closing 2019-20
CAO’s office claims millions at risk, Paz Dominguez calls statement ‘speculative’
As Humboldt County quickly approaches the end of this fiscal year, work remains on closing out fiscal year 2019-20, the supervisors were told by staff Tuesday morning.
During a presentation to the Humboldt County Board of Supervisors, assistant county administrative officer Elishia Hayes said the county is only four months away from fiscal year 2021-22 and yet the books for 2019-20 remain open. The staff report notes the county’s books are generally closed by the auditor-controller in “a reasonable period of time after the end of a given fiscal year,” usually by September or early October.
“This item comes to you today because staff received notification from the auditor-controller on Feb. 11 with the intention to close the year as is with outstanding transactions to be processed in fiscal year 20/21 as prior period adjustments. Staff has concerns that the ‘as is’ closing places the county at risk,” Hayes said. “In the decades that I’ve worked for the county, I have not experienced known financial transactions not being posted.”
At this point, Hayes said, “the final step to moving forward responsibly” is to authorize the auditor-controller to post the final transactions so staff can “move on to managing the current fiscal year and begin preparing for the next fiscal year.”
Reached by phone on Tuesday afternoon, Humboldt County Auditor-Controller Karen Paz Dominguez confirmed the closure of fiscal year 2019-20 on Feb. 11, which appears to contradict staff statements. The staff report from Hayes said, “As of Feb. 19, the closing had not been finalized.”
“We announced the closure on Feb. 11 and are in the fund rollover process now for the last remaining funds,” Paz Dominguez said. “… The few remaining items will be posted as prior period adjustments.”
There are 17 outstanding
transactions detailed in the staff report amounting to $10.8 million. Later in the meeting, Hayes corrected the amount to $10.6 million after the error was pointed out by someone during public comment.
According to the staff report, “The county is required to have a state-approved CAP (Cost Allocation Plan) to receive reimbursement from state and federal agencies for internal service and central service costs. The negative impact of not having a CAP for fiscal year 2020-21 is an estimated loss of federal and state dollars in the amount of $15.3 million. A loss of $15.3 million creates an estimated deficit of $6.1 million across five funds (ADA, information technology, liability, purchasing and workers compensation). The General Fund is the only source of funding to reduce these estimated negative fund balances.”
If the CAP is not submitted, Hayes projected an estimated loss of $4.7 million to the General Fund, $15.3 million in state and federal dollars, a reduction in public services and layoffs of county staff. As of Feb. 16, Hayes said the CAP still has not been submitted to the state Controller’s Office.
“I have not received any documentation to corroborate the statements that the County is going to lose any money and believe that statement is speculative,” Paz Dominguez told the Times-Standard after the meeting.
Humboldt County Administrative Officer Amy Nilsen noted that the 2019 audit has been completed.
“It’s the 2020 audit that will need to be completed once the books are closed,” she said.
Referring to previous conversations between the CAO and the board, 2nd District Supervisor Michelle Bushnell asked about the possibility of establishing an audit committee to oversee county transactions.
“An audit committee could be formulated by your board and that group would come together on a regular basis to evaluate the processes and receive updates on transactions that are moving forward,” Nilsen said. “Your board could adopt a resolution or a charter establishing an audit committee and normally on an audit committee it would be comprised of the CAO, the auditor-controller, the treasurer tax collector, possibly the assessor and then possibly also a board member. The composition is really up to you, but it would also include qualified members of the public that have knowledge of government accounting as well.”
Fourth District Supervisor Virginia Bass asked for clarification on a $3.4 million “health insurance error correction” listed in the staff report. Human Resources Director Linda Le said it was “a glitch in a ONESolution system that occurred in December 2019 pay cycle.”
“The actual cost that should be charged to the employee is $477,” Le said. “We reached out to ONESolution to see how we can fix this and it was discovered that we are unable to correct this in the system. There is still a pending ticket in the IT component to have it resolved.”
Le said the auditor-controller made a submission “to reverse the corrections” and said the error will “be a part of the fund rollover” with no revenue expense.
“At the end of the day, it has a substantial factor because it resolved in my side of the budget and it has a negative side on the DHHS whereby we could not completely process our transactions,” she added.
Bushnell made a motion to approve staff’s recommendation to authorize the auditor-controller to post all remaining financial transactions for fiscal year 2019-20 before closing the fiscal year and to establish an audit committee. Before voting, 3rd District Supervisor Mike Wilson asked Nilsen if it was a reasonable direction to move towards. Nilsen said, “Absolutely.”
Supervisors voted 5-0.