Mendocino County's Financial Woes: A Cautionary Tale of Mismanagement and Oversight

The state Controller's Office has shed light on the chaotic state of Mendocino County's finances, citing the Board of Supervisors' failure to properly assess the risks of consolidating two key financial offices as a significant contributing factor. The report also highlights leadership changes, high employee turnover, and a decentralized accounting system as additional challenges that have hindered the county's ability to prepare and submit its annual financial reports on time.

Uncovering the Roots of Mendocino County's Financial Crisis

Consolidation Chaos and Lack of Risk Assessment

The state auditors specifically point to the Board of Supervisors' decision to consolidate the county's Auditor-Controller and Treasurer-Tax Collector offices, despite opposition from senior county finance officials. The report states that the board failed to conduct a "risk assessment" of this controversial move, which ultimately contributed to the financial disarray. The consolidation, combined with the early retirement of the former Auditor, Lloyd Weer, threw the county's financial offices into disarray, according to the state report.The report suggests that the board's failure to collaborate with department heads and address their concerns about the merger's potential impact on operations and staffing levels exacerbated the problem. The auditors conclude that the lack of a thorough risk assessment and proactive planning led to the county's inability to fulfill its key financial responsibilities, including the timely submission of financial statements and required reports to state and federal agencies.

Staffing Challenges and Lack of Internal Controls

The state review also found that insufficient staffing levels in the county's financial offices, both before and after the consolidation, made it difficult for the Auditor-Controller and Treasurer-Tax Collector to complete their duties and responsibilities in a timely manner. The report emphasizes the importance of maintaining an adequate level of competent staffing to ensure effective internal controls in critical offices like these.Furthermore, the state auditors identified internal control deficiencies in the county's payroll system, which allowed employees in charge of the payroll process to "adjust their own payroll records" without proper segregation of duties. This lack of internal controls may have resulted in "unallowable payments to a former payroll supervisor," according to the report.

The Brewing Storm: Criminal Investigations and Political Tensions

The state report's findings have added fuel to the ongoing legal and political turmoil surrounding Mendocino County's financial management. A criminal investigation is underway, led by District Attorney Dave Eyster, who has accused the county's elected Auditor, Chamise Cubbison, and the former Payroll Manager, Paula June Kennedy, of felony use of public funds.Eyster's investigation was triggered by tips from the County Executive Office and board members, alleging that Kennedy had received unauthorized extra pay with Cubbison's permission. However, Cubbison contends that the special pay agreement was reached between former Auditor Weer and Kennedy before she took office in January 2023.The state report's findings have further fueled the political tensions, with some supervisors advocating for the creation of a new Department of Finance to replace the existing Auditor-Controller and Treasurer-Tax Collector offices. The report's conclusions have also lent support to the contentions made by Cubbison, former Treasurer-Tax Collector Shari Schapmire, and other senior county financial staff who had warned the board about the potential consequences of the forced consolidation.

The Broader Implications: A Statewide Audit and the Cost to Taxpayers

In response to the growing concerns, the state Legislature has authorized a broader audit of all Mendocino County functions, including finances, contracts, procurements, and elections. This expanded state audit is expected to cost taxpayers an estimated 0,000 over an 18-month period, underscoring the significant financial burden that the county's mismanagement has placed on its residents.The state Controller's Office report serves as a cautionary tale for local governments, highlighting the importance of robust internal controls, effective risk management, and collaborative decision-making when it comes to critical financial operations. As Mendocino County grapples with the fallout, the lessons learned here may prove invaluable for other jurisdictions seeking to avoid similar financial pitfalls.