UKIAH, CA., 10/31/24 – The Mendocino County Board of Supervisors unanimously approved a corrective action plan on Tuesday, Oct. 22, aimed at improving financial oversight and ensuring accurate accounting of county finances. Written by county Auditor-Treasurer Sara Pierce in response to state findings, the plan outlines the steps the board will take to prevent late filings, provide oversight, and enhance the accuracy of the county’s financial reporting.
State Controller Malia Cohen authorized an audit of the county’s finances at the end of August 2023 after a unanimous vote by the Board of Supervisors to request state support. According to Cohen’s office, the county needed state assistance to resolve “what some officials have referred to as a ‘fiscal crisis’ within the county.” The county was warned that its credit rating was at risk because the county was delinquent in filing its annual financial statements. A lower credit rating means borrowing money for necessary county projects is more expensive.
The audit by Cohen, published in July, examined a specific period of financial reporting from July 1, 2020, through June 30, 2022. The county is required to file financial reports at the end of each fiscal year and the county missed its deadlines twice – the 2021 report was 224 days late and the 2022 report was over a year late, 379 days to be exact.
The board asked for the financial reports during this period, but Cohen noted in her audit findings that “internal control deficiencies and other challenges contributed to the county’s inability to prepare and submit its annual financial reports promptly.”
The audit emphasized that leadership changes, a high staff turnover rate and a disorganized financial system all contributed to difficulties in filing and inconsistencies in the county’s accounting.
How the county got to this point
The delayed reports were exacerbated by the sudden retirement of Auditor-Controller Lloyd Weer in September 2021. The auditor-controller is an elected position, and Weer had held the seat since 2014. With 16 months left in his tenure, he endorsed his then assistant Chamise Cubbison as his successor.
The board appointed Cubbison as interim auditor-controller, despite opposition by District Attorney David Eyster due to disagreements with Cubbison over travel reimbursements and use of asset forfeiture funds.
Just as Cubbison was settling into her new role, the Board of Supervisors voted to merge the auditor-controller’s office and the treasurer-tax collector’s Office, a move Cubbison opposed because she feared the new department would be overwhelmed with work.
Staffing troubles continued when longtime Treasurer-Tax Collector Shari Schapmire retired in March 2022. An acting treasurer-tax collector was named, only to resign months later.
The consolidation of the two offices started in mid-2022, which, according to Cohen’s report, “left little time for these offices to prepare, plan and executive the consolidation while maintaining their regular workload, including timely financial reporting.”
Cubbison ran unopposed for the newly combined auditor-controller/treasurer-tax collector position in the June 2022 election.
The complexity of merging the two departments was compounded when in October 2023, Eyster filed felony misappropriation of public funds charges against Cubbison and former county payroll manager Paula June Kennedy.
Within days the board suspended Cubbison, locking her out of the auditor’s office and halting her pay and benefits. Subsequently, Sara Pierce was appointed acting auditor-controller.
The investigation into Cubbison’s and Kennedy’s conduct, initially led by Lieutenant Andrew Porter of the Mendocino County Sheriff’s Office with assistance from Eyster, found that Cubbison allegedly allowed Kennedy to fraudulently collect $68,000 in extra pay over a period of three years.
Cubbison protested that the payroll agreement resulted from a discussion between Kennedy and Weer before he retired early. Kennedy denied this and said that Cubbison was well aware of the pay raise.
At the beginning of this month, a motion was filed to dismiss the felony charges against Cubbison and Kennedy. A hearing is scheduled for November. Cubbison also has a pending civil lawsuit against the Board of Supervisors, stating that she was suspended without due process and lost pay and benefits. That lawsuit is pending.
One year later: What the state found
In its audit, the state reviewed the consolidation of the auditor-controller and treasurer-tax collector offices into one department. According to State Controller Malia Cohen, Cubbison and her staff opposed the move, which resulted in high staff turnover. Cohen reported that the board did not conduct a “risk assessment” before consolidating the two departments, which led to an overwhelming amount of work for staff, resulting in the delay of financial reports.
The audit also found that the county “lacked sufficient internal controls over its payroll system” and that there wasn’t a “proper segregation of duties.” The county’s payroll system allowed employees to monitor their own payroll records, said Cohen. According to these findings, there wasn’t a separation of duties among employees, which contributed to a lack of oversight.
The four primary findings from the state are:
- Untimely financial transaction reports and financial statements
- Inadequate controls over bank reconciliation process
- Insufficient internal controls over payroll
- Lack of established policy and procedures
Acting Auditor-Treasure Sara Pierce published a three-page plan to address the state’s audit. The plan also sets completion dates as to when the county will finish assigned tasks.
In an ironic turn of events, the plan recommends that the Board of Supervisors divide the two departments it consolidated, possibly as soon as November.
The county also plans on creating new procedures such as “conducting a risk assessment before implementing significant changes” to “implementing policies and procedures for journal entries and the annual year-end account closing.” The county plans to segregate the duties in the payroll process to ensure that no employee is able to create, approve, and record pay adjustments unilaterally.
“I was trying to bring more efficiency, transparency and understanding of our financials to the board and the public,” said Pierce about the plan in an interview. “To ensure that we are managing our funds appropriately and are able to see that through financial reports.”
Pierce said that in addition to ensuring transparency, she hopes that the corrective action plan will create more teamwork among employees.
“The goal is to ensure that we have departments that are working collaboratively together and not in silos,” Pierce added. “Getting some more efficiencies and policies and procedures in place so we don’t face these challenges in the future.”
Pierce presented her plan at the Oct. 22 Board of Supervisors meeting. After the presentation, 5th District Supervisor Ted Williams agreed that the corrective action plan is paramount in informing the public about the county’s spending.
“The public needs to be apprised of where we are spending on a monthly basis,” Williams urged. “The findings all point at the lack of transparency.”
However, this isn’t the end of the county’s audit nightmares.
In July, the State Legislature authorized another audit to review county operations. This audit, scheduled to span over 18 months, is estimated to cost taxpayers $800,000 and will review the county’s finances, contracts and elections.
The result of this audit is the most predictable outcome imaginable. Lots of people including myself were jumping up and down, waving our arms in the air to draw attention to these serious problems. To this day, I doubt people care. Even when it costs them another $1million or so to correct a problem that has metastasized from neglect.
Poor decisions made by 5 “elected” citizens who likely do not regularly review Federal and State Regulations. Now, they have to undue and separate the two offices as per the State Audit.
Poor decisions are often a product of top-down management; a few make changes that affect staff work loads and because the few do not make a habit of hearing from the staff who actually do the work, the decision is a blind one from the operational side. It is fair to wonder how overworked staff do with their jobs. The county operations are a public service. The staff are public servants. Services which require elevated positive customer service, are strained with poor morale. At heart of this issue is the continued top-down management that has been thoroughly discredited in all management theory. I can think of no leadership training I have attended that encourages top down/silo approaches with little to no consultation with staff before any decision is made. Engaging staff in the solution process for improvement is not the approach currently operationalized at the top of the county- the BOS and CEO office.