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Elected County Auditor-Controllers Behaving Badly

Elected County Auditor-Controllers Behaving Badly

The California State flag flies outside City Hall, in Los Angeles, Calif., on Jan. 27, 2017. (Mark Ralston/AFP via Getty Images)

John Moorlach

John Moorlach

10/3/2023

Updated: 12/21/2023

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Commentary
In 54 of California’s 58 counties, the auditor-controller is elected by the voters. They are responsible for the checkbook of their counties and the accounting of the transactions that occurred during the year. They are accountants. We lovingly call them bean counters. You know, the green eyeshade types of individuals who you usually never have to worry about.
Yet five of California’s 58 counties were more than a year behind in releasing their Annual Comprehensive Financial Reports (ACFRs). And I’m talking about the year that ended June 30, 2021!
Humboldt County was the last ACFR to arrive, with the retained auditors dating their report on August 31, 2023, and the county releasing it a month later. Eureka!
Forgive me for the play on the name of its county seat, but Humboldt County’s last auditor-controller garnered so much negative press she was unseated in last year’s election. The dismal performance of the now former auditor-controller, Karen Paz Dominguez, found Humboldt County’s CEO issuing the following press release last June:
“The county has been struggling for years to get the Auditor to complete some of our most basic financial reports, and the Board this year sued the Auditor to mandate that she complete those tasks in response to a state suit on the same issues.
“Timely and accurate financial recordkeeping is critical to the county’s ability to secure state and federal funding and ultimately to provide services to the most vulnerable members of our community. Accordingly, we have come to a tentative mutual agreement with the Auditor regarding the lawsuits filed by the Board and the State Controller wherein she will end her term early. Auditor-Controller-elect Cheryl Dillingham will assume the role of interim Auditor-Controller until her term officially begins in January. We appreciate Ms. Paz Dominguez’s cooperation with this transition.
“The Board has always been focused on ensuring the county can continue serving our community - providing public safety services, housing, road repairs, trails, workforce and economic development and other critical services. The Board has full confidence that Cheryl Dillingham will be successful as Auditor-Controller and serve the people of Humboldt County well.”
Imperial County released the second-latest ACFR. Its independent outside auditor’s report was dated May 25, 2023. The drama in this county was even more intriguing, as the former auditor-controller, Josue Guadalupe Mercado, was found guilty of misappropriating public funds at his trial in February of 2022. You can’t make this stuff up!
Tuolumne’s ACFR was dated April 26, Inyo’s Jan. 13, and Lassen’s was Sept. 29 of 2022. The tardiness has been frustrating as we’re in the autumn of 2023, when all the June 30, 2022, ACFRs should be online and available.
Now that we finally have all of the audited financial statements for all of California’s 58 counties for the year ending June 30, 2021, what can we learn from the chart below?
From the 30,000-foot level, the first thing one notices is the decline in population, with the state seeing a drop of 394,013 residents in the 58 counties. This one percent drop, from 39,743,894 to 39,349,881, is not reflected in the State’s ACFR. The state claimed that it had a population of 39,500,000 in 2021, which comes close to matching. But it reported a population of 39,538,000 in its ACFR in 2020, making it look like things were level. They are not. The exodus appears to be real, according to the Golden State’s counties.
The next thing one observes is that the coronavirus year of July 1, 2020, to June 30, 2021, did not seem to negatively impact the counties.
As is usually the trend, the better managed counties, the top eight, did not have much movement in this segment. Likewise, the 39 bottom counties did not move more than four positions, staying pretty much in place, except for Lassen County. When I provided the rankings for the year ending June 30, 2020 in How Does Your County’s Finances Compare to Others in California? from June 15, 2022, I used ACFRs from 2018 for Lassen and Humboldt Counties and 2019 for Tuolumne County. Lassen’s actual unrestricted net deficit for 2020 was $42,010,954, which means 2019 was a rough year for this rural county. This year I refused to take substitutes and waited, and waited, for the release of the actual audited statements.
Humboldt and Tuolumne did not move much in the rankings over the missing years. But it shows you why it’s critical to receive current data. Financial statements are a management tool, and a lack of fiscal reports reflects a lack of proper administrative management. It pains me to share this embarrassing activity for a state that includes Silicon Valley within its borders.
Let’s discuss the other four counties that also had significant movements. Sonoma County moved up 14 places to 10th place. An increase in total revenues of $259 million, more than 90 percent of it from governmental sources related to the pandemic, provided for the decrease in its unrestricted net deficit.
San Joaquin County had a similar story, but also converted $291 million from restricted to unrestricted, helping to cut its unrestricted net deficit by nearly one-half, jumping up 15 places.
San Diego County increased their restricted net assets by $246 billion, with 83 percent going to a new category titled “Health and Human Services Agency programs.” But having a pension liability increase by $685 million doesn’t help. The word “pension” is used 229 times in their entire ACFR report. These two components make up most of the increase in the county’s unrestricted net deficit, moving it down six places and out of the top ten.
Stanislaus County saw a $135 million increase in liabilities for other post-employment benefits and pension liabilities, now owing $732 million, or $1,306 per resident. This county dropped seven places.
Orange County stayed in the mid-20s after being in 46th place back in 2010, thanks to its massive investment pool losses of some $1.7 billion in 1994. Financial policies for pensions and other post-employment benefits helped Orange County’s rise in the rankings. And its ACFR was issued on time.
Orange County also has minimum qualifications for its auditor-controller. Let’s hope the California State Association of Auditor-Controllers can consider implementing the same requirements statewide, step up their game, and issue their June 30, 2022, and future ACFRs on a timely basis. Amateur hour is over, folks.
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John Moorlach

John Moorlach

Author

John Moorlach is the director of the California Policy Center's Center for Public Accountability. He has served as a California State Senator and Orange County Supervisor and Treasurer-Tax Collector. In 1994, he predicted the County's bankruptcy and participated in restoring and reforming the sixth most populated county in the nation.

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