Grand Jury’s Audit and Finance Committee investigates Lassen County Auditor-Controller

Based upon its own initiative, the 2023-2024 Lassen County Grand Jury formed a special committee and investigated the Lassen County Auditor-Controller’s Office.

According to the grand jury report, “The major function of a Civil Grand Jury is to oversee all aspects of the legislative and administrative departments that make up county, city, and special district governments. It has the power to examine and guarantee that those who are given the responsibility of managing these offices are: truthful, dedicated, and sincere in their efforts to serve the public. There are 42 states that have some form of Grand Jury, but California and Nevada mandate the impaneling of a Grand Jury each year.”

The civil grand jury made 11 findings and offered 12 recommendations. The majority of the recommendations are directed at the county administrative officer or the board of supervisors, but according to Recommendation 14, “The civil grand jury would like to recommend that an award be given to Ms. Cardenas for her unrelenting service to the county of Lassen to get the auditor-controller’s office back on track and have a clean slate for the 2027 elected official that takes her place! If this transition is successful, this would call for an award of all IT employees involved in this effort as well.”

Responses to findings and recommendations
Penal Code §933.05 provides for only two acceptable responses with which agencies and/or departments (respondents) may respond with respect to the findings of a Grand Jury report:

1. The respondent agrees with the finding.
2. The respondent disagrees wholly or partially with the findings, in which case the respondent shall specify the portion of the finding that is disputed and shall include an explanation of the reasons therefore.

Penal Code §933.05 provides for only four acceptable responses with which agencies and/or departments (respondents) may respond in respect to the recommendations of the Grand Jury.

1. The recommendation has been implemented, with a summary regarding the implemented action.
2. The recommendation has not yet been implemented, but will be in the future, with a timeframe for implementation.
3. The recommendation requires further analysis, with an explanation and the scope and parameters of an analysis, with a timeframe for the matter to be prepared for discussion by the officer or head of the agency/department being investigated or reviewed, including the governing body of the public agency when applicable. This timeframe shall not exceed six months from the date of publication of the Grand Jury Report.
4. The recommendation will not be implemented because it is not warranted or is not reasonable, with a detailed explanation therefore … The governance of responses to Grand Jury Final Report is contained in Penal Code §933 and §933.05.

Responses must be submitted within 60 or 90 days. Elected officials must respond within 60 days, governing bodies (for example: the board of supervisors) must respond within 90 days.

Summary
It’s its summary, the grand jury noted the auditor’s office has “experienced a series of setbacks” including issues with the transition of the county’s payroll system that were “not handled well upon the retirement” by the then incumbent auditor-controller.

The office was left “in free-fall” after the 2023 election left the office vacant which caused the Lassen County Board of Supervisors to act impulsively “in an attempt to right the ship.” After an attempt to find a qualified person to appoint to the position, the supervisors combined the auditor-controller’s office with the treasurer’s office under Nancy Cardenas, who has announced plans to retire after her term expires December 2026.

Grand jury committee
In order to conduct its investigation, the grand jury formed a committee of five members (from a pool of 19).

According to the grand jury report, “The Audit and Finance Committee examined Board of Supervisors’ actions through meeting minutes, ordinances, and proclamations of the Board of Supervisors, downloaded from the county government website. Additionally, the Civil Grand Jury called several Lassen County representatives to testify before the full Civil Grand Jury and ask clarifying questions.”

“Public office is a public trust; elected officials serve the people,” the grand jury wrote. “In the course of this investigation, the Civil Grand Jury found it difficult to ascertain the facts needed to reach its findings in a timely manner,” in part due to the closure of the Lassen County Times and that announcements of government are now published in the Modoc County Record.

The grand jury expressed concern with the retirement of auditor-controller Diana Wemple after serving just 1 year of a 4-year term.

“A planned retirement implies that the county auditor-controller ran for a 4-year term (each term runs for four years from January to December), knowing that they did not intend to complete that term,” the grand jury wrote. “A hasty retirement precipitated by personal or professional struggles is as much a violation of trust between the official and the people.”

The grand jury noted the lack of a succession plan should a vacancy occur. Due to Wemple’s retirement, the board of supervisors were required to appoint a successor, and after interviews, the board unanimously appointed Julie Morgan, who did not run for reelection in 2023 and the seat again became vacant.

Lassen County Administrative Officer Richard Egan recommended Advisory Measures T and U — creating the office of the Director of Finance and whether that position should be elected or appointed. The voters rejected both measures.

“The impacts are huge without an Auditor! The County cannot run effectively without an Auditor,” the grand jury wrote. “Every county transaction begins and ends in the auditor’s office. If this position is not elected, it is

not serving the people of the county. If this position is appointed, they would serve the board of supervisors or the CAO, with the risk of no transparency on the status of Lassen County funds.”

Software transition issues
According to the grand jury, the county did not include its IT department in the decision to replace the old system and transition to a new one.

“Under the newly appointed Auditor-Controller Morgan, the Munis software package proves to be difficult to use for the auditor’s office,” the grand jury reported. “At this point, the IT Department had not been involved in the difficult software transition, and the auditor’s office was trying to manage this application on their own. Many processes had to be done by hand. Paychecks became inaccurate. IRS tax payments were made late. Cal-PERS retirement contributions were late and/or inaccurate. Late charges reached $80,000 (however, they were later negotiated down to $10,200 for Cal-PERS and $17,927.50 for the IRS).Classes meant to train employees went unattended by office staff and not enforced.”

Audit deficiencies
For several years, the grand jury noted deficiencies in the county’s accounting system, but it also noted,” It should be emphasized that this is not a finding of any sort of wrongdoing. It is a problem, however, in that it could result in the withholding of further funding by the Federal Government and an eventual loss of that revenue to the county.”

By then end of fiscal year 2019-2020 the grand jury found the county’s external independent audit had become “a hot mess.”

According to the grand jury report, “In their findings, the external auditors recommended creation of a year-end checklist for closing the books and publishing the County Financial Statement, fully staffing the Auditor-Controller Office by hiring more and better trained, educated, experienced staff and providing additional training to staff, with emphasis on accounting specific to governmental entities, to ensure not only competency, but also currency (Finding 2020-001). Further, the independent external auditors noted the continuation of failure to properly account for realignment of unused funds for the Mental Health, Social Services and Public Health sections of the H&HS Department. Among their recommendations was that Lassen County review at least five years past financial activity within H&HS to determine the value of the cash and investments remaining on the books there (Finding 2020-002).”

According to the grand jury, “End of FY21-22 – June 30, 2022, the external auditor found (Finding 2022-001) that employees lacked understanding of revenue recognition rules and were receiving inadequate oversight and guidance from management. Lassen County does not regain status as a low-risk auditee. This audit identified weaknesses in the county’s financial controls which allowed for an mis-reconciliation of accounts between the county’s general ledger and subsidiary ledgers kept by several county departments. Such reconciliations are normally done multiple times each fiscal year in accordance with GAAP. Most glaringly, the ledgers were not properly reconciled at the end of the fiscal year prior to compilation of the County Financial Statement. The independent auditor noted a disrupted office with many personnel and managerial changes. These, added to the disruptions brought on by the then-exploding crisis over COVID-19, led to a perfect storm in which the office of the auditor-controller capsized.

Preamble
During our investigations, issues that came to light:

• No plan exists to have a “non” zero number of candidates run in any given race (lack of attracting new candidates to run for office)
• Local civic engagement is at a low ebb and the solution is evasive.
• Attracting potential candidates from outside of Lassen County is difficult due to our rural location and cost of living and relocation expenses.
• The pay may be too low to attract a qualified candidate ($98k to $138k); however, the board of supervisors could move to increase the pay.

Findings
Finding eight
Lack of local press coverage (i.e., printed newspaper) or news outlet (broadcast news), limits communication to the public regarding current status of county business.

Finding nine
County government has failed to attract sufficient qualified persons and prospective officeholders to both fill the available positions and present a choice for the voters. This is not restricted to the office of the auditor-controller.

Finding 10
The process of appointment by the board of supervisors for the Auditor-Controller vacant seat was unsatisfactory given that the Office of the Auditor-Controller is a technically challenging and professionally demanding position. The Civil Grand Jury has found that the appointment process in 2020 resulted in the appointment of a candidate incapable of handling a looming software transition of a vital personnel and payroll system.

Finding 11
In 2022, there were nine months left before the installment of new county officers, yet the board of supervisors was slow and ineffective in its effort to recruit a new auditor-controller, leading to a hasty decision for appointment.

Finding 12
County employees charged with keeping track of both county funds and state and federal
dollars are sorely in need of training and professional development.

Finding 13
The civil grand jury recognizes that the deficiencies noted in the external single audits for the past 8 years, generally involve accounting methods required for Federal grants (accrual basis) being different from the perfectly adequate methods used for decades (cash basis) in the accounting of funds generally, and failures in various county departments to recognize this difference.

Finding 14
While problems with the transition from outdated accounting software to the new Munis software has been bumpy and wasteful, the effort has been stabilized and is on-track to full implementation by July 2024.

Finding 15
The civil grand jury found no written succession plan in the office of the auditor-controller. When the incumbent Wemple left office in 2020 for retirement, there was no one to fill the void. Appointed auditor-controller Morgan left in early 2023 for health reasons. Therefore, the statutory remedy of appointing a qualified officeholder was only partly successful, resulting ultimately in a vacant ballot in 2022, followed by a vacant office in 2023.

Finding 16
The results of the advisory votes on County Measures T & U by a margin of three to one, show that the voters want to elect their Auditor, and do not deem to trust that selection to the Lassen County Board of Supervisors. Moreover, the voters desire that the offices of Auditor-Controller and Treasurer-Tax Collector remain vital, separate, and independent parts of county government.

Finding 17
Public office is a public trust. When auditor-controller Wemple was re-elected to office in 2018, she had entered a four-year compact with the voters. Wemple let The People of Lassen County down by her early vacating of the trust the voters placed in her to fulfill that oath.

Finding 18
The civil grand jury found it hard to find some information on county websites, especially organizational charts to lead us to certain points of contact for further information.

Recommendations
Recommendation eight
The chief administrative officer should work with the Lassen County Board of Supervisors to budget for, seek, and hire a public information officer to report on a regular basis to the public, so the public is more informed and can elect their representatives with necessary knowledge in hand.

Recommendation nine
The board of supervisors should develop a comprehensive written plan to find and entice qualified persons to run for office.

Recommendation 10
The obvious option is to recommend conducting a special election, however, that is barred by California Government Code. Short of a legislative remedy, the Civil Grand Jury can find no effective recommendation for improvement.

Recommendation 11
The board of supervisors should engage in contingency planning for this scenario (finding F11), as there is a distinct possibility that this situation will repeat in the near future. The chief administrative officer should work to coordinate board development of a written planning document.

Recommendation 12
The chief administrative officer should mandate annual continuing education and training for all county staff that work with or handle funds and/or accounts, to include management of state and federal grants. Enforce attendance and test for comprehension. Initiate HR actions as required. The chief administrative officer should routinely assure the board of supervisors that this is carried out.

Recommendation 13
The board of supervisors should provide the auditor-controller’s office with resources to hire and train a compliance auditor, trained to find compliance issues before they show up in the Annual Single Audit.

Recommendation 14
The civil grand jury would like to recommend that an award be given to Ms. Cardenas for her unrelenting service to the county of Lassen to get the auditor-controller’s office back on track and have a clean slate for the 2027 elected official that takes her place! If this transition is successful, this would call for an award of all IT employees involved in this effort as well.

Recommendation 15
The board of supervisors should direct the chief administrative officer to request each elected county official to come up with a written succession plan as well as written professional development plans. These may be published in employee policies. The board of supervisors should consider the question of requiring the chief administrative officer to do a similar process for all non-elected county departments.

Recommendation 16
Based on the results of Measures T and U in the 2024 election, the board of supervisors should respect the decision and will of the voters. The board of supervisors should request the county clerk to hold separate elective races for the offices of auditor-controller and treasurer-tax collector for the June 2026 election. The office staffs should be prepared to separate as directed by the current incumbent Cardenas. The incumbent auditor-controller-treasurer-tax collector will leave office in January 2027, which means two separate county elected offices will be up for election.

Recommendation 17
The civil grand jury has no actionable recommendation for Finding 17.

Recommendation 18
The chief administrative officer should ensure that detailed organizational charts (with names and titles of each position) for the full county government, as well as each department/ office, are developed and published on the county website; as well as ensure they are updated and re-published whenever there are changes.

Recommendation 19
Future civil grand juries should visit all elected and non-elected offices for an assessment of those operations, whether good or bad.

2023-2024 Civil Grand Jury Members
*Curtis Bortle (foreperson) (vacated March 2024); *Todd Murray (foreperson pro-tem); *Matthew Urquizu (sargeant at arms); Eugene Ilten (secretary); *Deana M. Bovee (financial officer); Stephen Blakeman; *Jaime Guzman; *Harold Kimbriel; *Kathleen McIntyre; Jennifer M. Mossi; *Dan Paez; Katherine Pawley; *Alicia Presswood; *Leighton Ratkey; Janis Smith; Frank Stevenson; Brent Wellman; Erich Woltjen; and, *Glen Yonan.

*Returning members from 2022-2023 Civil Grand Jury.