Together, 10 public funds managed by Humboldt County had a negative balance of over $30 million for the 2019-2020 fiscal year, a point of major concern for the county’s chief auditor but an issue the county says will be fixed — mostly — by pending transactions.
Each of the 10 special revenue funds ended the fiscal year in the red by amounts ranging from $5.3 million to just over $1 million. Among the funds: Mental health, liability insurance, roads, workers’ compensation, aviation capital projects, and social services administration.
Auditor-Controller Karen Paz Dominguez says the negative balances have put the county in a tough place. But a county spokesperson says the current state of funds is “premature” since there are pending transfers and external funding that will correct the situation in the coming months.
“By the end of each year, the fund balance is typically brought to positive standing,” spokesperson Manny Machado said in an email, adding that there were only two funds with negative balances at the end of the previous fiscal year.
The 2019-20 fiscal year concluded on June 30. But the county typically allows pending transactions to be completed for several months after the fact. Paz Dominguez said all the funds will be finalized after Sept. 25.
Machado provided a long list of external transfers, reimbursements and refunds that he said will bring the county’s red accounts back to positive territory, including $2 million in federal CARES Act money to reimburse dollars spent by the county coping with the coronavirus pandemic.
“There is still a lot of work that needs to be done in closing (fiscal year) 2019-20.” Machado said in an email. “This year in particular with COVID-19, there is more lingering at this time than there would normally be.”
Time will tell if the fund balances do return to the correct side of zero, but Paz Dominguez said she doubts many of them have a chance.
“There aren’t that many transactions left that are going to improve the fund balances,” she said. “If anything, there’s a lot of transactions that will make them go lower.”
The blanket disagreement between auditor and county is the latest in a pattern of disputes over the county’s financial practices, which the auditor insists have been institutionalized and protected by county officials, despite her efforts to reform them.
“Other counties have their (finances) together,” Paz Dominguez said last month. “It’s ridiculous what’s happening in Humboldt County.”
Auditors from other counties have resisted commenting directly on Humboldt County’s financial situation. But in interviews, they made clear that not a single fund should ever have a negative balance — and especially not at the end of the year.
“I don’t allow it,” said Brian Muir, the auditor-controller of Shasta County, earlier this month. “We don’t have negative funds.”
Muir clarified that a fund, usually a smaller one, might go negative at some point in the year as it waits for a reimbursement transfer. But he added it shouldn’t stay that way for long.
“I guess from my standpoint, I consider it to be critical that you address it,” Muir said. “If there’s a negative fund balance, I want to know how it’s going to get fixed.”
Lloyd Weer, the auditor-controller for Mendocino County, concurred that a county should “strive” to keep its fund balances from ever dipping into the red.
“It’s not impossible; it happens,” Weer said. “But, all in all, those funds should eventually be made whole and there should be a plan in place for the county to be working on getting (the balance) back to a surplus or zero.”
There were two funds with negative balances at the end of the last fiscal year. One was a “debt service” fund designed to pay for the principal and interest costs associated with construction at the Humboldt County Courthouse.
The other is the county’s mental health fund, which had a balance of negative-$3.2 million this month.
Machado said that particular fund has “consistently struggled” to maintain a positive balance, but added that the county estimates the fund will be positive by the end of 2020 after a major effort by the health department to improve the fund’s “fiscal health.”
“One issue is the lengthy claiming process from state and federal sources; an issue that at this point is largely outside our control,” Machado said in an email. “Mental Health is still receiving funds due to the county from fiscal years 2012-13, 2013-14 and 2014-15 with a total of $16 million in receivables due to them.”
Ultimately, the auditor-controller holds responsibility for the county’s accounting. When Paz Dominguez met with other county auditors, for instance,…