Treasury Audits Go Unnoticed
While the two state-ordered audits of Modoc County’s financial books are drawing considerable attention, two treasury audits released at the same time have attracted little public notice.
Immediately following the in-depth report from Vavrinek, Trine, Day (VTD) and its critical findings of the county’s inept bookkeeping on Jan. 25 were audit reports from Treasurer Cheryl Knoch.
The Treasury Oversight Committee Compliance audits reviewed the county treasurer’s records for fiscal years 2008-2009 and 2009-2010, and although they fell in the shadow of the two audits ordered by the State Controller’s Office they reveal a significant message.
The message is a repeat of the oft-heard admonition from the independent auditors that the county is seriously remiss in its handling of financial records -- even though in the case of the treasury there is an oversight committee specifically charged with watchdog duties.
What was revealed in the audits by Haws, Theobald & Auman of Susanville was that the oversight committee did not meet during the 2008-09 fiscal year -- the same year misappropriations from the treasury were made.
At the same time the county’s investment policy did not authorize Knoch's investments of $3.5 million in a Plumas Bank government CLA$$ account during fiscal year 2008-09 and $6.6 million in 2009-10 for a total of $10.1 million by the end of fiscal year 2010.
While apparently not an illegal move by Knoch, the auditor’s reports point to the lack of oversight committee review, noting that the Board of Supervisors on Jan. 15, 2008 approved the county’s investment policy.
“Prior to investing in the Plumas Bank Cla$$ Account I did have the Board of Supervisors authorize the investment and I did make sure that it was an investment that is allowable in the Government Code, but yes, it was not noted in the investment policy,” Knoch told the Modoc Independent News.
Members of the oversight committee in 2008-09 were Paul Breshears and Terry Williams, public representatives; Alice Marrs, county auditor’s office; Carol Silveria, office of county superintendent of schools; and Supervisor Loren “Shorty” Crabtree.
Knoch said the reason there was no meeting of the oversight committee for the fiscal year ending in 2009 was because there was no audit for it to review.
“From July 2006 to 2009 the Treasury Oversight Committee met once a year in May,” Knoch said. “The draft audits were not completed during the 2008-09 fiscal year. We received the draft in July of 2009. Since that is one of the main functions of the committee, we held off our meeting until we had an audit to review.”
Asked if she provided the oversight committee with reports during the 2008-09 year even though it did not meet, Knoch said that she did.
“Yes, I provide the oversight committee with quarterly investment reports and that is stated in the investment policy,” she replied in an e-mail exchange.
In 2009-10, following the disclosure of the county’s misappropriation of the treasury, including millions of dollars belonging to the schools, the oversight committee increased its school representation by adding Gary Jones, county superintendent of schools; Lane Bates, superintendent of Modoc Joint Unified School District (MJUSD); and Alan Hopkins, MJUSD board member. The public member representation was reduced to one, Terry Williams.
At the request of the school officials, Knoch moved school funds to separate, protected CLA$$ accounts at Plumas, according to Hopkins.
“I can’t fault her for making the decision to put county treasury money into Plumas Cla$$ accounts,” Hopkins said. “I believe there was no intention on her part to hide anything, but the policy should have been followed.”
-- Barbara March and Ray A. March
Wednesday, February 9, 2011
Tuesday, February 8, 2011
Impact on Schools Revealed
Editor’s Note: The following article is part of our on-going coverage of the response from community leaders to the two state-ordered audits of Modoc County’s financial records for the fiscal years 2007-through 2009 and their related impacts. In this report we examine an analysis provided by Gary Jones, Modoc County Superintendent of Schools, which can be found in its entirety at www.modoccoe.k12.ca.us.
From a public school's viewpoint there is virtually no good news coming from the two audits ordered by the State Controller’s Office of Modoc County’s financial records.
The two audits were mandated by the state in late 2009 after it was disclosed that county officials, including the Modoc County Board of Supervisors, chief administrative officer, auditor and treasurer had misappropriated an estimated $20 million of the county’s investment pool, which included money belonging to the schools.
A succinct report recently posted to the county schools website states that the audits not only reinforce the knowledge that the county’s record keeping has been nonexistent, but that the schools and county could both face still more audits and serious ramifications, including:
-- The county’s noncompliance with federal reporting requirements could trigger federal audits of both the schools’ records and the Secure Rural Schools and Counties program because the schools were sub-recipients of federal funds and also receive an estimated $1.3 million annually from the Rural Schools program.
-- The county has been incorrectly allocating interest earned on treasury funds, meaning the schools are due an unknown amount of interest that was misused by the county.
--- The county states they will pursue TRANS loans even though they have a qualified audit and there is serious doubt they can continue operating as “a going concern.” School districts with qualified audits typically cannot get a TRANS loan.
-- Families with school-age children will not move to Modoc County because of its economic straits. Families will also move from Modoc County and the schools can anticipate a declining enrollment meaning less money to the schools.
The report goes on to question the legality of the county’s continued uses of money from the treasury referred to as “restricted” funds, or funds that are not under a specific governing body.
Editor’s Note: The following article is part of our on-going coverage of the response from community leaders to the two state-ordered audits of Modoc County’s financial records for the fiscal years 2007-through 2009 and their related impacts. In this report we examine an analysis provided by Gary Jones, Modoc County Superintendent of Schools, which can be found in its entirety at www.modoccoe.k12.ca.us.
From a public school's viewpoint there is virtually no good news coming from the two audits ordered by the State Controller’s Office of Modoc County’s financial records.
The two audits were mandated by the state in late 2009 after it was disclosed that county officials, including the Modoc County Board of Supervisors, chief administrative officer, auditor and treasurer had misappropriated an estimated $20 million of the county’s investment pool, which included money belonging to the schools.
A succinct report recently posted to the county schools website states that the audits not only reinforce the knowledge that the county’s record keeping has been nonexistent, but that the schools and county could both face still more audits and serious ramifications, including:
-- The county’s noncompliance with federal reporting requirements could trigger federal audits of both the schools’ records and the Secure Rural Schools and Counties program because the schools were sub-recipients of federal funds and also receive an estimated $1.3 million annually from the Rural Schools program.
-- The county has been incorrectly allocating interest earned on treasury funds, meaning the schools are due an unknown amount of interest that was misused by the county.
--- The county states they will pursue TRANS loans even though they have a qualified audit and there is serious doubt they can continue operating as “a going concern.” School districts with qualified audits typically cannot get a TRANS loan.
-- Families with school-age children will not move to Modoc County because of its economic straits. Families will also move from Modoc County and the schools can anticipate a declining enrollment meaning less money to the schools.
The report goes on to question the legality of the county’s continued uses of money from the treasury referred to as “restricted” funds, or funds that are not under a specific governing body.
Monday, February 7, 2011
Modoc Independent News
Seeks Release of “Claim”
A second request for all documents related to an insurance claim against the county’s performance bond coverage was filed over the weekend by the Modoc Independent News.
Seeking release of the claim on grounds that it falls under the California Public Records Act (California Government Code Section 6250) is Ray A. March, editor of the newspaper.
March first appeared before the Modoc County Board of Supervisors Jan. 25 asking that the claim be made available for pubic inspection. His request went without comment from members of the board, and since then the county has failed to reply within the legally required 10 days of notice, according to March.
The claim, prepared by former DA Gary Woolverton when he was in office, seeks damages against various county officials covered by performance bonds for the misappropriation of an estimated $20 million from the treasury.
To date the Board of Supervisors has not decided whether the claim should be filed with its representative Trindel Insurance Fund, a multi-county joint powers authority based in Weaverville.
Trindel and county officials have not responded to repeated calls and e-mails seeking comment on the claim.
Addressed to all Modoc County supervisors, DA Chris Brooke, CAO Rick Rudometkin, Asst.CAO Pam Randall and others, the newspaper’s request seeks:
“Copies of all forms of recorded information pertaining to the document commonly known as the “claim against performance bonds,” to include but not limited to all related documentation, such as notes, drafts, memoranda, e-mail correspondence, and any revisions and drafts of the actual 'claim against performance bonds' that communicate, outline, reflect and/or describe the procedures followed, factors considered, and documentation involved in the drafting of a proposed or potential 'claim against performance bonds' under consideration by the Modoc County Board of Supervisors.”
The newspaper has also asked for release of the county’s insurance policy, but officials including Rudometkin and Randall have not responded.
County officials have until the close of business on Tuesday, Feb. 15, 2011, to comply with the newspaper’s request or show reason why they will not.
Seeks Release of “Claim”
A second request for all documents related to an insurance claim against the county’s performance bond coverage was filed over the weekend by the Modoc Independent News.
Seeking release of the claim on grounds that it falls under the California Public Records Act (California Government Code Section 6250) is Ray A. March, editor of the newspaper.
March first appeared before the Modoc County Board of Supervisors Jan. 25 asking that the claim be made available for pubic inspection. His request went without comment from members of the board, and since then the county has failed to reply within the legally required 10 days of notice, according to March.
The claim, prepared by former DA Gary Woolverton when he was in office, seeks damages against various county officials covered by performance bonds for the misappropriation of an estimated $20 million from the treasury.
To date the Board of Supervisors has not decided whether the claim should be filed with its representative Trindel Insurance Fund, a multi-county joint powers authority based in Weaverville.
Trindel and county officials have not responded to repeated calls and e-mails seeking comment on the claim.
Addressed to all Modoc County supervisors, DA Chris Brooke, CAO Rick Rudometkin, Asst.CAO Pam Randall and others, the newspaper’s request seeks:
“Copies of all forms of recorded information pertaining to the document commonly known as the “claim against performance bonds,” to include but not limited to all related documentation, such as notes, drafts, memoranda, e-mail correspondence, and any revisions and drafts of the actual 'claim against performance bonds' that communicate, outline, reflect and/or describe the procedures followed, factors considered, and documentation involved in the drafting of a proposed or potential 'claim against performance bonds' under consideration by the Modoc County Board of Supervisors.”
The newspaper has also asked for release of the county’s insurance policy, but officials including Rudometkin and Randall have not responded.
County officials have until the close of business on Tuesday, Feb. 15, 2011, to comply with the newspaper’s request or show reason why they will not.
"If county officials fail to comply with the law, we will have no choice but to seek legal recourse, just as we did when the county balked at producing the personnel files of Rudometkin," March said.
The Modoc Independent News is the print extension of the Modoc County Daily News blog.
Civility in Public Discourse
Editor’s Note: While we encourage the dialogue that is swirling around the speculation of replacing Modoc County’s CAO and county counsel, we support civility in public discourse, whether it be on this news site or a public meeting. Therefore, we will only publish those comments that speak specifically to issues rather than personalities.
Case in point. A recent poster made this perceptive comment about Modoc’s current county counsel, John Kenny, “The BOS loves him though, because they use his lack of comments or advice as an excuse for wrongdoing. I have personally heard Pat Cantrall use that excuse several times: "Legal counsel didn't tell us it was illegal to send all that money to the hospital". The guy is getting paid large to be an alibi for the BOS.” A point accomplished without name calling or personal reference.
Editor’s Note: While we encourage the dialogue that is swirling around the speculation of replacing Modoc County’s CAO and county counsel, we support civility in public discourse, whether it be on this news site or a public meeting. Therefore, we will only publish those comments that speak specifically to issues rather than personalities.
Case in point. A recent poster made this perceptive comment about Modoc’s current county counsel, John Kenny, “The BOS loves him though, because they use his lack of comments or advice as an excuse for wrongdoing. I have personally heard Pat Cantrall use that excuse several times: "Legal counsel didn't tell us it was illegal to send all that money to the hospital". The guy is getting paid large to be an alibi for the BOS.” A point accomplished without name calling or personal reference.
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