Analyzing the Modoc-gate Trail
The County’s Been to the State With
Its Payback Plan, Now Where Does It Go?
By Ray A. March
Considering the debate over whether or not county officials -- who don’t have the most shining reputation in Sacramento -- should reveal their “paying-ourselves-back“ financial plan to the State Controller’s Office, the final outcome was virtually anticlimactic.
At least it would appear so in reading a press release dispatch from CAO Chester Robertson’s office a week following May 14 when six county officials, including Modoc County Board of Supervisors Chair Patricia Cantrall, met with five representatives of the SCO.
From Robertson’s press release, possibly his first:
“It was emphasized that the controller’s office role is not to instruct the county on how to restore the deficit the county is facing, but to play a compliance role to ensure the county has a plan to deal with the deficit.”
It should be noted that county officials, including those responsible for raiding the treasury and causing a $13 million debt that must be repaid, have known the state’s enforcement role since late 2009.
To refresh memories: Various county officials and department heads have for a decade or more been fully aware of the fiscal musical chairs that caused the treasury deficit. These include former CAO Mike Maxwell, former Auditor Judi Stevens, Treasurer Cheryl Knoch, Supervisor Patricia Cantrall and past supervisor Dave Bradshaw and the heads of the library, social services and First 5 departments -- as alleged in the performance bond claim filed by the Board of Supervisors and Modoc Independent News coverage using the California Public Records Act.
Robertson continues:
“The controller’s office inquired about the current amount of the hospital enterprise fund deficit, and how the enterprise fund will be handled now that a hospital district has been formed. The county responded that we have currently been operating under annual inter-fund borrowing resolutions, and that we will work towards assigning the debt in upcoming financial statements."
No where in Robertson’s 378 -word statement is there any hint of which departments or districts will be “assigned the debt” that goes with “paying ourselves back.”
This raises the question, isn’t there the possibility that by assigning debt to various departments that it will reveal that the Modoc Medical Center was not the only department being floated by the illegal use of the treasury, and that it will expose other departments that were complicit in the treasury misappropriation?
Robertson did not respond to several e-mail messages left with his office, so Auditor Darcy Locken was asked the same questions.
“The intent is only to assign the debt owned by the hospital fund,” Locken explained. “Yes, there are other funds with deficit balances, but they have receivables against those balances.
“When we record inter-fund (inter-treasury) payables and receivables we would show a receivable in the positive funds and a payable in the hospital fund. There’s no mystery as to which fund owes the money. Assigning the debt really doesn’t bring any new surprises.”
These options do not rule out the possibility, as suggested by Robertson, to sell county-owned assets such as official buildings and to continue pursuing legal remedies.
Reference to “legal remedies” can be interpreted as an outside chance the county can collect from it previous auditor for costs it incurred when the state ordered a new audit, and an insurance settlement of some form on the performance bond claim.
30 comments:
There is no mystery as to which fund owes money and therefore no surprises simply because there are no records of the transactions thus far.
In other words, the county made up the transactions out of whole-cloth from the beginning, with nary a fund reconciliation in sight.
Now the county plans to "assign" the debt (to say that the hospital made us do it) even though the whole time these county officials were “borrowing” money they never took any measures to offset the deficits, such as to reduce health care and retirement costs, or to not give raises, or cut pay or reduce staff over the past 10 – 20 years while the hospital was supposedly the only source of overspending.
Hardly a realistic scenario. The overspending was obviously occurring throughout the county, and the hospital is simply the convenient scapegoat here.
The sad part is that most likely they’ll get away with it.
Exactly how does this assigning of the debt work? Does the library have an account where it says that they borrowed ‘X’ amount of cash from ‘Y’ account, and then repaid it on ‘Z’ date?
The same with the hospital and the other county fund accounts - for those who lent money, what actual records exist that show the actual transactions of these past (and current) lenders and borrowers?
It does sound like the county is just going to tell the state that the lending/borrowing came from ‘A’ and went to ‘B’, ’C’, ’D’, etc., and that the state can then do their best and try to make the county prove it.
Since the county has never had these “annual inter-fund borrowing resolutions” before, and certainly hasn’t repaid from where it has borrowed in the past, it doesn’t seem like the state or the taxpayers are going to get any answers after all.
Ray,
You sure have a lot of confidence in State politicians. I don't see many "shining reputations" amongst them that they can believably criticize the County. Wow, talk about pot and kettle tarnish!
Greg Small
Fort Bidwell
A little research on the Internet shows that interfund borrowing within states, counties, and municipalities is normal. There are accounting procedures to follow, usually including formal approval by the governing body.
Those of you with accounting experience know that the only real accounting is the balance sheet, how much you own minus how much you owe. The other accounts are just various kinds of reporting to aid in management. These later accounts are just on paper (yes, out of "whole cloth"). The exception for large organizations are accounts held for others (such a special district and First 5 funds), and those held under law or contract for a specific purpose ("restricted" funds). So as long as the County had enough money to pay its expenses, and the total funds available exceeded the total of all fiduciary and "restricted" funds, the County was solvent. You are in debt if what you owe exceeds what you own. Deficits in internal accounts are just paperwork.
The problem in Modoc was that small or quickly repaid interfund loans became large and eventually excessive in the case of the Hospital. For the small loans, it was not important that formal approval be obtained, but as the Hospital debt grew, the Auditor and Board failed to shift gears and do proper approval and accounting. In about 2005, the Auditor began charging interest for such loans, but that was just paperwork unless the funds were borrowed from fiduciary or "restricted" funds because all other money belongs to the County anyway. And without analysis of the Board minutes, we cannot see what kind of approval was granted. (Yes, I am lazy and have no plans to do this work. Water under the bridge, move on.)
The County failed to respond to the debt adequately, and the Auditor failed to do the accounting properly, but there was no theft. They did not "get away with anything". If failure were crime we would all be in jail.
Greg Small
Fort Bidwell
Off the subject but has anyone heard the news about MMC? They didn't make payroll last week and hourly workers still haven't been paid. Talk about poor management!! This takes the cake.
Hey greg. How do we know that no money was used for personal gain? They kept no real records. We have no acurate rcords to show where the money went. A piddling amount like $200,000.00 could probably totely disapear.
Greg, nobody said that 'getting away with it' means that criminal actions occurred in the decades of unaccounted for county borrowing (with no pay-back provisions) to the funds that were impacted - although that possibility cannot be blithely discounted.
What can be confirmed is that the county was delinquent (to say the least and in more ways than one) in its fiduciary duties to protect taxpayer funds, in that it took no remedial actions to reduce the deficits as they were happening.
In fact, as the library's recent reduction in taxpayer services show (due to poor budgeting practices, because they had years of warnings) the county continues to allow those with fiduciary duties (i.e., Cheryl Baker, the County Librarian) to not only overspend their budgets without consequence to themselves, but they allow this mismanagement to negatively impact other, lesser paid employees (1 and 1/2 employees eliminated) and thus negatively affect the taxpayer services they were hired to provide.
In other words, the cronyism in Modoc continues, because apparently only in Modoc can you be in charge of public funds, misspend them until they are gone, drain your reserves, and then fire people to make up an already foretold and now self-inflicted shortfall in income and still keep your job.
It may not be criminal, but it truly is pathetic.
I had not heard the rumor that MMC did not make payroll last week.
I personally distributed over 15 pay envelopes to hourly employees in my department.
I am not an hourly employee, but I am paid on the same schedule as hourly employees. My check was deposited into the bank it was drawn on Friday afternoon.
I had a look at the balance sheet a few days ago, and there is currently no problem I can see with cash for payroll.
Front line employees, management, administration and the Board of Directors are all working very hard to solve some longstanding problems at MMC. While there is a long way to go, I believe that great progress is being made.
Tony Richno
No Greg, the problem in Modoc is not that they made loans, but that they never told the taxpayers that they were "borrowing" money in the first place, not to mention that they were not paying it back. But that's what taking care of all your friends and relatives is all about around here.
Mr. Small,
Your theory about Modoc County doing things right and making small loans which were repaid over the years (no evidence forthcoming at all for this, by the way) and then somehow these becoming more and larger loans which were unpaid and unaccounted for (plenty of evidence for this, by the way) may have some merit, but by your own admission you'll not provide any evidence of this by paddling back up that river.
Water under the bridge, and all that. Critical inquiry and accountability be damned.
Apparently the Modoc Record is right. The Grand Jury in Modoc County is nothing but a paper-tiger. But that is the pot calling the kettle black…isn’t it? After all, the Modoc Record has hardly been a bastion of accurate reporting over the years in question on this illegal borrowing issue either.
Which is exactly the mindset that promulgated this fiscal fiasco, and apparently the course the county is taking in trying to deal with it. Hear no evil, see no evil, and speak no evil.
More disconcerting, however, is your contention that all of the funds within a county treasury, once there, belong to the county to do with as it wishes and that deficits in internal accounts are “just paperwork.”
This has proven to be a good formula for the county officials and employees and retirees from county employment in Modoc…but not so much for the Modoc County taxpayers themselves.
That is called cronyism: Special treatment and preference given to friends or colleagues, especially in politics.
What your theory also fails to consider is that the deficit spending that led to the $13 + million dollars of debt was based not only on funds that were only “on paper” and consequently were not there year after year such as Mr. Richno discovered, but more significantly was due to the use of one-time funds that would not be able (and are not meant) to support ongoing costs (i.e., the library reserve tax funds that were misspent), yet nevertheless were being used year after year to pay for salary increases, health benefit increases, and retirement plans for what became an unsupportable compensation package for County employees and retirees.
As a result all of these ongoing errors and misspending the salary, health benefit and retirement benefit increases are inflated by the erroneous numbers used for the past 10-20 years.
The taxpayers, as a “consequence” get to be the only accountable ones and get to repay the $13 – $20 million dollars that have (no one disputes this now) been illegally misspent, while those who benefitted for the most part will keep their jobs, their salaries, and get to retire and keep their inflated pensions. See the county librarian for a most recent example of such.
But Mr. Small, while most would agree with you that fiscal latitude is needed at the local level to ensure taxpayers get their money’s worth in allocating County funds received to the best advantage for the taxpayers they represent, it can hardly be argued that that is what occurred while going into debt to cover the employees, the retirees, the hospital, the county librarian, and the many other ”special interests” that happened to have the ear of the Modoc County Board of Supervisors and the County Superintendent of Schools.
The bottom line is that the county officials kept giving themselves raises (and still do, County Librarian Cheryl Baker being the latest ) in order to maintain their own personal status quo, thus ensuring their pocket books were less impacted by their money mismanagement than the taxpayers who actually pay them.
Hi Tony. According to my friend that works at MMC, there were at least 17 people that did not receive their pay on Fiday 6/1. On Thursday 6/7 they still had not been paid and had been advised by someone that if it was reported to the union or NLRB someone would lose thier job. Maybe there can be some answers about this at the next directors meeting. Can't reveal my name to avoid MMC staff from determining who "talked". Rather than looking at numbers on a piece of paper why not ask someone in management if it's true? I notice you did not realy respond to the truth or falseness of the rumor, only that your people got paid. If this is true, our loyal MMC empoyees are being abused and then told they will be fired if anyone complains.
I did not directly respond to the truth or falseness of the rumor because I make it a habit to not make statements of fact that I do not have firsthand, or substantiated knowledge of. It is very hard to have firsthand knowledge of something that did not happen.
I have no reason to believe that employees have not been paid since 6-1, but since I did not personally hand a pay envelope to every employee at the hospital, I cannot state as a fact that everyone was paid.
Here are some things that I CAN state as fact:
I KNOW that all employees in my department as well as myself were paid.
I KNOW that I have heard nothing at the hospital about anyone not being paid on 6-1 as scheduled.
I KNOW that in the past when clerical or computing errors in payroll have been discovered in my department and they involved a missing check or underpayment the errors have been rectified within hours by issuing a manual check. The hospital processes thousands of paychecks (or direct deposits) each year, so some errors naturally occur. I believe I have had 2 or 3 of these in my department the past year.
I BELIEVE that as a director level employee of the hospital involved in hospital wide issues I would have been informed of a problem of this magnitude.
I DO NOT BELIEVE that any member of hospital administration would threaten an employee, much less 17 of them with termination for bringing a problem such as this to light. There are state and federal statutes which provide very real legal protection to an employee in a situation such as this. Most non-management employees are represented by a union that very aggressively defends the employee's legal rights (as they should)
If an employee believes they have not been properly paid, they should contact their supervisor immediately so that the matter can be rectified.
Tony Richno
What a waste of time for that whole gang to go to Sacramento when the same thing would have been accomplished with a fax machine. Can anyone offer anything gained by this trip that could not have been done with a fax machine. Why didn't Shorty get to go?
Since there apparently are no actual records of the loans to any departments over the years, then won't this "assigning debt" just be another accounting trick that has very little to do with reality?
It is very interesting that our auditor answers questions promptly and completely and honestly but we often get a incomplete or no answer from Robertson. Maybe he has to check with those pulling his strings before he speaks.
maybe the auditor is contributing to this blog.
Anything new with the AG visit? Are they returning, or have they finished their investigation?
Hey Tony. The MMC workers that didn't get paid on time got paid on the following Wed. or Thurs.. No extra $$ for being late. Not even an offer to pay overdue charges or bounced check charges for the effected employees. What a croc!!. Tony you have your head in the sand if you realy think county officials don't retaliate against whistle blowers. They even threaton and intimidate private citizens right out in the open at BOS meetings if someone disagrees or blows a whistle. It's hard to believe that you do not see these things.
Its odd that Tony will sign his name but June 18, 2012 6:08 AM will not!
Anonymous at 8:11.
If I gave my name, the management at MMC will determine who talked and they will lose thier job. This is not the first time this has happened there also.
Would you give your name if you knew it would mean your friends would become unemployed?
Who cares if commenters want to remain anonymous. The question is: what is the truth?
And speaking of the hospital, why hasn't it been brought up that they are still losing money?
The facts are Modoc medical center is always going to lose money, the question is can they keep their losses below $2 million a year (the money brought in by the special tax).
It would also seem that the hospital administration could find better things to do with their time than fighting with the MMC hospital auxiliary.
It is going on three months since the auxiliary was removed from the hospital and that is lost money that would have gone to buy medical equipment for the hospital.
Isn't it about time that district members started going to the hospital board meetings and finding out what's going on?
I don't believe that my head is in the sand.
I do believe that whistleblowers in Modoc County are sometimes retaliated against. I can think of several examples of situations where this appears to have happened.
I do not believe that the fear of retaliation against employees for bringing alleged payroll problems to light is justified, for reasons that I explained in a previous post.
The hospital certainly does have continuing challenges to face, but I believe that there has been significant improvement in both fiscal performance and the quality of care delivered over the past few years. I expect this trend of gradual improvement to continue.
Unfortunately, there is no simple fix to most of the problems. The regulatory environment for a hospital, particularly in California is very onerous, and complicates the operation to levels that are hard to believe for someone not intimately involved.
I would agree that the public should take an interest in their hospital and it's operations. Board meetings are open to the public, and a great deal of information is presented.
As an example, the history and current situation with the hospital auxillary was openly discussed at board meetings. The hospital's financial situation is also routinely discussed during open meetings.
Tony has surprised me. I thought he was a typical head in the sand, everything is good type of Modoc management person. Now he admits that there is retaliation against employees that speak out (whistleblower). There may be some hope for this county if we get another one like him. With that kind of honesty he won't last much longer though. He made the type of admission not allowed here. Remember Charlton?
When is the next hospital board meeting and where?
Serious allegations about payroll issues need to be addressed out in the OPEN. If these are true, without anyone actually reporting it, then shame on them. If they are untrue, double shame.
You do not need to go to the Hospital District Board to complain, you can go to this website:
http://www.gotovertime.com/FAQ/late-and-bounced-paychecks.html
and get information about making a complaint. If there truly are 17 employees with this problem, I am certain no one will know who complained, safety in numbers you know. So IF this is true, don't just stick your tongue out, go do something to make them comply with the law. Or shut up.
From what I have heard the Hospital is trying to take over the Auxiliary.MMC is putting all kinds of rules in place so the Auxiliary toes the line, rules that the employees don't even have to follow.Just plain silly if you ask me. The hospital is trying to fix the auxiliary and they can't even fix themsevles,MMC is spending money faster than it is coming in.
Come to think about what is the Hospital Board going to do about building the new Hospital?
So you folks in Modoc first decided to borrow money and not pay it back to keep your deficit-spending hospital and your county employees and county retirees salaries and benefits intact - and now you have created a hospital district to tax yourselves to pay for these same deficit spending practices?
One would have thought you'd learned your lesson in the first place (by going into all of that debt), and that the better idea would have been to create a health delivery system that didn't rely on millions of dollars of deficit spending in order to provide services to the local community.
Until there is shown to be negative consequences for the wrongs and violations of law perpetrated by so many of our elected officials there will be no change. Example: They still haven't been forthcoming with budget info and it's nearly July. Cronyism and nepotism and self importance by elected officials is killing this county.
Has anyone noticed the grand Jury report? Part of it highlights the new overpriced Toyotas purchased by our CEO's mother-in-law without any shopping around or bids at all and then getting BOS aproval to make the purchase with no questions asked by any BOS member.
Sure hope this nonsense of unfettered nepotism ends with the new supervisors coming onboard.
Post a Comment