Balancing the County’s Budget Deficits

                              on the Backs of Children

                                                                  By Ray A. March

Part 18

Jan. 10, 2002
Knoch Takes It Personally

The day following the commission’s meeting at which members of the public said they had concerns and were suspicious of the county’s handling of Prop. 10 funds coupled with Commissioner Rosemary Nelson’s allegation that information held by the county was being kept secret, an offended Treasurer Cheryl Knoch surfaced with a memo to Donna Michelson.

Knoch’s  entire memo follows:
   
“I would like to receive agendas for all the future Children and Families Commission meetings, in advance of the meeting. I would also like to receive the past two meeting’s minutes, when they are available.
   
“It was brought to my attention today that there was a presentation of an audit report of the Children and Families Commission’s financial transactions last evening and that my name and office was brought up during the presentation of the audit. I find it very unfortunate that I was not invited or made aware of the meeting. I would have liked to hear the presentation, which supposedly questioned my investment strategies and be given the opportunity to clear up any misunderstandings.
   
“I feel that I deserve to review a copy of the actual audit report that was disclosed at the meeting, and I would like to have a copy of the Children and Families Commission by-laws that are in effect.
   
“I believe that I have been very cooperative with you and your requests and with giving the information requested by the auditing accountant’s office. If that is not your perception, I would like to hear your reasoning.”
   
In effect, assuming the best defense is an offense,  Knoch denied the allegations of Nelson, reprimanded Michelson and make her own demands on the commission.
   
Before the month was over, Phillip Smith would send a hand written note to Michelson asking her to find a way the commission could circumvent state law and keep the Prop. 10 funds in the treasury.
   
Next: Part 19
    But Smith’s odd request was still in Michelson’s future. First she had to respond to Knoch’s memo.

Balancing the County’s Budget Deficits

                            on the Backs of Children

                                                           By Ray A. March

Part 17

Jan. 9, 2002
Harbaugh Ignores Fiscal “Red Flag”

At this meeting of the commission, Donna Michelson, when pressed, was reluctant to sign off on the audit because she was not personally privy to all its sources and findings -- a reflection of the distance between her and Auditor Judi Steven’s office when it came to financial information involving the commission.
   
Michelson said she was unable to verify certain expenditures and that she could not vouch for “internal control” of Prop. 10 funds held in the treasury.
   
In a question and answer period conducted by Vice Chair Dr. Edward P. Richert, Kristin Domenichelli reveals, “We had a hard time. We tried to get a lot of information from the county and we were unable to obtain it.”
   
Rosemary Nelson: “This kind of concerns me. A red flag that concerns me. And it makes me a little resistant (an apparent typo in the minutes stated she was “resonant”) to approve an audit when these kinds of things are kept secret or not being shared. This is public money and this should be open to the public. The public should be able to look at these records.”
   
In spite of Nelson’s expressed concerns, Harbaugh said she had no problem with the audit’s process. Cochran agreed.
   
In answer to a question by Nelson, Michelson explained that the commission had no agreements with the county. “At this point they control the funding and they have no liability to us and no responsibility.”
   
Michelson told the commission that -- in clarification as to why there was no agreement with the county -- Chief Administrative Officer Mike Maxwell told her “he would not sign it because we are independent and separate and distinct and there is nothing he would be managing for us and there was no need to do a MOU (Memorandum of Understanding).”
   
Cheryl Maxson, identified in the minutes as a concerned citizen,  asked if there was nothing wrong with the audit -- as argued by Harbaugh and Cochran -- then “how come these concerns and red flags are coming up? There has to be some weakness there in order to have this much of an effort and as many eyebrows and question marks raised…”
   
Nelson concluded her statements with the advice that the commission should avoid any conflicts or perceived conflicts of interest regarding which office was managing the commission’s funds, the county or the commission.
   
“We need to do everything we can so we don’t have a conflict of interest or a perceived conflict of interest,” she told her fellow commissioners who did not respond.
   
Maxson repeated an argument she made at previous meetings and that was the recommendation that the commission place its Prop. 10 funds in a separate account, preferably Bank of America “which would alleviate a lot of the conflict of interest.”
   
This Jan. 9, 2002 meeting of the commission was the final turning point. For the remainder of the month there is incredible jockeying for position among the major players,  particularly Treasurer Cheryl Knoch, commissioners Phil Smith and Carol Harbaugh, Executive Director Donna Michelson and her ally CPA Kristin Domenichelli.
   
Next: Part 18
    Treasurer Cheryl Knoch, assuming an offense is the best defense, is offended by Nelson’s “red flag.”

Editor's Note: Considering the financial status of Modoc County, we think this article will interest our readers. 

http://latimesblogs.latimes.com/lanow/2012/02/stockton-goes-into-bankruptcy-mediation.html

Balancing the County’s Budget Deficits

                             on the Backs of Children

                                                                 By Ray A. March

Part 16

Jan. 2, 2002
Bombs Away!

Two months after her letter to Kristin Domenichelli, Harbaugh followed up with a formal proposal outlining essentially the same points and arguments that she made to Domenichelli -- that Harbaugh’s office take over fiscal management of Prop. 10 funds, and included Michelson’s options as an employee of the commission or an independent "conditional" member of Harbaugh’s management staff.
   
There was no mention as to who would exercise Michelson’s options -- whether Michelson, Harbaugh or the commission as a body.

Jan. 4, 2002

CPA Kristin L. Domenichelli sent a letter to Executive  Director Donna Michelson confirming the audit of the commission had been completed and in quick succession dropped a series of bombshells -- all stemming from “on-going problems associated with the commission’s connection with the county….”
   
Bombshell One: “It appears that there are very few transactions that occur in any given month yet the breadth and scope of the problems are somewhat staggering as it relates to getting basic operating expenses paid and tracking down the funds,” Domenichelli wrote.
   
Bombshell Two: (There is a) “lack of communication between the executive director and the county as to the financial status of the commission.”
   
Bombshell Three: “Funds received from the state, which were earmarked specifically for the commission, were initially deposited into an unrelated fund.”
   
Bombshell Four: “Payments for rent have had to be made on more than one occasion by private individuals because the county could not make the payment due to minor technicalities (no line item in the budget.)”
   
Bombshell Five: “Whether intentional or not, it is unacceptable to have public funds poorly managed and/or misappropriated. At any given time, there must be full accountability of all monies received and spent each month. Anything less is unacceptable and puts commission members at risk.”
   
Bombshell Six: “In accordance with the bylaws of the Modoc County Children and Families Commission, I believe that the commission should continue to proceed with its separation from the county immediately. This will alleviate most, if not all, of the problems incurred to date and will allow the commission to focus on its programs rather than its financial affairs.”
   
Copies of Domenichelli’s letter went to all members of the commission.

Jan. 8, 2002

Outside auditor Lynn Talbott in a letter confirming that he had audited the financial statements of Children and Families Commission for the year ending June 30, 2001, repeated the same recommendation that CPA Kristin Domenichelli had made three months earlier and again on Jan. 4.
   
“My recommendation is to open a separate bank account and write the checks in payment of the monthly expenses from this account,” Talbott stated.
   
Next: Part 17
    Commission Rosemary Nelson raises a red flag, only to be ignored while members of the public express suspicions -- also to be ignored.