Journal entries

California comptroller finds failure to reconcile accounts and recording of journal entries hinders reporting to Humboldt CO.

California State Comptroller’s Seal

California State Comptroller’s Office press release:

State Comptroller Betty T. Yee today released her team’s detailed review of Humboldt County Internal Financial Controls, which found that a backlog of journal entries and lack of bank reconciliations contributed the county’s inability to complete financial reports in a timely manner – compounded by insufficient staff, inadequate training, and a lack of up-to-date policies and procedures.

Established in 1853, Humboldt County covers more than 4,000 square miles of California’s northern coast and had a population of over 136,000 at the last census. Among the most significant conclusions of the state comptroller:

  • The county does not reconcile its bank balances and county treasurer accounting records, nor does it reconcile cash and investment accounts in accordance with GC 26905. Timely reconciliations allow an entity to ensure that transactions in cash has been properly recorded, to help monitor cash flow and detect errors and fraud.
  • The county has accumulated a backlog of journal entries needed to finalize the financial statements. In addition to delaying reporting, the backlog made county accounting data unreliable. For example, in September and October 2021, Office of the Auditor-Comptroller (ACO) staff recorded journal entries totaling $106 million in the general ledger for fiscal year 2019-20. As a result, county management may have made financial decisions based on outdated data throughout the 2019-20 fiscal year.
  • Lack of staff has prevented the ACO from carrying out its duties and responsibilities. With just 13 full-time positions, the tax team had an average of three vacancies throughout the review period, even as a realignment of payroll functions on the ACO increased its workload.

The report highlights that an organization’s commitment to competence is a key principle of an effective internal control system. Although employees interviewed during the review expressed their willingness to complete the tasks assigned to them, they felt that sufficient training had not been provided. Additionally, the ACO department’s policies and procedures manual has not been updated since 2012 and does not reflect current processes.

The report includes the counties’ responses to the SCO’s findings and the SCO’s recommendations for improvement. Controller Yee requested a progress update in six months.

Committed to government transparency and accountability, Comptroller Yee and his audit team have identified more than $7.25 billion in waste, fraud and misuse of public funds since January 2015.

As California’s Chief Financial Officer, Comptroller Yee is responsible for the accountability and disbursement of state financial resources. The Comptroller has independent audit authority over government agencies that spend public funds. She is a member of numerous funding authorities and tax and financial control entities, including the Franchise Tax Board. She also sits on the boards of the country’s two largest public pension funds. Elected in 2014 and re-elected in 2018, Comptroller Yee is the tenth woman elected to statewide office in California history. Follow the Controller on Twitter at @CAController and on Facebook at California State Comptroller’s Office.