SAN BENITO COUNTY, Calif. — The San Benito County Board of Supervisors voted 5-0 Oct. 21 to ask the California State Controller to open an independent review of the county auditor-controller’s office after a fraudulent automated clearinghouse payment of $696,602.02 was made Oct. 15 and routed to an account that has since been closed.

County Counsel Gregory Priamos opened the special meeting by outlining options for the board and recommending that the board seek a state controller audit under state law. Priamos cited the state-controller authority in his presentation and provided a timeline showing the transaction was initiated Oct. 15, alerted to county officials by the bank on Oct. 15, and described in an auditor email the following morning.

Why it matters: Supervisors said the incident — the second major loss involving county funds in two years — raises concerns about whether internal controls were followed countywide and whether prior fraudulent or erroneous transactions could have occurred undetected. The board approved a letter to the state controller asking for an immediate audit and investigation and instructed county staff to continue preparing parallel steps, including evaluating forensic accounting proposals already solicited by the county.

What happened: According to the timeline presented at the meeting and an email read into the record from Auditor-Controller Joe Paul Gonzalez, the county’s Resource Management Agency (RMA) submitted a vendor-change request that altered payment instructions. A staff member in the auditor’s office called the telephone number on the vendor-change form instead of the vendor phone number listed in the county’s ERP vendor database; the call reached the fraudster’s account, and an ACH transfer was paid to a Truist Bank account instead of the intended vendor’s account. The auditor’s email read in public said, in part, “This regrettable breakdown in our fraud prevention procedures will be addressed, and our fraud prevention procedures will be hardened to prevent future fraud.” The auditor also wrote that “the payment was intended to be made to Teichart Construction.”

Bank and criminal response: Wells Fargo fraud personnel notified county staff when the payment appeared suspicious, and Wells Fargo opened a fraud claim and began recovery procedures. Zena Monroe, Wells Fargo relationship manager for the county, told the board the bank’s fraud team was investigating and that recovery remains possible depending on how quickly the funds were moved from the receiving account. The county also reported the matter to the sheriff’s office and, with local law enforcement, filed a claim with the FBI; the board heard that the FBI will lead the federal portion of the investigation because the transfer is a wire/ACH matter that may involve out-of-jurisdiction actors.

Officials’ concerns and controls under review: Supervisors and staff described multiple failures they said contributed to the event: (1) RMA lacked a dedicated fiscal officer at the time the vendor-change request was handled, (2) a junior auditor staffer performed the vendor-change verification and called the telephone number on the vendor form rather than the vendor phone number in the county’s New World ERP vendor database, and (3) existing fraud-detection services and bank ACH filters did not stop the transfer in time. Treasurer Melinda Casillas told the board the bank initially reversed a preliminary credit but that recovery remained pending because the recipient account was closed before funds could be recovered.

The auditor acknowledged responsibility for the office’s role and said the department will strengthen verification procedures and add cross-departmental checks, including a recommended checkbox and department-head attestation on vendor-change request forms and additional internal sign-offs. The auditor also said he supports agreed-upon procedures or a forensic review to identify weaknesses, and county counsel urged the board to request the state controller’s audit as the first step.

Scope and next steps: County counsel presented three formal options to the board: (1) ask the State Controller to audit the auditor’s office under California Government Code authority; (2) issue a county-funded forensic or agreed-upon-procedures engagement; or (3) seek court relief to compel the auditor to perform duties required by state law. The board voted to approve option 1, and the clerk recorded a 5-0 roll call: Supervisors Kozmiche, Zenger, Sotelo, Curl and Velasquez voted yes. County staff said they will continue to evaluate forensic accounting firms in parallel, keep the public informed as investigations proceed, and pursue bank and federal recovery efforts.

Context and prior incidents: County counsel and the auditor noted this follows a separate, internal embezzlement at the county library two years earlier that cost the county hundreds of thousands of dollars. Priamos said the RFP process for forensic auditors was initiated Oct. 10 with proposals due Oct. 31; he also told supervisors that the state controller has statutory authority to audit local agencies’ internal controls under the Government Code section he cited.

Public comment and board reaction: Members of the public urged a broad, countywide forensic audit, and several supervisors said they did not have confidence that this was an isolated incident. Multiple supervisors pressed for stronger controls, improved staffing in RMA fiscal roles and training for department staff who initiate vendor changes.

Ending note: The board’s formal vote to request the state controller’s office audit the auditor-controller’s internal controls was approved by a 5-0 roll call Oct. 21. County staff told the board they will continue criminal and bank recovery efforts, proceed with evaluation of forensic accounting proposals already solicited, and return to the board with further findings and recommended policy changes.