Mayor moves to dissolve internal audit department

Under Gonzales’ proposals, which follow scathing report on city practices, auditor functions would be outsourced

In what appeared to be a response to a stinging external review that found the city of Santa Fe is at risk of fraud and abuse, Mayor Javier Gonzales on Wednesday introduced a measure that would eliminate the internal audit department — flagged as ineffective in the wide-ranging report on city operations.

Gonzales, who was ill and did not attend the City Council meeting Wednesday night, also is proposing a resolution directing the city manager to develop a plan to outsource the functions of the internal auditor, a move that was recommended by the recent report. The outside audit was conducted by an Albuquerque accounting firm and made public last month.

Gonzales’ proposals were introduced by Councilor Signe Lindell in his absence.

The measure to repeal the audit department would charge the five-member city Audit Committee with managing the contract of an independent auditor, who would perform the functions currently done by the internal auditor. The two proposals are scheduled for a committee hearing in early November.

In a similar vein, Councilor Joseph Maestas on Wednesday proposed a resolution that would place a charteramendment question on the ballot in the March municipal election asking voters whether to establish an independent inspector general for the city. Maestas, who is running for mayor, introduced a similar proposal two years ago; it was voted down by councilors.

Maestas also suggested the city councilors all meet pub-

licly to discuss the fraud report’s findings. Councilor Carmichael Dominguez said he was considering calling a special meeting of the Finance Committee, which he chairs, to talk about the review and next steps, with the full council present.

It was not immediately clear where the proposals might leave internal auditor Liza Kerr, who has resisted the fraud assessment report’s suggestion that her department had not sufficiently identified financial concerns and a lack of internal controls. The department, established in the city code in 2012, consists of Kerr alone.

Kerr could not be reached for comment after business hours Wednesday to comment on the mayor’s proposal. Because he was sick with the flu, city spokesman Matt Ross said, the mayor also was not available for comment.

After the external audit was released in late September, Gonzales issued a statement that read in part: “It should go without saying that the situations these findings are based on are unacceptable and have to change, and I expect that to happen very quickly.”

The report cast Kerr’s office in an unflattering light, saying it was out of compliance with generally accepted government auditing standards as well as the city’s own internal audit measure.

The report also said Kerr was “loath to visit” City Hall and said she preferred what the report called her “quite homey” remote office, where she had set up a yoga studio space and, when accountants visited, was preparing to roast root vegetables in an oven.

The internal audit department “does not appear to have been particularly effective,” the report said.

“A contributing factor” to the myriad issues with a lack of internal controls at the city “is an internal auditor’s office which failed to uncover or address many obvious issues over the years,” the report added.

The city’s regular external audits also failed to note important concerns, the report said.

Kerr vigorously disputed this characterization after the report was released, saying, “Every audit I have mentions there’s no policies and procedures throughout the city — it’s one of my repeat findings in every audit I’ve ever had. It comes up over and over.”

She also said she’d be willing to work from an office in City Hall if asked but believed the remote office allowed her to keep a professional distance from the people and departments she audited.

The report did not identify any fraud or abuse that had occurred but rather named 62 areas of concern across the city’s financial and accounting affairs where there is a risk of fraud.

When the review was released, City Manager Brian Snyder placed two high-level city workers on paid administrative leave. They remain on leave. The city has not named those employees.

Citing the personnel aspect of the investigation, Snyder and Ross have declined to answer specific questions about the investigation into the two employees, what prompted the decision to take action, what the employees are suspected of and how long they might remain on leave.

Snyder has said he would take additional disciplinary action as necessary — including possible termination.

On Wednesday, Snyder said law enforcement has not been involved in the investigation and that no criminal conduct has been identified yet, adding that city management was still in the “information-gathering phase.”

He said that he and Finance Director Adam Johnson, along with an external consulting firm, are gathering that information.

Asked whether there is a time frame for the investigation to be completed, Snyder said “not at this time.”

“It’s important to get this right and work closely with the governing body on moving forward,” he added.