S.F.’s 2022 audit shows resolution of some problems
Auditors still fault city over issues with payroll, delays in federal grants
The city of Santa Fe’s audit for the 2022 fiscal year shows it resolved some of its problems from previous years, but several continued — including issues with its internal financial reporting system and its process for tracking expenditures from federal grants.
The audit report, submitted to the State Auditor’s Office in early December, about a year past its due date, was published on the state agency’s website Thursday.
“We’re just glad that they got it in, and we’re looking forward to getting their 2023 [audit] in,” said Christopher Hall, a spokesman for the Office of the State Auditor.
An independent firm listed 17 findings in the audit, including two significant deficiencies and six material weaknesses. That compares with 22 findings in the city’s 2021 audit and 21 in 2020. From 2021 to 2022, 10 of the findings were resolved, and 12 were carried over.
The 2022 audit was dubbed unmodified, or “clean,” which means the auditing firm believes the financial statements submitted by the city are accurate.
The city lauded the opinion in a Friday afternoon news release, in which officials said the findings show the city is improving from previous years and is on track to resolving its ongoing audit issues.
City Manager John Blair said in a statement he “couldn’t be more proud of our Finance Department” and those who “fixed the longstanding issues the City’s faced with completing timely financial audits.”
Finance Director Emily Oster said the audit report is “good news” for the city.
“Two audits in less than six months is really fast, and the results are encouraging,” she said.
The two significant deficiencies cited in the report involved the payroll process and delays in submitting financial and performance reports for federal grants on a timely basis.
During testing of the payroll process, the report said, one out of 25 timesheets had not been approved because the supervisor was not available at the time, which could result in fraudulent payroll activity.
The city said it is working with the Human Services and Information Technology departments to ensure all timecards have a backup approver and that repeated failures to comply will come with disciplinary action.
When it comes to federal awards, the audit said the city does not have sufficient controls
in place to ensure reports are being submitted on time, something independent auditing firms have flagged in the past.
As in the 2021 audit, submitted to the state in June following an 18-month delay, the city said in the 2022 report it already has implemented many of the processes to correct the problems cited. The city hired a grants manager in fall 2022 who is working to establish a system for accurately tracking grant funding and expenditures, a years-long problem, the report said.
Another repeated issue — a practice of not adhering to a monthly or quarterly accounting process — also has been addressed, the city said, and a month-end close process was implemented in fiscal year 2023.
Other findings noted in the audit include the following:
♦ Less pledged collateral for a deposit at Guadalupe Credit Union than required by state statute.
♦ Not adjusting year-end payable balances to the Santa Fe Solid Waste Management Agency and Buckman Direct Diversion Project.
♦ Using the emergency procurement method for consulting services that did not meet state standards for what constitutes an emergency.
The report also said the city budgeted deficits in excess of available cash balances in a number of funds, including a deficit of almost $8 million for city street projects and more than $2.2 million for parks and trails.
One of the findings noted former finance director Mary McCoy, who left the position in April 2022, was still listed as a signatory on a city account with Guadalupe Credit Union.
The city’s response to many of the findings, none of which it disputed, noted the finance office experienced “major staffing shortages” over the past several years “due to the COVID-19 pandemic and a shortage of workers with budget expertise,” the city stated in the report. “It was very difficult for the Budget Director to monitor all Funds during this period.”
The city’s remaining overdue audit, for the 2023 fiscal year, is expected to be complete by May 15. City officials previously had said the audit would be submitted by the Dec. 15 deadline but later pushed the date back several months.
The overdue audit is preventing the city from accessing capital outlay allocated by the Legislature due to an executive order requiring local governments and other agencies to be in compliance with audit rules before accessing grants.
Oster said the city’s external auditor, Carr, Riggs & Ingram, will present the findings to the city’s Audit Committee on Jan. 25 and to the Finance Committee and the full City Council the week of Jan. 29.
“I’m thankful for the city staff team that worked their tails off to get this audit submitted,” City Councilor Michael Garcia said, but added the findings are concerning.
“We are not in the clear yet,” he said. He also said he continues to have transparency concerns regarding how the city handles news relating to the audit process. City councilors were notified by the city manager Friday morning the audit had been published, he said, but were asked not to spread that information until the city sent out a news release later in the day. City officials have emphasized to Santa Fe-area legislators they will be back in compliance with the rule before the next fiscal year begins July 1 and have asked them to secure funding for infrastructure projects in the current, 30-day session.
At least one lawmaker, Linda Serrato, D-Santa Fe, has signaled a reticence to do so. In an opinion column recently published in The New Mexican, Serrato wrote she needs the city to set a date for two projects she funded in previous sessions before she can appropriate more.
Senate Majority Leader Peter Wirth, D-Santa Fe, who is married to City Councilor Carol Romero-Wirth, said he saw Serrato’s column but had not spoken to her about her concerns.
Based on the results of the recently released audits, Wirth said he is comfortable supporting capital outlay for the city in this session.
“I’m confident the city is on the right track,” he said.