Office of the State Auditor Releases City of Santa Fe Fiscal Year 2021 Audit to the Public | City of Santa Fe

Office of the State Auditor Releases City of Santa Fe Fiscal Year 2021 Audit to the Public

31 Jul, 2023

Today, the City of Santa Fe’s Fiscal Year 2021 (FY21) Audit is available to the public. The City of Santa Fe worked with its Independent Public Accountant, Carr Riggs & Ingram CPAs, to submit the FY21 external financial statement and compliance audit to the New Mexico Office of the State Auditor (OSA) on Friday, June 30, 2023.  The FY21 audit covers the time period beginning July 1, 2020, and ending June 30, 2021.

Carr Riggs & Ingram CPAs will present the FY21 audit report to the Finance Committee tonight, July 31, 2023, to the Audit Committee on Thursday August 3, 2023, and to the Governing Body at the next regular meeting on Wednesday, August 9, 2023.

Highlights from the Audit:

  • The Independent Auditor’s Report on the FY21 financial statements expresses an unmodified, or “clean” opinion. This is the best opinion type, and it means that the auditor concluded that the financial statements are presented fairly, in all material respects, in accordance with generally accepted accounting principles.
  • The FY20 audit report identified 21 findings, and the FY21 audit report identified 22 findings.
  • 10 of the findings from the FY20 audit were resolved in the FY21 audit, demonstrating the progress that the City is making to improve internal controls over financial information and implement improvements to business process.
  • The Independent Auditor’s Report on compliance for each major federal program and on internal control over compliance expresses a qualified opinion. This means that the auditors concluded that the City complied, in all material respects, with Federal grant requirements, except for specific requirements related to the Airport Improvement Program and the Federal Transit Cluster.

Mayor Alan Webber said, "This 'clean' opinion is the best you can get and expresses confidence in our financial statements. We’ve fixed 10 findings from the year before. We’ve already addressed some of the findings in this audit and now we’ll go to work to address the other findings, while improving our overall performance."

Emily K. Oster, Finance Director for the City of Santa Fe, said: "I am proud of the hard work that our dedicated team put in to complete the Fiscal Year 2021 audit. The findings identified in the audit provide a roadmap for corrective action, which in many cases is already implemented or underway. We are making progress towards achieving our goal of timely and accurate financial reporting."

John Blair, Santa Fe City Manager said, "There are two takeaways for every Santa Fe resident today–the clean audit illustrates residents should continue to have faith in the quality financial work conducted at the City, and the City has resolved its problems related to timely audits and we’re getting back on track. I’m proud of everyone on Team Santa Fe who’s working to ensure future audits are clean, accurate, and on-time."

The City is actively working with its auditors and accounting consulting team on completing the FY22 audit. The Finance Director’s goal is to submit the FY22 and FY23 audits to the State Auditor’s Office by the deadline of December 31, 2023.

Findings Summary:

Of the 21 findings identified in the FY20 audit, 10 (48%) were resolved in the FY21 audit. The FY21 audit report identified 22 findings, 11 were repeated from FY20 with modifications, and 11 are new.

Breakdown of the 22 findings in FY21:

  • There are four material weaknesses in financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the City’s financial statements will not be prevented, or detected and corrected on a timely basis.
  • There are three significant deficiencies in financial reporting. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control, that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
  • There are two material weaknesses related to federal grant requirements.
  • There are two material non-compliance and material weaknesses related to federal grant requirements.
  • There are three significant deficiencies related to federal grant requirements.
  • There are three other matters that are required to be reported by the State Audit Act (Section 12-6-5 NMSA 1978).
  • There are five other noncompliance that are required to be reported by the State Audit Act (Section 12-6-5 NMSA 1978).

Additional City Actions:

  • The City has taken action to fill key positions, improve business practices, update critical software, and get caught up on financial reporting.
  • In the past year the City has hired a Finance Director, Grants Manager, Purchasing Officer, and Controller. These new staff members bring substantial experience and knowledge of governmental accounting, financial reporting, and auditing.
  • The Munis ERP system was successfully upgraded in January 2023. The new version of the system provides additional functionality needed to improve business practices through modernization and automation.
  • The City is actively working with its auditors and accounting consulting team on completing the FY22 audit.
  • The Finance Director’s goal is to submit the FY22 and FY23 audits to the State Auditor’s Office by the deadline of December 31, 2023.

 

Click here to read the audit report on the OSA website. Full List of Findings Details:

Financial Statement Findings

2021-001 Schedule of Expenditures of Federal Awards and Internal Controls over Grant Reporting (Material Weakness)

  • Summary: The City struggled to produce an accurate Schedule of Expenditures of Federal Awards (SEFA) for FY21. Three different versions of the SEFA were provided to the auditors.
  • Corrective Action: Implementation of functionality in the Munis ERP system to allow federal expenditures and revenues to be tracked.
  • Responsible Officials: Finance Director and Grants Manager.
  • Timeline for Corrective Action: Project underway in FY24, target for completion is summer 2024.

2021-002 Internal Controls over Financial Close and Reporting (Material Weakness)

  • Summary: The City did not have a monthly or quarterly accounting close process in FY21. 
  • Corrective Action: Implementation of a monthly close process in Fiscal Year 2023 (FY23). 
  • Responsible Officials: Finance Director and Controller.
  • Timeline for Corrective Action: The City implemented a monthly close process in FY23.

2021-003 Controls over Journal Entries (Material Weakness)

  • Summary: The City’s general ledger required multiple correcting journal entries in FY21. Supporting documentation was not attached to journal entry transactions in the Munis ERP system.
  • Corrective Action: Implementation of timely reconciliation processes and changes to procedures to require supporting documentation in Munis for all journal entries.  
  • Responsible Officials: Finance Director, Accounting Officer, and Controller.
  • Timeline for Corrective Action: In FY23 the City began requiring that all journal entries in Munis have adequate supporting documentation attached prior to posting. Beginning in FY23 and continuing into FY24 the City is working with accounting consultants to develop and implement reconciliation processes.

2021-004 Controls over Cash Balances (Material Weakness)

  • Summary: In FY21 the City fell behind on entering cash transactions in Munis and reconciling the books to the bank. 
  • Corrective Action: Implementation of timely reconciliation processes, implementation of a month-end close process, and training of staff.
  • Responsible Officials: Finance Director, Treasury Officer, and Controller.
  • Timeline and Estimated Completion Date for Corrective Action: In FY23 the City implemented a monthly close process. Beginning in FY23 and continuing into FY24 the City is working with accounting consultants to develop reconciliation processes and train staff. 

2021-005 Management of Professional Consultants (Significant Deficiency)

  • Summary: In FY21 the City utilized multiple contractors to assist with accounting functions. These vendors were not effectively managed to ensure that goals and objectives were met.
  • Corrective Action: Reduce the number of contractors assisting with accounting work, and hire City staff with the skills, knowledge, and experience to effectively oversee the work on the contractors.
  • Responsible Officials: Finance Director, Accounting Officer, and Controller
  • Timeline and Estimated Completion Date for Corrective Action: In FY23 the City consolidated accounting consulting services with one vendor. A Finance Director with a background in government finance joined the City in FY23. Weekly check-in meetings are conducted with the contractors to discuss workload and monitor progress on assigned tasks. Contractors are required to submit timesheets and supporting documentation, which are reconciled to invoices prior to payment.

2021-006 CDBG Reporting (Significant Deficiency)

  • Summary: In FY21 the City submitted Community Development Block Grant (CDBG) reports before the reporting period was over and did not retain adequate supporting documentation for the information reported. 
  • Corrective Action: Hire City staff and consultants with the skills, knowledge, and experience to complete required reports timely and accurately. Provide training to City staff on reporting requirements. 
  • Responsible Officials: Finance Director, Grants Manager, Affordable Housing Director, Community Development Housing Manager, and Grants Analyst.
  • Timeline and Estimated Completion Date for Corrective Action: The City hired several key employees in FY22 and FY23 who understand the required reporting and what supporting documentation should be retained. In FY22 the City retained the services of a contractor with expertise in the CDBG program.

2021-007 CDBG Program Income (Significant Deficiency)

  • Summary: In FY21 there were differences between the federal IDIS system and the City’s financial records. The IDIS reports did not include supporting documentation.
  • Corrective Action: Hire City staff and consultants with the skills, knowledge, and experience to complete required reports timely and accurately. Provide training to City staff on reporting requirements. 
  • Responsible Officials: Finance Director, Grants Manager, Affordable Housing Director, Community Development Housing Manager, and Grants Analyst.
  • Timeline and Estimated Completion Date for Corrective Action: The City hired several key employees in FY22 and FY23 who understand the required reporting and what supporting documentation should be retained. In FY22 the City retained the services of a contractor with expertise in the CDBG program.

 

Federal Award Findings

2021-008 Equipment and Real Property Management (Material Weakness)

  • Summary: In FY21 the City did not maintain an equipment listing tracking items purchased with federal funding, and the City did not conduct a physical inventory. 
  • Corrective Action: Hire City staff with the skills, knowledge, and experience to comply with federal requirements for equipment and real property management. Provide training to City staff on federal requirements. 
  • Responsible Officials: Finance Director, Airport Manager, Controller, Grants Manager.
  • Timeline and Estimated Completion Date for Corrective Action: In FY23 the City hired an Airport Manager with substantial experience managing municipal airports and federal funding for airports. In FY24 policies and procedures for equipment tracking and inventory are being developed and implemented, and training on federal grant requirements will be provided to City staff.

2021-009 Matching and Financial Reporting (Material Noncompliance and Material Weakness)

  • Summary: In FY21 the City did not submit required federal reports to the Federal Aviation Administration, did not retain adequate supporting documentation for the information reported. 
  • Corrective Action: Hire City staff with the skills, knowledge, and experience to comply with federal reporting requirements. Provide training to City staff on federal requirements. 
  • Responsible Officials: Finance Director, Airport Manager, Grants Manager.
  • Timeline and Estimated Completion Date for Corrective Action: In FY23 the City hired an Airport Manager with substantial experience managing municipal airports and federal funding for airports. In FY24 the Finance Department and the Airport Manager are working on implementing internal controls over federal reporting and providing training on federal grant requirements to City staff.

2021-010 Special Test and Provision, Wage Rate Requirement (Significant Deficiency)

  • Summary: In FY21 the City did not include language in a construction contract that is required for contracts utilizing federal funds.
  • Corrective Action: Hire City staff with the skills, knowledge, and experience to comply with federal reporting requirements. Provide training to City staff on federal requirements. 
  • Responsible Officials: Finance Director, Grants Manager, Purchasing Officer, Assistance City Attorney.
  • Timeline and Estimated Completion Date for Corrective Action: In FY23 the City hired a Grants Manager and a Purchasing Officer with substantial experience and knowledge in procurement and contracting requirements for federal funds. In FY24 the Finance Department and the City Attorney’s Office are working on implementing internal controls over contracting and providing training on federal grant requirements to City staff.

2021-011 Suspension and Debarment (Significant Deficiency)

  • Summary: In FY21 the City did not retain documentation showing that review for suspension and debarment of vendors was performed as part of the procurement process for contract utilizing federal funds.
  • Corrective Action: Hire City staff with the skills, knowledge, and experience to comply with federal reporting requirements. Provide training to City staff on federal requirements. 
  • Responsible Officials: Finance Director, Grants Manager, Purchasing Officer.
  • Timeline and Estimated Completion Date for Corrective Action: In FY23 the City hired a Grants Manager and a Purchasing Officer with substantial experience and knowledge in procurement and contracting requirements for federal funds. In FY24 the Finance Department will providing training on federal grant requirements to City staff.

2021-012 Activities Allowed, Allowable Costs, and Period of Performance Controls over Non-payroll (Material Weakness)

  • Summary: In FY21 the City did not retain documentation showing that non-payroll transactions were reviewed and approved by the Program Director for Federal Transit Cluster grants.
  • Corrective Action: Hire City staff with the skills, knowledge, and experience to comply with federal reporting requirements. Provide training to City staff on federal grant requirements. 
  • Responsible Officials: Finance Director, Grants Manager, Transit Director.
  • Timeline and Estimated Completion Date for Corrective Action: In FY23 the City hired a Grants Manager with substantial experience and knowledge in federal grant compliance. In FY24 the Finance Department will providing additional training on federal grant requirements to City staff.

2021-013 Cash Management (Material Noncompliance and Material Weakness)

  • Summary: In FY21 the City did draw down federal grant funding timely, and the drawdowns did not include adequate supporting documentation.
  • Corrective Action: Hire City staff with the skills, knowledge, and experience to comply with federal reporting requirements. Provide training to City staff on federal requirements. 
  • Responsible Officials: Finance Director, Grants Manager, Transit Director.
  • Timeline and Estimated Completion Date for Corrective Action: In FY23 the City hired a Grants Manager with substantial experience and knowledge in federal grant compliance. In FY24 the Finance Department will providing training on federal grant requirements to City staff.

2021-014 Activities allowed, Allowable Costs, and Period of Performance Controls over Non‐payroll (Significant Deficiency)

  • Summary: In FY21 the City did not retain documentation showing that non-payroll transactions were reviewed and approved by the Program Director for COVID-19 Coronavirus Relief Fund grants.
  • Corrective Action: Hire City staff with the skills, knowledge, and experience to comply with federal reporting requirements. Provide training to City staff on federal grant requirements. 
  • Responsible Officials: Finance Director, Grants Manager, Transit Director.
  • Timeline and Estimated Completion Date for Corrective Action: In FY23 the City hired a Grants Manager with substantial experience and knowledge in federal grant compliance. All Finance Department Grants team members and several City employees from other Departments participated in specialized federal grants training in April 2023 to develop more robust knowledge of grant compliance requirements. In FY24 the Finance Department will providing additional training on federal grant requirements to City staff.

 

Section 12-6-5 NMSA 1978 Findings:

2021-015 Controls over Payment Vouchers (Other Matter)

  • Summary: The City utilizes payment vouchers to make payments without having a purchase order in place. In FY21 there was not a maximum dollar amount established for payment vouchers, and the documentation did not indicate review by the Chief Procurement Officer.
  • Corrective Action: Utilize Vendor Self Service functionality in Munis ERP system to reduce the need for payment vouchers. Develop and implement a City-wide policy and procedure for the use of payment vouchers.
  • Responsible Officials: Finance Director, Controller, Purchasing Officer, A/P Staff.
  • Timeline and Estimated Completion Date for Corrective Action: In FY23 the Finance Department implemented changes to reduce the use of the miscellaneous vendor code for direct vouchers, including stepping up efforts to require vendors to register in Munis using the Vendor Self‐Service module. Because of these efforts, the volume of payment vouchers utilizing the miscellaneous vendor code dropped considerably in Fiscal Year 2023. In FY24 the Finance Department will work on a City-wide policy and procedure for payment vouchers.

2021-016 Controls over Accounts Payable (Other Matter)

  • Summary: In FY21 the City did not correctly accrue the balance owed as of the end of the fiscal year to Santa Fe Solid Waste Management Agency (SWMA) and Buckman Direct Diversion (BDD) Project.
  • Corrective Action: Develop and implement a procedure to ensure that transactions with related parties are recorded in Munis timely and accurately. 
  • Responsible Officials: Finance Director, Controller.
  • Timeline and Estimated Completion Date for Corrective Action: As part of the FY22 and FY23 audits the Finance Director, and the Controller will work with SWMA and BDD to ensure that transactions between the City and the related parties are accurately reflected as of the end of the fiscal year. A procedure will be developed in FY24 to document the process.

2021-017 Pledged Collateral (Other Noncompliance)

  • Summary: In FY21 the City had deposits at financial institutions that were unable to provide documentation showing that they complied with state statues regarding pledged collateral. The City did not conduct monitoring during FY21 to ensure that the institutions complied.
  • Corrective Action: Meet with the financial institutions to determine if statutory pledged collateral requirements can be met. If they cannot, move the deposits to a different financial institution.  
  • Responsible Officials: Finance Director and Treasury Officer.
  • Timeline and Estimated Completion Date for Corrective Action:  Target for completion is winter 2023.

2021-018 Emergency Procurement (Other Matter)

  • Summary: The auditors identified one transaction in FY21 where the City did not complete all the requirements of the emergency procurement policy.
  • Corrective Action: Hire knowledgeable and experienced purchasing personnel and provide training to City staff on procurement policies and procedures.
  • Responsible Officials: Finance Director and Chief Procurement Officer.
  • Timeline and Estimated Completion Date for Corrective Action: In FY23 the City hired a Purchasing Officer with substantial experience and knowledge in procurement and contracting requirements. In FY24 the Purchasing Officer will develop and deploy City-wide procurement training.

2021-019 Budgetary Compliance (Other Noncompliance)

  • Summary: inf FY21 the City’s actual expenditures exceeded the budgeted expenditures in six funds.
  • Corrective Action: Review actual expenditures at the end of the fiscal year and process budget adjustments as necessary. Ensure that staffing in the Budget Office is sufficient to allow for time to monitor actual expenditures to budget and process adjustments when needed.
  • Responsible Officials: Finance Director, Assistant Finance Director, and Budget Officer.
  • Timeline and Estimated Completion Date for Corrective Action: The Budget Office was able to achieve full staffing by filling all its vacancies in FY23. Appropriately staffing the Budget Office allowed time to implement additional oversight processes in FY23. Attrition has occurred in FY24, and the Finance Department is actively recruiting.

2021-020 Cash Appropriations in Excess of Available Cash Balances (Other Noncompliance)

  • Summary: For FY21 the City budgeted deficits more than available cash balances in six funds.
  • Corrective Action: Adequately staff the Budget Office to allow staff to review and monitor budgets for potential deficits throughout the fiscal year. Get caught up on financial statement audits so that Budget staff have more accurate and timely information to use in budgeting. 
  • Responsible Officials: Finance Director, Assistant Finance Director, and Budget Officer.
  • Timeline and Estimated Completion Date for Corrective Action: The Budget Office was able to achieve full staffing by filling all its vacancies in FY23. Appropriately staffing the Budget Office allowed time to implement additional oversight processes in FY23. Attrition has occurred in FY24, and the Finance Department is actively recruiting. The City’s goal is to get caught up on financial statement audits in FY24.

2021-021 CDBG Activities allowed and Allowable Costs over Payroll (Other Noncompliance)

  • Summary: For FY21 the City’s CDBG reports in the federal IDIS system did not agree to the financial records and did not include adequate supporting documentation. 
  • Corrective Action: Hire City staff and consultants with the skills, knowledge, and experience to complete required reports timely and accurately. Provide training to City staff on reporting requirements. 
  • Responsible Officials: Finance Director, Grants Manager, Affordable Housing Director, Community Development Housing Manager, and Grants Analyst.
  • Timeline and Estimated Completion Date for Corrective Action: The City hired several key employees in FY22 and FY23 who understand the required reporting for CDBG and what supporting documentation should be retained. In FY22 the City retained the services of a contractor with expertise in the CDBG program.

2021-022 Late Audit Report (Other Noncompliance)

  • Summary: The City did not complete its required annual financial statement and compliance audit for FY21 by the deadline of December 15, 2021. 
  • Corrective Action: Hire City staff and consultants with expertise in governmental financial reporting to assist with getting the City’s audits completed.
  • Responsible Officials: Finance Director, Accounting Officer, and Controller.
  • Timeline and Estimated Completion Date for Corrective Action: The City hired several key employees in FY22 and FY23 with substantial experience in governmental accounting and auditing. In FY23 the City engaged the services of an accounting firm with expertise in governmental financial reporting and auditing to provide audit preparation consulting services. The City’s goal is to complete the FY22 and FY23 audits by the FY23 deadline of December 15, 2023.
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