In a report that could be a sea change for how City Hall handles the business end of city affairs, an outside consulting group said this week that Santa Fe’s municipal government is at dramatic risk for fraud. The financial controls that are present at all are almost completely useless, the report said; so much so that it may be impossible to know if city employees have committed fraud and, if so, how much.

At a press briefing Wednesday, City Manager Brian Snyder said of Santa Fe’s financial processes, “We have lots of things in place, but [together] they really don’t make sense.”

“It’s like the illusion of controls,” Finance Director Adam Johnson added.

In February, after four months on the job, Johnson raised a series of red flags about Santa Fe’s financial practices. Worried about inadvertent errors or potential fraud, Johnson approached Snyder and asked for a review. The city hired McHard Accounting Consulting, an Albuquerque firm, to analyze the city’s systems. The cost was $50,000. While city leaders may consider it money well spent, the resulting report is sour.

For years, reviewers said, both internal and external auditors failed to pick up on obvious problems that were compounded with each passing audit. Some employees have had virtually unfettered access to computer systems and authority so broad, consultants likened it to “the keys to the kingdom.”

The city’s assistant finance director, for example, has access that would enable her to assume human resource functions to create new employees, set rates of pay, adjust leave time—even generate a paycheck. But the access hasn’t stopped there. The assistant finance director has also been able “to change any transaction without supervisory approval,” the report said, as well as write checks and adjust outgoing wire transfers in any amount, payable to anyone.

There was no safety net, consultants said, to ensure mistakes weren’t made or to detect fraud.

McHard recommended a detailed forensic accounting investigation be conducted, but warned the inquiries will be difficult. Snyder said Wednesday the city plans to begin a search for forensic auditors. The city manager also said he had already placed some employees on paid leave pending the outcome of the city’s review.

City processes and software are antiquated, McHard found, and to make the many different systems compatible, employees often have to hand-enter data. That practice once more opens up taxpayer dollars to mistakes and fraud.

“We need to examine how internal and external controls and audits that we rely on to sound the alarm missed these problems,” Mayor Javier Gonzales said in a statement. “We need to find out if actual fraud took place or if there was only the risk of fraud. And we need to know that the changes in systems, trainings, and staff are made to protect our taxpayers from fraud and our employees from accusations of fraud.”

Fixing what’s wrong is already underway, city leaders said. Many city employees are using an automated timecard system, and police and fire departments will soon join them. The city is in the process of rolling out a new enterprise resource planning system—essentially the heart of city financial tracking. That new system will, leaders said, finally enable the city’s varied money-handling software systems to talk to each other without manual manipulation by city employees. And the city plans to restrict access to that system, only allowing employees to access necessary parts of the city’s financial structure. By January of 2019, Snyder and Johnson said, the city hopes to have a completely new system in place that will not only guard against mistakes and fraud, but improve the way Santa Feans interact with their government.

“It’s not a park, it’s not a road, it’s not something that people really get to enjoy or use, but it is the guts of how the city operates. And it must be fixed,” Johnson said.

Wednesday afternoon, city councilor and mayoral candidate Joseph Maestas called for a ballot measure to ask voters in the next city election to create an Office of the Inspector General to independently review fraud, waste and abuse in city government. In a statement, Maestas criticized a “good-old-boy system [that] creates and perpetuates a culture of negligence where real checks and balances are never really implemented.”

Over the years, Johnson, Snyder and City Attorney Kelly Brennan said Wednesday, the city’s bureaucracy had developed a dangerous system of creating vendors to pay out money for everything from legitimate city contracts to travel reimbursements to credits for overpaid water utility accounts. The city, with a population of about 84,000 people, has roughly 93,000 entities listed as vendors.

City leaders shied away from broadly criticizing front-line employees for finding workarounds to a clumsy system, instead saying the city had let them down by implementing a broken framework and cutting money for training.

Miles Conway of the American Federation of State, County and Municipal Employees union that represents many city workers, said the union is generally supportive of using new systems, provided the city doesn’t try to do it on the cheap.

“Santa Fe should be a model employer that retains and invests in its existing workforce,” Conway said in an email to SFR. “The report recommends seeking outside professional managers for some facilities. Instead, a greater emphasis on workforce development and advanced training opportunities can help grow our existing pool of public employees to be leaders.”

The city forwarded a copy of the McHard report to the Office of the State Auditor. Justine Freeman, deputy chief of staff for the office, told SFR the report hadn’t been reviewed for accountancy standards, but that the office appreciated the city’s efforts to review managment of taxpayer dollars.