At The Dais Again

Santa Fe City Council returns in-person to daunting task of untangling the city’s finances ahead of meeting with state auditor

The Santa Fe City Council was a little rusty on in-person protocols on Wednesday evening during its first face-to-face meeting of 2022, and the job at hand didn’t make the transition any smoother.

That’s because it was time for Interim Finance Director Alexis Lotero and Interim Assistant Finance Director Ricky Bejarano to update the governing body on the status of the city’s audit.

The city’s financial standing has long been in question—since the 2017 publication of the McHard report, a forensic audit that revealed deeply-rooted fraud and abuse risks in city government’s policies and procedures.

More recently, Santa Fe’s financial woes have centered around the officials’ persistently late audits.

Santa Fe’s 2021 audit didn’t come in on time; neither had the previous three. Last month, State Auditor Brian Colón announced his office would intervene in the city’s finances to “prevent further financial crisis for the City.”

Colón’s inspection of the city’s finances came after the firm hired to conduct the fiscal year 2021 audit, CliftonLarsonAllen, stepped away from the job.

On Wednesday afternoon, Colón requested a meeting with city officials and the New Mexico Department of Finance and Administration.

Later, during the Council meeting, City Manager John Blair offered a response to Colón’s allegations.

Blair said he hopes the meeting will help him get “some guidance about best practices around our audits and our finance management and some of the things that were being referenced to in the letter we received from [CliftonLarsonAllen] when they withdrew from the audit.”

That wasn’t the only recent departure from the city’s Finance Department.

City officials announced that Mary McCoy, the former finance director, had left her job the day after the city approved the fiscal year 2023 budget—a $382.8 million spending plan.

Standing in for McCoy, Bejarano said since the auditing firm pulled out, “we were required to do a one-to-one match between what was going on the general ledger and the bank transactions.”

Since April 25, an Albuquerque-based contract firm has reviewed 3,000 transactions, and they’ve accounted for many of the discrepancies, Bejarano said. “We started with a $4.6 million difference; we’re at a $1.4 million difference.”

The city is working with REDW, the financial advisement firm, to reconcile Santa Fe’s bank accounts.

There are eight bank accounts that feed into one general operating account, although some of the money in those accounts comes from a specific revenue type. This clumping of revenue presents challenges, Bejarano said, when trying to match the transactions with city-specific revenue sources.

Often such money transfers are recorded as “batch transitions”, which can lump together up to 10 different deposits as a single transaction.

The city has quite a few line items to parse out. By Bejarano’s estimates, the city is dealing with close to 154,000 transactions.

Bejarano also noted that the meeting with the state auditor would illuminate how the city would select a new auditing contractor, “or how the new auditor is going to be selected for us.”

Councilor Michael Garcia asked whether the Finance Department expected the state would take oversight of the City of Santa Fe’s finances.

“That is always a possibility, DFA does have the authority, essentially, to take over operations. In my opinion, having been in the controller’s office…I believe it is an unrealistic possibility,” Bejarano answered.

The vast majority of council meetings have been conducted over Zoom since the COVID-19 pandemic began in March of 2020. The governing body returned to in-person meetings this time last year, but the subsequent rise in coronavirus cases forced the governing body back to remote gatherings.

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