They’re Baaack

Despite Interim Assistant Finance Director Ricky Bejarano’s July 13 assertion that CliftonLarsonAllen would not be returning as the City of Santa Fe’s external auditor, he’s now changed his tune. Wednesday evening’s City Council meeting saw the approval of a new contract with the firm for audit prep work, accounting and consulting for the Fiscal Year 2022 audit, though not the Fiscal Year 2021 audit it walked away from.

The one-year contract, which could be extended for an additional three years, is for up to roughly $3 million.

The number raised eyebrows. “It concerns me that we have to spend that much on outside accounting services,” said Councilor Signe Lindell. She said that while the contract is renewable, she fears that “if we put $3 million in the checkbook, we do spend $3 million.”

“I cannot find comfort with this,” Lindell said.

She cast the only vote against the contract; councilors Renee Villarreal, Chris Rivera, Carol Romero-Wirth, Jamie Cassutt, Amanda Chavez, Lee Garcia and Michael Garcia all voted to bring CliftonLarsonAllen back on board. So did Mayor Alan Webber.

CliftonLarsonAllen resigned from the FY21 project midstream in late April after finding the city had failed to account for some $4.6 million in cash balances. For the new contract, it was chosen in a Request For Proposal process over six other bidders. The RFP closed on June 24, and Interim Finance Director Alexis Lotero said the Audit Committee reviewed criteria including hourly rate, staffing levels, experience and references.

The contract limit amounts to more than the city has spent on audit services and audit prep, accounting and consulting since FY17, according to figures provided by city spokesman Dave Herndon, who pegged that figure at roughly $2.5 million.

But Bejarano and Romero-Wirth stressed that the $3 million figure is the ceiling and that, historically, the city hasn’t maxed out accounting contracts. They also said that if the city succeeds in beefing up its accounting staff, dependence on the external contractors would diminish.

Romero-Wirth framed the expenditure as an investment in cleaning up the city’s tangled finances—with external contractors working on prep for the FY22 audit, she said, city staff would be free to focus on streamlining financial processes.

She’s hopeful that the FY22 audit will be on time, and congratulated the Finance Department on successfully closing out the 2022 fiscal year on time for the first time since 2019.

“I think that is a really big deal,” she said. “It’s going to help us do a lot of things.”

Romero-Wirth also hopes that as the city works to address the staffing shortages that contributed to this mess, it will become less reliant on external accounting services.

Lotero called the Finance Department’s 40% vacancy rate “a major issue.” But, she says, it’s not the only one—the city’s internal financial mechanisms are also at fault.

Another reason Bejarano gave for the large dollar figure in the contract: The city has juggled multiple contractors in the past. This past year, City Manager John Blair said, four contractors were on the job, collecting a total of about $2.5 million. (Blair’s figures do not match those Herndon provided to SFR on Wednesday, which show nearly $1.4 million for audit prep, accounting and consulting.)

He also noted that the city’s long term goal is to hire a full-time finance director, who will be responsible for building out the city’s finance staff, including the accounting team, “so that we’ll be able to wean ourselves off these contracts in future years.”

Councilors raised the possibility of amending the contract with a lower price ceiling, but Lotero urged pushing the contract through quickly to get the city on track for future audits while staff expedite completion of the late FY21 audit.

Romero-Wirth and Rivera echoed that sentiment:

“Under normal circumstances I don’t think I’d be in favor of this contract, I think it’s very high, it’s very top-loaded,” Rivera said. “But I think getting back on track with audits is so important.”

He noted that the city can’t go out to bond for Infrastructure Capital Improvement Plan projects until the audit is complete, and many departments are also waiting on it before they can apply for grants.

“This is important to many different departments and future funding sources for the city,” Rivera said.

CliftonLarsonAllen did not respond to request for comment on why it chose to return under a new contract.

Editor’s note: This story has been updated from its original form to clarify information about the FY21 audit.