Audit Arrival

After two years in the works, the City of Santa Fe has received a clean opinion on financial statements for the 2021 fiscal year from the New Mexico Office of the State Auditor.

“It took longer than we had hoped to get to this point, but the results should be reassuring to the public and interested parties,” Finance Director Emily Oster tells SFR.

The original due date for the FY21 audit was December 31, 2021, leaving the city with one remaining late audit—FY22 audit was due seven months ago—and the regular due date for FY23 coming up in December.

According to Oster, a clean or unmodified opinion is the best of four possible types of audit opinions. She says it means “the auditor is saying you can rely on the financial statements for making decisions.” One example of a decision could be whether or not an investor would want to buy bonds issued by the city.

The city engaged several firms during the process of completing the FY21 audit, but later consolidated into one consulting contract. The official findings come from Carr Riggs & Ingram CPAs. Of the 22 findings in the final audit, Oster tells SFR 11 are repeated from the previous fiscal year and 11 are new. By the time the findings were issued, Oster says the city had already addressed 10 of the older problems, noting some of the repeated issues were “legacy issues that go as far back as 2018.”

The city’s late audits happened, she says, because of a variety of overlapping issues. The pandemic presented hurdles to the process, including the challenges of remote workers, plus vacancies and staff changes.

“The city was faced with a number of challenges and also trying to respond in real time to a public health emergency affecting the population. This was a difficult time for the world and the city was not immune from that,” she says.

Plus, the more time that passes before an audit is completed, the harder it becomes to secure all the necessary documents. Oster joined the long-standing audit effort as director of the finance department in September 2022 after formerly working in the state Department of Finance and Administration.

City Manager John Blair, who took the reins at City Hall in January 2022, says the city is working hard to get back on track.

“We are very pleased to see a clean audit,” Blair tells SFR on Friday after briefing city councilors on the audit earlier in the day. “The city is humming at a level it hasn’t done before, and we’re moving in the right direction to make sure this is a concern that’s in our rear-view mirror and never have to look back.”

The city manager and the finance director say that none of the findings were surprising to city officials, who were already working on resolving most of the identified issues.

While the city’s financial statements received a clean opinion, its federal single audit received a “qualified opinion” instead. Oster says two findings pointing to material noncompliance with federal grant requirements are among the findings her office is most concerned about. Auditors found the city did not comply with requirements regarding the Airport Improvement Program or the funding for transit.

“The reason that they concern me is because we could be at risk of losing federal funding. I think we are taking corrective action and we’ll be able to avoid losing federal funding, but material noncompliance that goes unresolved for a long period of time could result in the loss of federal grants, which we don’t want,” Oster says.

State Auditor Joseph Maestas tells SFR that Santa Fe remains on the list of cities at-risk for delayed reports as it is still in the process of completing two remaining audits. This is especially significant, he says, due to an executive order by former Gov. Susana Martinez in 2013 which said if an audit was significantly late, the public entity could not draw down capital appropriations coming from the Legislature.

“Obviously, we want all public entities to be compliant so they can access these pending and past forms of funding,” Maestas tells SFR.

While Maestas said in the spring the state was withholding $10 million, Blair tells SFR the city is “not in jeopardy of losing anything.” The state office monitors the process, with Maestas confirming the city sent in the most recent progress report on June 15.

With FY21 in the rearview mirror, city officials are now moving on to finish FY22. The goal? Crossing the finish line on both FY22 and 23 in December. This would mark three fiscal audits completed in one calendar year if the city can pull off the feat. To help stay on track and better prepare for future audits, the city updated its records system and hired a new grants manager, purchasing Officer and controller in the past year, according to a press release it issued Monday. Other steps the city is taking to better prepare is filling two vacancies in the four-person team within the Budget Division.

“This is such a meaningful step forward in how the city is being prepared for its audit,” Blair says. “I want to reinforce that [the FY21] audit, like the audit from the year before, illustrates that the public should feel competent to rely on the way in which we’re spending our money. A lot of this is about how we’re reporting those dollars and interacting with it, and we’re making significant strides.”

CliftonLarsonAllen, another contracted firm, has returned as the city’s contractor for the FY22 audit. This comes after the firm dropped out of the FY21 audit prep in April 2022, citing problems with the city’s record-keeping.