Accepting the Audit

Santa Fe Finance director names federal grant management area of greatest concern from FY22 audit

Despite repeat shortcomings identified in the most recent audit, city councilors on Wednesday offered mostly optimistic feedback about the condition of the city’s finances.

Carr Riggs & Ingram CPAs Alan D. “A.J.” Bowers, Jr. and Eric Spurlin presented the Fiscal Year 2022 report to city officials Wednesday evening. The audit, which was made public Jan. 18, reported five fewer findings than in FY21, yet still identified 17 areas of varying concern with the city’s financial practices—12 of which were identified as recurring problems also found in earlier audits.

Though Bowers said auditors don’t know which federal grants they will highlight in the next year’s audit, which is targeted for completion by May 15, City Finance Director Emily Oster said she considers a repeated warning about the city improperly managing grants as “the most serious” finding, adding it’s “critical to the city’s ability to access federal funding in the future.”

Among six items with the highest level of concern, called material weaknesses, the FY22 audit included a finding that officials at the airport had not followed procedures or retained supporting documents about purchases and another that reported the city’s financial system “was initially not set up to properly identify and segregate grant funding sources and expenditures to allow for accurate financial reporting.”

In addition to the material weaknesses, auditors identified a less severe sufficient deficiency regarding payroll controls and a second that also called out the city for failing to document an emergency management grant. The audit also noted several material noncompliances, including a lack of pledged collateral coverage, which is required under state statute. (See a spreadsheet SFR compiled of the findings here.)

The city’s planned corrective actions include internal training for Finance Department workers and external training for those in other departments, Oster explained to councilors. For example, she said her department hosted a two-week training on the procurement part of the city’s MUNIS accounting software and has encouraged staff to attend a related conference in May. The department is also recording training sessions, documenting procedures and updating policies to make available for new personnel and to “make sure everyone has a backup,” she said.

“Really across the board we are encouraging everyone in finance and citywide to participate in training opportunities,” Oster said. “My focus in my year and a half with the city has been building a strong team, and each person is an important part, but our team doesn’t depend on one person.”

Oster, who started work at the city in August 2022, has led a team tasked with catching up on years worth of late audits from City Hall. Officials turned in the FY22 audit more than eight months behind schedule, and before that the city’s FY21 audit was also late, along with the ones for 2020, 2019 and 2018. She said she’s optimistic that the city’s current grants management team has contributed to progress that will show on the FY23 audit.

District 1 Councilor Signe Lindell told the director and auditors she was “very, very happy with the information” provided.

“We have a lot to be proud of from where we started, and we are very, very close to being where we want to be,” Lindell said.

For District 4 Councilor Amanda Chavez, the findings “don’t take away the concern for late audits” or that the city can’t “measure its progress in real time,” but, she said, “in leadership, making big gains and improvements isn’t done within a year. I think sometimes it’s not even done within five if you want sustainable change.”

District 3 Councilor Lee Garcia and District 2 Councilor Michael Garcia, however, both told Oster they’re “concerned” with repeat findings, one of which dates as far back as 2017—the material weakness on internal controls over financial close and reporting.

“Having repeat findings is kind of really where we need to focus and figure out how we can remedy these and really get back on track,” Lee Garcia said.

Meanwhile, District 3 Councilor Pilar Faulkner said though “the public may think that audits are a bad thing,” they serve as a key part of a healthy organization, adding she’s optimistic based on Oster’s audit speed track record—two submitted within six months.

“That’s a big lift and you’ve done a good job,” Faulkner said.

However, she noted a need for better communication and staff training for all departments on “best practices working through financials.”

Later in the night, City Council and the mayor approved a resolution formally acknowledging the audit and corrective plan.

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