I’m the chairwoman for the city of Santa Fe’s Independent Audit Committee, and I’m honored to serve my fellow residents as a volunteer, unpaid official. As an outside, independent official, I do not get involved in the politics of the city.
However, in my role as chairwoman, I am charged with advising the city manager, the Finance Committee and the governing body regarding financial audits and related policies to promote transparency, accountability, efficiency and effectiveness of city government for the residents of Santa Fe. In this role, I’d like to discuss the city’s progress since the 2017 McHard Accounting Fraud Risk Assessment and the fiscal year 2020 Financial Statement Audit.
First, it’s important to understand the city’s ongoing efforts — and, to be frank, multiyear process — to clean up many long-standing problems identified by the McHard report. The city already has delivered on key corrective actions, including professionalizing the internal and external audit functions, and improving financial controls by writing policies and implementing a new IT system to modernize various functions including accounts payable and receivables, budget, purchasing, contract management, human resources, employee expense reimbursement and payroll.
I believe that good governance is good business, so I would like to clarify the mistruths being disseminated about the city’s audit.
Audit opinion: The city received an unmodified, or clean, opinion on the fiscal year 2020 financial statements, which is the highest rating. That means the financial statements were clean of misrepresentation and the city maintained financial records in accordance with generally accepted accounting principles.
Financial Performance: The financial statements noted the city improved its financial position — net position increased by $13.6 million — at the end of fiscal year 2020. This is a huge accomplishment given the financial challenges due to the COVID-19 pandemic.
Timeliness: The fiscal year 2020 audit, which is executed by an outside audit firm, CliftonLarsonAllen, was late. With limited staff, the city prioritized deploying a $17.5 million CARES ACT grant in the middle of a public health crisis under a tight deadline. The state auditor said previously he would rather have a tardy audit with accurate data than one that’s inaccurate. And that’s exactly the end result. The fiscal year 2020 audit was accurate and had integrity.
Findings: Yes, there were audit findings, and that’s expected because this was the first year the new accounting system was audited. I know folks are concerned about the number of findings, but, honestly, given my 35-year career in the audit profession, I’ve seen it all. You could have one finding, and it can be so severe that it requires an adverse opinion questioning the integrity of the financials. Or, in this case, multiple findings and a clean opinion.
So what is the corrective action? The city already has a plan in motion to correct each of the findings, including designing and implementing internal controls, continuing training and making sure the new accounting system is used correctly. This is the way a city should be managed, and I believe the reason why we are in a better situation financially.
I want to recognize the mayor for his leadership and everyone in the city’s Finance Department for their hard work to ensure the financial statements are accurate and provide a sound financial basis for the city. In times of unprecedented uncertainty created by the coronavirus pandemic, rest assured that one thing is certain — because of sound financial management, the city of Santa Fe is prepared for the future. Because Santa Fe has made sure that good governance is good business, we can continue to be the world-class city that makes us all proud.